10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2008
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	FOR THE TRANSITION PERIOD FROM              TO

COMMISSION FILE NUMBER: 000-52038

VERIGY LTD.

(Exact Name of Registrant as Specified in Its Charter)

SINGAPORE	N/A
(State or Other Jurisdiction of Incorporate or Organization)	(I.R.S. Employer Identification No.)
NO. 1 YISHUN AVE 7 SINGAPORE 768923	N/A
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (+65) 6755-2033

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

 Large accelerated filer    x Accelerated filer   o

Non-accelerated filer   o Small reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x

As of February 28, 2008, there were 59,998,797 outstanding ordinary shares, no par value.

VERIGY LTD.

TABLE OF CONTENTS

		Page Number
Part I. Financial Information
Item 1.	Financial Statements	3
	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations for the three months ended January 31, 2008 and 2007	3
	Condensed Consolidated Balance Sheets at January 31, 2008 and October 31, 2007	4
	Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 2008 and 2007	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
Part II. Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Submission of Matters to a Vote of Security Holders	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
Signature		42
Exhibit Index		43

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PART I — FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

VERIGY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended January  31,
	2008		2007
	(in millions, except share and per share amounts)
Net revenue:
Products	$	163	$	128
Services	37		37
Total net revenue	200		165
Costs of sales:
Cost of products	79		69
Cost of services	28		25
Total costs of sales	107		94
Operating expenses:
Research and development	25		23
Selling, general and administrative	39		34
Separation costs	—		2
Total operating expenses	64		59
Income from operations	29		12
Other income, net	6		3
Income before taxes	35		15
Provision for income taxes	3		2
Net income	$	32	$	13
Net income per share — basic:	$	0.53	$	0.22
Net income per share — diluted:	$	0.52	$	0.22
Weighted average shares (in thousands) used in computing net income per share:
Basic	59,875		58,768
Diluted	60,702		59,099

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

VERIGY LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (Unaudited)

	January 31, 2008			October 31, 2007
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	192		$	146
Short-term marketable securities	137			229
Trade accounts receivable, net	102			107
Inventory	68			68
Other current assets	51			54
Total current assets	550			604
Property, plant and equipment, net	43			42
Long-term marketable securities	94			48
Goodwill	19			18
Other long-term assets	81			59
Total assets	$	787		$	771
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	70		$	76
Payables to Agilent	—			1
Employee compensation and benefits	47			53
Deferred revenue, current	54			65
Income taxes and other taxes payable	5			12
Other current liabilities	19			19
Total current liabilities	195			226
Long-term liabilities:
Income taxes payable	10			—
Other long-term liabilities	49			47
Total liabilities	254			273
Commitments and contingencies (Note 18)
Shareholders’ equity
Ordinary shares, no par value; 59,956,641 and 59,704,629 issued and outstanding at January 31, 2008 and October 31, 2007, respectively
Additional paid in capital	389			381
Retained earnings	161			131
Accumulated other comprehensive loss	(17		)	(14		)
Total shareholders’ equity	533			498
Total liabilities and shareholders’ equity	$	787		$	771

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

VERIGY LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS

 (Unaudited)

	Three Months Ended January 31,
	2008			2007
	(in millions)
Cash flows from operating activities:
Net income	$	32		$	13
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4			3
Excess and obsolete inventory-related charges	2			2
Share-based compensation	4			4
Changes in assets and liabilities:
Trade accounts receivable, net	6			37
Receivables from Agilent	—			8
Inventory (Note 10)	—			(7		)
Accounts payable	(7		)	(20		)
Payables to Agilent	(1		)	(20		)
Employee compensation and benefits	(6		)	(8		)
Deferred revenue, current	(11		)	5
Income taxes and other taxes payable	(7		)	(14		)
Other current assets and accrued liabilities	1			(1		)
Other long term assets and long term liabilities	13			2
Net cash provided by operating activities	30			4
Cash flows from investing activities:
Acquisitions and investments, net of cash acquired	(28		)	—
Investments in property, plant and equipment	(2		)	(6		)
Purchases of available-for-sale marketable securities	(120		)	—
Proceeds from sales and maturities of available-for-sale marketable securities	162			—
Net cash provided by (used in) investing activities	12			(6		)
Cash flows from financing activities:
Issuance of ordinary shares under employee stock plans	4			2
Net cash provided by financing activities	4			2
Net increase in cash and cash equivalents	46			—
Cash and cash equivalents at beginning of period	146			300
Cash and cash equivalents at end of period	$	192		$	300
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	2		$	2

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

VERIGY LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.OVERVIEW

Overview

Verigy (“we,” “us” or the “Company”) designs, develops and manufactures semiconductor test equipment and provides test system solutions that are used in the manufacture of System-on-a-Chip (SOC), System-in-a-Package (SIP), high-speed memory and memory devices.  In addition to test equipment, our solutions include consulting, service and support offerings such as start-up assistance, application services and system calibration and repair.

Prior to our initial public offering, we were a wholly owned subsidiary of Agilent.  On June 13, 2006, we completed our initial public offering and became a separate stand-alone publicly-traded company incorporated in Singapore focused on technology and innovation in semiconductor testing.  Effective October 31, 2006 (“the distribution date”), Agilent distributed the 50 million Verigy ordinary shares it owned to its shareholders.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.     The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).  Our fiscal year end is October 31, and our fiscal quarters end on January 31, April 30, and July 31.  Unless otherwise stated, all dates refer to our fiscal years and fiscal periods.  Amounts included in the accompanying condensed consolidated financial statements are expressed in U.S. dollars.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments which are of normal and recurring nature and necessary to fairly state the statements of financial position, results of operations and cash flows for the dates and periods presented.

Reclassifications.     Certain amounts disclosed in the notes to the condensed consolidated financial statements for the three months ended January 31, 2007, were reclassified to conform to the presentation used for the three months ended January 31, 2008.

Principles of consolidation.     The condensed consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated.

Use of estimates.      The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes.  Management bases its estimates on historical experience and various other assumptions it believes to be reasonable.  Although these estimates are based on management’s knowledge of current events and actions that may impact us in the future, actual results may be different from the estimates.  Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management.  Those policies are revenue recognition, restructuring and asset impairment charges, inventory valuation, warranty, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and intangible assets, valuation of marketable securities and accounting for income taxes.

3.             RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).  The purpose of SFAS No. 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements.  In February 2008, the FASB issued FASB Staff Position (FSP) 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (FSP 157-1) and FSP 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope. FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2010. The measurement and disclosure requirements related to financial assets and financial liabilities are effective for us beginning in the first quarter of fiscal 2009. We are currently evaluating whether SFAS No. 157 will result in a change to our fair value measurements.

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In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value.  SFAS No.159 will be effective for us beginning in the first quarter of fiscal year 2009.  We are currently evaluating the impact of adopting SFAS No. 159 on our financial position, cash flows and results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”).  SFAS No. 141R amends SFAS 141 and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It is effective for fiscal years beginning on or after December 15, 2008 and will be applied prospectively.  We are currently assessing the impact that SFAS No. 141(R) may have on our consolidated financial statements upon adoption in fiscal 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS No. 160”).  SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated net income, be clearly identified, labeled, and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning on or after December 15, 2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements shall be applied prospectively.   We are currently assessing the impact that SFAS No. 160 may have on our consolidated financial statements upon adoption in fiscal 2010.

4.             TRANSACTIONS WITH AGILENT

During the three months ended January 31, 2008 and 2007, we had no revenue from sale of products to Agilent or any outstanding receivables.  For both the three months ended January 31, 2008 and 2007, we purchased $2 million of materials from Agilent.

As of January 31, 2008, we had no payables to Agilent, compared to $1 million of payables to Agilent at October 31, 2007, which primarily related to transition-related services provided to us by Agilent during the second half of fiscal year 2007.

5.             NET INCOME PER SHARE

The following is a reconciliation of the basic and diluted net income per share computations for the periods presented below:

	Three Months Ended January 31,
	2008		2007
Basic Net Income Per Share:
Net income (in millions)	$	32	$	13
Weighted average number of ordinary shares (1)	59,875		58,768
Basic net income per share	$	0.53	$	0.22
Diluted Net Income Per Share:
Net income (in millions)	$	32	$	13
Weighted average number of ordinary shares (1)	59,875		58,768
Potentially dilutive common stock equivalents—stock options, restricted share units and other employee stock plans (1)	827		331
Total shares for purpose of calculating diluted net income per share (1)	60,702		59,099
Diluted net income per share	$	0.52	$	0.22

(1)  Weighted average shares are presented in thousands.

The dilutive effect of outstanding options and restricted share units is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of share-based compensation required by SFAS No. 123(R).

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The following table presents those options to purchase ordinary shares and restricted share units outstanding which were not included in the computation of diluted net income per share because they were anti-dilutive:

	Three Months Ended January 31,
	2008		2007
Non-qualified share options:
Number of options to purchase ordinary shares (in thousands)	438		2,744
Weighted-average exercise price	$	25.26	$	15.57
Average ordinary share price	$	23.55	$	17.62
Restricted share units:
Number of restricted share units (in thousands)	30		—
Weighted-average grant date price	$	24.25	$	—
Average ordinary share price	$	23.55	$	17.62

6.             PROVISION FOR INCOME TAXES

We recorded income tax expense of approximately $3 million and $2 million in the three months ended January 31, 2008 and 2007, respectively.

Our effective tax rate varies based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where we operate, completion of separation, restructuring and other one-time charges, as well as discrete events, such as settlements of future audits.  We may also be subject to audits and examinations of our tax returns by tax authorities in various jurisdictions, including the Internal Revenue Service.  We intend to regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

On November 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.”  It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position as well as provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The provision of FIN 48 is effective for fiscal years beginning after December 15, 2006 and applies to all tax positions upon initial adoption of this standard.  Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48.  As a result of the adoption of FIN 48, we increased our reserves for unrecognized tax benefits by $0.2 million and increased our reserves for penalties by $0.2 million, for a total increase of $0.4 million, which was accounted for as a cumulative adjustment to the beginning balance of retained earnings.  Additionally, we reclassified $10 million from current income taxes and other taxes payable to long-term taxes payable.  At the adoption date of November 1, 2007, we had $9.8 million of unrecognized tax benefits which would reduce our income tax expense if recognized.  As of January 31, 2008, we had $10.4 million of unrecognized tax benefits which would reduce our income tax expense if recognized.

Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense.  We had approximately $0.6 million of accrued interest and penalties at the adoption date of November 1, 2007 and approximately $0.8 million of accrued interest and penalties as of January 31, 2008.

Although we file Singapore, U.S. federal, U.S. state and foreign income tax returns, our three major tax jurisdictions are Singapore, U.S. and Germany.  Our 2006 and 2007 tax years remain subject to examination by the tax authorities in our major tax jurisdictions.  We are not currently under audit for any tax years.

7.             SHARE-BASED COMPENSATION

2006 Equity Incentive Plan

On June 7, 2006, our board of directors adopted the Verigy Ltd. 2006 Equity Incentive Plan (the “2006 EIP”).  A total of 10,300,000 ordinary shares were authorized for issuance under the plan.  The 2006 EIP provides for grants of incentive stock options, nonqualified stock options, stock appreciation rights and restricted share units.  At January 31, 2008, there were approximately 4.5 million ordinary shares available for issuance under the 2006 EIP.

8

Except for replacement options granted in connection with Verigy’s separation from Agilent, employee nonqualified stock options have an exercise price no less than 100% of the fair market value of a share on the date of grant, and generally vest at a rate of 25% per year over 4 years.  The maximum allowable term is 10 years.  Restricted share units awarded to employees pay out in an equal number of shares of stock, and generally vest at a rate of 25% per year over 4 years.  Options and restricted share units cease to vest upon termination of employment.  If an employee terminates employment due to death, disability or retirement at or after age 65 with at least 15 years of service, then the vested portion of the employee’s option and restricted share unit award is determined by adding 12 months to the length of his or her actual service, and the option is exercisable as to the vested shares for one year after the date of termination, or, if earlier, the expiration of the term of the option.

Outside director options vest on the first anniversary of the date of grant and have a maximum term of 5 years.  Outside director restricted share units vest on the first anniversary of the date of grant and are payable on the third anniversary of the date of grant.  All awards granted to an outside director become fully vested upon the director’s termination of services because of death, disability, retirement at or after age 65, or in connection with a change in control.

Ordinary shares are issued for restricted share units on the date the restricted share units vest.  The majority of shares issued are net of the minimum statutory withholding requirements, as shares are withheld to cover the tax withholding obligation.  As a result, the actual number of shares issued will be less than the number of restricted share units granted.  Prior to vesting, restricted share units do not have dividend equivalent or voting rights.

2006 Employee Shares Purchase Plan

On June 7, 2006, our board of directors adopted the 2006 Employee Shares Purchase Plan (the “ESPP Plan”).  The ESPP Plan is intended to qualify for favorable tax treatment under section 423 of the U.S. Internal Revenue Code.  The total number of shares that were authorized for purchase under the plan is 1,700,000.

Under the ESPP Plan, eligible employees may elect to purchase shares from payroll deductions up to 10% of eligible compensation during 6-month offering periods.  The purchase price is (i) 85% of the fair market value per ordinary share on the trading day before the beginning of an offering period or (ii) 85% of the fair market value per ordinary share on the last trading day of an offering period, whichever is lower.  The maximum number of shares that an employee can purchase is 2,500 shares each offering period and $25,000 in fair market value of ordinary shares each calendar year.

As of January 31, 2008, a total of 496,511 ordinary shares had been issued as a result of purchases made by participants in our ESPP Plan.  On the purchase dates of November 30, 2007, May 31, 2007 and November 30, 2006 we issued 155,030, 197,000 and 144,481 of ordinary shares, respectively, to participants in our ESPP Plan.

Share-Based Compensation for Verigy Options and ESPP Plan

As of November 1, 2005, we adopted the provisions of SFAS No. 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock option awards and employee stock purchases made under the ESPP Plan.

We have recognized compensation expense based on the estimated grant date fair value method required under SFAS
No. 123(R) using a straight-line amortization method.  As SFAS No. 123(R) requires that share-based compensation expense be based on awards that are ultimately expected to vest, estimated share-based compensation is reduced for estimated forfeitures.  We expense restricted share units based on fair market value of the shares at the date of grant over the period during which the restrictions lapse.

Share-Based Compensation for Agilent Options Held by Verigy Employees

Prior to our separation from Agilent, some of our employees participated in Agilent’s stock-based compensation plans. Until November 1, 2005, we accounted for stock-based awards, based on Agilent’s stock, using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. Under the intrinsic value method, we recorded compensation expense related to stock options in our condensed combined and consolidated statements of operations when the exercise price of our employee stock-based award was less than the market price of the underlying Agilent stock on the date of the grant. We had no stock option expenses resulting from an exercise price that was less than the market price on the date of the grant in any of the periods presented.

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Share-Based Payment Award Activity

The following table summarizes stock option activity during the three months ended January 31, 2008:

	Options
	Shares		Weighted Average Exercise Price
	(in thousands)
Outstanding as of October 31, 2007	3,280		$	15.38
Granted	108		$	26.45
Exercised (1)	(67	)	$	13.05
Cancelled / Expired	(27	)	$	15.10
Outstanding as of January 31, 2008	3,294		$	15.80

(1)  The total pretax intrinsic value of stock options exercised during the three months ended January 31, 2008 was $0.8 million.

The following table summarizes restricted share unit activity during the three months ended January 31, 2008:

	Restricted Share Units (RSU)
	Shares		Weighted Average Grant Date Share Price
	(in thousands)
Outstanding as of October 31, 2007 (2) (3)	870		$	18.49
Granted	636		$	21.81
Vested and paid out	(47	)	$	18.43
Forfeited	(10	)	$	21.04
Outstanding as of January 31, 2008 (2) (3)	1,449		$	19.93

The following table summarizes information about all outstanding stock options to purchase ordinary shares of Verigy at January 31, 2008:

	Options Outstanding
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)				(in thousands)
$7.48 — 15.00	1,595	5.86  years	$	13.01	$	12,559
$15.01 — 20.00	1,297	7.08  years	$	16.06	6,248
$20.01 — 25.00	78	5.89  years	$	23.42	—
$25.01 — 30.00	324	5.93  years	$	26.62	—
	3,294	6.35  years	$	15.80	$	18,807

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The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of our ordinary shares of $20.88 at January 31, 2008, which would have been received by award holders had all award holders exercised their awards that were in-the-money as of that date.  As of January 31, 2008, approximately 1,225,000 outstanding options were vested and exercisable and the weighted average exercise price was $14.14.   Among the 1,225,000 outstanding options that were vested and exercisable, the total number of exercisable stock options that were in-the-money was 1,190,000, and the weighted average exercise price was $13.80.

The following table summarizes information about all outstanding restricted share unit awards of Verigy ordinary shares at January 31, 2008:

	Restricted Share Units Outstanding
Range of Grant Date Share Prices	Number Outstanding	Weighted Average Grant Date Share Price
	(in thousands)
$14.75 — 15.00 (2)	101	$	14.97
$15.01 — 20.00 (3)	663	$	18.34
$20.01 — 25.00	483	$	20.32
$25.01 — 30.00	202	$	26.69
	1,449	$	19.93

(2)The outstanding restricted share units as of January 31, 2008 include 22,000 units held by outside directors that are fully vested.

(3)The outstanding restricted share units as of January 31, 2008 include 13,000 units held by outside directors that are fully vested.

As of January 31, 2008, the total grant date fair value of our outstanding restricted share units was approximately $28.9 million and the aggregate market value of the ordinary shares underlying the outstanding restricted share units was $30.3 million.

Share-based Compensation

The impact on our results for share-based compensation for the three months ended January 31, 2008 and 2007, respectively, were as follows:

	Three Months Ended January 31,
	2008		2007
	(in millions, except per share data)
Cost of products and services	$	0.7	$	0.6
Research and development	0.5		0.5
Selling, general and administrative	2.7		2.6
Total share-based compensation expense	$	3.9	$	3.7

For the three months ended January 31, 2008 and 2007, share-based compensation capitalized within inventory was insignificant.

The weighted average grant date fair value of awards related to Verigy options granted during the three months ended January 31, 2008 and 2007, was $11.34 and $6.89 per share, respectively, and was determined using the Black Scholes option pricing model.  The tax benefit realized from exercised stock options and similar awards for the three months ended January 31, 2008 and 2007 was insignificant.

As of January 31, 2008 and 2007, the total compensation cost related to share-based awards not yet recognized, net of expected forfeitures, was approximately $28.3 million and $19.4 million, respectively.  We expect to recognize these share-based awards over 2.85 years on a weighted average basis.

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Valuation Assumptions for Verigy Options

The fair value of Verigy options granted during the three months ended January 31, 2008 and 2007 was estimated at grant date using a Black-Scholes options-pricing model with the following weighted-average assumptions:

	Three Months Ended January 31,
	2008		2007
Risk-free interest rate for options	3.30	%	4.54	%
Dividend yield	0.0	%	0.0	%
Volatility for options	47.6	%	41.1	%
Expected option life	4.45 years		4.31 years

Valuation Assumptions for the ESPP Plan

	Three Months Ended January 31,
	2008		2007
Risk-free interest rate for ESPP	3.35	%	4.90	%
Dividend yield	0.0	%	0.0	%
Volatility for ESPP	47.3	%	40.2	%
Expected option life for ESPP	6 months		6 months

The Black-Scholes model requires the use of highly subjective and complex assumptions, including the option’s expected life and the price volatility of the Company’s underlying stock.  The price volatility of our stock price was determined on the date of grant using a combination of the average daily historical volatility and the average implied volatility of publicly traded options of our ordinary shares.  Management believes that using a combination of historical and implied volatility is the most appropriate measure of the expected volatility of our stock price.  Because we have limited historical data, we used data from peer companies to determine our assumptions for the expected option life.  For the risk-free interest rate, we used the rate of return on US Treasury Strips as of the grant dates.

8.             INOVYS ACQUISITION

During the three month ended January 31, 2008, we acquired Inovys, a privately held company.  Inovys provides innovative solutions for design debug, failure analysis and yield acceleration for complex semiconductor devices and processes.   From the acquisition date, the results of operations of Inovys business are included in our condensed consolidated statements of operations and were not material to revenues or net income for the period following acquisition. The purchase price was allocated to the acquired net assets based on preliminary estimates of fair values.  Pro forma results of operations for the acquisition have not been presented as the effect has not been significant for all periods presented.

9.             COMPREHENSIVE INCOME

The components of comprehensive income, net of tax, are as follows:

	Three Months Ended January 31,
	2008			2007
	(in millions)
Net income	$	32		$	13
Other comprehensive income:
Foreign currency translation adjustments, net of tax	—			—
Change in unrealized losses on marketable securities, net of tax	(3		)	—
Total comprehensive income	$	29		$	13

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10.          INVENTORY

Inventory, net of related reserves, consists of the following:

	January 31, 2008		October 31, 2007
	(in millions)
Raw materials	$	30	$	25
Work in progress	7		6
Finished goods	31		37
Total inventory	$	68	$	68

Finished goods inventory includes demonstration products of $18 million as of January 31, 2008 and $17 million as of October 31, 2007.

11.          PROPERTY, PLANT AND EQUIPMENT, NET

	January 31, 2008			October 31, 2007
	(in millions)
Leasehold improvements	$	13		$	13
Software	21			21
Machinery and equipment	44			40
Total property, plant and equipment	78			74
Accumulated depreciation and amortization	(35		)	(32		)
Total property, plant and equipment, net	$	43		$	42

We recorded approximately $4 million and $3 million of depreciation and amortization expense during the three months ended January 31, 2008 and 2007, respectively.

12.          MARKETABLE SECURITIES

We account for our short-term marketable securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 115”).  We classify our marketable securities as available-for-sale at the time of purchase and re-evaluate such designation as of each consolidated balance sheet date.  We amortize premiums and discounts against interest income over the life of the investment.  Our marketable securities are classified as cash equivalents if the original maturity, from the date of purchase, is ninety days or less and are primarily invested in money market funds.  Our marketable securities are classified as short-term investments if the original maturity, from the date of purchase, is in excess of ninety days since we intend to convert them into cash as necessary to meet our liquidity requirements.

Our marketable securities include commercial paper, corporate bond and government securities and auction rate securities.  Auction rate securities are securities that are structured with short-term interest rate reset dates of generally less than ninety days but with contractual maturities that can be well in excess of ten years.  At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par.  In the fourth quarter of fiscal year 2007, certain auction rate securities failed auction due to sell orders exceeding buy orders.  In the first quarter of 2008, we continued to see deterioration in the market for these types of securities. Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities.  We believe that the credit quality of these securities is high based on these guarantees.  Based on an analysis of other-than-temporary impairment factors, we recorded a temporary impairment within other accumulated comprehensive loss of approximately $4 million (net of tax of $1 million) at January 31, 2008 related to these auction rate securities.  Our marketable securities portfolio as of January 31, 2008 was $231 million.  The portfolio includes approximately $112 million (at cost) invested in auction rate securities of which, $49.4 million (at cost) are currently associated with failed auctions as of January 31, 2008, all of which have been in a loss position for less than 12 months.  The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the underlying securities have matured or are recalled by the issuer.  Given the recent disruptions in the credit markets and the fact that the liquidity for these types of securities remains uncertain, we have classified substantially all of our auction rate securities that were not liquidated subsequent to January 31, 2008 as long-term assets in our condensed consolidated balance sheet as our ability to liquidate such securities in the next 12 months is uncertain.

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Our marketable securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax.  Realized gains or losses on the sale of marketable securities are determined using the specific-identification method and were not material for the three months ended January 31, 2008.  We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and our ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value.  We record an impairment charge to the extent that the carrying value of our available for sale securities exceeds the estimated fair market value of the securities and the decline in value is determined to be other-than-temporary.

The following table summarizes our marketable security investments as of January 31, 2008:

	Cost		Gross Unrealized Gains (Losses)		Estimated Fair Market Value
	(in millions)
Short-term marketable securities:
Money market funds	$	155	$	—	$	155
U.S. treasury securities and government agency securities	27		—		27
Corporate debt securities	97		—		97
Auction rate securities	13		—		13
Total short-term available-for-sale investments	$	292	$	—	$	292

	Cost		Gross Unrealized Gains (Losses)			Estimated Fair Market Value
	(in millions)
Long-term marketable securities:
Auction rate securities	$	99	$	(5	)	$	94
Total long-term available-for-sale investments	$	99	$	(5	)	$	94

As Reported:
Cash equivalents	$	155
Short-term marketable securities	137
Long-term marketable securities	94
Total at January 31, 2008	$	386

The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for sale at January 31, 2008 are shown in the table below based on their contractual maturity dates:

	Cost		Gross Unrealized Gains (Losses)			Estimated Fair Market Value
	(in millions)
Less than 1 year	$	246	$	—		$	246
Due in 1 to 2 years	33		—			33
Due after 2 years	112		(5		)	107
Total at January 31, 2008	$	391	$	(5	)	$	386

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13.         GUARANTEES

Standard Warranty

A summary of our standard warranty accrual activity during the three months ended January 31, 2008 and 2007, is shown in the table below: (Also see Note 17 “Other Current Liabilities and Other Long-Term Liabilities”)

	Three Months Ended January 31,
	2008			2007
	(in millions)
Beginning balance at November 1,	$	9		$	6
Accruals for warranties issued during the period	4			2
Accruals related to pre-existing warranties (including changes in estimates)	—			2
Settlements made during the period	(4		)	(4		)
Ending balance at January 31,	$	9		$	6

In our condensed consolidated balance sheets, standard warranty accrual is presented in other current liabilities.

Extended Warranty

A summary of our extended warranty deferred revenue activity for the three months ended January 31, 2008 and 2007 is shown in the table below:

	Three Months Ended January 31,
	2008			2007
	(in millions)
Beginning balance at November 1,	$	21		$	20
Recognition of revenue	(2		)	(2		)
Deferral of revenue for new contracts	3			3
Ending balance at January 31,	$	22		$	21

In our condensed consolidated balance sheets, current deferred revenue is presented separately and long-term deferred revenue is included in other long-term liabilities.

Indemnifications

As is customary in our industry and as provided for in local law in the United States and other jurisdictions, many of our standard contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products.  From time to time, we indemnify customers, as well as our suppliers, contractors, lessors, lessees and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and the use of our products, the use of their goods and services, the use of facilities and state of our owned facilities and other matters covered by such contracts, usually up to a specified maximum amount.  In addition, from time to time we also provide protection to these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations.  In our experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

Under the agreements with Agilent, we will indemnify Agilent in connection with our activities conducted prior to and following our separation from Agilent in connection with our business and the liabilities that we specifically assumed under the agreements.  These indemnifications cover a variety of aspects of our business, including, but not limited to, employee, tax, intellectual property and environmental matters.

