-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, INXstM6zSA7ODiG0jhDDtoUhAEs3AUofILJaKXLbLOaHdk4HG1WIZ13Tgql/pHum eghtuHMw6dxhXIZRYfV1EQ== 0000950144-01-001172.txt : 20010123 0000950144-01-001172.hdr.sgml : 20010123 ACCESSION NUMBER: 0000950144-01-001172 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001229 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CREE INC CENTRAL INDEX KEY: 0000895419 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 561572719 STATE OF INCORPORATION: NC FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21154 FILM NUMBER: 1508243 BUSINESS ADDRESS: STREET 1: 4600 SILICON DR CITY: DURHAM STATE: NC ZIP: 27703 BUSINESS PHONE: 9193615709 MAIL ADDRESS: STREET 1: 4600 SILICON DR STREET 2: STE 176 CITY: DURHAM STATE: NC ZIP: 27703 FORMER COMPANY: FORMER CONFORMED NAME: CREE RESEARCH INC /NC/ DATE OF NAME CHANGE: 19940224 8-K 1 g66404e8-k.txt CREE INC 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 29, 2000 CREE, INC. (Exact name of registrant as specified in its charter) NORTH CAROLINA 34-21154 56-1572719 (State or other (Commission File No.) I.R.S. Employer jurisdiction Identification Number of incorporation) 4600 SILICON DRIVE DURHAM, NORTH CAROLINA 27703 (Address of principal executive offices) (919) 313-5300 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On December 29, 2000, Cree, Inc. (Nasdaq: CREE), completed its previously announced acquisition of the UltraRF division (the "Business") of Spectrian Corporation (Nasdaq: SPCT) of Sunnyvale, California, through the purchase of the assets of the Business by Cree's wholly-owned subsidiary, Zoltar Acquisition, Inc. The subsidiary was renamed UltraRF, Inc. following the completion of the acquisition. The Business designs, manufactures and markets a line of bipolar transistors and laterally diffused metal oxide semiconductor (LDMOS) radio frequency (RF) power semiconductors. The asset purchase was consummated pursuant to an Asset Purchase Agreement dated as of November 20, 2000 (the "Asset Purchase Agreement") between Spectrian and UltraRF. A copy of the Asset Purchase Agreement is included as Exhibit 2.01 to this report and a copy of the press release announcing the completion of the acquisition is included as Exhibit 99.01. The description therein of the agreement and the transactions consummated thereby does not purport to be complete and is qualified in its entirety by reference to Exhibit 2.01. Under the terms of the Asset Purchase Agreement, Cree's subsidiary, UltraRF, acquired substantially all of the assets of the Business, including business inventories, equipment and tangible property, intangible assets, contract rights, records, supplies, rights associated with prepaid expenses, certain rights against third parties, certain software and trade accounts receivable attributable to external sales (offset by accounts payable, with no obligation of Cree to collect accounts receivable), and assumed certain specified liabilities of the Business, including obligations and liabilities under certain contracts, warranty obligations and tax obligations and liabilities relating to the Business, in exchange for a total of 2,656,917 shares of Cree common stock. 191,094 shares of Cree common stock were placed in escrow to secure Spectrian's representations, warranties and covenants under the Asset Purchase Agreement. The escrow period is one year, with 50% of the escrowed shares to be released after six months if there have been no indemnification claims. The acquired assets included equipment and other physical property used by the Business in designing, manufacturing and marketing bipolar and LDMOS RF power semiconductors and Cree intends to continue such use through its UltraRF subsidiary. The UltraRF facility is located in a building on one of two parcels of land in Sunnyvale, California, that Spectrian leased in November 1996 for a 15-year term (with three options to extend the lease for up to an additional fifteen years). In connection with the acquisition of the assets of the Business, Spectrian and Cree's subsidiary, UltraRF, also entered into a sublease agreement (included as Exhibit 10.01 to this report) with respect to the UltraRF facility. Under the sublease, Spectrian has leased the UltraRF facility to UltraRF for a term that expires in November 2011. If Spectrian exercises its option to extend the term of its master lease with its landlord, UltraRF may also exercise an option to extend its sublease of the UltraRF facility. Cree has guaranteed the obligations of its subsidiary under the sublease. In addition, at the closing of the acquisition, Cree's subsidiary, UltraRF, signed a supply agreement with Spectrian whereby Spectrian has committed to purchase semiconductor components having a minimum aggregate purchase price of approximately $58 million during the two years ended December 31, 2002, and UltraRF agreed to allocate sufficient capacity to supply Spectrian with quantities in excess of its minimum commitment by up to 20%. The minimum purchase amounts are fixed for each quarter during the two year term of the agreement, with the aggregate of the eight quarters equaling $58 million. Cree, UltraRF and Spectrian also entered into a development agreement, under which Spectrian has agreed to provide funding of $2.4 million during calendar 2001 to support development work by Cree and UltraRF directed to development of improved high linearity and gain LDMOS driver modules, high efficiency LDMOS power modules, and silicon carbide-based RF power transistors for potential use in Spectrian's power amplifier products. 3 The Asset Purchase Agreement was negotiated at arm's length between Cree and representatives of Spectrian. Neither Cree nor any director or officer of Cree is affiliated with or has any material relationship with Spectrian. 4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired. The financial statements required to be filed as part of this report will be filed by amendment to this report as soon as practicable but not later than March 19, 2001. (b) Pro forma financial information. The historical pro forma financial information required to be filed as part of this report will be filed by amendment to this report as soon as practicable but not later than March 19, 2001. (c) Exhibits. Exhibit Number Description of Exhibit - -------------- ---------------------- 2.01 Asset Purchase Agreement dated November 20, 2000, among Cree, Inc., Spectrian Corporation, and Zoltar Acquisition, Inc.* 10.01 Sublease Agreement for 160 Gibraltar Court, Sunnyvale, CA dated December 29, 2000, between Spectrian Corporation and Zoltar Acquisition, Inc. 99.01 Press Release regarding UltraRF Asset Purchase, dated January 2, 2001 of Cree, Inc. *Certain schedules and attachments have been omitted from this filing pursuant to Item 601(b)(2). A list of omitted schedules and attachments is attached to the agreement. Registrant hereby agrees to furnish supplementally to the Commission a copy of any omitted schedule or attachment upon request. 5 SIGNATURES 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 hereunto duly authorized. CREE, INC. By: /s/ Cynthia B. Merrell ------------------------------- Dated: January 12, 2001 Cynthia B. Merrell Chief Financial Officer 6 EXHIBIT INDEX Exhibit Number Description of Exhibit - -------------- ---------------------- 2.01 Asset Purchase Agreement dated November 20, 2000, among Cree, Inc., Spectrian Corporation, and Zoltar Acquisition, Inc.* 10.01 Sublease Agreement for 160 Gibraltar Court, Sunnyvale, CA dated December 29, 2000, between Spectrian Corporation and Zoltar Acquisition, Inc. 99.01 Press Release regarding UltraRF Asset Purchase, dated January 2, 2001 of Cree, Inc. *Certain schedules and attachments have been omitted from this filing pursuant to Item 601(b)(2). A list of omitted schedules and attachments is attached to the agreement. Cree hereby agrees to furnish supplementally to the Commission a copy of any omitted schedule or attachment upon request. EX-2.01 2 g66404ex2-01.txt ASSET PURCHASE AGREEMENT 1 EXHIBIT 2.01 ================================================================================ ASSET PURCHASE AGREEMENT Dated as of November 20, 2000 Among CREE, INC., a North Carolina corporation "PARENT," ZOLTAR ACQUISITION, INC., a North Carolina corporation "NEWCO," and SPECTRIAN CORPORATION, a Delaware corporation "SPECTRIAN" ================================================================================ 2 TABLE OF CONTENTS
Page ---- ASSET PURCHASE AGREEMENT ...........................................................................3 ARTICLE 1 DEFINITIONS ..............................................................................3 SECTION 1.1 DEFINITIONS ..................................................................3 SECTION 1.2 INTERPRETATION ...............................................................9 ARTICLE 2 SALE AND PURCHASE OF ACQUIRED ASSETS AND LIABILITIES .....................................9 SECTION 2.1 PURCHASE AND SALE ............................................................9 SECTION 2.2 ACQUIRED ASSETS AND EXCLUDED ASSETS ..........................................9 SECTION 2.3 ASSUMPTION OF BUSINESS LIABILITIES AND OBLIGATIONS ..........................12 ARTICLE 3 PURCHASE PRICE ..........................................................................14 SECTION 3.1 THE PURCHASE PRICE ..........................................................14 ARTICLE 4 THE CLOSING .............................................................................15 SECTION 4.1 CLOSING DATE ................................................................15 SECTION 4.2 TRANSACTIONS TO BE EFFECTED AT THE CLOSING ..................................15 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SPECTRIAN .............................................16 SECTION 5.1 SPECTRIAN'S ORGANIZATION; GOOD STANDING .....................................16 SECTION 5.2 AUTHORITY; EXECUTION AND DELIVERY ...........................................16 SECTION 5.3 CONSENTS AND APPROVALS; NO VIOLATIONS .......................................16 SECTION 5.4 FINANCIAL STATEMENTS ........................................................16 SECTION 5.5 TITLE TO ACQUIRED ASSETS ....................................................16 SECTION 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS ........................................17 SECTION 5.7 EMPLOYMENT MATTERS ..........................................................17 SECTION 5.8 EMPLOYEE BENEFIT PLANS ......................................................18 SECTION 5.9 LITIGATION ..................................................................18 SECTION 5.10 COMPLIANCE WITH LAWS ........................................................18 SECTION 5.11 CONTRACTS ...................................................................19 SECTION 5.12 NO BROKERS ..................................................................20 SECTION 5.13 INTELLECTUAL PROPERTY .......................................................20 SECTION 5.14 ACCREDITED INVESTOR STATUS ..................................................21 SECTION 5.15 RELIANCE ON EXEMPTIONS ......................................................21 SECTION 5.16 TRANSFER OR RESALE ..........................................................21 SECTION 5.17 LEGENDS .....................................................................22 SECTION 5.18 ENVIRONMENTAL COMPLIANCE ....................................................22 SECTION 5.19 ALL ASSETS OF BUSINESS; CONDITION OF ACQUIRED ASSETS ........................24 SECTION 5.20 TAXES .......................................................................24 SECTION 5.21 INVENTORY ...................................................................24 SECTION 5.22 MANUFACTURING YIELDS ........................................................24 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF NEWCO AND PARENT ......................................25 SECTION 6.1 ORGANIZATION AND QUALIFICATION ..............................................25 SECTION 6.2 CAPITALIZATION ..............................................................25 SECTION 6.3 AUTHORITY; EXECUTION AND DELIVERY ...........................................25 SECTION 6.4 CONSENTS AND APPROVALS; NO VIOLATIONS .......................................25 SECTION 6.5 SEC DOCUMENTS ...............................................................26 SECTION 6.6 COMPLIANCE WITH LAW; PERMITS ................................................26 SECTION 6.7 LITIGATION ..................................................................26
i 3 SECTION 6.8 BROKERS AND FINDERS .........................................................26 ARTICLE 7 CERTAIN COVENANTS AND AGREEMENTS ........................................................26 SECTION 7.1 COVENANTS OF SPECTRIAN RELATING TO CONDUCT OF BUSINESS ......................26 SECTION 7.2 NEWCO'S ACCESS TO INFORMATION ...............................................27 SECTION 7.3 PRESERVATION OF RECORDS .....................................................27 SECTION 7.4 LEGAL CONDITIONS TO CLOSING .................................................28 SECTION 7.5 EMPLOYEE BENEFITS ...........................................................28 SECTION 7.6 TAX MATTERS .................................................................29 SECTION 7.7 EXPENSES ....................................................................31 SECTION 7.8 FINANCIAL INFORMATION .......................................................31 SECTION 7.9 BULK TRANSFER LAWS ..........................................................31 SECTION 7.10 ACTIONS OF NEWCO AND SPECTRIAN ..............................................31 SECTION 7.11 NO ADDITIONAL REPRESENTATIONS ...............................................31 SECTION 7.12 HART-SCOTT-RODINO ACT .......................................................32 SECTION 7.13 LEASE .......................................................................32 SECTION 7.14 DELIVERY OF AUDITED FINANCIAL STATEMENTS ....................................33 SECTION 7.15 STUB PERIOD FINANCIAL INFORMATION ...........................................33 SECTION 7.16 LISTING OF ADDITIONAL SHARES ................................................33 SECTION 7.17 NON-COMPETITION; NON-SOLICITATION ...........................................33 SECTION 7.18 ORDERLY DISPOSITION OF STOCK CONSIDERATION ..................................34 SECTION 7.19 EXCLUSIVITY .................................................................34 SECTION 7.20 REGISTRATION RIGHTS .........................................................35 SECTION 7.21 PARENT'S INVESTIGATION PERIOD ...............................................35 ARTICLE 8 CONDITIONS PRECEDENT ....................................................................36 SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS ......................................36 SECTION 8.2 CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO ...............................37 SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF SPECTRIAN ..................................38 ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER .......................................................39 SECTION 9.1 TERMINATION .................................................................39 SECTION 9.2 AMENDMENTS AND WAIVERS ......................................................40 ARTICLE 10 INDEMNIFICATION ........................................................................40 SECTION 10.1 INDEMNIFICATION BY SPECTRIAN ................................................40 SECTION 10.2 INDEMNIFICATION BY PARENT AND NEWCO .........................................41 SECTION 10.3 LOSSES NET OF INSURANCE, ETC ................................................42 SECTION 10.4 TERMINATION OF INDEMNIFICATION ..............................................42 SECTION 10.5 PROCEDURE ...................................................................42 ARTICLE 11 GENERAL PROVISIONS .....................................................................43 SECTION 11.1 NOTICES .....................................................................43 SECTION 11.2 HEADINGS ....................................................................44 SECTION 11.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES ..................................44 SECTION 11.4 SEVERABILITY ................................................................44 SECTION 11.5 COUNTERPARTS ................................................................44 SECTION 11.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES ..............................44 SECTION 11.7 GOVERNING LAW ...............................................................45 SECTION 11.8 PUBLICITY ...................................................................45 SECTION 11.9 ASSIGNMENT ..................................................................45
ii 4 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT, dated as of November 20, 2000 (this "Agreement"), is by and among Cree, Inc., a North Carolina corporation ("Parent"), Zoltar Acquisition, Inc., a North Carolina corporation and wholly-owned subsidiary of Parent ("Newco"), and Spectrian Corporation, a Delaware corporation ("Spectrian"). WHEREAS, Spectrian is engaged, among other things, in the Business referred to below; and WHEREAS, Spectrian desires to sell to Newco, and Newco desires to purchase from Spectrian, substantially all of the assets used in connection with the Business, all upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below: "Acquired Assets" shall have the meaning given such term in Section 2.2. "Affiliate" shall mean, with respect to any person, any other person that directly or indirectly Controls, is Controlled by or is under common Control with such first person. A person shall be deemed to "Control" another person if such first person has the power to direct or cause the direction of such other person, whether through ownership of securities, by contract or otherwise. "Assigned Rights" shall have the meaning given such term in the Assignment and License Agreement attached hereto in Annex I. "Assumed Liabilities" shall have the meaning given such term in Section 2.3. "Audited Financial Statements" shall have the meaning given such term in Section 7.14. "Business" shall mean Spectrian's line of business commonly know as the "UltraRF division" which is generally engaged in the business of developing, manufacturing and supplying radio frequency power semiconductor products in the Semiconductor Field primarily for the wireless market. "Business Account Payable" shall mean any account payable of Spectrian that relates primarily to or arises primarily out of the operation of the Business. 3 5 "Business Account Receivable" shall mean any external account receivable of Spectrian that relates primarily to or arises primarily out of the operation of the Business, excluding intercompany receivables. The term "business day" shall mean any day other than a Saturday, Sunday or other day on which banks in the City of New York are permitted or required to close by law or regulation. "Business Equipment" shall mean all equipment, tools, and other tangible property of any kind used or held primarily for use in the Business, as set forth on Schedule 2.2(a)(ii). "Business Inventory" shall mean all inventories of raw materials, manufactured and purchased parts, goods in process, finished goods and supplies used or maintained in connection with the Business. "Business Names" shall mean all of Spectrian's goodwill relating to the Business and Spectrian's rights to the use in the Business of the names and marks "UltraRF" (including domain names) and any and all formative, variants and derivatives thereof. "Closing" and "Closing Date" shall have the respective meanings given such terms in Section 4.1. "COBRA" shall have the meaning given such term in Section 7.5. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Competing Business" shall have the meaning given such term in Section 7.17. "Confidentiality Agreement" shall have the meaning given such term in Section 7.2. "Contracts" shall mean written and oral contracts, leases, indentures, agreements, commitments, purchase orders and all other legally binding arrangements, whether in existence on the date hereof or subsequently entered into, including all amendments thereto. "DOJ" shall have the meaning given such term in Section 6.4. "Environmental Condition" shall have the meaning given such term in Section 2.3(b)(viii). "ERISA" shall have the meaning given such term in Section 5.8. "Escrow Agent" shall mean Branch Banking and Trust Company, a North Carolina banking corporation. "Escrow Consideration" means 95,547 shares of Parent Common Stock (equal to a number of shares of Parent Common Stock equal to (x) $10 million divided by (y) the average closing price of a share of Parent Common Stock on the NASDAQ National Market for the five (5) consecutive trading days immediately preceding the date hereof). 