14.          RESTRUCTURING

In connection with the transfer of our manufacturing activities to Flextronics in fiscal 2006, we transferred approximately 85 employees to Flextronics.  As part of this arrangement, we have a potential obligation in the future of approximately $2 million associated with these transferred employees.  We have deferred these costs and are recognizing them ratably over the employees’ period of service until the respective dates of the employee’s termination from Flextronics.  Restructuring charges incurred for the three months ended January 31, 2008 was $0.4 million and $1 million for the three months ended January 31, 2007.  As of January 31, 2008, we had approximately $2 million in accrued restructuring liability.

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15.          SEPARATION COSTS

In connection with our separation from Agilent, we incurred one-time internal and external separation costs, such as information technology set-up costs and consulting and legal and other professional fees.  These expenses totaled $0.1 million and $2 million in the three months ended January 31, 2008 and 2007, respectively.

16.          RETIREMENT AND POST-RETIREMENT PENSION PLANS

General.     Substantially all of our employees are covered under various Verigy defined benefit and/or defined contribution plans.  Additionally, we sponsor retiree medical accounts for certain eligible U.S. employees.  Prior to the separation, Agilent had sponsored post-retirement health care benefits and a death benefit under the Retiree Survivor’s Benefit Plan for our eligible U.S. employees.

U.S. Retirement and Post-retirement Health Care Benefits for U.S. Employees

Effective June 1, 2006, we established a new defined contribution benefit plan (“Verigy 401(k) plan”) for our U.S employees.  Our 401(k) plan provides matching contribution of up to 4% of eligible compensation.  Eligible compensation consists of base and variable pay.   In addition, we also offer a profit sharing plan for our U.S. employees, whereby we will make a maximum 2% contribution to the employee’s 401(k) plan if certain annual financial targets are achieved.  A small number of our U.S. employees meeting certain age and service requirements also receive an additional 2% profit sharing contribution to their 401(k) accounts if certain annual financial targets are achieved.

For the three months ended January 31, 2008 and 2007, our matching expenses for our U.S. employees under the Verigy 401(k) and the Verigy profit sharing plans were $0.9 million and $0.8 million, respectively.

Effective June 1, 2006, Verigy made available certain retiree benefits to U.S. employees meeting certain age and service requirements upon termination of employment through Verigy’s Retiree Medical Account (RMA) Plan.  At the date of separation, the present value of our responsibility for the retiree medical benefit obligation was approximately $2.3 million.  We are ratably recognizing this obligation over a period of 6.4 years, the shorter of the estimated average working lifetime or retirement eligibility of these employees.  For the three months ended January 31, 2008 and 2007, the amount of expenses recognized under the RMA plan was approximately $0.2 million for both periods presented.  There are no plan assets related to these obligations, and we currently do not have any plans to make any contributions.

Non-U.S. Retirement Benefit Plans.    Eligible employees outside the United States generally receive retirement benefits under various retirement plans based upon factors such as years of service and employee compensation levels.  Eligibility is generally determined in accordance with local statutory requirements.

Change in Plans.    Upon our separation from Agilent, the defined benefit plans for our employees in Germany, Korea, Taiwan, France and Italy were transferred to us.  With the exception of Italy and France, which involve relatively insignificant amounts, Agilent completed the funding of these transferred plans, based on 100% of the accumulated benefit obligation level as of the separation date, by contributing approximately $3.3 million into our pension trust accounts during the three months ended January 31, 2007.

Costs for All U.S. and Non-U.S. Plans.   The following tables provide the principal components of total retirement-related benefit plans impact on income of Verigy for the three months ended January 31, 2008 and 2007:

	U.S. Plans				Non-U.S. Plans				Total
	Three Months Ended January 31,
	2008		2007		2008		2007		2008		2007
	(in millions)
Defined benefit pension plan costs	$	—	$	—	$	1.7	$	1.4	$	1.7	$	1.4
Defined contribution pension plan costs	0.9		0.8		0.3		0.2		1.2		1.0
Non-pension post-retirement benefit costs	0.2		0.2		—		—		0.2		0.2
Total retirement-related plans costs	$	1.1	$	1.0	$	2.0	$	1.6	$	3.1	$	2.6

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Non-U.S. Defined Benefit Plans.   For the three months ended January 31, 2008 and 2007, the net pension costs related to our employees participating in our non-U.S. defined benefit plans were comprised of:

	Three Months Ended January 31,
	2008			2007
	(in millions)
Service cost — benefits earned during the year	$	1.1		$	1.0
Interest cost on benefit obligation	0.9			0.6
Expected return on plan assets	(0.6		)	(0.5		)
Amortization and deferrals of recognized amounts:
Actuarial loss	0.3			0.3
Total net plan costs	$	1.7		$	1.4

Measurement date.    We use a September 30 measurement date for all of our non-U.S. plans and October 31 for our U.S. retiree medical account.

17.          OTHER CURRENT LIABILITIES AND OTHER LONG-TERM LIABILITIES

Other current accrued liabilities at January 31, 2008 and October 31, 2007 were as follows:

	January 31, 2008		October 31, 2007
	(in millions)
Supplier liabilities	$	5	$	5
Accrued warranty costs	9		9
Other	5		5
Total other current liabilities	$	19	$	19

Supplier liabilities reflect the amount by which our firmly committed inventory purchases from our suppliers exceed our forecasted production and service and support needs.  (Also see Note 13, “Guarantees” for additional information regarding warranty accruals)

Other long-term liabilities at January 31, 2008 and October 31, 2007, were as follows:

	January 31, 2008		October 31, 2007
	(in millions)
Long-term extended warranty and deferred revenue	$	12	$	12
Retirement plan accruals	34		32
Other	3		3
Total other long-term liabilities	$	49	$	47

(Also see Note 16, “Retirement and Post-Retirement Pension Plans” for additional information regarding retirement plan accruals)

18.          COMMITMENTS AND CONTINGENCIES

As of January 31, 2008, there was no material change in our capital lease obligations, operating lease obligations, purchase obligations or any other long-term liabilities reflected on our condensed consolidated balance sheets as compared to such obligations and liabilities as of October 31, 2007.

Rent expense was $1.6 million and $1.3 million for the three months ended January 31, 2008 and 2007, respectively.

From time to time, we are involved in lawsuits, claims, investigations and proceedings, including patent, commercial and environmental matters that arise in the ordinary course of business.

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19.          SEGMENT & GEOGRAPHIC INFORMATION

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” (“SFAS No. 131”) requires us to identify the segment or segments we operate in.  Based on the standards set forth in SFAS 131, we operate in one reportable segment: we provide test system solutions that are used in the manufacture of semiconductor devices.  Below is the revenue detail for the two product platforms within this segment:

	Three Months Ended January 31,
	2008		2007
	(in millions)
Net revenue from products:
SOC / SIP / High-Speed Memory	$	121	$	49
Memory	42		79
Net revenue from products	163		128
Net revenue from services	37		37
Total net revenue	$	200	$	165

Major customers

For the three months ended January 31, 2008, one of our customers accounted for 12.3% of our total net revenue.

For the three months ended January 31, 2007, three of our customers accounted for 43.3% of our total net revenue, with one customer accounting for 15.2%, one customer accounting for 14.4% and another customer accounting for 13.7% of our total net revenue.

Geographic Net Revenue Information:

	Three Months Ended January 31,
	2008		2007
	(in millions)
United States	$	30	$	79
Singapore	131		57
Japan	24		15
Rest of the World	15		14
Total net revenue	$	200	$	165

Net revenue is attributed to geographic areas based on the country in which the customer takes title of our products.

Geographic Property, Plant and Equipment Information:

	January 31, 2008		October 31, 2007
	(in millions)
United States	$	13	$	13
Singapore	17		17
Germany	5		4
China	4		3
Rest of the World	4		5
Total geographic property, plant and equipment	$	43	$	42

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ITEM 2.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.  This report contains forward-looking statements including, without limitation, statements regarding the transfer of manufacturing of our 93000 Series platform to China, sales increases in Asia, manufacturing operations, research and development activities, variations in quarterly revenues and operating results, trends, cyclicality, seasonality and growth in the markets we sell into, our strategic direction, expenditure in research and development, anticipated benefits from our operating model, our future effective tax rate, new product introductions, product pricing, changes to our manufacturing processes, our liquidity position, our ability to generate cash from continuing operations, our expected growth, the potential impact of adopting new accounting pronouncements, our potential future financial results, our purchase commitments, our obligation and assumptions about our retirement and post-retirement benefit plans, the impact of our variable cost structure, our lease payment obligations and expected savings from our restructuring programs that involve risks and uncertainties.  Additional forward-looking statements can be identified by words such as “anticipated,” “expect,” “believes,” “plan,” “predicts,” and similar terms.  Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed under “Part II, Item 1A., Risk Factors” and elsewhere in this report.

Overview

Verigy became an independent company on June 1, 2006, when we separated from Agilent Technologies Inc.  We design, develop, manufacture and sell advanced test systems and solutions for the semiconductor industry.  We offer a single platform for each of the two general categories of devices being tested: our 93000 Series platform, designed to test System-on-a-Chip (SOC), System-in-a-Package (SIP) and high-speed memory devices, and our Versatest V5000 Series platform, designed to test memory devices, including flash memory and multi-chip packages.  Our test solutions are both scalable and flexible.  Our test platforms are scalable across different frequency ranges, different pin counts and different numbers of devices.  Our test platforms’ flexibility allows for a single test system to test a wide range of applications for semiconductor devices.  Our scalable platform architecture provides us with internal operating model efficiencies such as reduced research and development costs, engineering headcount, support requirements and inventory risk.  The scalability and flexibility of our test solutions also provides economic benefits to our customers by allowing them to get their complex, feature-rich semiconductor devices to market quickly and to reduce their overall costs.  We also provide test and application expertise, and service and support through our worldwide service organization.

We have a broad customer installed base, having sold over 1,700 of our 93000 Series systems and over 2,500 Versatest Series systems as of January, 31, 2008.  Our customers include integrated device manufacturers, or IDMs, test subcontractors, also referred to as subcontractors, which includes specialty assembly, package and test companies as well as wafer foundries, and fabless design companies.

Basis of Presentation and Separation from Agilent

Our fiscal year end is October 31, and our fiscal quarters end on January 31, April 30 and July 31.  Unless otherwise stated, all dates refer to our fiscal year and fiscal periods.

Amounts included in the accompanying condensed consolidated financial statements are expressed in U.S. dollars.  The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Certain amounts in the condensed consolidated financial statements for the three months ended January 31, 2007, were reclassified to conform with the presentation used for the three months ended January 31, 2008. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted pursuant to such rules and regulations.  The following discussion should be read in conjunction with our 2007 Annual Report on Form 10-K.

We are incorporated in Singapore.  We separated from Agilent and became a stand-alone company as of June 1, 2006.  On June 13, 2006, we completed our initial public offering.

Overview of Results

Our net revenue for the three months ended January 31, 2008, was $200 million, up $35 million, or 21.2%, from the comparable period in fiscal year 2007.  This decrease was primarily due to higher revenue from sales of our SOC/SIP test systems driven by the continued demand in cell phone applications, computer devices and automotive integrated circuits (“ICs”).  This increase is partially offset by lower revenue from sales of our memory test systems as customers are delaying memory tester purchases due to the challenges in their end markets. For the three months ended January 31, 2008, one of our customers accounted for more than 10% of our net revenue.  For the three months ended January 31, 2007, three of our customers accounted for more than 10% of our net revenue.

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Our total operating expenses, including separation and restructuring charges, were $64 million in the three months ended January 31, 2008, up $5 million, or 8.5%, from the comparable period in fiscal year 2007.  Our research and development and sales, general and administrative expenses were $64 million in the three months ended January 31, 2008, up $7 million, or 12.3%, from the comparable period in fiscal year 2007.  This increase was due to research and development initiatives for product programs that are planned for introduction during the second half of fiscal year 2008, increased infrastructure investment costs and higher variable compensation as a result of the increase in revenue.

In the three months ended January 31, 2008, we recorded approximately $0.4 million in restructuring expenses, $0.2 million of which was recorded to cost of sales, compared to a $1 million charge to cost of sales during the comparable period in fiscal year 2007.  Also, in connection with our separation from Agilent, we incurred separation costs, such as information technology set-up costs, consulting, legal and other professional fees and other spin-off related costs.  In the three months ended January 31, 2008, we incurred approximately $0.1 million in separation costs, all of which were recorded in cost of sales, compared to a $2 million charge to operating expenses in the comparable period in fiscal year 2007.

We derive a significant percentage of our net revenue from outside North America.  Net revenue from customers located outside of North America represented 85.0% and 51.5% of total net revenue in three months ended January 31, 2008 and 2007, respectively.  Net revenue in North America was lower by 62.5% during the three months ended January 31, 2008, compared to the same period of fiscal year 2007, due to the continuing outsourcing by our North American customers to contract manufacturers in Asia.  Net revenue in Asia (including Japan) was higher by 109% in the three months ended January 31, 2008, compared to the same period of fiscal year 2007.  We expect this trend of increasing sales in Asia (including Japan) to continue as semiconductor manufacturing activities continue to concentrate in that region.

The sales of our products and services are dependent, to a large degree, on customers who are subject to cyclical trends in the demand for their products.  These cyclical periods have had, and will continue to have, a significant effect on our business since our customers often delay or accelerate purchases in reaction to changes in their businesses and to demand fluctuations in the semiconductor industry.  Historically, these demand fluctuations have resulted in significant variations in our results of operations.  Upturns and downturns in the semiconductor industry in recent years have generally affected the semiconductor test equipment and services industry more significantly than the overall capital equipment sector.  Furthermore, we sell to a variety of customers, including subcontractors.  Because we sell to subcontractors, which during market downturns tend to reduce or cancel orders for new test systems and test services more quickly and dramatically than other customers, any downturn may cause a quicker and more significant adverse effect on our business than on the broader semiconductor industry.  In addition, although a decline in orders for semiconductor capital equipment may accompany or precede the timing of a decline in the semiconductor market as a whole, recovery in semiconductor capital equipment spending may lag the recovery by the semiconductor industry.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes.  Management bases its estimates on historical experience and various other assumptions management believes to be reasonable.  Although these estimates are based on management’s knowledge of current events and of actions that may impact the Company in the future, actual results may be different from the estimates.  Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management.  Those policies include revenue recognition, restructuring charges, inventory valuation, warranty, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and intangible assets, valuation of marketable securities and accounting for income taxes.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements.  There have been no significant changes during the three months ended January 31, 2008 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended October 31, 2007, filed with the Securities and Exchange Commission on December 21, 2007.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).  The purpose of SFAS No. 157 is to define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements.  In February 2008, the FASB issued FASB Staff Position (FSP) 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (FSP 157-1) and FSP 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). FSP 157-1 amends SFAS No. 

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157 to remove certain leasing transactions from its scope. FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2010. The measurement and disclosure requirements related to financial assets and financial liabilities are effective for us beginning in the first quarter of fiscal 2009. We are currently evaluating whether SFAS No. 157 will result in a change to our fair value measurements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value.  SFAS No.159 will be effective for us beginning in the first quarter of fiscal year 2009.  We are currently evaluating the impact of adopting SFAS No. 159 on our financial position, cash flows and results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”).  SFAS No. 141R amends SFAS 141 and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It is effective for fiscal years beginning on or after December 15, 2008 and will be applied prospectively.  We are currently assessing the impact that SFAS No. 141(R) may have on our consolidated financial statements upon adoption in fiscal 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS No. 160”).  SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated net income, be clearly identified, labeled, and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning on or after December 15, 2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements shall be applied prospectively.   We are currently assessing the impact that SFAS No. 160 may have on our consolidated financial statements upon adoption in fiscal 2010.

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Quarterly Results of Operations

Our quarterly results of operations have varied in the past and are likely to continue to vary in the future primarily due to the cyclical nature of the semiconductor industry.  Our third and fourth fiscal quarters tend to be our strongest quarters for new orders, while our first fiscal quarter tends to be our weakest quarter for orders.  We believe that the most significant factor driving these seasonal patterns is the holiday buying season for consumer electronics products.  The seasonality of our business is often masked to a significant extent by the high degree of cyclicality of the semiconductor industry.  As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance.  In future periods, the market price of our ordinary shares could decline if our revenues and results of operations are below the expectations of analysts and investors.  Factors that may cause our revenue and results of operations to vary include those discussed in the “Risk Factors” in Item 1A of Part II of, and else where in, this report.

The following table sets forth certain operating data as a percent of net revenue for the periods presented:

	Three Months Ended January 31,
	2008		2007
Net revenue:
Products	81.5	%	77.6	%
Services	18.5		22.4
Total net revenue	100.0		100.0
Cost of sales:
Cost of products	39.5		41.8
Cost of services	14.0		15.2
Total cost of sales	53.5		57.0
Gross margin (1)	46.5		43.0
Operating expenses:
Research and development	12.5		13.9
Selling, general and administrative	19.5		20.6
Separation costs	—		1.2
Total operating expenses	32.0		35.7
Income from operations	14.5		7.3
Other income (expense), net	3.0		1.8
Income before income taxes	17.5		9.1
Provision for income taxes	1.5		1.2
Net income	16.0	%	7.9	%

(1) Gross margin represents the ratio of gross profit to total net revenue

Net Revenue

	Three Months Ended
	January 31,				2008 over 2007
	2008		2007		Change
	($ in millions)
Net revenue from products:
SOC / SIP / High-Speed Memory	$	121	$	49	146.9		%
Memory	42		79		(46.8		)%
Net revenue from products	$	163	$	128	27.3		%
Net revenue from services	37		37		—
Total net revenue	$	200	$	165	$	21.2	%

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Our revenue by geographic region for the three months ended January 31, 2008 and 2007 is as follows:

	Three Months Ended
	January 31,						2008 over 2007
	2008			2007			Change
	($ in millions)
North America	$	30		$	80		(62.5	)%
As a percent of total net revenue	15.0		%	48.5		%
Europe	$	9		$	8		12.5	%
As a percent of total net revenue	4.5		%	4.8		%
Asia-Pacific, excluding Japan	$	137		$	62		121.0	%
As a percent of total net revenue	68.5		%	37.6		%
Japan	$	24		$	15		60.0	%
As a percent of total net revenue	12.0		%	9.1		%
Total net revenue	$	200		$	165		21.2	%

Net Revenue.     Net revenue is derived from the sale of products and services and is adjusted for returns and allowances, which historically have been insignificant.  Our product revenue is generated predominantly from the sales of our test equipment products.  Revenue from services includes extended warranty, customer support, consulting, training and education activities.  Service revenue is recognized over the contractual period or as services are rendered to the customer.

Net revenue in the three months ended January 31, 2008 was $200 million, an increase of $35 million, or 21.2%, from the $165 million achieved in the three months ended January 31, 2007.  Net product revenue in the three months ended January 31, 2008 was $163 million, an increase of $35 million, or 27.3%, from the $128 million achieved in the three months ended January 31, 2007.  This increase was primarily due to higher revenue from sales of our SOC/SIP test systems driven by the continued demand in cell phone applications, computer devices and automotive ICs, partially offset by lower revenue from sales of our memory test systems.

Service revenue for the three months ended January 31, 2008, accounted for $37 million, or 18.5% of net revenue, flat compared to the three months ended January 31, 2007.  We continue to service our growing installed base through contract renewals and new shipments; however our revenue for service and support typically will not fluctuate significantly due to the fact that service revenue is recognized over the contractual period or as services are rendered.

Net revenue in North America was lower by 62.5% in the three months ended January 31, 2008, compared to the three months ended January 31, 2007, due continued outsourcing by our North American customers to contract manufacturers in Asia (including Japan).  Net revenue from customers located in Asia represented 80.5% of total net revenue for the three months ended January 31, 2008, compared to 46.7% in the three months ended January 31, 2007.  We expect this trend of increasing sales in Asia (including Japan) to continue as semiconductor manufacturing activities continue to concentrate in that region.

Cost of Sales

Cost of Products

	Three Months Ended
	January 31,						2008 over 2007
	2008			2007			Change
	($ in millions)
Cost of products	$	79		$	69		14.5	%
As a percent of product revenue	48.5		%	53.9		%

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Cost of Products.    Cost of products consists primarily of manufacturing materials, outsourced manufacturing costs, direct labor, manufacturing and administrative overhead, warranty costs and provisions for excess and obsolete inventory, partially offset, when applicable, by benefits from sales of previously written-down inventory.

The increase in cost of products of approximately $10 million in the three months ended January 31, 2008, compared to the three months ended January 31, 2007, was primarily due to the increase in product shipments, higher variable performance-based compensation as well as a shift in product mix.  These increases were partially offset by $1 million in lower restructuring and separation costs.   Also, our cost of products included $0.5 million of SFAS No. 123(R) share-based compensation expense in the three months ended January 31, 2008, compared to $0.4 million of such charges in the three months ended January 31, 2007.

Cost of products as a percent of net product revenue increased by 5.4 percentage points in the three months ended January 31, 2008, compared to the three months ended January 31, 2007, primarily due to higher sales volume and variable performance compensation, product mix and offset by lower restructuring and separation costs.

Excess and obsolete inventory-related charges were $2 million in both the three months ended January 31, 2008 and 2007.  We also sold previously written down inventory of $1 million in both the three months ended January 31, 2008 and 2007.  The sales of previously written down inventory improved our cost of products gross margins by approximately 0.3 percentage points in the three months ended January 31, 2008 and by 0.4 percentage points in the three months ended January 31, 2007.

As of January 31, 2008, we held $68 million of inventory, net of $36 million of reserves, composed of $30 million of raw materials, $7 million of work in progress and $31 million of finished goods.  Raw materials include approximately $19 million of support inventory.  We continue to dispose of previously written down inventory on a recurring basis.

Cost of Services

	Three Months Ended January 31,						2008 over 2007
	2008			2007			Change
	($ in millions)
Cost of services	$	28		$	25		12.0	%
As a percent of service revenue	75.7		%	67.6		%

Cost of Services.    Cost of services includes cost of field service and support personnel, spare parts consumed in service activities and administrative overhead allocations.

Cost of services in the three months ended January 31, 2008 increased by $3 million, compared to the three months ended January 31, 2007.  Cost of services as a percent of service revenue increased by 8.1 percentage points, from 67.6% in the three months ended January 31, 2007, to 75.7% in the three months ended January 31, 2008.  This margin deterioration is primarily due to higher material and overhead costs as well as duty costs needed to support our installed base.  Our cost of services included $0.2 million of SFAS No. 123(R) share-based compensation expense in both the three months ended January 31, 2008 and 2007.

As a percent of net services revenue, cost of services will vary depending on a variety of factors, including our ability to weather price erosion, the reliability and quality of our products and our need to maintain customer service and support centers worldwide.

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Operating Expenses

Research and Development Expenses

	Three Months Ended
	January 31,						2008 over 2007
	2008			2007			Change
	($ in millions)
Research and development	$	25		$	23		8.7	%
As a percent of net revenue	12.5		%	13.9		%

Research and Development.    Research and development expense includes costs related to:

·              salaries and related compensation expenses for research and development and engineering personnel;

·              materials used in research and development activities;

·              outside contractor expenses;

·              depreciation of equipment used in research and development activities;

·              facilities and other overhead and support costs for the above; and

·              share-based compensation.

Research and development costs have generally been expensed as incurred.

Research and development expense in the three months ended January 31, 2008 increased in absolute dollars by $2 million compared to the same time last year.  This increase was primarily due to higher expenses to support new product introductions planned for release during the later part of 2008.  Research and development as a percentage of revenue decreased by 1.4 percentage points, from 13.9% in the three months ended January 31, 2007 to 12.5% in the three months ended January 31, 2008.  This decrease was primarily due to increased product shipments in the three months ended January 31, 2008.  Research and development expense also included $0.5 million of SFAS No. 123(R) share-based compensation expense for both the three months ended January 31, 2008 and 2007.

We believe that we need to maintain our level of research and development spending in order to remain competitive and, as a result, we expect our research and development expenses to vary only modestly.

Selling, General and Administrative Expenses

	Three Months Ended
	January 31,						2008 over 2007
	2008				2007		Change
	($ in millions)
Selling, general and administrative	$	39		$		34			14.7	%
As a percent of net revenue	19.5		%	20.6				%

Selling, General and Administrative.    Selling, general and administrative expense (“SG&A) includes costs related to:

·              salaries and related expenses for sales, marketing and applications engineering personnel;

·              sales commissions paid to sales representatives and distributors;

·              outside contractor expenses;

·              other sales and marketing program expenses;

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·              travel and professional service expenses;

·salaries and related expenses for administrative, finance, human resources, legal and executive personnel;

·              facility and other overhead and support costs for the above; and

·share-based compensation.

The $5 million increase in selling, general and administrative expense in the three months ended January 31, 2008, compared to the three months ended January 31, 2007, was primarily due to higher selling costs and variable performance-based compensation, increased infrastructure investment, increased governance costs and higher SFAS No. 123(R) share-based compensation expense.  SG&A expense included approximately $2.7 million of SFAS No. 123(R) share-based compensation expenses in the three months ended January 31, 2008, compared to $2.6 million of such charges for the three months ended January 31, 2007.

Restructuring Charges

In connection with the transfer of our manufacturing activities to Flextronics in fiscal 2006, we transferred approximately 85 employees to Flextronics.  As part of this arrangement, we have a potential obligation in the future of approximately $2 million associated with these transferred employees.  We have deferred these costs and are recognizing them ratably over the employees’ period of service until the respective dates of the employee’s termination from Flextronics.  Restructuring charges incurred for the three months ended January 31, 2008 was $0.4 million and $1 million for the three months ended January 31, 2007.

As of January 31, 2008, we had approximately $2 million in accrued restructuring liability.

Separation Costs

In connection with our separation from Agilent, we incurred one-time internal and external separation costs, such as information technology set-up costs and consulting and legal and other professional fees in 2007.  These expenses totaled $0.1 million and $2 million in the three months ended January 31, 2008 and 2007, respectively.

Other Income (Expense), net

Interest and other income was $5 million for the three months ended January 31, 2008, and was $3 million for the three months ended January 31, 2007.  Interest and other income consists primarily of interest earned on cash, cash equivalents and investments as well as gains and losses from foreign exchange transactions.  The increase in interest and other income during the three months ended January 31, 2008, compared to the comparable period in fiscal year 2007, is primarily a result of increased interest income from higher cash, cash equivalents and investment balances.

Provision for Income Taxes

We recorded income tax expense of approximately $3 million and $2 million in the three months ended January 31, 2008 and 2007, respectively.  The higher tax expense in the three months ended January 31, 2008 is primarily due to a higher pre-tax income.

Our effective tax rate varies based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where we operate, completion of separation, restructuring and other one-time charges, as well as discrete events, such as settlements of future audits.  We may also be subject to audits and examinations of our tax returns by tax authorities in various jurisdictions, including the Internal Revenue Service.  We intend to regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

On November 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.”  It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position as well as provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The provision of FIN 48 is effective for fiscal years beginning after December 15, 2006 and applies to all tax positions upon initial adoption of this standard.  Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48.  As a result of the adoption of FIN 48, we increased our reserves for unrecognized tax benefits by $0.2 million and increased our reserves for penalties by $0.2 million, for a total increase of $0.4 million, which was accounted for as a cumulative adjustment to the beginning balance of retained earnings.  Additionally, we reclassified $10 million from current income taxes and other taxes

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payable to long-term taxes payable.  At the adoption date of November 1, 2007, we had $9.8 million of unrecognized tax benefits which would reduce our income tax expense if recognized.  As of January 31, 2008, we had $10.4 million of unrecognized tax benefits which would reduce our income tax expense if recognized.  We estimate that there will be no material changes in our unrecognized tax benefits in the next 12 months.

Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense.  We had approximately $0.6 million of accrued interest and penalties at the adoption date of November 1, 2007 and approximately $0.8 million of accrued interest and penalties as of January 31, 2008.

Although we file Singapore, U.S. federal, U.S. state and foreign income tax returns, our three major tax jurisdictions are Singapore, U.S. and Germany.  Our 2006 and 2007 tax years remain subject to examination by the tax authorities in our major tax jurisdictions.  We are not currently under audit for any tax years.

Financial Condition

Liquidity and Capital Resources

As of January 31, 2008, we had $192 million in cash and cash equivalents, compared to $146 million as of October 31, 2007.  This increase was primarily due to cash proceeds from sale of available for sale securities and cash generated from our operations partially offset by investments in other private companies made during the quarter including the acquisition of Inovys.

Net Cash Provided by (Used in) Operating Activities

In the three months ended January 31, 2008, we generated $30 million in cash from operating activities, compared to cash provided by operating activities of $4 million in the three months ended January 31, 2007.  The $30 million cash generation during the three months ended January 31, 2008, was the result of $32 million of net income, a $6 million reduction in receivables and $14 million increase in other current and long-term assets and liabilities.  Also, during the three months ended January 31, 2008, we had non-cash charges of $4 million in depreciation and amortization expense, $2 million from gross inventory write-offs and $4 million of SFAS No. 123(R) share-based compensation costs.  These impacts were partially offset by decreases of $8 million in payables, $6 million in employee compensation and benefits, $11 million in deferred revenue and $7 million in income taxes and other taxes payable.

In the three months ended January 31, 2007, we generated $4 million in cash from operating activities.  This $4 million cash generation was a result of $13 million of net income, $45 million reduction in receivables and a $5 million increase in deferred revenue.  Also, during the three months ended January 31, 2007, we had non-cash charges of $2 million from gross inventory write-offs, $4 million of SFAS No. 123(R) share-based compensation costs, and $3 million in depreciation and amortization expense.  These impacts were partially offset by decreases of $40 million in payables, $8 million in employee compensation and benefits and $14 million in income and other taxes payable.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities in the three months ended January 31, 2008, was $12 million, compared to $6 million used in the three months ended January 31, 2007.  The net cash generated was primarily related to the net proceeds from the purchase and sales of available for sale marketable securities of $42 million.  Our marketable securities include commercial paper, corporate bond and government securities and auction rate securities.  Auction rate securities are securities that are structured with short-term interest rate reset dates of generally less than ninety days but with contractual maturities that can be well in excess of ten years.  At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par.  In the fourth quarter of fiscal year 2007, certain auction rate securities failed auction due to sell orders exceeding buy orders.  In the first quarter of 2008, we continued to see deterioration in the market for these types of securities. Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities.  We believe that the credit quality of these securities is high based on these guarantees.  Based on an analysis of other-than-temporary impairment factors, we recorded a temporary impairment within other accumulated comprehensive loss of approximately $4 million (net of tax of $1 million) at January 31, 2008 related to these auction rate securities.  Our marketable securities portfolio as of January 31, 2008 was $231 million.  The portfolio includes approximately $112 million (at cost) invested in auction rate securities of which, $49.4 million (at cost) are currently associated with failed auctions as of January 31, 2008, all of which have been in a loss position for less than 12 months.  The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the underlying securities have matured or are recalled by the issuer.  Given the recent disruptions in the credit markets and the fact that the liquidity for these types of securities remains uncertain, we have classified substantially all of our auction rate securities that were not liquidated subsequent to January 31, 2008 as long-term assets in our condensed consolidated balance sheet as our ability to liquidate such securities in the next 12 months is uncertain.

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Cash generated from our available-for-sale marketable securities was partially offset by cash paid for the acquisition of Inovys and other investments of $28 million, net of cash acquired.

Net cash used in investing activities in the three months ended January 31, 2007 was $6 million.  The $6 million expenditure was primarily related to cash payments for site-set-ups and leasehold improvements.

Net Cash Provided by Financing Activities

Net cash provided by financing activities in the three months ended January 31, 2008, was $4 million, compared to $2 million in the three months ended January 31, 2007.  The $4 million net cash proceeds in the three months ended January 31, 2008 was comprised of approximately $1 million from the exercise of employee stock options, $3 million from contributions by participants of our Employee Share Purchase Plan, for which 155,030  shares were issued in the three months ended January 31, 2008.

The $2 million net cash proceeds in the three months ended January 31, 2007 was the result of the issuance of 144,481 shares as part of the semi-annual purchase by participants in our Employee Share Purchase Plan.

Other

On November 27, 2007, our Board of Directors approved the use of up to $150 million to repurchase up to 10 percent of Verigy’s outstanding ordinary shares. We will seek to obtain shareholder approval for this repurchase program at our 2008 Annual General Meeting of Shareholders expected to be held in April 2008.

Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets.  Our cash balances are generated and held in many locations throughout the world.  Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances.  We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout our global organization.

We believe that existing cash, cash equivalents and short-term marketable securities of approximately $329 million, together with cash generated from operations, will be sufficient to satisfy our working capital, capital expenditure and other liquidity needs at least through the next twelve months.  We may require or choose to obtain debt or equity financing in the future.  We cannot assure you that additional financing, if needed, will be available on favorable terms or at all.

Contractual Obligations and Commitments

Contractual Obligations

Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, accounts receivable collections, inventory management and the timing of tax and other payments. As a result, the impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with such factors.

The following table summarizes our contractual obligations at January 31, 2008:

			Less than		One to three		Three to five		More than
(in millions)	Total		one year		years		years		five years
Operating leases	$	57	$	10	$	17	$	11	$	19
Commitments to contract manufacturers and suppliers	121		121		—		—		—
Other purchase commitments	52		52		—		—		—
Long-term liabilities	49		—		14		35		—
Total	$	279	$	183	$	31	$	46	$	19

The table aboveexcludes approximately $10 million of unrecognized tax benefits as we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority.

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Operating leases.    Commitments under operating leases relate primarily to leasehold property.  We have long-term lease arrangements for our corporate headquarters in Singapore, our U.S. headquarters in Cupertino, California, and our Boeblingen, Germany facility, currently the site of our 93000 Series platform development.  We also have long-term lease arrangements for our ASIC development office in Colorado as well as other sales and support facilities around the world.

Commitments to contract manufacturers and suppliers.    We purchase components from a variety of suppliers and historically we have used several contract manufacturers to provide manufacturing services for our products.  During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates.  However, our agreements with these suppliers usually allow us the option to cancel, reschedule, or adjust our requirements based on our business needs prior to firm orders being placed.  Typically purchase orders outstanding with delivery dates within 30 days are non-cancelable.  Therefore, only approximately 19% of our purchase commitments arising from these agreements are firm, non-cancelable and unconditional commitments.  We expect to fulfill the purchase commitments for inventory within one year.

In addition, we record a liability for firm, non-cancelable and unconditional purchase commitments for quantities in excess of our future demand forecasts.  Such liabilities were $5 million as of January 31, 2008 and October 31, 2007 for both periods presented.  These amounts are included in other current liabilities in our condensed consolidated balance sheets at January 31, 2008 and October 31, 2007.

Other purchase commitments.    Other purchase commitments relate primarily to contracts with professional services suppliers, which include third-party consultants for legal, finance, engineering and other administrative services.  With the exception of our IT service providers, our purchase commitments from professional service providers are typically cancelable with a notice of 90 days or less without significant penalties.  Our agreement with our primary IT service provider requires a notification period of 120 days and includes a termination charge of up to approximately $1.6 million in order to cancel our long-term contract.

Long-term liabilities.   Long-term liabilities relate primarily to $34 million of defined benefit and defined contribution retirement obligations, $12 million of extended warranty and deferred revenue obligations, $10 million in income taxes payable and approximately $3 million of other long-term liabilities.  Upon our separation from Agilent, the defined benefit plans for our employees in Germany, Korea, Taiwan, France and Italy were transferred to us.  With the exception of Italy and France, which involve relatively insignificant amounts, Agilent completed the funding of these transferred plans, based on 100% of the accumulated benefit obligation level as of the separation date.  Verigy made approximately $2 million of contributions to the retirement plans during fiscal year 2007.  We expect expenses of approximately $7 million in fiscal year 2008 for the retirement plans and will plan on making additional contributions during the second half of 2008.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of January 31, 2008 or October 31, 2007.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Foreign Currency Risk

With the exception of Japan, where products are sold primarily in Yen, our products are generally sold in U.S. Dollars.  Services and support sales are sold primarily in local currency when sold after the initial product sale.  As such, our revenue, costs and expenses, and monetary assets and liabilities are somewhat exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities.

We have implemented a hedging strategy that is intended to mitigate our currency exposures by entering into foreign currency forward contracts that have maturities of three months or less.  These contracts are used to reduce our risk associated with exchange rate movements, as gains and losses on these contracts are intended to offset exchange losses and gains underlying exposures.  Not withstanding our efforts to mitigate some foreign currency exposures, we do not hedge all of our foreign currency exposures, and there can be no assurances that our efforts will adequately protect us against the risks associated with foreign currency fluctuations.  Verigy does not use derivative financial instruments for speculative or trading purposes.

We performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above.  As of January 31, 2008, the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.

Investment and Interest Rate Risk

We account for our investment instruments in accordance with SFAS No. 115, Accounting for Investments in Debt and Equity Securities.  All of our cash and cash equivalents and marketable securities are treated as “available for sale” under SFAS No.115.  Our marketable securities include commercial paper, corporate bond and government securities and auction rate securities.

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Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates.  Fixed rate interest securities may have their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.  Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in the market value due to changes in interest rates.  However because we classify our debt securities as “available for sale”, no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other than temporary.  Should interest rates fluctuate by 10 percent, the value of our marketable securities would not have a significant impact as of January 31, 2008 and our interest income would have changed by approximately $0.5 million for the three months ended January 31, 2008.

Auction rate securities are securities that are structured with short-term interest rate reset dates of generally less than ninety days but with contractual maturities that can be well in excess of ten years. At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par.  In the fourth quarter of fiscal year 2007, certain auction rate securities failed auction due to sell orders exceeding buy orders.  In the first quarter of 2008, we continued to see deterioration in the market for these types of securities. Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities.  We believe that the credit quality of these securities is high based on these guarantees.  Based on an analysis of other-than-temporary impairment factors, we recorded a temporary impairment within other accumulated comprehensive loss of approximately $4 million (net of tax of $1 million) at January 31, 2008 related to these auction rate securities.  Our marketable securities portfolio as of January 31, 2008 was $231 million.  The portfolio includes approximately $112 million (at cost) invested in auction rate securities of which, $49.4 million (at cost) are currently associated with failed auctions as of January 31, 2008, all of which have been in a loss position for less than 12 months.  The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the underlying securities have matured or are recalled by the issuer.  Given the recent disruptions in the credit markets and the fact that the liquidity for these types of securities remains uncertain, we have classified substantially all of our auction rate securities that were not liquidated subsequent to January 31, 2008 as long-term assets in our condensed consolidated balance sheet as our ability to liquidate such securities in the next 12 months is uncertain.

We evaluate our investments periodically for possible other-than-temporary impairment by reviewing factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and our ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery of market value.  In the future, should we determine that the decline in value of these auction rate securities is other than temporary, it would result in a loss being recognized in our statement of operations to the extent that the carrying value of our available for sale securities exceeds the estimated fair market value of the securities, which could be material.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of January 31, 2008, pursuant to and as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of January 31, 2008, the company’s disclosure controls and procedures, as defined by Rule 13a-15(b) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in the company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.  Based on their evaluation, Verigy’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Inherent Limitations on Effectiveness of Controls

Because of its inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements.  In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.  Management necessarily applied its judgment in assessing the benefits of controls relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on the results of this evaluation, our management concluded that our internal control over financial reporting was effective as of January 31, 2008.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended January 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

From time to time we are subject to legal proceedings, claims, and litigation arising in the ordinary course of business.

ITEM 1A.  RISK FACTORS

Set forth below and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with the SEC, are risks and uncertainties that could cause actual results to differ materially from the results expressed or implied by the forward-looking statements contained in this Quarterly Report. You should carefully consider the risks described below and the other information in this report before investing in our ordinary shares. Our business could be seriously harmed by any of these risks. The trading price of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment.  The following risk factors, “Our dependence on contract manufacturers may prevent us from delivering our products on a timely basis,” “The loss of, or significant reduction in the number of sales to, our significant customers could materially harm our business,” “We face substantial competition which, among other things, may lead to price pressure and adversely affect our sales and revenue,” “We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in eographies outside of the United States” and “Funds associated with certain of our auction rate securities may not be accessible for in excess of 12 months and our auction rate securities may experience an other than temporary decline in value, which would adversely affect our income “ have been updated from the version of these risk factors set forth in our Annual Report on Form 10-K for the year ended October 31, 2007.

A description of the risk factors associated with our business is set forth below. You should carefully consider the risks described below and the other information in this report before investing in our ordinary shares. Our business could be seriously harmed by any of these risks. The trading price of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to Our Business

Our dependence on sole source suppliers may prevent us from delivering our products on a timely basis.

We rely on sole source suppliers, some of whom are relatively small in size, for many of the components we use in our products, including custom integrated circuits, relays and other electronic components. In the past, we experienced, and in the future may experience, delays in shipping our products due to our dependence on sole source suppliers. Another sole source supplier substantially extended the order lead times for the components we rely upon, and those components were difficult to source in the market. While neither of these situations had a material impact on our results, any future failure of other sole source suppliers to meet our requirements in a timely manner could impair our ability to ship products and to realize the related revenues when anticipated, which could adversely affect our business and operating results.

Our dependence on contract manufacturers may prevent us from delivering our products on a timely basis.

We rely entirely on contract manufacturers, which gives us less control over the manufacturing process and exposes us to significant risks, especially inadequate capacity, late delivery, substandard quality and high costs. Moreover, because our products are very complex to manufacture, transitioning manufacturing activities from one location to another, or from one manufacturing partner to another, is complicated. Flextronics commenced production of our Versatest series products in China in July 2006 and assumed our manufacturing activities for the 93000 Series products in Germany in June 2006. We expect to complete the transition of our volume manufacturing activities related to our 93000 Series platform to Flextronics in China by the end of fiscal year 2008.  We cannot be certain that existing or future contract manufacturers will be able to manufacture our products on a timely and cost-effective basis, or to our quality and performance specifications. If our contract manufacturers are unable to meet our manufacturing requirements in a timely manner, whether as a result of transitional issues or otherwise, our ability to ship products and to realize the related revenues when anticipated could be materially affected.

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Our quarterly operating results may fluctuate significantly from period to period and this may cause our share price to decline.

In the past, we have experienced, and in the future we expect to continue to experience, fluctuations in revenue and operating results from quarter to quarter for a variety of reasons, including the risk factors described in this report. As a result of these and other risks, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance. In addition, sales of a relatively limited number of our test systems account for a substantial portion of our net revenue in any particular quarter. In contrast, our costs are relatively fixed in the short-term. Thus, changes in the timing or terms of a small number of transactions could disproportionately affect our operating results in any particular quarter. Moreover, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we would expect to experience an immediate and significant decline in the trading price of our ordinary shares.

Our business and operating results could be harmed by the highly cyclical nature of the semiconductor industry.

Our business and operating results depend in significant part upon capital expenditures of semiconductor designers and manufacturers, which in turn depend upon the current and anticipated market demand for products incorporating semiconductors from these designers and manufacturers. Historically, the semiconductor industry has been highly cyclical with recurring periods of diminished product demand. During these periods, semiconductor designers and manufacturers, facing reduced demand for their products, have significantly reduced their capital and other expenditures, including expenditures for semiconductor test equipment and services such as those we offer. These periods of reduced product and services demand have been characterized by excessive inventory levels, cancellation of customer orders and erosion of selling prices, as well as excessive semiconductor test capacity. As a consequence, during these periods, we have experienced significant reductions in customer orders for new test equipment, fewer upgrades to existing test equipment and less demand for our test services. We have also experienced order cancellations, delays in commitments and delays in collecting accounts receivable. Furthermore, because we have a high proportion of customers that are subcontractors, which during market downturns tend to reduce or cancel orders for new test systems and test services more quickly and dramatically than other customers, any downturn may cause a quicker and more significant adverse impact on our business than on the broader semiconductor industry. In addition, although a decline in orders for semiconductor capital equipment, including test equipment, may accompany or precede the timing of a decline in the semiconductor market as a whole, any recovery in spending for semiconductor capital equipment, including test equipment, may lag any recovery by the semiconductor industry.

We have a limited ability to quickly or significantly reduce our costs, which makes us particularly vulnerable to the highly cyclical nature of the semiconductor industry.

Historically, downturns in the semiconductor industry have affected the test equipment and services market more significantly than the overall semiconductor industry. A significant portion of our overall costs are fixed. Because a high proportion of our costs are fixed, we have a limited ability to reduce expenses and manufacturing inventory purchases quickly in response to decreases in orders and revenues. Moreover, to remain competitive, even during downturns in the semiconductor industry or generally, we are required to maintain significant fixed costs for research and development. As a consequence, in a downturn, we may not be able to reduce our costs quickly, or by a sufficient amount, and our financial performance may suffer.

The market for semiconductor test equipment and services is highly concentrated, and we have limited opportunities to sell our test equipment and services.

The semiconductor industry is highly concentrated in that a small number of semiconductor designers and manufacturers and subcontractors account for a substantial portion of the purchases of semiconductor test equipment and services generally, including our test equipment and services. Consolidation in the semiconductor industry may increase this concentration. Accordingly, we expect that sales of our products will be concentrated with a limited number of large customers for the foreseeable future. We believe that our financial results will depend in significant part on our success in establishing and maintaining relationships with, and effecting substantial sales to, these potential customers. Even if we establish these relationships, our financial results will depend in large part on these customers’ sales and business results.

The loss of, or a significant reduction in the number of sales to, our significant customers could materially harm our business.

For the three months ended January 31, 2008, revenue from our top ten customers accounted for approximately 69.8% of our total net revenue, with one customer accounting for 12.3% of our total net revenue. In comparison, for the three months ended January 31, 2007, revenue from our top ten customers accounted for approximately 70.9% of our total net revenue, with one customer accounting for 15.2% of our total net revenue.

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Our relationships with our significant customers, who frequently evaluate competitive products prior to placing new orders, could be adversely affected by a number of factors, including:

·              a decision by our customers to purchase test equipment and services from our competitors;

·              a decision by our customers to pursue the development and implementation of self-testing integrated circuits or other strategies that reduce their need for our new or enhanced test equipment;

·              the loss of market share by our customers in the markets in which they operate;

·              the shift by our IDM customers to fabless semiconductor models;

·              our ability to keep pace with changes in semiconductor technology;

·              our ability to maintain quality levels of our equipment and services that meet customer expectations;

·              our ability to produce and deliver sufficient quantities of our test equipment in a timely manner; and

·              our ability to provide quality customer service and support.

Generally, our customers may cancel orders with little or no penalty. Our business and operating results could be materially adversely affected by the loss of, or any reduction in orders by, any of our significant customers, particularly if we are unable to replace that lost revenue with additional orders from new or existing customers.

If we do not maintain and expand existing customer relationships and establish new customer relationships, our ability to generate revenue growth will be adversely affected.

Our ability to increase our sales will depend in large part upon our ability to obtain orders for new test systems, enhancements for existing test systems and services from our existing and new customers. Maintaining and expanding our existing relationships and establishing new ones can require substantial investment without any assurance from customers that they will place significant orders. Moreover, if we are unable to provide new test systems, enhancements for existing test systems and services to our customers in a timely fashion or in sufficient quantities, our business will be harmed. In the past we have experienced, and in our industry it is not unusual to experience, difficulty in delivering new test equipment, as well as product enhancements and upgrades. When we encountered difficulties in the past, our customer relationships and our ability to generate additional revenue from customers were harmed. Our inability to meet the demands of customers would severely damage our reputation, which would make it more difficult for us to sell test equipment, enhancements and services to existing, as well as new, customers and would adversely affect our ability to generate revenue.

In addition, we face significant obstacles in establishing new customer relationships. It is difficult for us to establish relationships with new customers because such companies may have existing relationships with our competitors, may be unfamiliar with our product and service offerings, may have an installed base of test equipment sufficient for their current needs or may not have the resources necessary to transition to, and train their employees on, our test equipment. Even if we do succeed in establishing new relationships, these new customers may nonetheless continue to favor our competitors, as our competitors may have had longer relationships with these customers or may maintain a larger installed base of their competing test equipment in the facilities of new customers and only purchase limited quantities from us. In addition, we could face difficulties in our efforts to develop new customer relationships abroad as a result of buying practices that may favor local competitors or non-local competitors with a larger presence in local economies than we have. As a result, we may be forced to partner with local companies in order to compete for business and such arrangements, if available, may not be achieved on economically favorable terms, which could negatively affect our financial performance.

Failure to accurately estimate our customers’ demand and plan the production of our new and existing products could adversely affect our inventory levels and our income.

Given the cyclical nature of the semiconductor industry, we cannot reliably forecast the timing and size of our customers’ orders. In order to meet anticipated demand, we must order components and build some inventory before we actually receive purchase orders. Our results could be harmed if we do not accurately estimate our customers’ product demands and are unable to adjust our purchases with market fluctuations, including those caused by the cyclical nature of the semiconductor industry. During a market upturn, our results could be materially and adversely affected if we cannot increase our purchases of components, parts and services quickly enough to meet increasing demand for our products, and during a market downturn, we could have excess inventory that we would not be able to sell, likely resulting in inventory write-offs. Either of these results could have a material adverse effect on our business, financial condition and results of operations.

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Further, if we do not successfully manage the introduction of our new products and estimate customer demand for such products, our ability to sell existing inventory may be adversely affected. If demand for our new products exceeds our projections, we might have insufficient quantities of products for sale to our customers, which could cause us to miss opportunities to increase revenues during market upturns. If our projections exceed demand for our new products or if some of our customers cancel their current orders for our old products in anticipation of our new products, we may have excess inventories of our new products and excess obsolete inventories, which could result in inventory write-offs that would adversely affect our financial performance.

Failure to accurately predict our customers’ varying ordering patterns could adversely affect our inventory levels and our income.

Our customers tend to make large purchases of our products on an inconsistent basis, rather than smaller purchases on a consistent basis, which makes it difficult to predict the timing of customer orders. Failure to accurately predict our customers’ varying ordering patterns may cause us to experience insufficient or excess product inventories. If our competitors are more successful than us at timing new product introductions and inventory levels to customers’ ordering patterns, we may lose important sales opportunities and our business and results of operations may be harmed.

Existing customers may be unwilling to bear expenses associated with transitioning to new and enhanced products.

In order to grow our business, we need to sell enhancements and upgrades for our existing test equipment, in addition to selling new test equipment. Certain customers may be unwilling, or unable, to bear the costs of implementing enhancements and upgrades to our test equipment platforms, particularly during semiconductor industry downturns. As a result, it may be difficult to market and sell enhancements and upgrades to customers. In addition, as we introduce new enhancements and upgrades, we cannot predict with certainty if and when our customers will transition to those enhancements or upgrades. Any delay in or failure of our customers to transition to new enhancements or upgrades could result in excess inventories or our new or enhanced products, which could result in inventory write-offs that would adversely affect our financial performance.

If we do not introduce new test equipment platforms and upgrade existing test equipment platforms in a timely manner, and if we do not offer comprehensive and competitive services for our test equipment platforms, our test equipment and services will become obsolete, we will lose existing customers and our operating results will suffer.

The semiconductor design and manufacturing industry into which we sell our test equipment is characterized by rapid technological changes, frequent new product introductions, including upgrades to existing test equipment, and evolving industry standards. The success of our new or upgraded test equipment offerings will depend on several factors, including our ability to:

·              properly identify customer needs and anticipate technological advances and industry trends, such as the disaggregation of the traditional IDM semiconductor supply chain into fabless design companies, foundries and packaging, assembly and test providers;

·              develop and commercialize new and enhanced technologies and applications that meet our customers’ evolving performance requirements in a timely manner;

·              develop and deliver enhancements and related services for our current test equipment that are capable of satisfying our customers’ specific test requirements; and

·              introduce and promote market acceptance of new test equipment platforms, such as our Versatest V5500 Series system for memory testing.

In many cases, our test equipment and services are used by our customers to develop, test and manufacture their new products. We therefore must anticipate industry trends and develop new test equipment platforms or upgrade existing test equipment platforms in advance of the commercialization of our customers’ products. In addition, new methods of testing integrated circuits, such as self-testing integrated circuits, may be developed which would render our test equipment uncompetitive or obsolete if we failed to adopt and incorporate these new methods into our new or existing test equipment platforms. Developing new test equipment platforms and upgrading existing test equipment platforms requires a substantial investment before we can determine the commercial viability of the new or upgraded platform.