4 6 "Exchange Act" shall mean the Securities and Exchange Commission Act of 1934, as amended. "Excluded Assets" shall have the meaning given such term in Section 2.2. "Excluded Liabilities" shall have the meaning given such term in Section 2.3. "Facility" shall mean the real property and improvements thereon located at 160 Gibraltar Court, Sunnyvale, California 94089. "Financial Information" shall have the meaning given such term in Section 5.4. "FTC" shall have the meaning given such term in Section 6.4. "GAAP" shall mean United States generally accepted accounting principles. "Governmental Entity" shall mean any court, administrative agency or commission or other governmental authority or instrumentality, whether domestic or foreign. "Governmental Rule" shall mean any law, judgment, order, decree, statute, ordinance, rule or regulation issued or promulgated by any Governmental Entity. "Hazardous Substance" shall have the meaning given such term in Section 5.18. "HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Immediately Available Consideration" shall mean at Parent's option (which option must be exercised on the Closing Date), either (i) $30 million in immediately available, freely transferable, cleared funds, or (ii) a number of shares of Parent Common Stock equal to (a) $30 million divided by (b) the average closing price of a share of Parent Common Stock on the NASDAQ National Market for the five (5) consecutive trading days immediately preceding the Closing Date which shares may then be sold by Spectrian through a registered market maker designated by Parent (and whose commission shall be paid by Parent) within five (5) business days of the Closing; provided, however, that in the event Spectrian elects to sell such shares during the five (5) business day period referred to above and the aggregate proceeds of such sale are less than $30 million, Parent agrees that it shall pay the difference (which amount shall be pro rated on a basis consistent with the percentage of such shares actually sold) in immediately available, freely transferable, cleared funds by wire transfer to an account designated by Spectrian within six (6) business days of the Closing. "Indemnified Parties" shall have the meaning given such term in Section 7.21. "Indemnifying Party" shall have the meaning given such term in Section 10.5. "Intellectual Property" shall mean any and all of the following, whether or not registered, together with all grants, registrations and applications relating thereto: U.S. and foreign patents, utility models, copyrights, mask works, trademarks, service marks, logos, designs, trade names, 5 7 inventions, trade secrets, know-how and all other proprietary and intellectual property rights and information. "IRS" means the Internal Revenue Service. "Lease" shall have the meaning given such term in Section 7.13. "Lien" shall mean any mortgage, claim, charge, lien, security interest, easement, right of way, pledge, covenant, restriction or encumbrance of any nature whatsoever. "Loss" shall mean any loss, liability, claim, damage or expense, whether accrued, absolute, fixed, contingent, known or unknown or otherwise. "Marketing Materials" shall mean all advertising materials, customer lists, training materials and market research materials. "Material Adverse Effect" shall mean, with respect to the Business or with respect to a party, a material adverse effect (i) on the business, properties, assets, liabilities, operations, results of operations or condition (financial or otherwise) of the Business, on the one hand, or Newco and the Parent, on the other hand, as applicable, taken as a whole, or (ii) on the ability of Spectrian, on the one hand, or Newco and the Parent, on the other hand, to perform its obligations under or to consummate the transactions contemplated by this Agreement. "Newco Indemnified Parties" shall have the meaning given such term in Section 10.1. "Parent Common Stock" shall mean the common stock, par value $0.0025 per share, of Parent. "Parent SEC Reports" shall have the meaning given such term in Section 6.5. "Parent's Investigation" shall have the meaning given such term in Section 7.21. "Parent's Investigation Period" shall have the meaning given such term in Section 7.21. "Permits" shall mean permits, licenses, franchises, approvals, waivers, orders, rights privileges and authorizations of any nature granted issued, approved or allowed by or from any Governmental Entity. "Permitted Lien" shall mean (a) any mechanics', carriers', workmen's, repairmen's, and other like Lien arising or incurred in the ordinary course of business, (b) any Lien for Taxes, assessments and other governmental charges that are not yet due and payable or that may thereafter be paid without penalty, or that are being contested in good faith by appropriate proceedings and (c) any imperfection of title or other covenants, restrictions or encumbrance that, individually or in the aggregate with other such imperfections, covenants, restrictions and encumbrances, is not substantial in character or amount and does not materially interfere with the use of, the Acquired Assets in the Business as presently conducted or proposed to be conducted. 6 8 "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, business association, organization, Governmental Entity or other entity. "Personal Property" shall mean all of the Acquired Assets. "Post-Closing Period" shall mean any Taxable Period, or portion thereof, that begins after the Closing. "Potential Transaction" shall have the meaning given such term in Section 7.19. "Pre-Closing Period" shall mean any Taxable Period, or portion thereof, that ends at the time of or before the Closing. "Property" shall have the meaning given such term in Section 7.21. "Purchased Intellectual Property" shall mean the Intellectual Property of the Business to be transferred to Newco pursuant to the Assignment and License Agreement. "Purchase Price" shall mean the Stock Consideration plus the Immediately Available Consideration plus the Escrow Consideration. "Registrable Securities" shall have the meaning given such term in Section 7.20. "Resolution CPA Firm" shall have the meaning given such term in Section 7.6. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Semiconductor Field" shall mean the design, fabrication, manufacture and sale of electronic devices and/or circuits on semiconductor materials, as well as passive elements in wafer, die or multi-chip module form (meaning multiple bare die on an electronic interconnect substrate) or in integrated circuit packaging, whether in hybrid or monolithic form. "Spectrian Benefit Plan" shall have the meaning given such term in Section 5.8. "Spectrian Contractors" shall have the meaning given such term in Section 5.7. "Spectrian Employees" shall have the meaning given such term in Section 7.5. "Spectrian Indemnified Parties" shall have the meaning given such term in Section 10.2. "Spectrian Rights" shall have the meaning given such term in Section 5.13. "Spectrian's Cap Amount" shall have the meaning given such term in Section 10.1. "Spectrian's Threshold Amount" shall have the meaning given such term in Section 10.1. 7 9 "Stock Consideration" means 812,154 shares of Parent Common Stock, (equal to a number of shares of Parent Common Stock equal to (x) $85 million divided by (y) the average closing price of a share of Parent Common Stock on the NASDAQ National Market for the five (5) consecutive trading days immediately preceding the date hereof). "Subject Rights" shall have the meaning defined in the Assignment and License Agreement. "Tax" (including with correlative meaning, the terms "Taxes" and "Taxable") shall mean income, gross receipts, ad valorem, excise, value-added, sales, use, transfer, franchise, license, stamp, occupation, withholding, employment, payroll, property, estimated or environmental tax, together with any interest, penalty, deficiency or addition to tax, whether disputed or not. "Tax Return" shall mean any return, report, statement, declaration estimate and the like required to be filed with any Taxing Authority. "Taxable Period" shall mean any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Taxing Authority" shall mean any governmental body or authority responsible for the imposition of any Tax. "Termination Date" shall have the meaning given such term in Section 11.3. "Third Party Claim" shall have the meaning given such term in Section 10.5. "Transaction Agreements" shall mean this Agreement, the Escrow Agreement, the Development Agreement, the Employment Agreements, the Transition Services Agreement, the Purchase and Supply Agreement, the Registration Rights Agreement, and the Assignment and License Agreement, which Transaction Agreements shall be attached hereto as Annex I and an Assignment and Assumption Agreement which shall be in a mutually acceptable form. "Transferred Employee" shall have the meaning given such term in Section 7.5. "UltraRF Net Assets" means, by reference to each respective balance sheet prepared as of the date of calculation, the difference obtained by subtracting (a) total liabilities of the Business as shown on such balance sheet, including capital lease obligations but excluding Excluded Accrued Liabilities from (b) total assets of the Business as shown on such balance sheet, excluding intercompany accounts receivable. "Unaudited Closing Balance Sheet" shall have the meaning given such term in Section 3.1. "Unaudited Stub Period Financial Information" shall have the meaning given such term in Section 7.15. "WARN Act" shall have the meaning given such term in Section 7.5. 8 10 Section 1.2 Interpretation. (a) When used in this Agreement the words "include", "includes" and "including" shall be deemed to be followed by the words "without limitation". (b) When used in this Agreement, the word "primarily" shall be deemed to be followed by the words "or exclusively". (c) Any terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa. (d) When used in this Agreement, the word "or" is not exclusive. (e) All references to Articles, Sections, Exhibits, Schedules and Appendices shall be deemed references to Articles, Sections, Exhibits, Schedules and Appendices to this Agreement, unless otherwise indicated. (f) This Agreement shall be deemed drafted jointly by all the parties hereto and shall not be specifically construed against any party hereto based on any claim that such party or its counsel drafted this Agreement. ARTICLE 2 SALE AND PURCHASE OF ACQUIRED ASSETS AND LIABILITIES Section 2.1 Purchase And Sale. (a) Upon the terms and subject to the conditions of this Agreement, on the Closing Date, Spectrian shall sell, assign, transfer, convey and deliver to Newco, and Newco shall (and Parent shall cause Newco to) purchase, acquire and accept, all of Spectrian's right, title and interest in, to and under the Acquired Assets. (b) The Schedules attached hereto pursuant to Section 2.2 and Section 2.3, shall reflect assets and liabilities as of October 1, 2000, and, in each case, shall be deemed to include assets and liabilities accrued and disposed in the ordinary course of business for the Business between such date and the Closing Date. Section 2.2 Acquired Assets and Excluded Assets. (a) The term "Acquired Assets" shall mean the properties, assets, goodwill and rights