As our customers’ product requirements are diverse and subject to frequent change, we will also need to ensure that we have an adequate mix of products that meet our customers’ varying requirements. If we fail to adequately predict our customers’ needs and technological advances, we may invest heavily in research and development of test equipment that does not lead to significant revenue, or we may fail to invest in technology necessary to meet changing customer demands. Without the timely introduction of new or upgraded test equipment that reflects technological advances, our test equipment and services will likely become obsolete, we may have difficulty retaining customers and our revenue and operating results would suffer.

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Our long and variable sales cycle depends upon factors outside of our control, could cause us to expend significant time and resources prior to our ever earning associated revenues and may therefore cause fluctuations in our operating results.

Sales of our semiconductor test equipment and services depend in significant part upon semiconductor designers and manufacturers upgrading existing manufacturing equipment to accommodate the requirements of new semiconductor devices and expanding existing, and adding new, manufacturing facilities. As a result, our sales are subject to a variety of factors we cannot control, including:

·              the complexity of our customers’ fabrication processes, which impacts the number of our test systems and amount of our product enhancements and upgrades our customers require;

·              the willingness of our customers to adopt new or upgraded test equipment platforms;

·              the internal technical capabilities and sophistication of our customers, which impacts their need for our test services; and

·              the capital expenditures of our customers.

The decision to purchase our equipment and services generally involves a significant commitment of capital. As a result, our test equipment has lengthy and variable sales cycles during which we may expend substantial funds and management effort to secure a sale prior to receiving any commitment from a customer to purchase our test equipment or services. Prior to completing sales to our customers, we are often subject to a number of significant risks, including the risk that our competitors may compete for the sale or that the customer may change its technological requirements. Our business, financial condition and results of operations may be materially adversely affected by our long and variable sales cycle and the uncertainty associated with expending substantial funds and effort with no guarantee that sales will be made.

Test systems that contain defects that harm our customers could damage our reputation and cause us to lose customers and revenue.

Our test equipment is highly complex and employs advanced technologies. The use of complex technology in our test equipment increases the likelihood that we could experience design, performance or manufacturing problems. If any of our products have defects or reliability or quality problems, we may, in some circumstances, be exposed to liability, our reputation could be damaged significantly and customers might be reluctant to buy our products, which could result in a decline in revenues, an increase in product returns and the loss of existing customers and the failure to attract new customers.

We face substantial competition which, among other things, may lead to price pressure and adversely affect our sales and revenue.

We face substantial competition throughout the world in each of our product areas. Our most significant competitors historically have included Advantest Corporation, Credence Systems Corporation, LTX Corporation, Teradyne, Inc. and Yokogawa Electric Corporation. Some of our competitors have substantially greater financial resources, broader product offerings, more extensive engineering, manufacturing, marketing and customer support capabilities or a greater presence in certain countries than we do. We may have less leverage with component vendors than some of our competitors. Also, some of our competitors have greater resources and may be more willing or able than we are to put capital at risk to win business. Price reductions by our competitors may force us to lower our prices. We also expect our current competitors to continue to improve the performance of their current products and to introduce new products, technologies or services that could adversely affect sales of our current and future test equipment and services. Additionally, current and future competitors may introduce testing technologies, equipment and services, which may in turn reduce the value of our own test equipment and services. Any of these circumstances may limit our opportunities for growth and negatively impact our financial performance.

We may face competition from Agilent in the future.

Pursuant to the intellectual property matters agreement between us and Agilent in connection with our separation from Agilent, except as described below, until October 31, 2009, three years after the date on which Agilent distributed to its stockholders all of our ordinary shares that it held, Agilent agreed not to develop, manufacture, distribute, support or service automated semiconductor test systems for providing high-volume functional test of ICs (including memory and high speed memory devices and SOCs) or SIPs, or components for such products. However, during this three-year period, Agilent may compete with us with respect to:

·              products (other than automated semiconductor test systems for high-volume functional test) for providing functional test of ICs or SIPs, whether or not including parametric test (the testing of selected parameters of a device or group of devices to identify errors or flaws), design verification or engineering characterization capabilities;

·              automated semiconductor test development systems (including hardware and software) that are intended to enable development of test programs and protocols for use in high-volume functional test of ICs or SIPs, whether or not such development test systems themselves are capable of performing such high-volume functional test; and

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·              products (other than automated semiconductor test systems for high-volume functional test) for providing parametric test, design verification, engineering characterization or functional test of: (i) wireless communications devices, such as cellular telephones or wireless networking products, whether in packaged device or module form, and whether or not implemented as an IC or SIP; (ii) modules (such as RF front-end modules) containing one or more ICs connected with other active or passive devices; and (iii) RF and higher frequency (e.g., microwave and optical) devices and components such as oscillators, mixers, amplifiers and 3-port devices, to the extent that such devices or components are in the form of an IC or SIP.

While none of the product types for which Agilent reserved the right to compete with us has provided material revenue to us in the past, we can provide no assurance that the limitations contained in the intellectual property matters agreement, which was entered into in the context of a parent-subsidiary relationship and may be less favorable to us than if it had been negotiated between unaffiliated third parties, will be effective at protecting us from competition from Agilent.

In addition, the intellectual property matters agreement permits Agilent to fulfill its obligations under contracts in existence as of March 1, 2006, even though fulfilling such obligations would otherwise have been precluded during the non-competition period and even if fulfilling such obligations would result in Agilent competing with us. This exception will allow Agilent to fulfill its obligations to a semiconductor manufacturer pursuant to which Agilent will develop and sell components to the manufacturer for use in the manufacturer’s semiconductor test systems purchased from a competitor of Verigy. While we do not believe that Agilent fulfilling these obligations will have a material effect on our business or prospects, we may in the future be less successful at selling test systems to this semiconductor manufacturer than would have been the case were the manufacturer not able to combine products from Agilent with the test systems of our competitor.

Although under the intellectual property matters agreement Agilent transferred all of the intellectual property rights Agilent held that relate exclusively to our products to us, Agilent retained and only licensed to us the intellectual property rights to underlying technologies used in both our products and the products of Agilent. Under the agreement, Agilent remains free to use the retained underlying technologies without restriction (other than as described above with respect to the three-year non-compete period).

After October 31, 2009, Agilent will be free to compete with any portion or all of our business without restriction, and in doing so will be free to use the retained underlying technologies. Agilent will not be permitted to use the intellectual property rights transferred to us, and licensed from us back to Agilent, to compete with us with respect to our core business of developing, manufacturing, selling and supporting automated semiconductor test systems for high-volume functional test of ICs or SIPs. Agilent will, however, be able to use such intellectual property rights to develop and sell components for such systems, including systems developed and sold by us as well as those developed and sold by our competitors. While selling components has not represented a material portion of our business in the past and is not expected to be an area of focus for the near future, our business could be adversely affected if systems offered by our competitors become more competitive as a result of Agilent supplying components for our competitors’ systems or if, by buying components from Agilent, our customers are able to delay or bypass altogether purchasing newer systems from us.

Competition from Agilent during or after the three-year non-compete period described above or other actions taken by Agilent that create real or perceived competition with us, could harm our business and operating results.

Third parties may compete with us by using intellectual property that Agilent licensed to us under the intellectual property matters agreement.

Under the intellectual property matters agreement, Agilent retained and only licensed to us the intellectual property rights to underlying technologies used in both our products and the products of Agilent. Under the agreement, Agilent remains free to license the intellectual property rights to the underlying technologies to any party, including our competitors. Any unaffiliated third party that is licensed to use such retained intellectual property would not be subject to the non-competition provisions of the intellectual property matters agreement and could compete with us at any time using the underlying technologies. The intellectual property that Agilent retained and that can be licensed in this manner does not relate solely or primarily to one or more of our products, or groups of products; rather, the intellectual property that Agilent licensed to us is generally used broadly across our entire product portfolio. Competition by third parties using the underlying technologies retained by Agilent could harm our business and operating results.

Third parties may claim we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling our products or services.

Our industry has been and continues to be characterized by uncertain and conflicting intellectual property claims and vigorous protection and pursuit of these rights. As a result, third parties may claim that we are infringing their intellectual property rights, and we may be unaware of intellectual property rights of others that may cover some of our technology, products and services. Any litigation regarding patents or other intellectual property could be costly and time-consuming, and divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements. However, we may not be able to obtain royalty or license agreements on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of certain of our products and services.

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In addition, there may be third parties who have refrained from asserting intellectual property infringement claims against our products while we were a wholly owned subsidiary of Agilent that elect to pursue such claims against us now that our separation from Agilent is complete because we no longer have the benefit of being able to counterclaim based on Agilent’s patent portfolio, and we are no longer able to provide licenses of Agilent’s patent portfolio in order to resolve such claims.

Third parties may infringe our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury.

Our success depends in large part on our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. If we fail to protect our intellectual property rights, our competitive position could suffer, which could harm our operating results. Our pending patent and trademark registration applications may not be allowed or competitors may challenge the validity or scope of these patent applications or trademark registrations. In addition, our patents may not provide us with a significant competitive advantage.

We may be required to spend significant resources to monitor and protect our intellectual property rights. We may not be able to detect infringement and may lose competitive position in the market before we do so. In addition, competitors may design around our technology or develop competing technologies. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the United States, and we may be subject to unauthorized use of our products or technologies in those countries, particularly in Asia, where we expect our business to expand significantly in the foreseeable future.

In addition, our agreements with Agilent, and in particular the intellectual property matters agreement, set forth the terms and provisions under which we received the intellectual property rights necessary to operate our business. Under our agreements with Agilent, we do not have the right to enforce against third parties intellectual property rights we license from Agilent, and Agilent is under no obligation to enforce such rights on our behalf.

Intellectual property rights are difficult to enforce in the certain countries, which may inhibit our ability to protect our intellectual property rights or those of our suppliers and customers in those countries.

Commercial law in certain countries is relatively undeveloped compared to the commercial law in the U.S. Limited protection of intellectual property is available under local law. Consequently, operating in certain countries may subject us to an increased risk that unauthorized parties may attempt to copy or otherwise obtain or use our intellectual property or the intellectual property of our suppliers, customers or business partners. We cannot assure you that we will be able to protect our intellectual property rights or those of our suppliers and customers or have adequate legal recourse in the event that we encounter difficulties with infringements of intellectual property under local law.

We may incur a variety of costs to engage in future acquisitions of companies, products or technologies, and the anticipated benefits of any acquisitions we may make may never be realized.

We may acquire, or make significant or minority investments in, complementary businesses, products or technologies. Any future acquisitions or investments could be accompanied by risks such as:

·              difficulties in assimilating the operations and personnel of acquired companies;

·              diversion of our management’s attention from ongoing business concerns;

·              our potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;

·              additional expense associated with amortization of acquired assets;

·              difficulty in maintaining uniform standards, controls, procedures and policies;

·              impairment of existing relationships with employees, suppliers and customers as a result of the integration of new management personnel;

·              dilution to our shareholders in the event we issue shares as consideration to finance an acquisition;

·              difficulty integrating and implementing the accounting controls necessary to comply with regulatory requirements such as Section 404 of the Sarbanes-Oxley Act; and

·              increased leverage, if we incur debt to finance an acquisition.

We cannot guarantee that we will realize any benefit from the integration of any business, products or technologies that we might acquire in the future, and our failure to do so could harm our business.

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Our executive officers and certain key personnel are critical to our business.

Our future operating results will depend substantially upon the performance of our executive officers and key personnel. Our future operating results also depend in significant part upon our ability to attract and retain qualified management, manufacturing, technical, application engineering, marketing, sales and support personnel. Competition for qualified personnel is intense, and we cannot ensure success in attracting or retaining qualified personnel. Our business is particularly dependent on expertise which only a very limited number of engineers possess and it may be increasingly difficult for us to hire personnel over time. We operate in several geographic locations, including parts of Asia and Silicon Valley, where the labor markets, especially for application engineers, are particularly competitive. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees, particularly engineers.

Our effective tax rate may vary significantly from period to period, and we could owe significant taxes even during periods when we experience low operating profit or operating losses.

We have negotiated tax incentives with the Singapore Economic Development Board, an agency of the Government of Singapore, which have been approved by Singapore’s Ministry of Finance and Ministry of Trade and Industry. Under the incentives, a portion of the income we earn in Singapore during these ten to fifteen year incentive periods is subject to reduced rates of Singapore income tax. The incentive tax rates will expire in various fiscal years beginning in fiscal 2011. The Singapore corporate income tax rate that would apply, absent the incentives, is 18% and 20% for fiscal years 2007 and 2006, respectively. As a result of these incentives, income taxes decreased by $18 million or $0.30 per share (diluted) and $8 million or $0.15 per share (diluted) in fiscal years 2007 and 2006, respectively. In order to receive the benefit of the incentives, we must develop and maintain in Singapore certain functions such as procurement, financial services, order management, credit and collections, spare parts depot and distribution center, a refurbishment center and regional activities like an application development center. In addition to these qualifying activities, we must hire specified numbers of employees and maintain minimum levels of investment in Singapore. We have from two to nine years to phase-in the qualifying activities and to hire the specified numbers of employees. If we do not fulfill these conditions for any reason, our incentive could lapse, our income in Singapore would be subject to taxation at higher rates, and our overall effective tax rate could be between fifteen to twenty percentage points higher than would have been the case had we maintained the benefit of the incentives.

In addition, our effective tax rate may vary significantly from period to period because, for example, we may owe significant taxes in jurisdictions other than Singapore during periods when we are profitable in those jurisdictions even though we may be experiencing low operating profit or operating losses on a consolidated basis. Our effective tax rate varies based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where we operate, as well as discrete events, such as settlements of future audits. Certain combinations of these factors could cause us to owe significant taxes even during periods when we experience low income before taxes or loss before taxes.

We sell our products and services worldwide, and our business is subject to risks inherent in conducting business activities in geographies outside of the United States.

Our headquarters are in Singapore, our manufacturing is outsourced largely to Flextronics, and we sell our products and services worldwide. As a result, our business is subject to risks associated with doing business internationally. Revenue from customers in Japan accounted for approximately 12.0% and 9.1% of total net revenue for the three months ended January 31, 2008 and 2007,  respectively. Revenue from customers in Asia-Pacific, excluding Japan, accounted for approximately 68.5% and 37.6% for the three months ended January 31, 2008 and 2007, respectively. The economies of Asia have been highly volatile and recessionary in the past, resulting in significant fluctuations in local currencies. Our exposure to the business risks presented by the economies of Asia will increase to the extent that we continue to expand our operations in that region, including continuing to transition our volume contract manufacturing processes to Flextronics in China.

Our international activities subjects us to a number of risks associated with conducting operations internationally, including:

·                      difficulties in managing geographically disparate operations;

·                      potential greater difficulty and longer time in collecting accounts receivable from customers located abroad;

·                      difficulties in enforcing agreements through non-U.S. legal systems;

·                      unexpected changes in regulatory requirements that may limit our ability to export our software or sell into particular jurisdictions or impose multiple conflicting tax laws and regulations;

·                      political and economic instability, civil unrest or war;

·                      terrorist activities and health risks such as “bird flu’ and SARS that impact international commerce and travel;

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·                      difficulties in protecting our intellectual property rights, particularly in countries where the laws and practices do not protect proprietary rights to as great an extent as do the laws and practices of the United States;

·                      changing laws and policies affecting economic liberalization, foreign investment, currency convertibility or exchange rates, taxation or employment; and

·                      nationalization of foreign owned assets, including intellectual property.

In addition, we are exposed to foreign currency exchange movements versus the U.S. dollar, particularly the Japanese Yen and the Euro. With respect to revenue, our primary exposure exists during the period between execution of a purchase order denominated in a foreign currency and collection of the related receivable. During this period, changes in the exchange rates of the foreign currency to the U.S. Dollar will affect our revenue, cost of sales and operating margins and could result in exchange gains or losses. While a significant portion of our purchase orders to date have been denominated in U.S. Dollars, competitive conditions may require us to enter into an increasing number of purchase orders denominated in foreign currencies. We incur a variety of costs in foreign currencies, including some of our manufacturing costs, component costs and sales costs. Therefore, as we expand our operations in Asia, we may become more exposed to a strengthening of currencies in the region against the U.S. dollar. We cannot assure you that any hedging transactions we may enter into will be effective or will not result in foreign exchange hedging gains or losses. As a result, we are exposed to greater risks in currency fluctuations.

Funds associated with certain of our auction rate securities may not be accessible for in excess of 12 months and our auction rate securities may experience an other than temporary decline in value, which would adversely affect our income.

Our marketable securities portfolio, which totals $231 million at January 31, 2008, includes auction rate securities of approximately $112 million (at cost). Auction rate securities are securities that are structured with short-term interest rate reset dates of generally less than ninety days, but with contractual maturities that can be well in excess of ten years. At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par. In the fourth quarter of fiscal year 2007, certain auction rate securities failed auction due to sell orders exceeding buy orders.  In the first quarter of 2008, we continued to see deterioration in the market for these types of securities and had failed auctions as of January 31, 2008 with a cost value of $49.4 million.  Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities.  We believe that the credit quality of these securities is high based on these guarantees.  Based on an analysis of other-than-temporary impairment factors, we recorded a temporary impairment within other accumulated comprehensive loss of approximately $4 million (net of tax of $1 million) at January 31, 2008 related to these auction rate securities.  Our marketable securities portfolio as of January 31, 2008 was $231 million.  The portfolio includes approximately $112 million (at cost) invested in auction rate securities of which, $49.4 million (at cost) are currently associated with failed auctions as of January 31, 2008, all of which have been in a loss position for less than 12 months.  The funds associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the underlying securities have matured or are recalled by the issuer.  Given the recent disruptions in the credit markets and the fact that the liquidity for these types of securities remains uncertain, we have classified substantially all of our auction rate securities that were not liquidated subsequent to January 31, 2008 as long-term assets in our condensed consolidated balance sheet as our ability to liquidate such securities in the next 12 months is uncertain.

If our facilities or the facilities of our contract manufacturers were to experience catastrophic loss due to natural disasters, our operations would be seriously harmed.

Our facilities and the facilities of our contract manufacturers could be subject to a catastrophic loss caused by natural disasters, including fires and earthquakes. We and our contract manufacturers have significant facilities in areas with above average seismic activity, such as California, Japan and Taiwan. If any of these facilities were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, reduce revenue and result in large expenses to repair or replace the facility. We do not carry catastrophic insurance policies that cover potential losses caused by earthquakes.

Risks Related to the Securities Markets and Ownership of Our Ordinary Shares

Our securities have a limited trading history, and the price of our ordinary shares may fluctuate significantly.

There has been a public market for our ordinary shares for a short period of time. An active public market for our ordinary shares may not be sustained, which would adversely impact the liquidity and market price of our ordinary shares. The market price of our ordinary shares may fluctuate significantly. Among the factors that could affect the market price of our ordinary shares are the risk factors described in this section and other factors including:

·                      changes in expectations as to our future financial performance, including financial estimates or publication of research reports by securities analysts;

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·                      strategic moves by us or our competitors, such as acquisitions or restructurings;

·                      announcements of new products or technical innovations by us or our competitors;

·                      actions by institutional shareholders; and

·                      speculation in the press or investment community.

We may become involved in securities litigation that could divert management’s attention and harm our business.

The stock market in general, and The NASDAQ Global Select Market and the securities of semiconductor capital equipment companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the affected companies. Further, the market prices of securities of semiconductor test system companies have been particularly volatile. These market and industry factors may materially harm the market price of our ordinary shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Such litigation, whether or not meritorious, could result in the expenditure of substantial funds, divert management’s attention and resources, and harm our reputation in the industry and the securities markets, which would reduce our profitability and harm our business.

It may be difficult for investors to affect service of process within the United States on us or to enforce civil liabilities under the federal securities laws of the United States against us.

We are incorporated in Singapore under the Companies Act, Chapter 50 of Singapore, or Singapore Companies Act. Some of our officers and directors reside outside the United States. A substantial portion of our assets is located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us. Similarly, investors may be unable to enforce judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States against us in U.S. courts. Judgments of U.S. courts based upon the civil liability provisions of the federal securities laws of the United States are not directly enforceable in Singapore courts and are not given the same effect in Singapore as judgments of a Singapore court. Accordingly, there can be no assurance as to whether Singapore courts will enter judgments in actions brought in Singapore courts based upon the civil liability provisions of the federal securities laws of the United States.

Singapore corporate law may impede a takeover of our company by a third party, which could adversely affect the value of our ordinary shares.

Under the Singapore Code on Take-overs and Mergers, generally when a person (or a group of persons acting together) acquires shares having 30% or more of the voting rights of a company or holds at least 30% but not more than 50% of the voting rights of a company and thereafter acquires in any period of six months additional shares carrying more than 1% of the voting rights, then such person is required by law to make an offer to acquire the remaining voting shares of the company. Consequently, the Code of Take-overs and Mergers may discourage potential acquirers from purchasing substantial but non-majority ownership positions of our ordinary shares, which could, in turn, impede takeovers of our company by a third party.

For a limited period of time, our directors have general authority to issue new shares on terms and conditions and with any preferences, rights or restrictions as may be determined by our board of directors in its sole discretion.

Under Singapore law, new shares may be issued only with the prior approval of our shareholders in a general meeting. At our 2007 annual general meeting of shareholders, our shareholders provided our directors general authority to issue new shares until the earlier to occur of the conclusion of our 2008 annual general meeting or the expiration of the period within which the next annual general meeting is required to be held. Subject to the shareholders’ approval, the provisions of the Singapore Companies Act and our amended and restated memorandum and articles of association, our board of directors may allot and issue new shares on terms and conditions and with the rights and restrictions as they may think fit to impose. Any additional issuances of new shares by our directors may adversely impact the market price of our ordinary shares.

Our shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation.

Our corporate affairs are governed by our amended and restated memorandum and articles of association and by the laws governing corporations incorporated in Singapore. The rights of our shareholders and the responsibilities of the members of our board of directors under Singapore law are different from those applicable to a corporation incorporated in the United States. Therefore, our public shareholders may have more difficulty in protecting their interests in connection with actions taken by our management, members of our board of directors or our controlling shareholder than they would as shareholders of a corporation incorporated in the United States. For example, controlling shareholders in U.S. corporations are subject to fiduciary duties while controlling shareholders in Singapore corporations are not subject to such duties.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3. DEFAULT UPON SENIOR SECURITIES

Not applicable

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5.OTHER INFORMATION

U.S. Officer Severance Agreements

On March 6, 2008, the Compensation Committee approved an Amended and Restated Severance Agreement to be entered into between the Company and each U.S. officer of the Company. The Amended and Restated Severance Agreements bring such agreements into compliance with Section 409A of the Internal Revenue Code and the final regulations and other official guidance thereunder and replace in their entirety the original Severance Agreements between the Company and the U.S. officers, approved by the Compensation Committee on December 13, 2006.

The form of Amended and Restated Severance Agreement is filed with this Quarterly Report on Form 10-Q as Exhibit 10.11, and is incorporated by reference in this description.

Amendment to Pascal Rondé Awards

On March 6, 2008, the Compensation Committee approved certain modifications to the existing equity award agreements between the Company and Pascal Rondé in order to structure the awards in a similar manner to equity awards for executives worldwide.

Specifically, Mr. Rondé was granted an option to purchase 62,500 shares at the time of the Company’s initial public offering.  That award provided for 100% vesting on the fourth anniversary of the date of grant.  The Compensation Committee approved a modification to provide for annual vesting over the same four-year period, which is consistent with awards made to other executives at that time. The Compensation Committee also approved a modification to Mr. Rondé’s share unit agreement, also granted at the time of the Company’s initial public offering, to provide for 50% vesting after two years and 25% per year thereafter (fully vesting over the same four-year period as originally provided).

Mr. Rondé’s other share option agreements previously provided that the options were exercisable four years and one day from the date of grant and expired 90 days following termination of employment, which means that a vested option could expire before it became exercisable.  The Compensation Committee approved a modification to Mr. Rondé’s share option agreements to provide that the options will expire as to vested shares at the later of (i) 90 days from termination of employment or (ii) 90 days after they first become exercisable (but in no event later than the original term of the option).

Finally, the Compensation Committee approved modifications to Mr. Rondé’s other share unit agreements to provide that RSUs settle as they vest.

                The forms of amended award agreements, as modified by the Compensation Committee as of March 6, 2008, are attached to this Quarterly Report on Form 10-Q as Exhibits 10.2.7, 10.2.8, 10.2.11, 10.2.13, 10.2.15 and 10.2.16, and are incorporated into this description under Item 5.

ITEM 6.  EXHIBITS

(a) Exhibits:

Exhibit		Incorporated By Reference
Number	Exhibit Description	Form	File Number	Exhibit	Date	Filed Herewith
3.1	Amended and Restated Memorandum and Articles of Association of Verigy Ltd.	S-1/A	333-132291	3.2	6/5/2006
4.1	Form of Specimen Share Certificate for Verigy Ltd.’s Ordinary Shares	S-1/A	333-132291	4.1	6/1/2006
10.2.7**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Option Agreement for the Share Options Granted to Pascal Rondé on June 12, 2006					X
10.2.8**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé on June 12, 2006					X
10.2.11**	Verigy Ltd. Amended and Restated Replacement Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé, on October 31, 2006					X
10.2.13**	Form of Amended and Restated Four-Tranche Officer Share Option Agreement for Pascal Rondé, effective March 6, 2008					X
10.2.15**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé on December 13, 2006					X
10.2.16**	Form of Verigy Ltd. 2006 Equity Incentive Plan Share Unit Agreement for Pascal Rondé, as revised 2008					X
10.9.1**	Form of Amended and Restated Severance Agreement for U.S.-Based Officers					X
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X

**     Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 7, 2008	By:	/s/ Robert J. Nikl
		ROBERT J. NIKL
		Vice President and Chief Financial Officer

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Verigy Ltd.

EXHIBIT INDEX

Exhibit		Incorporated By Reference
Number	Exhibit Description	Form	File Number	Exhibit	Date	Filed Herewith
3.1	Amended and Restated Memorandum and Articles of Association of Verigy Ltd.	S-1/A	333-132291	3.2	6/5/2006
4.1	Form of Specimen Share Certificate for Verigy Ltd.’s Ordinary Shares	S-1/A	333-132291	4.1	6/1/2006
10.2.7**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Option Agreement for the Share Options Granted to Pascal Rondé on June 12, 2006					X
10.2.8**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé on June 12, 2006					X
10.2.11**	Verigy Ltd. Amended and Restated Replacement Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé, on October 31, 2006					X
10.2.13**	Form of Amended and Restated Four-Tranche Officer Share Option Agreement for Pascal Rondé, effective March 6, 2008					X
10.2.15**	Verigy Ltd. Amended and Restated 2006 Equity Incentive Plan Share Unit Agreement for the Restricted Share Units Granted to Pascal Rondé on December 13, 2006					X
10.2.16**	Form of Verigy Ltd. 2006 Equity Incentive Plan Share Unit Agreement for Pascal Rondé, as revised 2008					X
10.9.1**	Form of Amended and Restated Severance Agreement for U.S.-Based Officers					X
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X

**     Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

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EX-10.2.7

EXHIBIT 10.2.7

Amended and Restated Share Option Agreement

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED & RESTATED NOTICE OF SHARE OPTION GRANT

For Awardees located in France

Effective as of March 6, 2008, this Amended & Restated Notice of Share Option Grant and Amended & Restated Share Option Agreement (together, the “Amended Share Option Agreement”) amend and replace in their entirety that certain Notice of Share Option Grant and Verigy Ltd. 2006 Equity Incentive Plan Share Option Agreement dated June 12, 2006.

You have been granted an option to purchase 62,500 Ordinary Shares of Verigy Ltd. (the “Company”) at the exercise price of $15.00 per share.  Your option is summarized on the Award Summary page of your Smith Barney account.

Your option becomes vested with respect to 25% of the Shares subject to your option on each of the following dates, provided that you continue to be an Awardee Eligible to Vest (as defined in the U.S. Plan) as of each such date: June 12, 2007; June 12, 2008; June 12, 2009 and June 12, 2010.

You and the Company agree that your option is granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan and the Verigy Ltd. 2006 Equity Incentive Plan for Options Granted to employees in France (the “French Option Plan”) (together, the “Plan”), the Amended and Restated Share Option Agreement (of which this notice is a part), and the Award Summary.

Except as otherwise provided in the event of death or disability, this option shall first become exercisable on that date that is four years and one day from the date of grant.

Your option grant is intended to qualify for favorable tax and social security contributions treatment in France under Sections L. 225-177 to L. 225-186 of the French Commercial Code, as subsequently amended.

You further agree that the Company shall cause the shares issued upon exercise of this option to be deposited in your Smith Barney Account and, further, that the Company may deliver electronically all documents relating to the Plan or your option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify you regarding such posting.

BY CLICKING ON THE “ACCEPT”BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE AMENDED SHARE AGREEMENT AND THE PLAN. VERIGY LTD. By: Keith L. Barnes President and Chief Executive Officer

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED & RESTATED SHARE OPTION AGREEMENT

Tax Treatment	This option is intended to be a nonstatutory stock option.
Term	This option expires in any event at the close of business at Company headquarters on the day before the 7th anniversary of the Date of Grant, as shown in the Award Summary. (It may expire earlier if your Service terminates, as described below.)
Vesting	This option becomes vested during the Option term, as shown in the Notice of Share Option Grant, as long as you remain an Awardee Eligible to Vest (as defined in the U.S. Plan).
	This option will in no event become vested for additional shares after your Service has terminated for any reason, except as otherwise provided in the Plan, Amended Share Option Agreement or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 17, 2007 (the “Modification Agreement”).
Exercisability	Except as otherwise provided in the event of death or disability, this option shall first become exercisable on that date that is four years and one day from the date of grant.
Regular Termination	If your Service terminates for any reason except death, disability (as defined below), or retirement due to age (as defined in the Plan), then this option will expire at the close of business at Company headquarters on the later of (i) the date 90 days after your termination date or (ii) the date 90 days following the fourth anniversary of the date of grant, but in no event later than the expiration of the term of this option. The Company determines when your Service terminates for this purpose.
Death	If you die before your Service terminates, this option will become immediately vested and exercisable in full and will expire at the close of business at Company headquarters on the date 6 months after the date of death.
	In the event of your death after cessation of employment but prior to the termination of the option, your heirs may exercise the vested options for 6 months following your death. In these circumstances, all unvested options will lapse upon your death.
	All vested options that are not exercised within 6 months of your death will be forfeited. The 6-month exercise period will apply without regard to the term of the option.

Disability	If your Service terminates because of your disability which is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code, then this option will become immediately vested and exercisable in full and expire at the close of business at Company headquarters on the date 12 months after your termination date, or, if earlier, the expiration of the term of this option.
Retirement	If your Service terminates because of retirement due to age (as defined in the Plan), then (i) the vested portion of this option will be determined by adding twelve months to your length of service and (ii) the option will expire at the close of business at Company headquarters on the later of (A) the date twelve months after your termination date or (B) the date twelve months following the fourth anniversary of the date of grant, but in no event later than the expiration of the term of this option.
Leaves of Absence and Part-Time Work	For purposes of this option, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work.
	Your status as an Awardee Eligible to Vest (as defined in the U.S. Plan) will always cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 5 of the U.S. Plan.
	If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Share Option Grant may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Restrictions on Exercise	The Company will not permit you to exercise this option if the issuance of shares at that time would violate any law or regulation.
Notice of Exercise	You may exercise this option from time to time for any number of shares for which the option is then exercisable, by notice in writing, electronically or by other means to, and as proscribed by, the Company’s equity incentive administration service provider (the “administration service provider”). Your exercise notice will be effective and irrevocable at such time as your notice, method of payment and such other documentation as the administration service provider may require have been received by the administration service provider.
	If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

Form of Payment	When you exercise this option, you must provide for payment of the option exercise price for the shares that you are purchasing. Notwithstanding any provision in the U.S. Plan to the contrary, upon exercise of an option, the full exercise price will be paid either in cash, by check or by credit transfer. Under a cashless exercise program, you may give irrevocable instructions to the administration service provider to properly deliver the option price to the Company.
Withholding Taxes and Stock Withholding	Regardless of any action the Company or your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the option grant, including the grant, vesting or exercise of the option, the subsequent sale of shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the option to reduce or eliminate your liability for Tax-Related Items.
	Prior to exercise of the option, you will pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer. In this regard, you authorize the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer, within legal limits, or from proceeds of the sale of shares. Finally, you will pay to the Company or the Employer, by means of cash, check or credit transfer, any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your purchase of shares that cannot be satisfied by the means previously described. The Company may refuse to honor the exercise and refuse to deliver the shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
Restrictions on Resale	You agree not to sell any option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
Transfer of Option	This option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by the beneficiary designation, will or by the laws of descent or distribution and may be exercised, during your lifetime, only by you.

Retention Rights	Your option or this Amended Share Option Agreement does not give you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time.
Stockholder Rights	You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this option by submitting the required notice in accordance with the provisions under “Notice of Exercise” set forth above and paying the exercise price and any applicable withholding taxes. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan.
Nature of the Grant	In accepting the grant, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Amended Share Option Agreement; (b) the grant of the option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past; (c) all decisions with respect to future option grants, if any, will be at the sole discretion of the Company; (d) you are voluntarily participating in the Plan; (e) the option is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which is outside the scope of your employment contract, if any; (f) the option is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer;

(g) in the event that you are not an employee of the Company, the option grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the option grant will not be interpreted to form an employment contract with the Employer or any subsidiary or affiliate of the Company; (h) the future value of the underlying shares is unknown and cannot be predicted with certainty; (i) if the underlying shares do not increase in value, the option will have no value; (j) if you exercise your option and obtain shares, the value of those shares acquired upon exercise may increase or decrease in value, even below the exercise price; (k) in consideration of the grant of the option, no claim or entitlement to compensation or damages shall arise from termination of the option or diminution in value of the option or shares purchased through exercise of the option resulting from termination of your employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Amended Share Option Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and (l) in the event of termination of your employment, your right to receive the option and vest in the option under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of employment, your right to exercise the option after termination of employment, if any, will be measured by the date of termination of your active employment and will not be extended by any notice period mandated under local law; the Company shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your option grant.

Data Privacy Notice and Consent

You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Amended Share Option Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan.

	You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon exercise of the option may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, You understand that You may contact your local human resources representative.
Language	If you have received this Amended Share Option Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
Applicable Law	This Amended Share Option Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).
The Plan and Other Agreements	The text of the Plan is incorporated in this Amended Share Option Agreement by reference.

This Amended Share Option Agreement and the Plan, together with the Modification Agreement constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option, except for the Modification Agreement, are superseded. This Amended Share Option Agreement may be amended only by another written agreement between the parties.

If one or more of the provisions of this Amended Share Option Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Amended Share Option Agreement to be construed so as to foster the intent of this Amended Share Option Agreement and the Plan,

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THIS AMENDED SHARE OPTION AGREEMENT AND THE PLAN.

EX-10.2.8

EXHIBIT 10.2.8

Amended and Restated Share Unit Award Agreement

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED & RESTATED NOTICE OF SHARE UNIT AWARD

Effective as of March 6, 2008, this Amended & Restated Notice of Share Unit Award and Amended & Restated Share Unit Agreement (together, the “Amended Share Unit Agreement”) amend and replace in their entirety that certain Notice of Share Unit Award and Verigy Ltd. 2006 Equity Incentive Plan Share Unit Agreement dated June 12, 2006.

You have been granted units representing 8,334 Ordinary Shares of Verigy Ltd. (the “Company”). Your award is summarized on the Award Summary page of your Smith Barney account.

The first 50% of the units subject to this award vest on June 12, 2008 and an additional 25% of the units subject to this award vest on each of June 12, 2009 and June 12, 2010, provided that you continue to be an Awardee Eligible to Vest (as defined in the U.S. Plan) as of each such date.

You and the Company agree that these units are granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan (the “U.S. Plan”) and the Verigy Ltd. 2006 Equity Incentive Plan for Awards Granted to Employees in France (the “French Share Units Plan”) (together, the “Plan”), the Amended Share Unit Agreement (of which this notice is a part), and the Award Summary.

These units are intended to be a grant of a French qualified RSU which qualifies for favorable tax and social security contributions treatment in France under Section L. 225-197-1 to L. 225-197-5 of the French Commercial Code, as amended.

You further agree that the Company shall cause the shares issued upon payment of your units to be deposited in your Smith Barney account, and, further, that the Company may deliver electronically all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements). You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company. If the Company posts these documents on a web site, it will notify you regarding such posting.

BY CLICKING ON THE “ACCEPT”BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE AMENDED SHARE UNIT AGREEMENT AND THE PLAN. VERIGY LTD. By: Keith L. Barnes        President and Chief Executive Officer

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED & RESTATED SHARE UNIT AGREEMENT

For Awardees located in France

Payment for Units	No payment is required for the units that you are receiving.
Vesting	The units vest in installments, as shown in the Amended and Restated Notice of Share Unit Award, as long as you remain an Awardee Eligible to Vest (as defined in the Plan).
	No additional units vest after your Service has terminated for any reason, except as otherwise provided in the Plan, this Amended Share Unit Agreement or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 19, 2007 (the “Modification Agreement”)..
	Notwithstanding any provision in the U.S. Plan to the contrary, in the event of your death while employed by the Company or its French Subsidiary, on the date of death, your units shall become fully vested. Your heirs may request issuance of the underlying shares within six months of your death. However, your heirs must comply with the restrictions on sale as set forth under the French Share Units Plan to the extent and as long as applicable under French law.
	If your Service is terminated because of retirement (as defined in the Plan), or total and permanent disability, which is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code, your units are subject to certain vesting acceleration provisions as provided in the U.S. Plan.

Forfeiture	If your Service terminates for any reason, then your units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the units will immediately be cancelled. You receive no payment for units that are forfeited.
	The Company determines when your Service terminates for this purpose.
Leaves of Absence andPart-Time Work	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy or the terms of your leave. But your Service terminates when the approved leave ends, unless you immediately return to active work.
	Your status as an Awardee Eligible to Vest will cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 8 of the Plan.
	If you commence working on a part-time basis, then the vesting schedule specified in the Amended and Restated Notice of Share Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Nature of Units	Your units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue Ordinary Shares on a future date. As a holder of units, you have no rights other than the rights of a general creditor of the Company.
No Voting Rights orDividends	Your units carry neither voting rights nor rights to cash dividends or dividend equivalent payments on the units and no cash dividends or dividend equivalents will accrue during the period between the grant date and the issuance date. You have no rights as a shareholder of the Company unless and until your units are settled by issuing Ordinary Shares of the Company’s stock.

Units Nontransferable	You may not sell, transfer, assign, pledge or otherwise dispose of any units. For instance, you may not use your units as security for a loan.
Settlement of Units	Each of your units will be settled when it vests, unless you and the Company have agreed to a later settlement date.
	At the time of settlement, you will receive one share of the Company’s Ordinary Shares for each vested unit.
Withholding Taxes	Regardless of any action the Company or your actual employer takes with respect to any or all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax Related Items”), you acknowledge that the ultimate liability for all Tax Related Items legally due by you is and remains your responsibility and that the Company and/or your actual employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the units, including the grant of the units, the vesting of units, the conversion of the units into shares or the receipt of an equivalent cash payment, the subsequent sale of any shares acquired at vesting and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the units to reduce or eliminate your liability for Tax Related Items.
	Prior to the issuance of shares upon vesting of the units or the receipt of an equivalent cash payment, you shall pay, or make adequate arrangements satisfactory to the Company or to your actual employer (in their sole discretion) to satisfy all withholding and payment on account obligations of the Company and/or your actual employer. In this regard, you authorize the Company or your actual employer to withhold all applicable Tax Related Items legally payable by you from your wages or other cash compensation payable to you by the Company or your actual employer, within legal limits, or from any equivalent cash payment received upon vesting of the units. You shall pay to the Company or to your actual employer, by means of cash check or credit transfer, any amount of Tax Related Items that the Company or your actual employer may be required

	to withhold as a result of your receipt of units, the vesting of units, the receipt of an equivalent cash payment, or the conversion of vested units to shares that cannot be satisfied by the means previously described. The Company may refuse to deliver shares to you if you fail to comply with your obligation in connection with the Tax Related Items as described herein.
Restrictions on Resale	You may not sell or transfer the shares issued pursuant to the share units prior to the second anniversary of each vesting date or such other period as is required to comply with the minimum mandatory holding period applicable to shares underlying French-qualified awards under Section L. 225-197-1 of the French Commercial Code, as amended. In addition, the underlying shares cannot be sold during certain “Closed Periods” as provided for by Section L. 225-197-1 of the French Commercial Code, as amended, so long as those Closed Periods are applicable to shares underlying French-qualified awards.
	You agree not to sell any shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
No Retention Rights	Your award or this Amended Share Unit Agreement does not give you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of your units will be adjusted accordingly, as the Company may determine pursuant to the Plan.

Nature of Grant In accepting the award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan and this Amended Share Unit Agreement; (b) the award of units is voluntary and occasional and does not create any contractual or other right to receive future awards of units, or benefits in lieu of units even if units have been awarded repeatedly in the past; (c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or to your actual employer, and units are outside the scope of your employment contract, if any; (f) the units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) neither the units nor any provision of this Amended Share Unit Agreement, the Plan or the policies adopted pursuant to the Plan confer upon you any right with respect to employment or continuation of current employment, and in the event that you are not an employee of the Company or any subsidiary of the Company, the units shall not be interpreted to form an employment contract or relationship with the Company or any subsidiary of the Company; (h) the future value of the underlying shares is unknown and cannot be predicted with certainty; (i) if you receive shares, the value of such shares acquired on vesting of units may increase or decrease in value; (j) no claim or entitlement to compensation or damages arises from termination of units, and no claim or entitlement to compensation or damages shall arise from any diminution in value of the units or shares received

	upon vesting of units resulting from termination of your Service by the Company or your actual employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and your actual employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Amended Share Unit Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and (k) in the event of involuntary termination of your Service, your right to receive units and vest under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of Service, your right to receive shares pursuant to the units after termination of Service, if any, will be measured by the date of termination of your active Service and will not be extended by any notice period mandated under local law.
Data Privacy Notice andConsent	You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Amended Share Unit Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan.
	You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all units or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy

	laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon vesting of the units may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, You understand that You may contact your local human resources representative.
Language	If you have received this Amended Share Unit Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
Applicable Law	This Amended Share Unit Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).

The Plan and OtherAgreements	The text of the Plan is incorporated in this Agreement by reference.
	This Amended Share Unit Agreement, the Award Summary and the Plan, together with the Modification Agreement, constitute the entire understanding between you and the Company regarding this award. Any prior agreements, commitments or negotiations concerning this award, except for the Modification Agreement, are superseded. This Amended Share Unit Agreement may be amended only by another written agreement between the parties.
	If one or more of the provisions of this Amended Share Unit Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Amended Share Unit Agreement to be construed so as to foster the intent of this Amended Share Unit Agreement and the Plan.

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THIS AMENDED SHARE UNIT AGREEMENT, AND THE PLAN.

EX-10.2.11

EXHIBIT 10.2.11

Amended And Restated France RSU Replacement Grant

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED AND RESTATED NOTICE OF SHARE UNIT AWARD

For Awardees located in France

Effective as of March 6, 2008, this Amended and Restated Notice of Share Unit Award and Amended and Restated Share Unit Agreement (together, the “Amended Share Unit Agreement”) amend and replace in their entirety that certain Notice of Share Unit Award and Verigy Ltd. 2006 Equity Incentive Plan Share Unit Agreement, each dated October 31, 2006.

In connection with the separation of Verigy Ltd. (the “Company”), Agilent Technologies, Inc. (“Agilent”) cancelled your unvested Agilent employee stock option awards held by you as of October 31, 2006, and the Company has granted you units representing 43,837 Ordinary Shares of Verigy Ltd. (the “Company”).  Your grant is summarized on the Award Summary page of your Smith Barney account.

Your units vest when you complete 24 months of continuous “Service” (as defined in the Plan) as an “Awardee Eligible to Vest” (as defined in the Plan) from the date of grant.

You and the Company agree that these units are granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan (the “U.S. Plan”) and the Verigy Ltd. 2006 Equity Incentive Plan for Awards Granted to Employees in France (the “French Share Units Plan”) (together, the “Plan”), the Amended Share Unit Agreement (of which this notice is a part) and the Award Summary.

These units are intended to be a grant of a French qualified RSU which qualifies for favorable tax and social security contributions treatment in France under Section L. 225-197-1 to L. 225-197-5 of the French Commercial Code, as amended.

You further agree that the Company shall cause the shares issued upon payment of your units to be deposited in your Smith Barney Account and, further, that the Company may deliver electronically all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you regarding such posting.

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE AMENDED SHARE UNIT AGREEMENT AND THE PLAN.	VERIGY LTD.
	By:
		Keith L. Barnes President and Chief Executive Officer

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED SHARE UNIT AGREEMENT

For Awardees located in France

Payment for Units	No payment is required for the units that you are receiving.
Vesting	The units vest when you complete 24 months of continuous “Service” (as defined in the Plan) as an “Awardee Eligible to Vest” (as defined in the Plan) from the date of grant.
	No additional units vest after your Service has terminated for any reason, except as otherwise provided in the Plan, this Amended Share Unit Agreement or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 19, 2007 (the “Modification Agreement”).
	Notwithstanding any provision in the U.S. Plan to the contrary, in the event of your death while employed by the Company or its French Subsidiary, on the date of death, your units shall become fully vested. Your heirs may request issuance of the underlying shares within six months of your death. However, your heirs must comply with the restrictions on sale as set forth under the French Share Units Plan to the extent and as long as applicable under French law.
	If your Service is terminated because of retirement (as defined in the Plan), or total and permanent disabilitywhich is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code, your units are subject to certain vesting acceleration provisions as provided in the U.S. Plan.

Forfeiture	If your Service terminates for any reason, then your units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the units will immediately be cancelled. You receive no payment for units that are forfeited.
	The Company determines when your Service terminates for this purpose.
Leaves of Absence and Part-Time Work	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy or the terms of your leave. But your Service terminates when the approved leave ends, unless you immediately return to active work.
	Your status as an Awardee Eligible to Vest will cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 8 of the Plan.
	If you commence working on a part-time basis, then the vesting schedule specified in the Amended and Restated Notice of Share Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Nature of Units	Your units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue Ordinary Shares on a future date. As a holder of units, you have no rights other than the rights of a general creditor of the Company.
No Voting Rights or Dividends	Your units carry neither voting rights nor rights to cash dividends or dividend equivalent payments on the units and no cash dividends or dividend equivalents will accrue during the period between the grant date and the issuance date. You have no rights as a shareholder of the Company unless and until your units are settled by issuing Ordinary Shares of the Company’s stock.

Units Nontransferable	You may not sell, transfer, assign, pledge or otherwise dispose of any units. For instance, you may not use your units as security for a loan.
Settlement of Units	Each of your vested units will be settled when it vests, unless you and the Company have agreed to a later settlement date.
	At the time of settlement, you will receive one share of the Company’s Ordinary Shares for each vested unit. You agree that the Company shall cause the shares to be deposited in your Smith Barney Account.
Withholding Taxes	Regardless of any action the Company or your actual employer takes with respect to any or all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax Related Items”), you acknowledge that the ultimate liability for all Tax Related Items legally due by you is and remains your responsibility and that the Company and/or your actual employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the units, including the grant of the units, the vesting of units, the conversion of the units into shares or the receipt of an equivalent cash payment, the subsequent sale of any shares acquired at vesting and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the units to reduce or eliminate your liability for Tax Related Items. Prior to the issuance of shares upon vesting of the units or the receipt of an equivalent cash payment, you shall pay, or make adequate arrangements satisfactory to the Company or to your actual employer (in their sole discretion) to satisfy all withholding and payment on account obligations of the Company and/or your actual employer. In this regard, you authorize the Company or your actual employer to withhold all applicable Tax Related Items legally payable by you from your wages or other cash compensation payable to you by the Company or your actual employer, within legal limits, or from any equivalent cash payment received upon vesting of the units. You shall pay to the Company or to your actual employer, by means of cash check or credit transfer, any amount of Tax Related Items that the

	Company or your actual employer may be required to withhold as a result of your receipt of units, the vesting of units, the receipt of an equivalent cash payment, or the conversion of vested units to shares that cannot be satisfied by the means previously described. The Company may refuse to deliver shares to you if you fail to comply with your obligation in connection with the Tax Related Items as described herein.
Restrictions on Resale	You may not sell or transfer the shares issued pursuant to the share units prior to such period as is required to comply with the minimum mandatory holding period applicable to shares underlying French-qualified awards under Section L. 225-197-1 of the French Commercial Code, as amended. In addition, the underlying shares cannot be sold during certain “Closed Periods” as provided for by Section L. 225-197-1 of the French Commercial Code, as amended, so long as those Closed Periods are applicable to shares underlying French-qualified awards. You agree not to sell any shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
No Retention Rights	Neither your award nor this Amended Share Unit Agreement gives you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of your units will be adjusted accordingly, as the Company may determine pursuant to the Plan.

Nature of the Grant In accepting the award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan; (b) the award of units is a one-time occurrence being made in connection with the Company’s separation from Agilent Technologies and does not create any contractual or other right to receive future awards of units, or benefits in lieu of units even if units have been awarded repeatedly in the past; (c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or to your actual employer, and units are outside the scope of your employment contract, if any; (f) the units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) neither the units nor any provision of this Amended Share Unit Agreement, the Plan or the policies adopted pursuant to the Plan confer upon you any right with respect to employment or continuation of current employment, and in the event that you are not an employee of the Company or any subsidiary of the Company, the units shall not be interpreted to form an employment contract or relationship with the Company or any subsidiary of the Company; (h) the future value of the underlying shares is unknown and cannot be predicted with certainty; (i) if you receive shares, the value of such shares acquired on vesting of units may increase or decrease in value; (j) no claim or entitlement to compensation or damages arises from termination of units, and no claim or entitlement to compensation or damages shall arise from any diminution in value of the units or shares received upon vesting of units resulting from termination of your Service by the Company or your actual employer (for any reason whatsoever and whether or not in breach of local labor laws) and you

irrevocably release the Company and your actual employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Amended Share Unit Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and (k) in the event of involuntary termination of your Service, your right to receive units and vest under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of Service, your right to receive shares pursuant to the units after termination of Service, if any, will be measured by the date of termination of your active Service and will not be extended by any notice period mandated under local law.

Data Privacy Notice and Consent

You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Amended Share Unit Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all units or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources

	representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon vesting of the units may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, upon request, view Data, request additional information about the storage and processing of Data, correct Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative
Language	If you have received this Amended Share Unit Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
Applicable Law	This Amended Share Unit Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).

The Plan and Other Agreements	The text of the Plan is incorporated in this Amended Share Unit Agreement by reference.
	This Amended Share Unit Agreement, the Award Summary, and the Plan, together with the Modification Agreement, constitute the entire understanding between you and the Company regarding this award. Any prior agreements, commitments or negotiations concerning this award, except for the Modification Agreement, are superseded. This Amended Share Unit Agreement may be amended only by another written agreement between the parties.
	If one or more of the provisions of this Amended Share Unit Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Amended Share Unit Agreement to be construed so as to foster the intent of this Amended Share Unit Agreement and the Plan.

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THIS AMENDED SHARE UNIT AGREEMENT AND THE PLAN.

EX-10.2.13

EXHIBIT 10.2.13

Amended and Restated Four Tranche Share Option Agreement

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED & RESTATED NOTICE OF SHARE OPTION GRANT

(FOUR TRANCHE — FRENCH OPTIONEE)

Effective as of March 6, 2008, this Amended and Restated Notice of Share Option Grant and Amended & Restated Share Option Agreement (together, the “Amended Share Option Agreement”) amend and replace in their entirety that certain Notice of Share Option Grant and Verigy Ltd. 2006 Equity Incentive Plan Share Option Agreement, each dated <<AwardDate>>.

On <<AwardDate>> (the “Award Date”) you were awarded an option to purchase <<TotalShares>> Verigy Ltd. (the “Company”) ordinary shares.  The Option is divided into four tranches, each representing <<TrancheShares>> shares covered by the Option.  Each tranche will be summarized on the Award Summary page of your Smith Barney account.  Each summary (including the number of shares and exercise price of each tranche) will be posted to your Smith Barney account shortly after the exercise price is determined as follows:

Exercise Prices(1)

Exercise Price Per Share, 1st Tranche:	$<<PericePerShare1st>> (The closing price of Verigy ordinary shares on the Date of Award;
Exercise Price Per Share, 2nd Tranche:	Closing price of Verigy ordinary shares on the 11th business day following Verigy’s announcement of financial results for the fiscal quarter ending <<2pricingdate>>(2);
Exercise Price Per Share, 3rd Tranche:	Closing price of Verigy ordinary shares on the 11th business day following Verigy’s announcement of financial results for the fiscal quarter ending <<3pricingdate>>(2); and
Exercise Price Per Share, 4th Tranche:	Closing price of Verigy ordinary shares on the 11th business day following Verigy’s announcement of financial results for the fiscal quarter ending <<4pricingdate>>(2).