of whatever kind and nature, real or personal, tangible or intangible, other than the Excluded Assets, of Spectrian existing on the Closing Date that constitute or relate primarily to or arise primarily out of the operation of the Business, including, without limitation: (i) all Business Inventories; (ii) all Business Equipment and tangible property, including fab, test, assembly & burn in, construction in-process, office and research and development equipment, leasehold improvements and certain computer equipment, identified specific UltraRF software if legally 9 11 transferable and utilized solely by UltraRF and if subject to any transfer fees then such fees are to be paid by the Parent, as set forth on Schedule 2.2(a)(ii); (iii) all rights associated with prepaid expenses related to the Business, including pre-paid taxes that are subject to proration pursuant to Section 7.6(a); (iv) all intangible assets of the Business existing on and as of the Closing Date, including the Business Names and the Purchased Intellectual Property to the extent transferred to Parent or Newco pursuant to the Assignment and License Agreement together with all goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringement thereof, and rights to protections of interests therein under the laws of all jurisdictions; (v) all right, title and interest of Spectrian in and to the Contracts to which Spectrian is a party or by which Spectrian is bound that are listed in Schedule 2.2(a)(v), and all other Contracts to which Spectrian is a party on the Closing Date that relate primarily to or arise primarily out of the operation of the Business that are not required to be listed in such Schedule 2.2(a)(v) and which were entered into in the ordinary course of the Business, in each case, to the extent such Contracts are assignable; (vi) all records and lists pertaining to accounts and suppliers, personnel records, books, ledgers, files, Marketing Materials and other printed and written materials reasonably necessary for Newco's continuing operation of the Business, other than books, records and other data relating to the Excluded Assets and the Excluded Liabilities and other books and records reasonably retained by Spectrian; (vii) all of Spectrian's rights against third parties pursuant to the warranties and guarantees related to the Acquired Assets, subject to the provisions concerning warranties and guarantees contained in the Purchase and Supply Agreement attached hereto in Annex I; and (viii) all trade accounts receivable attributable to external sales less the related allowance for doubtful accounts. (b) The term "Excluded Assets" shall mean all properties, assets, goodwill and rights of whatever kind and nature, real or personal, tangible or intangible, other than the Acquired Assets of Spectrian existing on the Closing Date, including without limitation the following: 10 12 (i) cash on hand or in banks and cash equivalents owned by Spectrian relating to the operations of the Business; (ii) intercompany receivables; (iii) all rights of Spectrian under this Agreement and the agreements, instruments and certificates delivered in connection with this Agreement; (iv) all records prepared in connection with the sale of the Business, including the bids and other information received from third persons in respect of the Business and analyses relating to the Business; (v) any assets under any Benefit Plan; (vi) all rights relating to the Excluded Liabilities; (vii) business records other than Acquired Assets; (viii) any Tax refunds, insurance refunds, insurance deposits or recoveries from claims relating to the Business or the Acquired Assets with respect to Pre-Closing Periods; (ix) all Intellectual Property, other than the Purchased Intellectual Property to the extent transferred to Parent pursuant to the Assignment and License Agreement; and (x) except as provided in the Assignment and License Agreement, all of Spectrian's rights, claims, causes of action or rights of set-off against third parties relating to the Business or Acquired Assets with respect to Pre-Closing Periods, other than rights, claims or set-offs with respect to warranties and guarantees. (c) Nothing in this Agreement shall be construed as an attempt by Spectrian to assign any Contract to the extent that such Contract is not assignable without the necessary consent of the other party or parties thereto. Spectrian shall use commercially reasonable efforts, in cooperation with Newco, to secure any necessary consent to assignment of those Contracts indicated with an asterisk on Schedule 5.11 which consent has not been obtained prior to the Closing Date; provided, however, that Spectrian shall not be required to make any payment to any person or forego any benefits to obtain such consent. If any such consent shall not be obtained, Spectrian agrees to cooperate with Newco in any reasonable arrangement designed to provide for Newco the benefits intended to be assigned to Newco under the relevant Contract, including enforcement of any and all rights of Spectrian against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise at the cost and for the account of Newco. If and to the extent that such arrangement satisfactory to Newco cannot be made, Newco shall not have any obligation with respect to any such Contract. 11 13 Section 2.3 Assumption of Business Liabilities and Obligations. (a) Upon the terms and subject to the conditions of this Agreement, Newco shall assume, effective as of the Closing, the Assumed Liabilities. Neither Newco nor Parent will assume or have any responsibility, however, with respect to any Excluded Liability or any other obligation or liability of Spectrian not included within the definition of Assumed Liabilities. "Assumed Liabilities" means: (i) all obligations and liabilities of Spectrian (other than known or unknown liabilities or obligations for breach or default which occurred prior to the Closing) under the Contracts included in the Acquired Assets and assigned to Newco; (ii) the following Business liabilities: (A) Accounts payable, including payables for inventory purchases, property and equipment purchases, and other direct liabilities including uninvoiced receipts and manual accruals in the normal course of business, as set forth on Schedule 2.3(a)(ii)(A); provided that the date that such invoices are due to the vendor (within the normal payment term) for such accounts payable must be after the Closing Date; (B) The equipment leases associated with the Business Equipment; (C) Warranty obligations pursuant to and to the extent set forth in the Supply Agreement attached hereto; and (D) (i) any obligation or liability for Taxes that is attributable to the Business or relating to the Acquired Assets with respect to Post-Closing Periods, and (ii) Newco's share, as determined pursuant to Section 7.6(a), of real property, personal property, ad valorem and similar Taxes relating to the Acquired Assets. (b) The term "Excluded Liabilities" shall include: (i) other than the Assumed Liabilities, any obligation or liability for any Taxes of Spectrian; (ii) all obligations and liabilities of Spectrian in respect of any current or former employee of Spectrian engaged in the Business, including variable comp, payroll and payroll taxes, royalties, employee benefits and workers compensation, 401(K) Plan, garnishments, any obligation or liability of Spectrian arising under or in connection with any Employee Benefit Plan, liabilities related 12 14 to accrued vacation, in each case, which obligation or liability arises out of acts or conditions that occurred prior to the Closing Date; (iii) any obligation of Spectrian to indemnify any Person by reason of the fact that such Person was a director, officer, employee or agent of Spectrian or was serving at the request of Spectrian as a partner, trustee, director, officer, employee or agent of another entity; (iv) any liability of Spectrian for costs and expenses incurred in connection with this Agreement and the other Transaction Agreements and the transactions contemplated hereby and thereby; (v) any liability or obligation of Spectrian under this Agreement or any other Transaction Agreement; (vi) any liability or obligation of Spectrian relating to the Excluded Assets; (vii) subject to Section 2.2(c), any liability or obligation arising from or relating to any Contract for which assignment to Newco is provided herein which is not assignable to Newco without the consent of another party and to which other party's consent to assignment is not obtained and no other arrangements have been made to provide for Newco the benefits intended to be assigned to Newco under such Contracts; (viii) any liability or obligation of Spectrian or an Affiliate thereof, or any liability or obligation that may be imposed on Newco or Parent, arising out of, in connection with, or relating to any Environmental Condition, existing as of and/or prior to the Closing Date (even if not discovered until after the Closing Date), relevant to: (i) the Property (as that term is defined in Section 7.22(a) below) or (ii) any leases, contracts or agreements relating to the Property. As used herein the term "Environmental Condition" shall mean any condition with respect to the soil, ambient air, surface waters or groundwaters at, from, on or under the Property, whether or not yet discovered, which could or does result in any damage, loss, cost, expense or claim to or against Newco or Parent; and (ix) any liability or obligation of Spectrian not incurred in the ordinary course of business attributable to any assets, properties or Contracts which are not included in the Acquired Assets. 