(1) Except as set forth in the accompanying Option Agreement, the exercise prices for the second, third and fourth tranches will be equal to the greater of (A) the last sale price of the Company’s ordinary shares on the pricing dates indicated above or (B) 80% of the average of the last sale prices for the 20 trading days preceding the applicable pricing date. Such prices shall be set automatically and without any further action on the part of the Company or the optionee.

(2) If such pricing date falls during a Closed Period (as defined by Section L. 255-177 of the French Commercial Code), then the pricing shall take place on the next trading day following expiration of the Closed Period.

Vesting Schedule

1st Tranche (1/4shares):	The first tranche of shares subject to this option vests in 16 equal quarterly installments,(3) with the first installment vesting on <<1vestdate>>, provided that you continue to be an Awardee Eligible to Vest as of the applicable vesting date.
2nd Tranche (1/4shares):	The second tranche of shares subject to this option vests in 15 equal quarterly installments,(3) with the first installment vesting on <<2vestdate>>, provided that you continue to be an Awardee Eligible to Vest as of the applicable vesting date.
3rd Tranche (1/4shares):	The third tranche of shares subject to this option vests in 14 equal quarterly installments,(3) with the first installment vesting on <<3vestdate>>, provided that you continue to be an Awardee Eligible to Vest as of the applicable vesting date.

4^th Tranche (1/4shares): The fourth tranche of shares subject to this option vests in 13 equal quarterly installments,(3) with the first installment vesting on <<4vestdate>>, provided that you continue to be an Awardee Eligible to Vest as of the applicable vesting date.

(3) No fractional shares shall be issuable.  The number of shares exercisable at each vesting event other than the last shall be rounded down to the nearest whole share and the last vesting event shall cover all shares not previously vested.

Exercisability of Option Except as otherwise provided in the event of death or disability, each tranche of this option shall first become exercisable on that date that is four years and one day following the date on which the exercise price of such tranche became fixed.

                You and the Company agree that this option is granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan and the Verigy Ltd. 2006 Equity Incentive Plan for Options Granted to Employees in France (the “French Option Plan”) (together, the “Plan”) and the Amended Share Option Agreement, both of which are made a part of this document.

You further agree that the Company shall cause the shares issued upon exercise of this option to be deposited in your Smith Barney Account and, further, that the Company may deliver electronically all documents relating to the Plan or this option (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you regarding such posting.

	VERIGY LTD.
BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE AMENDED STOCK OPTION AGREEMENT AND THE PLAN.	BY:
		KEITH L. BARNES
		PRESIDENT ANDCHIEF EXECUTIVE OFFICER

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED SHARE OPTION AGREEMENT

(Four Tranche — French Optionee)

Tax Treatment	This option is intended to be a nonstatutory stock option.
Term	This option expires in any event at the close of business at Company headquarters on the day before the date that is 7 years after the Date of Grant, as shown in the Notice of Share Option Grant. (It may expire earlier if your Service terminates, as described below.)
Vesting	This option becomes vested during the Option term, as shown in the Notice of Share Option Grant, as long as you remain an Awardee Eligible to Vest (as defined in the U.S. Plan). This option will in no event become vested as to additional shares after your Service has terminated for any reason, except as otherwise provided in the Plan, Amended Share Option Agreement or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 19, 2007 (the “Modification Agreement”).
Exercisabiltiy	Except as otherwise provided in the event of death or disability, this option shall first become exercisable on that date that is four years one day from the date of grant.
Regular Termination	If your Service terminates for any reason except death, disability (as defined below), or retirement due to age (as defined in the Plan), then this option will expire at the close of business at Company headquarters on the later of (i) the date 90 days after your termination date or (ii) the date 90 days following the fourth anniversary of the date of grant, but in no event later than the expiration of the term of this option. The Company determines when your Service terminates for this purpose.
Death	If you die before your Service terminates, this option will become immediately vested and exercisable in full and will expire at the close of business at Company headquarters on the date 6 months after the date of death. In the event of your death after cessation of employment but prior to the termination of the option, your heirs may exercise the vested options for 6 months following your death. In these circumstances, all unvested options will lapse upon your death. All vested options that are not exercised within 6 months of your death will be forfeited. The 6-month exercise period will apply without regard to the term of the option.
Disability	If your Service terminates because of your disability which is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code, then this option will become immediately vested and exercisable in full and expire at the close of business at Company headquarters on the date 12 months after your termination date, or, if earlier, the expiration of the term of this option.

Retirement	If your Service terminates because of retirement due to age (as defined in the Plan), then (i) the vested portion of this option will be determined by adding twelve months to your length of service and (ii) the option will expire at the close of business at Company headquarters on the later of (A) the date twelve months after your termination date or (B) the date twelve months following the fourth anniversary of the date of grant, but in no event later than the expiration of the term of this option.
Special Provisions for Accelerated Pricing of Unpriced Tranches	Notwithstanding the establishment of pricing dates for the 2nd, 3rd and 4th tranches of the award as set forth in the Notice of Stock Option Award, the exercise price of any previusly unpriced tranche shall be established in accordance with the following in the following circumstances: Change of Control. In the event that prior to any pricing date the Company or any third party publicly announces any transaction or event which, as announced or if consummated, would constitute a Change of Control (as defind in the Plan) of the Company, the per-share exercise price for each tranche of this option not already priced as of the date of such announcement shall become fixed at an amount equal to the closing price of Verigy ordinary shares on the 11th trading day immediately preceding such announcement. Termination of Employment. In the event that prior to any pricing date your Service (as defined in the Plan) with the Company and its affiliates shall terminate for any reason, then the per-share exercise price for each tranche of this option not already priced as of the date of such termination of Service shall become fixed at an amount equal to the closing price of Verigy ordinary shares on the last trading day immediately preceding your last day of Service. No Affect On Vesting or Exercisability. The Vesting provisions applicable to any tranche shall not be affected by a change in the timing of establishing the exercise price in accordance with the preceding paragraphs.
Leaves of Absence and Part-Time Work	For purposes of this option, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to active work. Your status as an Awardee Eligible to Vest (as defined in the U.S. Plan) will always cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 5 of the U.S. Plan. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Share Option Grant may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Restrictions on Exercise	The Company will not permit you to exercise this option if the issuance of shares at that time would violate any law or regulation.
Notice of Exercise	You may exercise this option from time to time for any number of shares for which the option is then exercisable, by notice in writing, electronically or by other means to, and as prescribed by, the Company’s equity incentive administration service provider (the “administration

	service provider”). Your exercise notice will be effective and irrevocable at such time as your notice, method of payment and such other documentation as the administration service provider may require have been received by the administration service provider. You hereby direct the Company to deposit any shares issued upon exercise of the option in your Smith Barney account.
	If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.
Form of Payment	When you exercise this option, you must provide for payment of the option exercise price for the shares that you are purchasing. Notwithstanding any provision in the U.S. Plan to the contrary, upon exercise of an option, the full exercise price will be paid either in cash, by check or by credit transfer. Under a cashless exercise program, you may give irrevocable instructions to the administration service provider to properly deliver the option price to the Company.
Withholding Taxes and Stock Withholding	Regardless of any action the Company or your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the option grant, including the grant, vesting or exercise of the option, the subsequent sale of shares acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the option to reduce or eliminate your liability for Tax-Related Items. Prior to exercise of the option, you will pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding and payment on account obligations of the Company and/or the Employer. In this regard, you authorize the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or the Employer, within legal limits, or from proceeds of the sale of shares. Finally, you will pay to the Company or the Employer, by means of cash, check or credit transfer, any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your purchase of shares that cannot be satisfied by the means previously described. The Company may refuse to honor the exercise and refuse to deliver the shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
Restrictions on Resale	You agree not to sell any option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
Transfer of Option	This option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by the beneficiary designation, will or by the laws of descent or distribution and may be exercised, during your lifetime, only by you.

Retention Rights	Your option or this Amended Share Option Agreement does not give you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time.
Stockholder Rights	You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this option by submitting the required notice in accordance with the provisions under “Notice of Exercise” set forth above and paying the exercise price and any applicable withholding taxes. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan.
Nature of the Grant	In accepting the grant, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Amdended Share Option Agreement; (b) the grant of the option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past; (c) all decisions with respect to future option grants, if any, will be at the sole discretion of the Company; (d) you are voluntarily participating in the Plan; (e) the option is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which is outside the scope of your employment contract, if any; (f) the option is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer; (g) in the event that you are not an employee of the Company, the option grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the option grant will not be interpreted to form an employment contract with the Employer or any subsidiary or affiliate of the Company; (h) the future value of the underlying shares is unknown and cannot be predicted with certainty; (i) if the underlying shares do not increase in value, the option will have no value; (j) if you exercise your option and obtain shares, the value of those shares acquired upon exercise may increase or decrease in value, even below the exercise price; (k) in consideration of the grant of the option, no claim or entitlement to compensation or damages shall arise from termination of

the option or diminution in value of the option or shares purchased through exercise of the option resulting from termination of your employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Amended Share Option Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and (l) in the event of termination of your employment, your right to receive the option and vest in the option under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of employment, your right to exercise the option after termination of employment, if any, will be measured by the date of termination of your active employment and will not be extended by any notice period mandated under local law; the Company shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your option grant.

Data Privacy Notice and Consent

You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Amended Share Option Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon exercise of the option may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, upon request, view Data, request additional information about the storage and processing of Data ,correct Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, You understand that You may contact your local human resources representative.

Language	If you have received this Amended Share Option Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
Applicable Law	This Amended Share Option Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).
The Plan and Other Agreements	The text of the Plan is incorporated in this Amended Share Option Agreement by reference.
	This Amended Share Option Agreement and the Plan, together with the Modification Agreement, constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option, except for the Modification Agreement, are superseded. This Amended Share Option Agreement may be amended only by another written agreement between the parties.
	If one or more of the provisions of this Amended Share Option Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Amended Share Option Agreement to be construed so as to foster the intent of this Amended Share Option Agreement and the Plan

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3:  CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD.”  YOU AGREE TO BE BOUND BY THIS AMENDED SHARE OPTION AGREEMENT AND THE PLAN.

EX-10.2.15

EXHIBIT 10.2.15

Amended and Restated Share Unit Award Agreement

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

AMENDED AND RESTATED NOTICE OF SHARE UNIT AWARD

(For Awardees located in France)

Effective as of March 6, 2008, this Amended and Restated Notice of Share Unit Award and Amended and Restated Share Unit Agreement (together, the “Amended Share Unit Agreement”) amend and replace in their entirety that certain Notice of Share Unit Award and Verigy Ltd. 2006 Equity Incentive Plan Share Unit Agreement, each dated December 13, 2006.

You have been granted units representing 14,600 Ordinary Shares of Verigy Ltd. (the “Company”).

Your award vests in accordance with the following schedule: The first 50% of your units vest on December 13, 2008; thereafter, an additional 6.25% of your units vest at the end of each 3 months, provided, in each case, that you continue to be an Awardee Eligible to Vest as of such date.  Shares issued upon vesting are subject to resale restrictions as set forth in the accompanying Amended Share Unit Agreement (of which this Notice is a part).

You and the Company agree that these units are granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan (the “U.S. Plan”), and the Verigy Ltd. 2006 Equity Incentive Plan for Awards Granted to Employees in France (the “French Share Units Plan”) (together, the “Plan”), and the Amended Share Unit Agreement (of which this notice is a part).

These units are intended to be a grant of a French qualified RSU which qualifies for favorable tax and social security contributions treatment in France under Section L. 225-197-1 to L. 225-197-5 of the French Commercial Code, as amended.

You further agree that the Company shall cause the shares issued upon payment of your units to be deposited in your Smith Barney account and, further, that the Company may deliver electronically all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you regarding such posting.

	VERIGY LTD.
BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE AMENDED SHARE UNIT AGREEMENT AND THE PLAN.	By:
		Keith L. Barnes
		President and Chief Executive Officer

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED SHARE UNIT AGREEMENT

For Awardees located in France

Payment for Units	No payment is required for the units that you are receiving.
Vesting	The units vest in installments, as shown in the Amended and Restated Notice of Share Unit Award, as long as you remain an Awardee Eligible to Vest (as defined in the Plan).
	Unless otherwise provided in a written agreement between you and the Company and except as otherwise provided in the Plan or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 19, 2007 (the “Modification Agreement”), no additional units vest after your Service has terminated for any reason.
	Notwithstanding any provision in the U.S. Plan to the contrary, in the event of your death while employed by the Company or its French Subsidiary, on the date of death, your units shall become fully vested. Your heirs may request issuance of the underlying shares within six months of your death. However, your heirs must comply with the restrictions on sale as set forth under the French Share Units Plan to the extent and as long as applicable under French law.
	If your Service is terminated because of retirement (as defined in the Plan) or total and permanent disability,which is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code , your units are subject to certain vesting acceleration provisions as provided in the U.S. Plan.
Forfeiture	If your Service terminates for any reason, then your units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the units will immediately be cancelled. You receive no payment for units that are forfeited.
	The Company determines when your Service terminates for this purpose.

Leaves of Absence and Part-Time Work	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy or the terms of your leave. But your Service terminates when the approved leave ends, unless you immediately return to active work.
	Your status as an Awardee Eligible to Vest will cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 8 of the Plan.
	If you commence working on a part-time basis, then the vesting schedule specified in the Amended and Restated Notice of Share Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Nature of Units	Your units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue Ordinary Shares on a future date. As a holder of units, you have no rights other than the rights of a general creditor of the Company.
No Voting Rights or Dividends	Your units carry neither voting rights nor rights to cash dividends. You have no rights as a shareholder of the Company unless and until your units are settled by issuing Ordinary Shares of the Company’s stock.
Units Nontransferable	You may not sell, transfer, assign, pledge or otherwise dispose of any units. For instance, you may not use your units as security for a loan.
Settlement of Units	Each of your units will be settled when it vests, unless you and the Company have agreed to a later settlement date.
	At the time of settlement, you will receive one share of the Company’s Ordinary Shares for each vested unit. You agree that the Company shall cause the shares to be deposited in your Smith Barney Account. But the Company, at its sole discretion, may substitute an equivalent amount of cash if the distribution of stock is not reasonably practicable due to the requirements of applicable law. The amount of cash will be determined on the basis of the market value of the Company’s Ordinary Shares at the time of settlement.

Withholding Taxes Regardless of any action the Company or your actual employer takes with respect to any or all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax Related Items”), you acknowledge that the ultimate liability for all Tax Related Items legally due by you is and remains your responsibility and that the Company and/or your actual employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the units, including the grant of the units, the vesting of units, the conversion of the units into shares or the receipt of an equivalent cash payment, the subsequent sale of any shares acquired at vesting and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the units to reduce or eliminate your liability for Tax Related Items. Prior to the issuance of shares upon vesting of the units or the receipt of an equivalent cash payment, you shall pay, or make adequate arrangements satisfactory to the Company or to your actual employer (in their sole discretion) to satisfy all withholding and payment on account obligations of the Company and/or your actual employer. In this regard, you authorize the Company or your actual employer to withhold all applicable Tax Related Items legally payable by you from your wages or other cash compensation payable to you by the Company or your actual employer or from any equivalent cash payment received upon vesting of the units. Alternatively, or in addition, if permissible under local law, the Company or your actual employer may, in their sole discretion, (i) sell or arrange for the sale of shares to be issued on the vesting of the units to satisfy the withholding or payment on account obligation, and/or (ii) withhold in shares, provided that the Company and your actual employer shall withhold only the amount of shares necessary to satisfy the minimum withholding amount. You shall pay to the Company or to your actual employer any amount of Tax Related Items that the Company or your actual employer may be required to withhold as a result of your receipt of units, the vesting of units, the receipt of an equivalent cash payment, or the conversion of vested units to shares that cannot be satisfied by the means previously described. The Company may refuse to deliver shares to you if you fail to comply with your obligation in connection with the Tax Related Items as described herein.

Restrictions on Resale	You may not sell or transfer the shares issued pursuant to the share units prior to the second anniversary of each vesting date or such other period as is required to comply with the minimum mandatory holding period applicable to shares underlying French-qualified awards under Section L. 225-197-1 of the French Commercial Code, as amended. In addition, the underlying shares cannot be sold during certain “Closed Periods” as provided for by Section L. 225-197-1 of the French Commercial Code, as amended, so long as those Closed Periods are applicable to shares underlying French-qualified awards. You agree not to sell any shares at a time when applicable laws or Company policies prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
No Retention Rights	Your award or this Amended Share Unit Agreement does not give you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of your units will be adjusted accordingly, as the Company may determine pursuant to the Plan.
Nature of the Grant	In accepting the award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan; (b) the award of units is voluntary and occasional and does not create any contractual or other right to receive future awards of units, or benefits in lieu of units even if units have been awarded repeatedly in the past; (c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or to your actual employer, and units are outside the scope of your employment contract, if any; (f) the units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation,

termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(g) neither the units nor any provision of this Amended Share Unit Agreement, the Plan or the policies adopted pursuant to the Plan confer upon you any right with respect to employment or continuation of current employment, and in the event that you are not an employee of the Company or any subsidiary of the Company, the units shall not be interpreted to form an employment contract or relationship with the Company or any subsidiary of the Company;

(h) the future value of the underlying shares is unknown and cannot be predicted with certainty;

(i) if you receive shares, the value of such shares acquired on vesting of units may increase or decrease in value;

(j) no claim or entitlement to compensation or damages arises from termination of units, and no claim or entitlement to compensation or damages shall arise from any diminution in value of the units or shares received upon vesting of units resulting from termination of your Service by the Company or your actual employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and your actual employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Amended Share Unit Agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and

(k) in the event of involuntary termination of your Service (whether or not in breach of local labor laws), your right to receive units and vest under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of Service (whether or not in breach of local labor laws), your right to receive shares pursuant to the units after termination of Service, if any, will be measured by the date of termination of your active Service and will not be extended by any notice period mandated under local law.

Data Privacy Notice and Consent You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Amended Share Unit Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all units or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon vesting of the units may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, upon request, view Data, request additional information about the storage and processing of Data, correct Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, You understand that You may contact your local human resources representative.

Language	If you have received this Amended Share Unit Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.
Applicable Law	This Amended Share Unit Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).
The Plan and Other Agreements	The text of the Plan is incorporated in this Amended Share Unit Agreement by reference.
	This Amended Share Unit Agreement and the Plan, together with the Modification Agreement, constitute the entire understanding between you and the Company regarding this award. Any prior agreements, commitments or negotiations concerning this award, except for the Modification Agreement, are superseded. This Amended Share Unit Agreement may be amended only by another written agreement between the parties.
	If one or more of the provisions of this Amended Share Unit Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Amended Share Unit Agreement to be construed so as to foster the intent of this Amended Share Unit Agreement and the Plan.

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THIS AMENDED SHARE UNIT AGREEMENT AND THE PLAN.

EX-10.2.16

EXHIBIT 10.2.16

France Executive Rsu Award (Revised January 2008)

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN

NOTICE OF SHARE UNIT AWARD

(For Awardees located in France)

You have been granted units representing Ordinary Shares of Verigy Ltd. (the “Company”).  Your grant, including the number of shares subject to the award, is summarized on the Award Summary page of your Smith Barney account.

Your award vests in accordance with the following schedule: The first <<vesting percent>> of your units vest <<number of months>> from the date of grant or such other initial vesting date as indicated on the Award Summary page of your Smith Barney account; thereafter, an additional <<vesting percent>> of your units vest at the end of each <<vesting months>>, provided, in each case, that you continue to be an Awardee Eligible to Vest as of such date.  Shares issued upon vesting are subject to resale restrictions as set forth in the accompanying Share Unit Agreement (of which this Notice is a part).

You and the Company agree that these units are granted under and governed by the terms and conditions of the Verigy Ltd. 2006 Equity Incentive Plan (the “U.S. Plan”), and the Verigy Ltd. 2006 Equity Incentive Plan for Awards Granted to Employees in France (the “French Share Units Plan”) (together, the “Plan”), the Share Unit Agreement (of which this notice is a part), and the Award Summary.

These units are intended to be a grant of a French qualified RSU which qualifies for favorable tax and social security contributions treatment in France under Section L. 225-197-1 to L. 225-197-5 of the French Commercial Code, as amended.

You further agree that the Company shall cause the shares issued upon payment of your units to be deposited in your Smith Barney account and, further, that the Company may deliver electronically all documents relating to the Plan or this award (including, without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements).  You also agree that the Company may deliver these documents by posting them on a web site maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a web site, it will notify you regarding such posting.

	VERIGY LTD.
BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THE SHARE UNIT AGREEMENT, THIS NOTICE AND THE PLAN.	By:
		Keith L. Barnes
		President and Chief Executive Officer

VERIGY LTD. 2006 EQUITY INCENTIVE PLAN
SHARE UNIT AGREEMENT

For Awardees located in France

Payment for Units	No payment is required for the units that you are receiving.
Vesting	The units vest in installments, as shown in the Notice of Share Unit Award, as long as you remain an Awardee Eligible to Vest (as defined in the Plan).
	Unless otherwise provided in a written agreement between you and the Company and except as otherwise provided in the Plan or in that certain Equity Award Modification Agreement between the Company and you dated on or about September 19, 2007 (the “Modification Agreement”), no additional units vest after your Service has terminated for any reason.
	Notwithstanding any provision in the U.S. Plan to the contrary, in the event of your death while employed by the Company or its French Subsidiary, on the date of death, your units shall become fully vested. Your heirs may request issuance of the underlying shares within six months of your death. However, your heirs must comply with the restrictions on sale as set forth under the French Share Units Plan to the extent and as long as applicable under French law.
	If your Service is terminated because of retirement or total and permanent disability,which is defined as disability under categories 2 or 3 under Section L. 341-4 of the French Social Security Code , your units are subject to certain vesting acceleration provisions as provided in the U.S. Plan.
Forfeiture	If your Service terminates for any reason, then your units will be forfeited to the extent that they have not vested before the termination date and do not vest as a result of the termination. This means that the units will immediately be cancelled. You receive no payment for units that are forfeited.
	The Company determines when your Service terminates for this purpose.
Leaves of Absence and Part-Time Work	For purposes of this award, your Service does not terminate when you go on a military leave, a sick leave or another Company approved leave of absence, and if continued crediting of Service is required by applicable law, the Company’s leave of absence policy or the terms of your leave. But your Service terminates when the approved leave ends, unless you immediately return to active work.
	Your status as an Awardee Eligible to Vest will cease upon termination of employment with the Company or a Subsidiary or Affiliate except as provided in Article 8 of the Plan.

	If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Share Unit Award may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.
Nature of Units	Your units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issue Ordinary Shares on a future date. As a holder of units, you have no rights other than the rights of a general creditor of the Company.
No Voting Rights or Dividends	Your units carry neither voting rights nor rights to cash dividends. You have no rights as a shareholder of the Company unless and until your units are settled by issuing Ordinary Shares of the Company’s stock.
Units Nontransferable	You may not sell, transfer, assign, pledge or otherwise dispose of any units. For instance, you may not use your units as security for a loan.
Settlement of Units	Each of your units will be settled when it vests, unless you and the Company have agreed to a later settlement date.
	At the time of settlement, you will receive one share of the Company’s Ordinary Shares for each vested unit. You agree that the Company shall cause the shares to be deposited in your Smith Barney Account. But the Company, at its sole discretion, may substitute an equivalent amount of cash if the distribution of stock is not reasonably practicable due to the requirements of applicable law. The amount of cash will be determined on the basis of the market value of the Company’s Ordinary Shares at the time of settlement.
Withholding Taxes	Regardless of any action the Company or your actual employer takes with respect to any or all income tax (including federal, state and local taxes), social insurance, payroll tax, payment on account or other tax-related withholding (“Tax Related Items”), you acknowledge that the ultimate liability for all Tax Related Items legally due by you is and remains your responsibility and that the Company and/or your actual employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the units, including the grant of the units, the vesting of units, the conversion of the units into shares or the receipt of an equivalent cash payment, the subsequent sale of any shares acquired at vesting and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant or any aspect of the units to reduce or eliminate your liability for Tax Related Items. Prior to the issuance of shares upon vesting of the units or the receipt of an equivalent cash payment, you shall pay, or make adequate arrangements satisfactory to the Company or to your actual employer

	(in their sole discretion) to satisfy all withholding and payment on account obligations of the Company and/or your actual employer. In this regard, you authorize the Company or your actual employer to withhold all applicable Tax Related Items legally payable by you from your wages or other cash compensation payable to you by the Company or your actual employer or from any equivalent cash payment received upon vesting of the units. Alternatively, or in addition, if permissible under local law, the Company or your actual employer may, in their sole discretion, (i) sell or arrange for the sale of shares to be issued on the vesting of the units to satisfy the withholding or payment on account obligation, and/or (ii) withhold in shares, provided that the Company and your actual employer shall withhold only the amount of shares necessary to satisfy the minimum withholding amount. You shall pay to the Company or to your actual employer any amount of Tax Related Items that the Company or your actual employer may be required to withhold as a result of your receipt of units, the vesting of units, the receipt of an equivalent cash payment, or the conversion of vested units to shares that cannot be satisfied by the means previously described. The Company may refuse to deliver shares to you if you fail to comply with your obligation in connection with the Tax Related Items as described herein.
Restrictions on Resale	You may not sell or transfer the shares issued pursuant to the share units prior to the second anniversary of each vesting date or such other period as is required to comply with the minimum mandatory holding period applicable to shares underlying French-qualified awards under Section L. 225-197-1 of the French Commercial Code, as amended. In addition, the underlying shares cannot be sold during certain “Closed Periods” as provided for by Section L. 225-197-1 of the French Commercial Code, as amended, so long as those Closed Periods are applicable to shares underlying French-qualified awards. You agree not to sell any shares at a time when applicable laws or Company policies prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
No Retention Rights	Your award or this Agreement does not give you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of your units will be adjusted accordingly, as the Company may determine pursuant to the Plan.
Nature of the Grant	In accepting the award, you acknowledge that: (a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or

terminated by the Company at any time, as provided in the Plan;

(b) the award of units is voluntary and occasional and does not create any contractual or other right to receive future awards of units, or benefits in lieu of units even if units have been awarded repeatedly in the past;

(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;

(d) your participation in the Plan is voluntary;

(e) the units are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or to your actual employer, and units are outside the scope of your employment contract, if any;

(f) the units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;

(g) neither the units nor any provision of this Agreement, the Plan or the policies adopted pursuant to the Plan confer upon you any right with respect to employment or continuation of current employment, and in the event that you are not an employee of the Company or any subsidiary of the Company, the units shall not be interpreted to form an employment contract or relationship with the Company or any subsidiary of the Company;

(h) the future value of the underlying shares is unknown and cannot be predicted with certainty;

(i) if you receive shares, the value of such shares acquired on vesting of units may increase or decrease in value;

(j) no claim or entitlement to compensation or damages arises from termination of units, and no claim or entitlement to compensation or damages shall arise from any diminution in value of the units or shares received upon vesting of units resulting from termination of your Service by the Company or your actual employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and your actual employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this agreement, you shall be deemed irrevocably to have waived your entitlement to pursue such claim; and

(k) in the event of involuntary termination of your Service (whether or not in breach of local labor laws), your right to receive units and vest under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of Service (whether or not in breach of local labor laws), your right to receive shares pursuant to the units after termination of Service, if any, will be measured by the date of termination of your active Service and will not be extended by any notice period mandated under local law.