13 15 ARTICLE 3 PURCHASE PRICE Section 3.1 The Purchase Price. (a) The Purchase Price for the Acquired Assets shall consist of the Stock Consideration, the Immediately Available Consideration and the Escrow Consideration. The Stock Consideration shall be paid by delivery at the Closing to Spectrian of a stock certificate evidencing the Stock Consideration. The Immediately Available Consideration shall be paid either (a) by wire transfer to an account designated by Spectrian of $30 million in immediately available, freely transferable, cleared funds at the Closing, or (b) by delivery at the Closing to Spectrian of a number of shares of Parent Common Stock equal to (x) $30 million divided by (y) the average closing price of a share of Parent Common Stock on the NASDAQ National Market for the five (5) consecutive trading days immediately preceding the Closing Date which shares may then be sold by Spectrian through a registered market maker designated by Parent (and whose commission shall be paid by Parent) within five (5) Business Days of the Closing; provided, however, that in the event Spectrian elects to sell such shares during the five (5) Business Day period referred to above and the aggregate proceeds of such sale are less than $30 million, Parent agrees that it shall pay the difference (which amount shall be prorated on a basis consistent with the percentage of such shares actually sold) in immediately available, freely transferable, cleared funds by wire transfer to an account designated by Spectrian within six (6) business days of the Closing. The Escrow Consideration shall be paid by delivery at the Closing to the Escrow Agent of a stock certificate evidencing the Escrow Consideration. (b) If, between the date of this Agreement and the Closing, the shares of Parent Common Stock shall be changed into a different number or class of shares by reason of any reclassification, recapitalization, split-up, spin-off, stock-split, combination, exchange of shares or readjustment or other similar transaction involving Parent or a stock dividend thereon shall be declared with a record date within said period, the number of shares of Parent Common Stock to be issued to Spectrian pursuant to Section 3.1(a) shall be appropriately and proportionately adjusted. Each of the parties to this Agreement shall, and shall cause their Affiliates to, use all reasonable efforts to cause the issuance of the Parent Common Stock to be exempt from registration under applicable federal and state securities laws by filing as soon as practicable an application with the Secretary of State of the State of North Carolina pursuant to N.C. Gen. Stat. Section 78A-30 requesting a hearing upon the terms and conditions of the transactions contemplated by this Agreement to be held as soon as practicable after the filing of such application and taking all actions necessary or appropriate to comply with the requirements set forth therein. None of the parties to this Agreement shall make at such hearing, or include in any information supplied with such application or distributed at such hearing, any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) Spectrian shall prepare and use commercially reasonable efforts to deliver within 10 business days after the Closing an unaudited balance sheet for the Business as of the Closing Date (the "Unaudited Closing Balance Sheet") to Parent for review and comment, prepared on the same basis as the unaudited stub period balance sheet as of October 1, 2000 14 16 delivered by Spectrian to Parent prior to the date of this Agreement and attached hereto in Schedule 5.4. In addition, Spectrian shall cause PricewaterhouseCoopers LLP to prepare and deliver to Spectrian within 45 days after the Closing Date an audited balance sheet for the Business as of the Closing Date (the "Closing Date Balance Sheet") prepared on the same basis as the unaudited balance sheet as of October 1, 2000. PricewaterhouseCoopers LLP shall allow Parent's auditors to review the workpapers at least five (5) business days prior to delivery of the Closing Date Balance Sheet. If the amount of the UltraRF Net Assets as of the Closing Date (which shall be calculated based on the Closing Date Balance Sheet) is less than the amount of the UltraRF Net Assets as of October 1, 2000, then Spectrian shall pay to Newco, promptly but within 10 days after delivery of the Closing Date Balance Sheet, an amount equal to such difference in immediately available, freely transferable, cleared funds by wire transfer to an account designated by Newco. If the amount of the UltraRF Net Assets as of October 1, 2000 is less than the UltraRF Net Assets as of the Closing Date (which shall be calculated based on the Closing Date Balance Sheet), then Newco shall (and Parent shall cause Newco to) pay to Spectrian, promptly but within 10 days after delivery of the Closing Date Balance Sheet, an amount equal to such difference in immediately available, freely transferable, cleared funds by wire transfer to an account designated by Spectrian. In addition, Spectrian agrees to disburse funds for the trade accounts payable on behalf of Newco for the 45 days immediately following the Closing Date. Spectrian shall provide Newco with schedules setting forth all such disbursements made 15 days after the Closing Date, 30 days after the Closing Date and 45 days after the Closing Date. Newco agrees to fully reimburse Spectrian within five (5) days of receipt of each schedule, provided, however, after receipt of the Closing Date Balance Sheet and the schedule setting forth the funds disbursed by Spectrian on Newco's behalf during the 45 days after the Closing Date, Newco and Spectrian agree that Newco shall reimburse Spectrian for the amount of such trade accounts payable net the external accounts receivable set forth in the Closing Date Balance Sheet (whether collected or not); provided, further, all accounts receivable set forth in the Closing Date Balance Sheet shall be collected and remitted to Spectrian for Spectrian's benefit whether collected by Spectrian or Parent; provided, further, this paragraph shall specifically supercede Section 2.2(a)(viii). ARTICLE 4 THE CLOSING Section 4.1 Closing Date. The closing of the sale and transfer of the Acquired Assets and the assumption of the Assumed Liabilities (hereinafter called the "Closing") shall take place at the offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, 2500 First Union Capitol Center, Raleigh, North Carolina 27601, on December 29, 2000, provided all of the conditions to each party's obligations under Article 8 have been satisfied or waived, or at such other time, date and place as shall be mutually agreed to by the parties hereto (such date of the Closing being hereinafter referred to as the "Closing Date"). Section 4.2 Transactions To Be Effected At The Closing. At the Closing: (a) Spectrian shall deliver or cause to be delivered to Newco the documents referred to in Section 8.2(c), in each case appropriately executed; and (b) Parent or Newco, as appropriate, shall deliver or cause to be delivered to Spectrian (i) the documents referred to in Section 8.3(c), in each case appropriately executed and 15 17 (ii) payment of the Stock Consideration and the Immediately Available Consideration by the delivery of validly authorized and issued shares of Parent Common Stock at the Closing, and shall deliver to the Escrow Agent payment of the Escrow Consideration by the delivery of validly authorized and issued shares of Parent Common Stock at the Closing. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SPECTRIAN Spectrian hereby represents and warrants to Newco as follows: Section 5.1 Spectrian's Organization; Good Standing. Spectrian is a corporation, validly existing and in good standing under the laws of the State of Delaware. Spectrian has the requisite power and authority to own the Acquired Assets and to carry on the Business as currently conducted. Spectrian is duly qualified to conduct business as a foreign entity in the State of California. Section 5.2 Authority; Execution and Delivery. Spectrian has the requisite power and authority to enter into the Transaction Agreements and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Agreements by Spectrian, and the consummation of the transactions contemplated thereby have been duly and validly authorized, executed and delivered by Spectrian and, assuming the due authorization, execution and delivery of the Transaction Agreements by the other parties thereto, constitute the legal, valid and binding obligation of Spectrian, enforceable against Spectrian in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing) regardless of whether considered in a proceeding in equity or at law. Section 5.3 Consents and Approvals; No Violations. The execution and delivery of the Transaction Agreements by Spectrian and the consummation by Spectrian of the transactions contemplated thereby will not: (i) violate any provision of the charter documents or the by-laws of Spectrian; (ii) violate any Governmental Rule applicable to Spectrian; or (iii) require any filing with, or permit, consent or approval of, or the giving of any notice to, any governmental or regulatory body, agency or authority other than the filing of a pre-merger notification with the Federal Trade Commission and the Department of Justice under the HSR Act, except where the failure to make such filing, or obtain such permit, consent or approval, or give such notice would not have a Material Adverse Effect on the Business. Section 5.4 Financial Statements(a). Attached hereto as Schedule 5.4 are the following financial statements of the Business (collectively the "Financial Information"): (i) unaudited balance sheets as of March 31, 1999 and 2000, (ii) unaudited statement of operations for the fiscal years ended March 31, 1998, 1999 and 2000, (iii) unaudited statement of operations for the six month period ended October 1, 2000, and (iv) unaudited balance sheet as of October 1, 2000. The Financial Information has been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, presents fairly the financial condition of the Business as of such dates and the results of operations of the Business for such periods, is materially correct and complete, and is consistent with the books and records of the Business and Spectrian (which books and records are correct and complete in all material respects); provided, however, that the Financial Information includes the normal recurring adjustments booked at each quarter end and lacks footnotes, income tax provisions and other presentation items. Section 5.5 Title to Acquired Assets. Except as set forth on Schedule 5.5, Spectrian has good and valid title to all the Acquired Assets, free and clear of all Liens other than Permitted Liens. 