Data Privacy Notice and Consent

You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement by and among, as applicable, your employer, the Company, its subsidiaries and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company and your employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all units or any other entitlement to shares awarded, canceled, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker, escrow agent or other third party with whom the shares received upon vesting of the units may be deposited. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that you may, upon request, view Data, request additional information about the storage and processing of Data, correct Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand that refusal or withdrawal of consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, You understand that You may contact your local human resources representative.

Language

If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control.

Applicable Law	This Agreement shall be governed by, and construed in accordance with, the laws of the Republic of Singapore (except its choice-of-law provisions).
The Plan and Other Agreements	The text of the Plan is incorporated in this Agreement by reference.
	This Amended Share Unit Agreement and the Plan, together with the Modification Agreement, constitute the entire understanding between you and the Company regarding this award. Any prior agreements, commitments or negotiations concerning this award, except for the Modification Agreement, are superseded. This Amended Share Unit Agreement may be amended only by another written agreement between the parties.
	If one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Agreement to be construed so as to foster the intent of this Agreement and the Plan.

BY CLICKING ON THE “ACCEPT” BUTTON ON THE SCREEN TITLED “STEP 3: CONFIRM THE REVIEW/ACCEPTANCE OF YOUR AWARD,” YOU AGREE TO BE BOUND BY THIS SHARE UNIT AGREEMENT, THE NOTICE AND THE PLAN.

EX-10.9.1

EXHIBIT 10.9.1

AMENDED AND RESTATED SEVERANCE AGREEMENT

This Amended and Restated Severance Agreement (the “Agreement”) is entered into this          day of                         , 2008 (the “Effective Date”), between Verigy Ltd., a Singapore corporation (the “Company”), and                                (“Executive”), who currently serves as [title] of the Company.

RECITALS

WHEREAS, the Company and Executive entered into a severance agreement, dated [                        , 200  ] (the “First Severance Agreement”).

WHEREAS, the Company and Executive wish to amend and restate the First Severance Agreement, and bring such terms into compliance with Section 409A of the Internal Revenue Code (the “Code”) and the final regulations and other official guidance thereunder, as set forth below.

NOW THEREFORE, in consideration of the following:

A.            As is the case with most, if not all, publicly traded businesses, it is expected that the Company from time to time may consider or may be presented with the need to consider the possibility of an acquisition by another company or other change in control of the ownership of the Company.  The Board of Directors of the Company (the “Board”) recognizes that such considerations can be a distraction to Executive and can cause Executive to consider alternative employment opportunities or to be influenced by the impact of a possible change in control of the ownership of the Company on Executive’s personal circumstances in evaluating such possibilities.  The Board has determined that it is in the best interests of the Company and its shareholders to ensure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

B.            The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his/her employment and to motivate Executive to maximize the value of the Company for the benefit of its shareholders.

C.            The Board believes that it is important to provide Executive with certain benefits upon Executive’s termination of employment in certain instances that provide Executive with enhanced financial security and incentive and encouragement to Executive to remain with the Company.

D.            At the same time, the Board expects the Company to receive certain benefits in exchange for providing Executive with this measure of financial security and incentive under the Agreement.  Therefore, the Board believes that Executive should provide various specific commitments, which are intended to assure the Company that Executive will not direct Executive’s skills, experience and knowledge to the detriment of the Company for a period not to exceed the period during which payments are being made to Executive under this Agreement.

E.             Certain capitalized terms used in this Agreement are defined in Article VIII.

The Company and Executive hereby agree as follows:

ARTICLE I

EMPLOYMENT BY THE COMPANY

1.1          This Agreement shall be in effect commencing on the Effective Date and ending on the later of (i) the date when Executive ceases to be employed by the Company for any reason or (ii) the date when all obligations of the parties under this Agreement have been met.

1.2          The Company and Executive each agree and acknowledge that Executive is employed by the Company as an “at-will” employee and that either Executive or the Company has the right at any time to terminate Executive’s employment with the Company, with or without cause or advance notice, for any reason or for no reason.  This Agreement does not constitute a contract of employment or impose on Executive any obligation to remain as an employee or impose on the Company any obligation (i) to retain Executive as an employee, (ii) to change the status of Executive as an at-will employee or (iii) to change the Company’s policies regarding termination of employment.  In this Agreement, the Company and Executive wish to set forth the compensation and benefits that Executive shall be entitled to receive in the event that Executive’s employment with the Company terminates under the circumstances described in Article II or III.

1.3          The duties and obligations of the Company to Executive under this Agreement shall be in consideration for Executive’s past services to the Company, Executive’s continued employment with the Company, Executive’s compliance with the obligations described in Section 5.4, and Executive’s execution of the general waiver and release described in Section 5.5.  The Company and Executive agree that Executive’s compliance with the obligations described in Section 5.4 and Executive’s execution of the general waiver and release described in Section 5.5 are preconditions to Executive’s entitlement to the receipt of benefits under this Agreement and that these benefits shall not be earned unless all such conditions have been satisfied through the scheduled date of payment.  The Company hereby declares that it has relied upon Executive’s commitments under this Agreement to comply with the requirements of Article V and would not have been induced to enter into this Agreement or to execute this Agreement in the absence of such commitments.

ARTICLE II

TERMINATION BEFORE CHANGE IN CONTROL

2.1          Termination without Cause.  In the event (i) Executive’s employment with the Company and its subsidiaries is involuntarily terminated at any time by the Company without Cause or (ii) Executive voluntarily terminates his/her employment within three months of the occurrence of an event constituting Good Reason and on account of an event constituting Good Reason and, in each case, Article III does not apply, then such termination of employment will be a Termination Event and the Company shall pay Executive the compensation and benefits described in this Article II, subject to Executive complying with his/her obligations described in Sections 5.4 and 5.5 of this Agreement.

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2.2          Disability.  In the event Executive’s employment with the Company and its subsidiaries terminates as a result of his/her Disability, then Executive shall be entitled to the pro rated final period bonus described in Section 2.5, the stock award acceleration described in Section 2.6 and the Company-reimbursed health insurance coverage described in Section 2.7 (but none of the other compensation and benefits described in this Article II).

2.3          Death.  In the event Executive’s employment with the Company and its subsidiaries terminates as a result of his/her death, then Executive’s survivors shall be entitled to the pro rated final period bonus described in Section 2.5 and the stock award acceleration described in Section 2.6 (but none of the other compensation and benefits described in this Article II).

2.4          Salary Continuation upon Termination before Change in Control.  If a Termination Event described in Section 2.1 occurs, Executive shall receive an amount equal to the sum of Executive’s Base Salary and Target Bonus, less any applicable withholding of federal, state, local or foreign taxes.  Such salary and bonus continuation shall be paid in accordance with the Company’s standard payroll procedures in equal installments over the 12 month period following the date of the Termination Event, with such installments beginning after the effective date of the general waiver and release of claims entered unto between Executive and the Company, as described in Section 5.5 below; provided, however, that the timing of such payments shall be subject to any delay period required under Section 5.6 of this Agreement.

2.5          Bonus for Final Period.  If a Termination Event described in Section 2.1 occurs, Executive shall receive a pro rated bonus for the performance period in which the Termination Event occurs (in addition to the amount described in Section 2.4).  The amount of the bonus shall be equal to the Target Bonus for the period in which the Termination Event occurred multiplied by a fraction in which (i) the numerator is the number of days from and including the first day of the performance period until and including the date of the Termination Event and (ii) the denominator is the number of days in the performance period.  Subject to any delay period required under Section 5.6 of this Agreement, such bonus shall be paid on the date Executive would have received the bonus if the Termination Event had not occurred during such performance period.  Executive’s rights to the payment provided in this Section 2.5 shall not be subject to Section 5.4.

2.6          Stock Award Acceleration upon Termination before Change in Control.

(a)           The vested portion of Executive’s stock options and stock appreciation rights (the “Stock Options”) that are outstanding as of the date of an event described in Section 2.1, 2.2 or 2.3 shall be determined as follows upon the occurrence of such event:

(i)            A period equal to 12 months shall be added to the actual length of Executive’s service; and

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(ii)           If the vested portion of the Stock Options otherwise would be determined in increments larger than one month, then the vesting of the Stock Options shall be prorated on the basis of the full months of service completed by Executive since the vesting commencement date of the Stock Options.(1)

(b)           The Stock Options shall remain exercisable until the earlier of (i) the fifteen month anniversary of the date of the Termination Event or (ii) the expiration of each option in accordance with its original terms provided, in either case, that Executive complies with his/her obligations under Article V of this Agreement. The term “Stock Options” shall not include any rights of Executive under the Company’s 2006 Employee Shares Purchase Plan or similar plans.

(c)           The vested portion of Executive’s restricted stock awards (“Restricted Stock”) that are outstanding as of the date of an event described in Section 2.1, 2.2 or 2.3 shall be determined as follows upon the occurrence of such event:

(i)            A period equal to 12 months shall be added to the actual length of Executive’s service; and

(ii)           If the vested portion of the Restricted Stock otherwise would be determined in increments larger than one month, then the vesting of the Restricted Stock shall be prorated on the basis of the full months of service completed by Executive since the vesting commencement date of the Restricted Stock.

All shares of Restricted Stock that have not yet been delivered to Executive or his/her designee (whether because subject to joint escrow instructions or otherwise) shall be promptly delivered to Executive or his/her designee upon the occurrence of an event described in Section 2.1, 2.2 or 2.3.

(d)           The vested portion of Executive’s stock unit awards (the “Stock Units”) that are outstanding as of the date of an event described in Section 2.1, 2.2 or 2.3 shall be determined as follows upon the occurrence of such event:

(i)            A period equal to 12 months shall be added to the actual length of Executive’s service; and

(ii)           If the vested portion of the Stock Units otherwise would be determined in increments larger than one month, then the vesting of the Stock Units shall be prorated on the basis of the full months of service completed by Executive since the vesting commencement date of the Stock Units.

All Stock Units that have not yet been settled shall be promptly settled, in the form specified in the relevant Stock Unit agreements and relevant stock plans under which the Stock Units were granted, upon the occurrence of an event described in Section 2.1, 2.2 or 2.3, but in no event

(1) For example, assume that Executive’s Stock Options ordinarily vest in four equal annual installments and that Executive is subject to an event described in Section 2.1, 2.2 or 2.3 after completing 18 months of service from the vesting commencement date.  Executive would be vested in 18/48ths of the Stock Options for the actual period of service plus 12/48ths of the Stock Options for the added vesting provided herein, for a total of 30/48ths vested.

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after the later of (i) 2 1/2 months after the end of the Company’s fiscal year in which vesting occurs, or (ii) March 15 following the calendar year in which vesting occurs.  Notwithstanding the foregoing, such settlement shall be subject to any delay period required under Section 5.6 of this Agreement.

2.7          Health & Welfare Benefits Coverage.

(a)           Following the occurrence of a Termination Event described in Section 2.1, to the extent permitted by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and codified in Section 4980B of the Code and the regulations thereunder (“COBRA”) and by the Company’s group health insurance policies, Executive and/or Executive’s covered dependents will be eligible to continue their health insurance benefits at their own expense.  However, if Executive and/or Executive’s covered dependents timely elect COBRA continuation for Executive and/or Executive’s covered dependents, the Company shall reimburse Executive and/or Executive’s covered dependents’ COBRA continuation premiums for group health coverage for 12 months, provided that the Company’s obligation to make such reimbursements shall cease immediately to the extent that Executive and/or Executive’s covered dependents are no longer entitled by law to receive COBRA continuation coverage.  Executive agrees to notify a duly authorized officer of the Company in writing immediately upon Executive’s and/or a covered dependent’s beginning to receive health benefits from another source, or as otherwise required by COBRA.  This Section 2.7(a) provides only for the Company’s reimbursement of COBRA continuation premiums for the periods specified above, and does not affect the rights of Executive and/or Executive’s covered dependents under any applicable law with respect to health insurance continuation coverage. Such reimbursements shall be made as soon as administratively feasible following the Company’s receipt of appropriate documentation.

ARTICLE III

TERMINATION AFTER CHANGE IN CONTROL

3.1          Involuntary Termination upon or Following Change of Control.  In the event Executive’s employment with the Company and its subsidiaries is involuntarily terminated at any time by the Company without Cause either (i) at the time of or within 24 months following the occurrence of a Change of Control, (ii) within three months prior to a Change of Control, whether or not such termination is at the request of an Acquiror, or (iii) at any time prior to a Change of Control if such termination is at the request of an Acquiror, then such termination of employment will be a Termination Event and the Company shall pay Executive the compensation and benefits described in this Article III in the manner and at the time described in Section 3.3, subject to Executive complying with his/her obligations described in Sections 5.4 and 5.5 of this Agreement.  If the Company reasonably believes that a Change of Control will not occur within three months following the termination of Executive, but in fact a Change of Control does occur within three months following such termination, Executive will be provided with the compensation and benefits described in this Article III in the manner and at the time described in Section 3.3.  An “Acquiror” is either a person or a member of a group of related persons representing such group that in either case obtains effective control of the Company in

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the transaction or a group of related transactions constituting the Change of Control.  For the elimination of doubt, in the event Executive’s employment with the Company and its subsidiaries is involuntarily terminated by the Company without Cause and the circumstances described in this Section 3.1 are not applicable, then Article II will apply to such event.

3.2          Voluntary Termination For Good Reason Upon or Following Change of Control.

(a)           In the event Executive voluntarily terminates his/her employment within three months of the occurrence of an event constituting Good Reason and on account of an event constituting Good Reason, which event occurs either (i) at the time of or within 24 months following the occurrence of a Change of Control, (ii) within three months prior to a Change of Control, whether or not such termination is at the request of an Acquiror, or (iii) at any time prior to a Change of Control if such triggering event or Executive’s termination is at the request of an Acquiror, then such termination of employment will be a Termination Event and the Company shall pay Executive the compensation and benefits described in this Article III in the manner and at the time described in Section 3.3, subject to Executive complying with his/her obligations described in Sections 5.4 and 5.5 of this Agreement.  If the Company reasonably believes that a Change of Control will not occur within three months following the voluntary termination for Good Reason by Executive, but a Change of Control does in fact occur within three months following such termination, Executive will be provided with the compensation and benefits described in this Article III in the manner and at the time described in Section 3.3.

(b)           In the event Executive voluntarily terminates his/her employment for any reason other than on account of an event constituting Good Reason under the circumstances described in Section 3.2(a), then such termination of employment will not be a Termination Event, Executive will not be entitled to receive any payments or benefits under the provisions of this Agreement, and the Company will cease paying compensation or providing benefits to Executive as of Executive’s termination date.

3.3          Lump Sum Payment upon Termination after Change in Control.

(a)           If a Termination Event described in this Article III occurs, Executive shall receive an amount equal to two times the sum of Executive’s Base Salary and Target Bonus, less any applicable withholding of federal, state, local or foreign taxes; provided, however, that the Company may deduct from amounts payable to Executive pursuant to this Article III any amounts paid to Executive pursuant to Article II.

(b)           The salary and bonus amounts payable pursuant to this Article III shall be paid in a single lump sum.  Such payments shall be made (i) not later than immediately prior to completion of the Change of Control where the Termination Event occurs prior to a Change of Control or (ii) within two business days after the date of a Termination Event where the Termination Event occurs subsequent to a Change of Control; provided that, in each case, no payment will occur until after the effective date of the general waiver and release of claims entered into between Executive and the Company, as described in Section 5.5 below, and provided further that the timing of such payments shall be subject to any delay period required under Section 5.6 of this Agreement.

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3.4          Bonus for Final Period.  If a Termination Event described in this Article III occurs, Executive shall receive a pro rated bonus for the performance period in which the Termination Event occurs (in addition to the amount described in Section 3.3).  The amount of the bonus shall be equal to Target Bonus for the period in which the Termination Event occurred multiplied by a fraction in which (i) the numerator is the number of days from and including the first day of the performance period until and including the date of the Termination Event and (ii) the denominator is the number of days in the performance period.  Such bonus shall be paid at the time prescribed in Section 3.3(b).

3.5          Stock Award Acceleration upon Termination after Change in Control.

(a)           Executive’s Stock Options that are outstanding as of the date of a Termination Event described in this Article III shall become fully vested upon the occurrence of such Termination Event and exercisable so long as Executive complies with the restrictions and limitations set forth in Article V.  The Stock Options shall remain exercisable until the earlier of (i) the second anniversary of the date of the Termination Event or (ii) the expiration of each option in accordance with its original terms provided, in either case, that Executive complies with his/her obligations under Article V of this Agreement. The term “Stock Options” shall not include any rights of Executive under the Company’s 2006 Employee Shares Purchase Plan or similar plans.

(b)           Executive’s Restricted Stock awards that are outstanding as of the date of a Termination Event described in this Article III shall become fully vested and free from any contractual rights of the Company to repurchase or otherwise reacquire the Restricted Stock as a result of Executive’s termination of employment.  All shares of Restricted Stock that have not yet been delivered to Executive or his/her designee (whether because subject to joint escrow instructions or otherwise) shall be promptly delivered to Executive or his/her designee upon the occurrence of a Termination Event described in this Article III.

(c)           Executive’s Stock Units that are outstanding as of the date of a Termination Event described in this Article III shall become fully vested as a result of Executive’s termination of employment.  All Stock Units that have not yet been settled shall be promptly settled, in the form specified in the relevant Stock Unit agreements and relevant stock plans under which the Stock Units were granted, upon the occurrence of a Termination Event described in this Article III, but in no event later than the later of (i) 2 ½ months after the end of the Company’s fiscal year in which vesting occurs, or (ii) March 15 following the calendar year in which vesting occurs.  Notwithstanding the foregoing, such settlement shall be subject to any delay period required under Section 5.6 of this Agreement.

3.6          Health & Welfare Benefits Coverage.

(a)           Following the occurrence of a Termination Event described in this Article III, to the extent permitted by COBRA and by the Company’s group health insurance policies, Executive and/or Executive’s covered dependents will be eligible to continue their health insurance benefits at their own expense.  However, if Executive and/or Executive’s covered dependents timely elects COBRA continuation for Executive and/or Executive’s covered dependents, the Company shall reimburse Executive’s and/or Executive’s covered

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dependents’ COBRA continuation premiums for group health coverage for 24 months, provided that the Company’s obligation to make such reimbursements shall cease immediately to the extent that Executive and/or Executive’s covered dependents are no longer entitled to receive COBRA continuation coverage.  Executive agrees to notify a duly authorized officer of the Company, in writing, immediately upon Executive’s and/or a covered dependent’s beginning to receive health benefits from another source, or as otherwise required by COBRA.  This Section 3.6(a) provides only for the Company’s reimbursement of COBRA continuation premiums for the periods specified above.  This Section 3.6(a) does not affect the rights of Executive or Executive’s covered dependents under any applicable law with respect to health insurance continuation coverage.  Such reimbursement shall be made as soon as administratively feasible following the Company’s receipt of appropriate documentation.

ARTICLE IV

TERMINATION FOR CAUSE

4.1          General Effect of Termination for Cause.  In the event Executive’s employment with the Company and its subsidiaries is involuntarily terminated by the Company with Cause at any time, whether before or after a Change of Control, then such termination of employment will not be a Termination Event, Executive will not be entitled to receive any payments or benefits under the provisions of this Agreement, and the Company will cease paying compensation or providing benefits to Executive as of Executive’s termination date.

4.2          Procedure for “Cause” Finding.

(a)           Prior to a Change in Control, Executive may only be terminated for Cause if a majority of the Board then in office determines that grounds for Cause exist.  In the event of such determination, the Company will give Executive notice of the finding of Cause with reasonable specificity, and will provide Executive with a reasonable opportunity to meet with the Board to refute the finding.

(1)           If Executive elects to appear before the Board to dispute the finding, the Board will meet with the Executive.  Following such meeting, the Board shall reconsider its initial finding and the decision of a majority of the Board then in office will be required to confirm the determination that grounds for Cause exist.

(2)           If Executive declines to appear before the Board to dispute the finding, then the initial action by the Board shall constitute the determination to terminate Executive for Cause.

(b)           Subsequent to a Change in Control, the procedural requirements of Section 4.2(a) shall apply, except that the findings of the Board must be approved by not less than 2/3rds of the directors then in office.

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ARTICLE V

LIMITATIONS AND CONDITIONS ON BENEFITS

5.1          Right to Benefits.  If a Termination Event does not occur, Executive shall not be entitled to receive any benefits described in this Agreement, except as otherwise specifically set forth herein.  If a Termination Event occurs, Executive shall be entitled to receive the benefits described in this Agreement only if Executive complies with the restrictions and limitations set forth in this Article V.

5.2          No Mitigation.  Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by retirement benefits after the date of the Termination Event, or otherwise.

5.3          Withholding Taxes.  The Company shall withhold appropriate federal, state, local or foreign income, employment and other applicable taxes from any payments hereunder.

5.4          Obligations of Executive.

(a)           For two years following a Termination Event, Executive agrees not to personally solicit any of the employees either of the Company or of any entity in which the Company directly or indirectly possesses the ability to determine the voting of 50% or more of the voting securities of such entity (including two-party joint ventures in which each party possesses 50% of the total voting power of the entity) to become employed elsewhere or provide the names of such employees to any other company that Executive has reason to believe will solicit such employees.

(b)           Following the occurrence of a Termination Event, Executive agrees to continue to satisfy his/her obligations under the terms of the Company’s standard form of Agreement Regarding Confidential Information and Proprietary Development previously executed by Executive (or any comparable agreement subsequently executed by Executive in substitution or supplement thereto).

(c)           Executive acknowledges and recognizes that payments and benefits under this Agreement will cease if, within one year following a Termination Event, Executive (whether on Executive’s own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever), directly or indirectly, either (i) engages in any business that is a Competitive Business or (ii) enters the employ of, or render any services to, any person or entity (or any division of any person or entity) that engages in a Competitive Business.  For purposes of this Agreement, the term “Competitive Business” shall include any person or entity that competes with any business of the Company or its affiliates at the time of the Termination Event (including, without limitation, businesses that the Company or its affiliates have specific plans at the time of the Termination Event to conduct in the future, of which plans Executive is aware at that time) in any geographical area where the Company or its affiliates manufacture,

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sell, lease, rent, license, or otherwise provide their products or services (including, without limitation, geographical areas where the Company or its affiliates have specific plans at the time of the Termination Event to engage in one or more such activities, of which plans Executive is aware at that time).  Notwithstanding the preceding sentence, a person or entity shall be treated as a Competitive Business for purposes of this Agreement only if the Company includes such person or entity (which, unless otherwise specified by the Company, shall be considered to include all of the subsidiaries and other affiliates of such listed person or entity) on a list to be prepared by the Company at or shortly after the time of the Termination Event, such list is provided to Executive, and such list includes not more than 15 persons or entities.

Notwithstanding any provision in this Agreement to the contrary, it shall not be a violation of this Section 5.4(c) if any one or more of the following shall occur:

(i)            Executive may own, directly or indirectly, solely as a passive investment, securities of any person engaged in a Competitive Business, which securities are publicly traded on a national or regional stock exchange or on the over-the-counter market, if Executive (A) is not a controlling person of, or a member of a group that controls, such person and (B) does not, directly or indirectly, own 5% or more of any class of securities of such person.

(ii)           If Executive is providing services to or for the benefit of an entity that has two or more distinct business units, at least one of which does not constitute a Competitive Business, Executive may provide services to such entity so long as Executive does not provide services, directly or indirectly, to or for the benefit of a business unit that constitutes a Competitive Business.

(iii)          If Executive is providing services to or for the benefit of an entity that does not engage in a Competitive Business, and such entity subsequently is acquired by a person or entity that does engage in a Competitive Business, Executive may continue such employment so long as Executive does not personally engage, directly or indirectly, in such Competitive Business or otherwise advise or assist such Competitive Business.

(d)           It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 5.4 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time or territory and to such maximum extent as such court may judicially determine or indicate to be enforceable.  Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

(e)           Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 5.4(a), (b) or (c) would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by

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this Agreement and, with respect to a breach or threatened breach of Section 5.4(a) or (b) only, obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available.

5.5          Employee Release Prior to Receipt of Benefits.  Upon the occurrence of a Termination Event, and prior to the receipt of any benefits under this Agreement on account of the occurrence of the Termination Event, Executive shall, as of the date of the Termination Event, execute an employee release substantially in the form attached hereto as Exhibit A.  Such employee release shall specifically relate to all of Executive’s rights and claims in existence at the time of such execution relating to Executive’s employment with the Company, but shall not include (i) Executive’s rights under this Agreement, (ii) Executive’s rights under any employee benefit plan sponsored by the Company, (iii) Executive’s rights to indemnification or advancement of expenses under applicable law, the Company’s bylaws or other governing instruments or any agreement addressing such subject matter between Executive and the Company or (iv) any claims that cannot be released as a matter of law.  It is understood that Executive has 21 days (or such longer period as may be required by applicable law) to consider whether to execute such employee release and Executive may revoke such employee release within seven days after execution of such employee release.  In the event Executive does not execute such employee release within the 21-day period (or such longer period as may be required by applicable law), or if Executive revokes such employee release within the seven-day period, no benefits shall be payable under this Agreement and this Agreement shall be null and void.  Nothing in this Agreement shall limit the scope or time of applicability of such employee release once it is executed and not timely revoked.