16 18 Section 5.6 Absence of Certain Changes or Events. Except as set forth on Schedule 5.6, since March 31, 2000 there has not been: (a) any damage, destruction, loss or change in or effect on the Business (whether or not covered by insurance) that would have a Material Adverse Effect on the Business; (b) any labor dispute, labor law, or labor regulation or any event or condition of any character relating to labor matters that would have a Material Adverse Effect on the Business; (c) any sale, assignment, transfer, or disposition of any material item of property, plant or equipment or Intellectual Property owned by Spectrian, except in the ordinary course of business; (d) any material change from current practice of Spectrian in any accounting principle or practice other than changes required as a result of changes in GAAP; (e) any incurrence of material liabilities with respect to the Business, other than in the ordinary course of business; or (f) any acceleration, termination, modification or cancellation of any Contract involving more than $50,000; (g) any capital expenditure (or series of related capital expenditures) involving more than $50,000; (h) any cancellation, compromise, waiver, or release of any right or claim (or series of related rights and claims) either involving more than $50,000 or outside the ordinary course of business; or (i) any agreement to do any of the foregoing. Section 5.7 Employment Matters. (a) There are no collective bargaining or similar agreements with any labor unions or associations representing employees of the Business. To the knowledge of Spectrian, no executive, key employee or group of employees has any plans to terminate employment with Spectrian with respect to the Business. (b) Except as set forth on Schedule 5.7, the Business is in compliance with all applicable laws, regulations and orders relating to the employment of labor, including all such laws, regulations and orders relating to wages and hours, labor relations, civil rights, safety and health, workers' compensation, except for such noncompliance which would not have a Material Adverse Effect on the Business. To the knowledge of Spectrian, no employee of the business is subject to any Contract or law which adversely affects or which might adversely affect such employee's ability to act as an employee of Newco or Parent following consummation of the transactions contemplated by this Agreement. (c) Schedule 5.7 sets forth a complete list of the Persons engaged by Spectrian at any time to render consulting or similar services to the Business on an independent contractor 17 19 basis (collectively, the "Spectrian Contractors"). Spectrian has previously provided to Newco true and complete copies of each and every agreement between Spectrian and any Spectrian Contractor. To the knowledge of Spectrian, each Spectrian Contractor is and at all times has been an independent contractor to, and not an employee of, Spectrian for purposes of all applicable federal and state income tax withholding requirements and otherwise. Section 5.8 Employee Benefit Plans. (a) Schedule 5.8 contains a list and a brief description of each "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all other employee compensation and fringe benefit plans or arrangements (including, without limitation, all bonus, incentive and stock compensation plans) maintained or contributed to or by Spectrian or the Business for the benefit of any employees of the Business (collectively, the "Spectrian Benefit Plans") and the amount of any unfunded retirement liabilities, including medical coverage, arising under any plan, fund or arrangement described in this Section and the identity of the plan, fund or arrangement giving rise thereto. Spectrian has made available to Parent complete and correct copies of (i) each Spectrian Benefit Plan (or, in the case of any unwritten Plan, a description thereof) and (ii) the most recent summary plan description of each Spectrian Benefit Plan (if such description was required). (b) The execution and delivery of this Agreement by Spectrian and the consummation of the transactions contemplated hereunder will not result in any obligation or liability (with respect to accrued benefits or otherwise) of Newco to any Transferred Employee, any employee or former employee of any plan or the PBGC. No amendment to, termination of, or withdrawal from, any Spectrian Benefit Plan (subject to Title IV of ERISA) at any time before or after the Closing Date by Spectrian or any other corporation or other entity has or will subject Newco to any liability to any plan, the PBGC or the IRS, to any current or former employee of Spectrian, or to any other person or party. (c) With respect to any Transferred Employee, Spectrian has not within five (5) years prior to the Closing Date contributed to (or been obligated to contribute to) any multiemployer plan (within the meaning of Section 3(37) of ERISA). (d) Within five (5) years prior to the Closing Date, Spectrian has neither maintained nor contributed to a defined benefit pension plan (as defined in Section 3(35) of ERISA). (e) Spectrian has complied in all respects with ERISA, the Code and the regulations thereunder and all other applicable federal or state statutes or regulations. Section 5.9 Litigation. Except as set forth on Schedule 5.9, there are no actions, suits, claims, proceedings or investigations which have been served and are pending or, to the knowledge of Spectrian, are threatened against Spectrian or the Acquired Assets, nor any outstanding judgments, orders, writs, injunctions or decrees of any Governmental Entity against Spectrian or the Acquired Assets, which (i) would have a Material Adverse Effect on the Business, (ii) seek to prevent or materially restrict or delay the consummation of the transactions contemplated by the Transaction Agreements or (iii) would materially and adversely affect the ability of Spectrian to consummate the transactions contemplated by the Transaction Agreements. Section 5.10 Compliance with Laws. 18 20 (a) Except as set forth on Schedule 5.10, Spectrian is in compliance with all Governmental Rules applicable to it which relate primarily to the Acquired Assets and the Facility, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect on the Business. Except as set forth in Schedule 5.10, there is no investigation or review by any Governmental Entity with respect to the Business or the Facility pending and Spectrian has not received any written notice since January 1, 2000 that any such investigation or review is contemplated, except where the outcome of such investigation or review if adversely determined would not reasonably be expected to have a Material Adverse Effect on the Business. (b) Schedule 5.10 attached hereto contains an accurate and complete list of all Permits used, or anticipated to be used, in the operation of the Business. All of the Permits are in full force and effect, not subject to any current default or right of cancellation, termination or revocation. Section 5.11 Contracts. (a) As of the date hereof, except for Contracts listed on Schedule 5.11 and Contracts relating to Excluded Assets, Spectrian is not a party to or bound by any contract primarily relating to the Acquired Assets or the Assumed Liabilities which is: (i) an indenture, note, loan or credit agreement or other Contract relating to the borrowing of money by Spectrian or to the direct or indirect guarantee or assumption by Spectrian of the obligation of any other person in excess of $50,000; (ii) a lease or similar agreement under which Spectrian is a lessee of, or holds or operates, any real property owned by any third party; (iii) a Contract involving future payment for goods or services by Spectrian of more than $50,000 (unless terminable without payment or penalty upon no more than sixty (60) days' notice); (iv) a Contract involving the obligation of Spectrian to deliver in the future products or services for payment of more than $50,000 (unless terminable without payment or penalty upon no more than sixty (60) days' notice); (v) a Contract evidencing any Lien on the Acquired Assets (other than Permitted Liens or Liens created in the ordinary course of business); (vi) a Contract with or Permit by or from any Governmental Entity, the loss of which would materially interfere with the operation of the Business as presently conducted; (vii) a Contract concerning confidentiality or noncompetition; 19 21 (viii) any Contract under which the consequences of a default or termination could have a Material Adverse Effect on the business, financial condition, operations, results of operations or prospects of the Business; or (ix) any other Contract (or group of related Contracts) the performance of which involves consideration in excess of $50,000. (b) Except as disclosed in Schedule 5.11, each Contract listed thereon (i) is a valid and binding obligation of Spectrian and is in full force and effect and (ii) will continue to be valid and binding and in full force and effect on identical terms following the consummation of the transactions contemplated hereby. Except as disclosed in Schedule 5.11, Spectrian has not received any notice of default or of the intention of any party to any such Contract to terminate such Contract. Complete and correct copies of all contracts referred to in Schedule 5.11, together with all modifications and amendments thereto, have been made available to Purchaser. Section 5.12 No Brokers. Except for Dain Rauscher Wessels, the fees and expenses of which will be paid by Spectrian, Spectrian has not entered into any agreement, arrangement or understanding with any person or firm which will result in the obligation to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. Section 5.13 Intellectual Property. (a) Except as disclosed on Schedule 5.13(a), Spectrian is the owner of, or has a valid license or otherwise possesses legally enforceable rights to use, free and clear of any Lien and without obligation for the payment of any royalty, all Intellectual Property necessary for the conduct of the Business as now conducted (such Intellectual Property owned by or licensed to Spectrian, collectively, the "Spectrian Rights"). (b) Except as disclosed on Schedule 5.13(b), the Subject Rights transferred and licensed to Newco and pursuant to the Assignment and License Agreement include all Intellectual Property necessary for the conduct of the Business as now conducted. The Assigned Rights transferred pursuant to the Assignment and License Agreement, together with the Licensed Patent Rights with Extended Sublicense Rights include all of the Spectrian Rights that relate primarily to the Semiconductor Field or the Business. Except as disclosed on Schedule 5.13(b), Spectrian owns all of the Assigned Rights, free and clear of any Lien and without obligation for the payment of any royalty, and has the right to transfer the Assigned Rights to Newco. Except as disclosed on Schedule 5.13(b), Spectrian owns or otherwise possesses rights in the Licensed Rights sufficient to grant Newco the licenses therein granted pursuant to the Assignment and License Agreement, free and clear of any Lien and without obligation for the payment of any royalty. (c) The Annexes to the Assignment and License Agreement sets forth a complete list of all patents, registered and unregistered trademarks, registered copyrights, and any applications therefor, included in the Subject Rights, and specifies, where applicable, the jurisdictions in which each such Subject Right has been issued or registered or in which an application for such issuance and registration has been filed, including the respective registration or application numbers and the names of all registered owners. Schedule 5.13(c) sets forth a 20 22 complete list of all licenses, sublicenses and other agreements, if any, pursuant to which Spectrian or any other person is authorized to use any of the Subject Rights and includes the identity of all parties thereto, a description of the nature and subject matter and terms thereof. The transfer or license of Subject Rights pursuant to the Assignment and License Agreement will neither cause Spectrian to be in violation or default under any such license, sublicense or agreement, nor entitle any other party to any such license, sublicense or agreement to terminate or modify such license, sublicense or agreement, except as disclosed in Schedule 5.13(c). (d) To the knowledge of Spectrian, Spectrian's rights in the Subject Rights are valid and enforceable. (e) Spectrian has not received any demand, claim or notice from any Person in respect of the Subject Rights which challenges the validity of, or the rights of Spectrian in, any such Subject Rights. (f) To the knowledge of Spectrian, no Person, including any employee or former employee of Spectrian, is infringing any Subject Rights. Each current and former employee, consultant or contractor of Spectrian involved with the development of the Spectrian Rights has executed a proprietary information and confidentiality agreement substantially in the form of Spectrian's standard forms. (g) No claims have been asserted nor, to Spectrian's knowledge, have any such claims been threatened by any person except as disclosed on Schedule 5.13(g), nor to Spectrian's knowledge are there any valid grounds for any claims, (i) to the effect that the manufacture, use, sale, offer to sell, import or licensing of any of the products of the Business infringes or violates any Intellectual Property of any other Person or (ii) against the use by Spectrian of any Intellectual Property used in or necessary for the conduct of the Business as now conducted. (h) To Spectrian's knowledge, Spectrian, in the conduct of the Business, has not infringed or violated, and the Business as currently conducted does not infringe, any Intellectual Property of any other Person. Section 5.14 Accredited Investor Status. Spectrian is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act. Section 5.15 Reliance on Exemptions. Spectrian understands that the Parent Common Stock is being offered and sold to it in reliance on specific exemptions from the registration requirements of the United States federal and state securities laws and that Parent is relying in part upon the truth and accuracy of, agreements, acknowledgments and understandings of Spectrian set forth herein in order to determine the availability of such exemptions and the eligibility of Spectrian to acquire the Parent Common Stock. Section 5.16 Transfer or Resale. Spectrian understands that the Parent Common Stock has not been and is not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned, or transferred unless (i) subsequently registered thereunder or (ii) Spectrian shall have delivered to Parent an opinion of counsel, in a reasonably 21 23 acceptable form, to the effect that such Parent Common Stock to be sold, assigned, or transferred may be sold, assigned, or transferred pursuant to an exemption from such registration. Section 5.17 Legends. Spectrian understands that the certificates or other instruments representing the Parent Common Stock shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER SAID ACT. The legend set forth above shall be removed and Parent shall issue a certificate without such legend to the holder of the Parent Common Stock upon which it is stamped, if, unless otherwise required by state securities laws, (i) the Parent Common Stock is registered for sale under the Securities Act, (ii) in connection with a sale transaction, such holder provides Parent with an opinion of counsel, in a reasonably acceptable form, to the effect that a public sale, assignment or transfer of the Parent Common Stock may be made without registration under the Securities Act, or (iii) such holder provides the Parent with reasonable assurances that the Parent Common Stock can be sold pursuant to Rule 144 of the Securities Act without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. Section 5.18 Environmental Compliance. (a) For purposes of this Section 5.18, "Hazardous Substance" means any of the following: (i) a "hazardous substance" as defined in 42 U.S.C. Section 9601(14), as amended, and all rules, regulations and orders promulgated thereunder, in each case, as in effect on the date hereof, (ii) a "hazardous waste," as defined in 42 U.S.C. Section 6903(5), as amended, and all rules, regulations and orders promulgated thereunder, in each case, as in effect on the date hereof, (iii) if not included in (i) or (ii) above, "hazardous waste constituents" as defined in 40 C.F.R. Section 260.10, including, without limitation, those substances listed in Appendix VII and VIII of Subpart D of 40 C.F.R. Section 261, in each case, as in effect on the date hereof, (iv) "source," "special nuclear" or "by-product material," as defined in 42 U.S.C. Sections 3011, et seq., as amended, and all rules, regulations and orders promulgated thereunder, in each case, as in effect on the date hereof, and (v) any other waste, substance or material, the generation, transportation, treatment, storage, release, or disposal of which is regulated under or by applicable laws as in effect on the date hereof, including without limitation petroleum and 22 24 petroleum products, asbestos and asbestos-containing materials, and low-level radioactive substances and wastes. (b) Except as set forth in Schedule 5.18, the Business, the Facility and the Acquired Assets are in compliance, in all material respects, with all applicable laws relating to Hazardous Substances. Without limiting the foregoing, (i) the operations of the Business do not violate, and have not violated, in any material respect, any law relating to the generation, storage, processing, utilization, labeling, transportation, treatment, disposal, release, discharge, emission or other disposition of Hazardous Substances, and (ii) neither Spectrian nor, to the knowledge of Spectrian, any current or former owner, occupant or operator of any property owned, leased or operated by Spectrian in connection with the Business, has ever utilized any such property or any portion thereof in violation of any law relating to the generation, storage, processing, utilization, labeling, transportation, disposal, treatment, emission, release, discharge, or other disposition of Hazardous Substances. Schedule 5.18 thereto contains a true list of all environmental audits and assessments in the possession of Spectrian relating to the Business and Acquired Assets. (c) With respect to the Business, the Facility and the Acquired Assets, Spectrian has not and does not utilize, store, dispose of, treat, generate, process, transport, release or own any Hazardous Substance in material violation of any applicable law. (d) With respect to the Business, the Facility and the Acquired Assets except as listed on Schedule 5.18, Spectrian has, in a timely manner, obtained all material licenses, permits, consents and approvals from any foreign, federal, state, local or other Governmental Entity and filed all material reports required to be filed under or pursuant to any applicable law related to any Hazardous Substance. (e) With respect to the Business, the Facility and the Acquired Assets except as listed on Schedule 5.18, Spectrian has not received any written notice of any writ, injunction, claim, decree, order or judgment outstanding or of any action instituted or threatened under or pursuant to, or of any violations of, any environmental, health or safety law applicable to any operations or property of the Business, the Facility and the Acquired Assets, including, without limitation, any notice from any Governmental Entity or other Person advising Spectrian that, in connection with the Business, the Facility or the Acquired Assets, it is or is potentially responsible for response costs under the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) (together with the regulations promulgated thereunder, "CERCLA"), or any other law with respect to a release or threatened release of any Hazardous Substances. (f) With respect to the Business, the Facility and the Acquired Assets except as listed on Schedule 5.18, Spectrian has not received any written notice of any violation of any environmental, zoning, worker safety or land use law, including without limitation, under CERCLA, the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.), the Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.), the Emergency Planning and Community Right-to-Know Act, as amended (42 U.S.C. Section 11001, et seq.), the Clean Water Act, as amended (33 U.S.C. Section 3121, et seq.), the Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. section 2601 et seq), Occupational Safety and Health Act, as amended (29 U.S.C. section 651, et seq.), together 23 25 with the regulations promulgated under each respective law, and any state or local similar laws and regulations and any so-called local, state or federal "superfund" or "superlien" law. (g) Except as listed on Schedule 5.18, there are no under- or aboveground storage tanks, piping or facilities located on or under the Facility or any Acquired Assets. (h) Except as set forth on Schedule 5.18, there are no Hazardous Substances present on, in or under the Facility or any Acquired Assets, regardless of how such Hazardous Substances came to be there, in a concentration or amount that would be reasonably expected to have a Material Adverse Effect on the Business. Section 5.19 All Assets of Business; Condition of Acquired Assets. The Acquired Assets constitute all of the material assets used and necessary to conduct the Business as presently conducted by Spectrian and as presently proposed to be conducted. All of the tangible assets included in the Acquired Assets are, taken as a whole, in reasonably good repair and operating condition (except for normal wear and tear). Section 5.20 Taxes. Except as set forth on Schedule 5.20: (a) All Tax Returns relating to the Business or the Acquired Assets have been timely filed, and all such Tax Returns are correct and complete in all material respects. Spectrian has paid, or where payment is not yet required, has established an adequate accrual for the payment of, all Taxes due with respect to the Business or the Acquired Assets for Pre-Closing Periods. Spectrian has not secured an extension of time within which to file any Tax Return relating to the Business or the Acquired Assets. (b) Spectrian has not received written notice of: (i) any action, suit, investigation, audit or claim currently pending or threatened or (ii) any deficiency claimed, proposed or asserted, in each case regarding property (or other ad valorem) Taxes applicable to the Acquired Assets. (c) There are no Tax Liens (other than for property Taxes not yet due and payable or delinquent) on any of the Acquired Assets. (d) None of the Acquired Assets is property that (i) Spectrian or Newco is or will be required to treat as owned by another person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii) is "tax-exempt use property" within the meaning of Section 168(h) of the Code, or (iii) is "tax-exempt bond financed property" within the meaning of Section 168(g)(5) of the Code. Section 5.21 Inventory. The Inventory of the Business is merchantable and fit for the purpose for which it was procured or manufactured. Section 5.22 Manufacturing Yields. The reports of manufacturing yields furnished to Parent by Spectrian after October 1, 2000 were accurate in all material respects. 