5.6          Compliance with Section 409A.  In the event that (i) one or more payments of compensation or benefits (and any other severance payments or benefits which may be considered deferred compensation under Section 409A) received or to be received by Executive pursuant to this Agreement (“Agreement Payment”) would constitute deferred compensation subject to Section 409A of the Code and the regulations or other authority promulgated thereunder, as amended from time to time (“Section 409A”), and (ii) Executive is deemed at the time of such termination of employment to be a “specified employee” under Section 409A(a)(2)(B)(i), then such Agreement Payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from the date of Executive’s “separation from service” (as such term is at the time defined in Treasury Regulations under Section 409A) with the Company (the “delay period”) or (ii) such earlier time permitted under Section 409A of the Code; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive under Section 409A, including (without limitation) the additional 20% tax for which Executive would otherwise be liable under Section 409A(a)(1)(B)  or any state law equivalent of Section 409A in the absence of such deferral.  During any period in which an Agreement Payment to Executive is deferred pursuant to the foregoing, Executive shall be entitled to interest on the deferred Agreement Payment at a per annum rate equal to the highest rate of interest applicable to six-month non-callable certificates of deposit with daily compounding offered by Citibank N.A., Wells Fargo Bank, N.A. or Bank of America on the date of such separation from service.  Upon the expiration of the applicable delay period, any Agreement Payment that would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this Section 5.6 shall be paid to Executive or Executive’s beneficiary in one lump sum, including all accrued interest, and all remaining Agreement Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

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The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.  The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

5.7          Golden Parachute Payments.

(a)           In the event that any payment received or to be received by Executive pursuant to this Agreement or otherwise (“Payment”) would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable federal, state, local or foreign excise tax (such excise tax, together with any interest and penalties, is hereinafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment from the Company (“Gross-Up Payment”) in such an amount that after the payment of all taxes (including, without limitation, any interest and penalties on such taxes and the Excise Tax) on the Payment and on the Gross-Up Payment, Executive shall retain an amount equal to (a) the Payment minus (b) all applicable taxes on the Payment other than the Excise Tax.  The intent of the parties is that the Company shall be solely responsible for, and shall pay, any Excise Tax on the Payment and Gross-Up Payment and any income, employment and other taxes (including, without limitation, penalties and interest) imposed on the Gross-Up Payment (as well as any loss of tax deduction caused by the Payment or the Gross-Up Payment).  Notwithstanding the foregoing, in the event that Excise Taxes could be avoided by a reduction in payments to Executive pursuant to this Agreement, the Company may reduce such payments to bring the total payments to that amount that falls immediately below the threshold triggering the Excise Tax, up to a total reduction not to exceed $25,000.  Any reduction in payments and/or benefits required by this Section 5.7 shall occur in the following order unless the Executive elects in writing a different order prior to the date on which the event that triggers the severance payments and benefits due hereunder occurs: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid to the Executive.  In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant for the Executive’s equity awards unless the Executive elects in writing a different order for cancellation prior to the triggering event. Any Gross-Up Payment under this Agreement shall be made with thirty (30) days following the date in which the related taxes are remitted to the taxing authorities by Executive.

(b)           Unless the Company and Executive otherwise agree in writing, all determinations required to be made under this Section 5.7 and the assumptions to be utilized in arriving at such determinations shall be made in writing in good faith by an independent tax professional designated by the Company and reasonably acceptable to Executive (the “Independent Tax Professional”).  For purposes of making the calculations required by this Section 5.7, the Independent Tax Professional may make reasonable assumptions and

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approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and Executive shall furnish to the Independent Tax Professional such information and documents as the Independent Tax Professional may reasonably request in order to make a determination under this Section 5.7.  The Company shall bear all costs that the Independent Tax Professional may reasonably incur in connection with any calculations contemplated by this Section 5.7.

ARTICLE VI

OTHER RIGHTS AND BENEFITS NOT AFFECTED

Nothing in the Agreement shall prevent or limit Executive’s continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which Executive may otherwise qualify, nor shall anything herein limit such greater rights as Executive may have under any agreements with the Company applicable to his/her Stock Options, Restricted Stock, Stock Units or other equity awards; provided, however, that any benefits provided hereunder shall be in lieu of any other severance benefits to which Executive may otherwise be entitled, including (without limitation) under any employment contract or severance plan, program or arrangement.  Except as otherwise expressly provided herein, amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the date of a Termination Event shall be payable in accordance with such plan, policy, practice or program.

ARTICLE VII

NON-ALIENATION OF BENEFITS

No benefit hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void.

ARTICLE VIII

DEFINITIONS

For purposes of the Agreement, the following terms shall have the meanings set forth below:

8.1          “Base Salary” means Executive’s annual salary (excluding bonus, any other incentive or other payments and stock option exercises) from the Company at the time of the occurrence of the Change of Control (if applicable) or the Termination Event, whichever is greater.

8.2          “Cause” means (i) an unauthorized use or disclosure by Executive of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company, (ii) a material breach by Executive of a material agreement between Executive and the Company, (iii) a material failure by Executive to comply with the Company’s

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written policies or rules resulting in material harm to the Company, (iv) Executive’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof or the equivalent under the applicable laws outside of the United States, (v) Executive’s gross negligence or willful misconduct resulting in material harm to the Company, (vi) a continuing failure by Executive to perform assigned duties after receiving written notification of such failure or (vii) a failure by Executive to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested Executive’s cooperation.

8.3          “Change of Control” means:

(a)           The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not shareholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity;

(b)           The sale, transfer or other disposition of all or substantially all of the Company’s assets;

(c)           A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either:

(i)            Had been directors of the Company on the date 24 months prior to the date of such change in the composition of the Board (the “Original Directors”); or

(ii)           Were appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a majority of the aggregate of (A) the Original Directors who were in office at the time of their appointment or nomination and (B) the directors whose appointment or nomination was previously approved in a manner consistent with this Paragraph (ii); or

(d)           Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of securities of the Company representing at least 30% of the total voting power represented by the Company’s then outstanding voting securities.  For purposes of this Subsection (d), the term “person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of Shares.

A transaction shall not constitute a Change in Control if its sole purpose is to change the jurisdiction of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

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8.4          “Company” means Verigy Ltd., a Singapore corporation, and any successor thereto and its subsidiaries; provided, however, that with respect to determining whether a Change in Control has occurred, the term “Company” shall mean Verigy Ltd. exclusively.

8.5          “Disability” means that Executive is unable to perform the duties of his/her office with the Company or any subsidiary, and is unable to perform substantially equivalent duties, by reason of any medically determinable physical or mental impairment, and such condition has lasted or can be expected to last for a continuous period of not less than 12 months.

8.6          “Good Reason” means: (i) a reduction of Executive’s rate of compensation as in effect on the Effective Date of this Agreement or, if a Change of Control has occurred, as in effect immediately prior to the occurrence of a Change of Control, other than reductions in Base Salary that apply broadly to employees of the Company or reductions due to varying metrics and achievement of performance goals for different periods under variable-pay programs; (ii) either (A) failure to provide a package of benefits that, taken as a whole, provides substantially similar benefits to those in which Executive is entitled to participate as of the Effective Date (except that employee contributions may be raised to the extent of any cost increases related to such benefits where such increases in employee contributions are broadly applicable to employees of the Company) or (B) any action by the Company that would significantly and adversely affect Executive’s participation or reduce Executive’s benefits under any of the Company’s benefit plans, other than changes that apply broadly to employees of the Company; (iii) a change in Executive’s duties, responsibilities, authority, job title or reporting relationships resulting in a significant diminution of position, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied by the Company promptly after notice thereof is given by Executive; (iv) a request that Executive relocate to a worksite that is more than 25 miles from his/her prior worksite, unless Executive accepts such relocation opportunity; (v) a failure or refusal of a successor to the Company to assume the Company’s obligations under this Agreement, as provided in Section 9.9 or (vi) a material breach by the Company or any successor to the Company of any of the material provisions of this Agreement.  [Last Sentence Version A:  For purposes of clause (iii) of the immediately preceding sentence, Executive’s duties, responsibilities, authority, job title or reporting relationships shall not be considered to be significantly diminished (and therefore shall not constitute “Good Reason”) so long as Executive continues to perform substantially the same functional role for the Company as Executive performed immediately prior to the occurrence of the Change of Control, even if the Company becomes a subsidiary or division of another entity.] [Last Sentence Version B:  For purposes of clause (iii) of the immediately preceding sentence, Executive’s duties, responsibilities, authority, job title or reporting relationships shall be considered to be significantly diminished (and therefore shall constitute “Good Reason”) if Executive no longer to performs substantially the same functional role for the Company as Executive performed immediately prior to the occurrence of the Change of Control of an entity whose equity securities are publicly traded; provided, however, that prior to terminating his/her employment for Good Reason under clause (iii) of the immediately preceding sentence solely as a result of the entity for which Executive is providing services not being an entity whose securities are publicly traded, Executive shall notify the successor entity of his/her intention to so terminate his/her employment and shall provide the successor entity with a reasonable period of time, not to exceed 90 days, to negotiate terms of employment which meet Executive’s requirements.  If, at the end of the notice and negotiation period, the parties are unable to arrive at mutually satisfactory terms and conditions of employment, then Executive may exercise his/her right to termination for good reason as a result of no longer serving in a comparable role with a company whose securities are publicly traded.]

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8.7          “Target Bonus” means:

(a)           With respect to a Termination Event occurring on or before October 31, 2008, the “Target Bonus” shall be an amount equal to the annualized bonus compensation that Executive would be entitled to receive under the terms of any applicable performance-based compensation plan in effect at the time of Executive’s Termination Event, as set for Executive by the Compensation Committee of the Board or other authorized body, covering the 12-month period ending at the end of the performance period during which Executive’s Termination Event occurs, assuming that the performance objectives are fully met.  The “Target Bonus” amount shall equal 100% of the target amount regardless of whether or not, or to what degree, the actual performance objectives are met.

(b)           With respect to a Termination Event occurring on or after November 1, 2008, the “Target Bonus” shall be an amount equal to an average of the annualized bonus compensation paid to Employee with respect to the two fiscal years of the Company most recently preceding the date of the Termination Event; provided, however, that if the Executive’s target bonus in the year in which the Termination Event occurs, expressed as a percent of Executive’s Base Salary, is higher than the percentage target bonus levels in the years used for purposes of the average, then an equitable adjustment will be made to the prior year amounts so as to treat Executive as if s/he were at the higher target bonus percentage for the years used to determine the average.

8.8          “Termination Event” means an involuntary termination of employment described in Section 2.1 or 3.1(a) or a voluntary termination of employment described in Section 3.2(a).  No other event shall be a Termination Event for purposes of this Agreement.

ARTICLE IX

GENERAL PROVISIONS

9.1          Interpretation.  The parties acknowledge that Executive may serve as an officer and/director of the Company as well as an officer and/or director of one or more of the Company’s subsidiaries.  It is the parties’ intention that, when determining whether a Termination Event or Change of Control has occurred, the parties will look at the facts and circumstances affecting the highest level entity in the Company’s corporate family in which Executive plays a role.  For example, an executive officer of the Company who also served on the Board or as an officer of one or more of the Company’s subsidiaries will not be deemed to have experienced a change in Executive’s duties, responsibilities, authority, job title or reporting relationships resulting in a significant diminution of position solely as a result of the change at the subsidiary level, i.e., changes implemented solely at the subsidiary level but not at the higher level would not constitute Good Cause unless the overall effect of the subsidiary-level changes resulted in a significant diminution of overall position with the Company and its subsidiaries taken as a whole.

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9.2          Subsidiaries Bound.  To the extent that Executive is employed by a subsidiary of Verigy Ltd. and not by Verigy Ltd. itself, (i) Executive’s Base Salary and Target Bonus shall be the amounts as so defined as payable by Executive’s direct employer; and (ii) to the extent that Verigy Ltd. itself is not the direct employer or otherwise paying the benefits due to Executive under this Agreement, Verigy Ltd. shall cause the subsidiary directly employing Executive to make provide the benefits due to Executive under this Agreement.

9.3          Notices.  Any notices provided hereunder must be in writing, and such notices or any other written communication shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third day after mailing by first-class mail, to the Company at its primary U.S. office location and to Executive at Executive’s address as listed in the Company’s payroll records.  Any payments made by the Company to Executive under the terms of this Agreement shall be delivered to Executive either in person or at such address as listed in the Company’s payroll records.

9.4          Severability.  It is the intent of the parties to this Agreement that, whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

9.5          Waiver.  If either party should waive any breach of any provisions of this Agreement, that party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

9.6          Complete Agreement.  This Agreement, including Exhibit A, constitutes the entire agreement between Executive and the Company and is the complete, final and exclusive embodiment of their agreement with regard to this subject matter; provided that (subject to any delay period required under Section 5.6) nothing herein shall limit such greater rights as Executive may have under any agreements with the Company applicable to his/her Stock Options, Restricted Stock, Stock Units or other equity awards.  This Agreement shall be deemed to be an amendment of any agreements between Executive and the Company applicable to his/her Stock Options, Restricted Stock, Stock Units or other equity awards to the extent that this Agreement provides greater rights.  This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein.  Without limiting the foregoing, this Agreement supersedes and replaces all prior agreements and understandings, whether written or oral, on the matters set forth herein that may exist between Executive and the Company or its predecessor, Agilent Technologies, Inc. or any of their respective subsidiaries. With respect to Stock Options, Restricted Stock, Stock Units or other equity awards granted on or after the date hereof, the acceleration of vesting provided herein will apply to such awards except to the extent otherwise explicitly provided (which must include reference to this Agreement) in the applicable equity award agreement.

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9.7          Counterparts.  This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

9.8          Headings.  The headings of the Articles and Sections hereof are inserted for convenience only and shall neither be deemed to constitute a part hereof nor to affect the meaning thereof.

9.9          Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not delegate any of Executive’s duties hereunder and may not assign any of Executive’s rights hereunder without the written consent of the Company, which consent shall not be withheld unreasonably.  Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the Company’s obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets, whether or not such successor executes and delivers an assumption agreement referred to in the preceding sentence or becomes bound by the terms of this Agreement by operation of law or otherwise.

9.10        Amendment or Termination of this Agreement.  This Agreement may be changed or terminated only upon the mutual written consent of the Company and Executive.

9.11        Attorney Fees.  If either party hereto brings any action to enforce such party’s rights hereunder, the prevailing party in any such action shall be entitled to recover such party’s reasonable attorneys’ fees and costs incurred in connection with such action.

9.12        Arbitration.  In order to ensure rapid and economical resolution of any dispute that may arise under this Agreement, Executive and the Company agree that any and all disputes or controversies arising from or regarding the interpretation, performance, enforcement or termination of this Agreement which cannot be resolved by good faith negotiation between the parties shall first be submitted for non-binding mediation.  If complete agreement cannot be reached within 60 days after the date of submission to mediation, any remaining issues will be submitted to the Judicial Arbitration & Mediation Services, Inc. (“JAMS”) to be resolved by final and binding arbitration under the its Employment Arbitration Rules & Procedures (the “JAMS Rules”) and California Law. Accordingly, the parties hereby agree to waive their right to have any dispute between them under this Agreement resolved in a court of law by a judge or jury.

9.13        Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California.

9.14        Construction of Agreement.  In the event of a conflict between the text of the Agreement and any summary, description or other information regarding the Agreement, the text of the Agreement shall control.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year written above.

Verigy Ltd.,	EXECUTIVE
a Singapore corporation
(Signature of Authorized Signatory)	Signature
(Print Name & Title of Signatory)
Exhibit A: General Release and Agreement

Exhibit A

GENERAL RELEASE AND AGREEMENT

This General Release and Agreement (the “Agreement”) is entered into this          day of                         , 200   (the “Effective Date”), between Verigy Ltd., a Singapore corporation (the “Company”), and                                (“Executive”).  The Agreement is part of an agreement between Executive and Verigy Ltd. (“Verigy”) to terminate Executive’s employment with Verigy on the terms set forth in the Amended & Restated Severance Agreement dated                  , 200  , between Verigy and Executive (the “Severance Agreement”).

Verigy and Executive hereby agree as follows:

1.Executive agrees to attend a Functional Exit Interview on                          , 20    , at which time all company property and identification will be turned in and the appropriate personnel documents will be executed.  Thereafter, Executive agrees to do such other acts as may be reasonably requested by Verigy in order to effectuate the terms of this Agreement.  Executive agrees to remove all personal effects from his/her current office within seven days of signing this Agreement and in any event not later than                        , 20    .

2.Executive agrees not to make any public statement or statements to the press concerning Verigy, its business objectives, its management practices, or other sensitive information without first receiving Verigy’s written approval.  Executive further agrees to take no action that would cause Verigy or its employees or agents any embarrassment or humiliation or otherwise cause or contribute to Verigy’s or any such person’s being held in disrepute by the general public or Verigy’s employees, clients, or customers.  Verigy agrees to take no action that would cause Executive any embarrassment or humiliation or otherwise cause or contribute to Executive’s being held in disrepute by the general public or by Verigy’s employees, clients or customers.

3.Executive, on behalf of Executive and his/her heirs, estate, executors, administrators, successors and assigns, does fully release, discharge, and agree to hold harmless Verigy, its officers, agents, employees, attorneys, subsidiaries, affiliated companies, predecessors, successors and assigns (collectively, the “Releasees”) from all actions, causes of action, claims, judgments, obligations, damages, liabilities, costs, or expense of whatsoever kind and character that he may have, including but not limited to:

a.any claims relating to employment discrimination on account of race, sex, age, national origin, creed, disability, or other basis, whether or not arising under the Federal Civil Rights Acts, the Age Discrimination in Employment Act (“ADEA”), California Fair Employment and Housing Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, any amendments to the foregoing laws, or any other federal, state, county, municipal, foreign or other law, statute, regulation or order relating to employment discrimination;

b.any claims relating to pay or leave of absence arising under the Fair Labor Standards Act, the Family Medical Leave Act, and any similar laws enacted in California or any other jurisdiction, except as prohibited by law;

c.any claims for reemployment, salary, wages, bonuses, vacation pay, stock options, acquired rights, appreciation from stock options, stock appreciation rights, benefits or other compensation of any kind;

d.any claims relating to, arising out of, or connected with Executive’s employment with Verigy, its predecessor Agilent Technologies, Inc. (“Agilent”), or their respective subsidiaries, whether or not the same be based upon any alleged violation of public policy; compliance (or lack thereof) with any internal policy, procedure, practice or guideline; or any oral, written, express, and/or implied employment contract or agreement, or the breach of any terms thereof, including but not limited to, any implied covenant of good faith and fair dealing; or any federal, state, county, municipal or foreign law, statute, regulation or order, whether or not relating to labor or employment; and

e.any claims relating to, arising out of, or connected with any other matter or event occurring prior to the execution of this Agreement, whether or not brought before any judicial, administrative, or other tribunal.

The foregoing notwithstanding, Executive does not release any actions, causes of action, claims, judgments, obligations, damages, liabilities, costs or expense of whatsoever kind and character that he may have with respect to (i) Executive’s rights under this Agreement or the Severance Agreement, (ii) Executive’s rights under any employee benefit plan sponsored by Agilent or Verigy or (iii) Executive’s rights to indemnification or advancement of expenses under applicable law, the bylaws of Agilent or Verigy, or other governing instruments or any agreement addressing such subject matter between Executive and Agilent or Verigy.  Moreover, this release does not release claims that cannot be released as a matter of law, including, but not limited to:  (1) Executive’s right to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, against the Company (with the understanding that any such filing or participation does not give Executive the right to recover any monetary damages against the Company; Executive’s release of claims herein bars Executive from recovering such monetary relief from the Company); (2) claims under Division 3, Article 2 of the California Labor Code (which includes California Labor Code section 2802 regarding indemnity for necessary expenditures or losses by employee); and (3) claims prohibited from release as set forth in California Labor Code section 206.5 (specifically “any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made”).

4.Executive represents and warrants that Executive has not assigned any such claim or authorized any other person or entity to assert such claim on Executive’s behalf.  Further, Executive agrees that under this Agreement Executive waives any claim for damages

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incurred at any time in the future because of alleged continuing effects of past wrongful conduct involving any such claims and any right to sue for injunctive relief against the alleged continuing effects of past wrongful conduct involving such claims.

5.Executive agrees not to act in any manner that might damage the business of the Company.  Executive further agrees that he/she will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement.  Executive agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order.  If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Executive shall state no more than that he/she cannot provide counsel or assistance.

6.In entering into this Agreement, the parties have intended that this Agreement be a full and final settlement of all matters, whether or not presently disputed, that could have arisen between them.

7.Executive understands and expressly agrees that this Agreement extends to all claims of every nature and kind whatsoever, known or unknown, suspected or unsuspected, past or present, and all rights under Section 1542 of the California Civil Code and/or any similar statute or law or any other jurisdiction are hereby expressly waived.  Such Section reads as follows:

“Section 1542.  A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

8.It is expressly agreed that the claims released pursuant to this Agreement include all claims against individual employees of Verigy, whether or not such employees were acting within the course and scope of their employment.

9.Executive understands and agrees that, as a condition of this Agreement, Executive shall not be entitled to any employment (including employment as an independent contractor or otherwise) with Verigy, its subsidiaries or related companies, or any successor, and Executive hereby waives any right, or alleged right, of employment or re-employment with Verigy.  Executive further agrees not to apply for employment with Verigy in the future and not to institute or join any action, lawsuit or proceeding against Verigy, its subsidiaries, related companies or successors for any failure to employ Executive.  In the event Executive should secure such employment, it is agreed that such employment is voidable without cause in the sole discretion of Verigy.  After terminating Executive’s employment, should Executive become employed by another company that Verigy merges with or acquires after the date of this Agreement, Executive may continue such employment only if Verigy makes offers of employment to all employees of the acquired or merged company.

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10.Executive agrees that the terms, amount and fact of settlement shall be confidential until Verigy needs to make any required disclosure of any agreements between Verigy and Executive.  Therefore, except as may be necessary to enforce the rights contained herein in an appropriate legal proceeding or as may be necessary to receive professional services from an attorney, accountant, or other professional adviser in order for such adviser to render professional services, Executive agrees not to disclose any information concerning these arrangements to anyone, including, but not limited to, past, present and future employees of Verigy, until such time of the public filings.

11.The terms of this Agreement are intended by the parties as a final expression of their agreement with respect to such terms as are included in this Agreement and may not be contradicted by evidence of any prior or contemporaneous agreement.  The parties further intend that this Agreement constitutes the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial or other proceeding, if any, involving this Agreement.  No modification of this Agreement shall be effective unless in writing and signed by both parties hereto.

12.It is further expressly agreed and understood that Executive has not relied upon any advice from Verigy and/or its attorneys whatsoever as to the taxability, whether pursuant to federal, state, local or foreign income tax statutes or regulations or otherwise, of the payments made hereunder and that Executive will be solely liable for all tax obligations, if any, arising from payment of the sums specified herein and shall hold Verigy harmless from any tax obligations arising from said payment.

13.In order to ensure rapid and economical resolution of any dispute that may arise under this Agreement, Executive and the Company agree that any and all disputes or controversies arising from or regarding the interpretation, performance, enforcement or termination of this Agreement which cannot be resolved by good faith negotiation between the parties shall first be submitted for non-binding mediation.  If complete agreement cannot be reached within 60 days after the date of submission to mediation, any remaining issues will be submitted to the American Arbitration Association to be resolved by final and binding arbitration under the its National Rules for the Resolution of Employment Disputes and California Law.  BY ENTERING INTO THIS AGREEMENT, EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE IS WAIVING EXECUTIVE’S RIGHT TO JURY TRIAL OF ANY DISPUTE COVERED BY THIS AGREEMENT.

14.The following notice is provided in accordance with the provisions of Federal Law:

You have up to [21 days] [45 days] [NOTE USE “45” IF TERMINATION IS IN CONNECTION WITH A “REDUCTION IN FORCE” FOR ADEA PURPOSES.] from the date this General Release and Agreement is given to you in which to accept its terms, although you may accept it any time within that [21-day period] [45-day period] [NOTE USE “45-day period” IF TERMINATION IS IN CONNECTION WITH A

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“REDUCTION IN FORCE” FOR ADEA PURPOSES.].  You are advised to consult with an attorney regarding this Agreement.  You have the right to revoke your acceptance of this Agreement at any time within seven days from the date you sign it, and this Agreement will not become effective and enforceable until this seven-day revocation period has expired.  To revoke your acceptance, you must send a written notice of revocation to Verigy Ltd., Attention: Vice President and General Counsel, by 5:00 p.m. on or before the seventh day after you sign this Agreement.

EXECUTIVE FURTHER STATES THAT EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT WITH THE ATTORNEY OF EXECUTIVE’S CHOICE, THAT EXECUTIVE HAS CAREFULLY READ THIS AGREEMENT, THAT EXECUTIVE HAS HAD AMPLE TIME TO REFLECT UPON AND CONSIDER ITS CONSEQUENCES, THAT EXECUTIVE FULLY UNDERSTANDS ITS FINAL AND BINDING EFFECT, THAT THE ONLY PROMISES MADE TO EXECUTIVE TO SIGN THIS AGREEMENT ARE THOSE STATED ABOVE OR IN THE SEVERANCE AGREEMENT, AND THAT EXECUTIVE IS SIGNING THIS AGREEMENT VOLUNTARILY.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, this Agreement has been executed in duplicate originals on the dates indicated below, and shall become effective as indicated above.

Verigy Ltd.,	EXECUTIVE
a Singapore corporation
(Signature of Authorized Signatory)	Signature
	Date:
(Print Name & Title of Signatory)
Date:

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EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer Pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14 (a),
As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Keith L. Barnes, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Verigy Ltd.;

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent function):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 7, 2008	/s/ Keith L. Barnes
	Keith L. Barnes
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14,
As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Nikl, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Verigy Ltd.;

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent function):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 7, 2008	/s/ Robert J. Nikl
	Robert J. Nikl
	Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Verigy Ltd. (the “Company”) for the period ended January 31, 2008 filed with the Securities and Exchange Commission (the “Report”), I, Keith L. Barnes, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the consolidated financial condition  of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented.

Date:  March 7, 2008	/s/ Keith L. Barnes
	Keith L. Barnes
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Verigy Ltd. (the “Company”) for the period ended January 31, 2008 filed with the Securities and Exchange Commission (the “Report”), I, Robert J. Nikl, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented.

Date: March 7, 2008	/s/ Robert J. Nikl
	Robert J. Nikl
	Vice President and Chief Financial Officer