24 26 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF NEWCO AND PARENT Newco and Parent jointly and severally represent and warrant to Spectrian as follows: Section 6.1 Organization and Qualification. Each of Newco and Parent is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is in good standing and duly qualified to do business in each jurisdiction in which the transaction of its business makes such qualification necessary, except where the failure to be so organized, existing, qualified and in good standing or to have such power or authority would not have a Material Adverse Effect on Newco or Parent and its Subsidiaries taken as a whole. True and complete copies of the Newco and Parent Charters and the Newco and Parent By-Laws, as amended to date, and Certificate of Incorporation and By-Laws of each their Subsidiaries, as amended to date and currently in full force and effect, have been made available to Spectrian. Section 6.2 Capitalization. As of the Date of this Agreement, the authorized capital stock of Parent consists of 100,000,000 shares of common stock, par value $0.0025 per share, of Parent (the "Parent Common Stock") and 3,000,000 shares of preferred stock, par value $0.01 per share (the "Parent Preferred Stock"). The Board of Directors of Parent on October 30, 2000 approved an amendment of the Articles of Incorporation of Parent, to become effective December 1, 2000, and upon the effectiveness of such amendment (i) each outstanding share of Parent Common Stock will become two shares of common stock, par value $0.00125 per share, and (ii) the authorized capital stock of Parent will consist of 200,000,000 shares of common stock, par value $0.00125 per share, and 3,000,000 shares of Parent Preferred Stock. As of the close of business on November 17, 2000, 35,782,502 shares of Parent Common Stock were issued and outstanding and no shares of Parent Preferred Stock were issued and outstanding. All outstanding shares of Parent Common Stock are validly issued, fully paid and nonassessable and, to Parent's knowledge, are not subject to preemptive rights. As of the date of this Agreement, 3,056,744 shares of Parent Common Stock are reserved for issuance in respect of future grants of stock options (exclusive of 243,377 shares reserved for issuance pursuant to the Parent's 1999 Employee Stock Purchase Plan). Section 6.3 Authority; Execution and Delivery. Newco and Parent have the requisite power and authority to enter into the Transaction Agreements and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Agreements by Newco and Parent, and the consummation of the transactions contemplated hereby have been duly and validly authorized. The Transaction Agreements have been duly executed and delivered by Newco and/or Parent, as the case may be, and, assuming the due authorization, execution and delivery of the Transaction Agreements by Spectrian, constitute the legal, valid and binding obligation of Newco, enforceable against Newco in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors' rights generally from time to time in effect and to general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing) regardless of whether considered in a proceeding in equity or at law. Section 6.4 Consents And Approvals; No Violations. The execution and delivery of the Transaction Agreements by Parent and Newco and the consummation by Parent and Newco of the transactions contemplated thereby will not: (i) violate any provision of the charter documents or the by-laws of Parent or Newco; (ii) violate any Governmental Rule applicable to Parent or Newco; or (iii) require any filing with, or permit, consent or approval of, or the giving 25 27 of any notice to, any governmental or regulatory body, agency or authority other than the filing of a pre-merger notification with the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") under the HSR Act, except where the failure to make such filing, or obtain such permit, consent or approval, or give such notice would not have a Material Adverse Effect on Parent or Newco, respectively. Section 6.5 SEC Documents. Parent has filed all required forms, reports, schedules, statements and other documents (including exhibits and other information incorporated therein) with the SEC since April 20, 1995 through the date hereof (collectively, the "Parent SEC Reports"). As of their respective dates, or, if amended, as of the date of the last such amendment, each Parent SEC Report, (i) was prepared in all material respects with the applicable requirements of the Securities Act, the Exchange Act, and the rules and regulations thereunder applicable to such Parent SEC Reports and (ii) at the time they were filed did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Section 6.6 Compliance with Law; Permits. Neither Parent nor any of its Subsidiaries are in violation of any applicable statute, rule, regulation, decree or order of any Governmental Entity applicable to Parent, except for violations which would not have a Material Adverse Effect on Parent taken as a whole. Section 6.7 Litigation. Except as set forth in the Parent SEC Reports, as of the date hereof, there are no claims, actions, proceedings or governmental investigations pending or, to the knowledge of Parent, threatened against Parent or its Subsidiaries which, if adversely determined, would have a Material Adverse Effect on Parent or its Subsidiaries taken as a whole or prevent the consummation of the transactions contemplated hereby. Parent is not subject to any outstanding and unsatisfied order, writ, judgment, injunction or decree or settlement or consent agreement by or with a Governmental Entity which would have a Material Adverse Effect on Parent and its Subsidiaries taken as a whole or prevent the transactions contemplated hereby. Section 6.8 Brokers and Finders. Except for CIBC World Markets Corp. whose fees shall be borne by Parent in connection with the transactions contemplated hereby, no broker, finder or investment bank has acted directly or indirectly for Parent or Newco, and neither Parent nor Newco has incurred any obligation to pay any brokerage, finder's or other fee or commission to any person. ARTICLE 7 CERTAIN COVENANTS AND AGREEMENTS Section 7.1 Covenants of Spectrian Relating to Conduct of Business. During the period from the date of this Agreement and continuing until the Closing, Spectrian agrees (except as expressly provided in this Agreement or Schedule 7.1 or to the extent that Parent shall otherwise consent in writing) that: (a) Ordinary Course. Spectrian shall carry on the Business and operate the Acquired Assets in the ordinary course of business in substantially the same manner as presently conducted, maintain the business records of the Business in substantially the same manner as presently maintained and use commercially reasonable efforts to preserve intact the Business' present business organization, keep available the services of the Business' present employees and preserve the Business' relationships with customers, suppliers and others having business dealings with the Business; provided, however, that nothing contained herein shall be deemed to require the expenditures of any funds outside the ordinary course of business. 26 28 (b) No Dispositions. Spectrian shall not sell, lease, or transfer, or agree to sell, lease, or transfer, any of the Acquired Assets, except in the ordinary course of business. (c) No Salary Increases. Spectrian shall not increase the salary of any employee of the Business, except pursuant to existing employment contracts or in the ordinary course of business consistent with prior practice. (d) No Additional Material Contracts. Spectrian shall not enter into any Contract that would be required to be listed on Schedule 5.11 if it were in effect on the date hereof, including any such Contract for the purchase of capital assets, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed); provided, however, Spectrian shall not be required to obtain Parent's consent with respect to contracts that would be required to be listed pursuant to Section 5.11(a)(iii) or Section 5.11(a)(iv) if such contracts are entered into during the ordinary course of business. (e) Other Actions. Spectrian shall not knowingly take any action that would reasonably be expected to result in any of the representations and warranties of Spectrian set forth in this Agreement becoming untrue in any material respect or in any of the conditions of the Closing set forth in Article VIII not being satisfied. Section 7.2 Newco's Access to Information. Spectrian shall afford to Parent and its accountants, counsel and other representatives reasonable access upon reasonable advance notice and during normal business hours during the period prior to the Closing to all the properties, books, contracts, commitments, Tax Returns and records of the Business (other than any of the foregoing relating primarily to the Excluded Assets). Newco and Parent acknowledge that any information being provided to it or its representatives by Spectrian pursuant to this Agreement is subject to the terms of a confidentiality agreement between Parent and Spectrian, dated October 5, 2000, (the "Confidentiality Agreement"), which terms are incorporated herein by reference. Section 7.3 Preservation of Records. (a) At its own expense, Parent shall cause Newco to (i) preserve and keep the books, contracts, commitments and records included in the Acquired Assets for a period of not less than seven (7) years from the Closing Date, or for any longer periods as may be required by any Governmental Entity or as may be made prudent by the circumstances of any ongoing audit or litigation, and (ii) provide Spectrian with reasonable access to the foregoing upon reasonable notice and during normal business hours during such period. In the event Newco wishes to destroy such copies and records after the time specified above, it shall first give 60 days' prior written notice to Spectrian, and Spectrian shall have the right, at its option and expense, and upon prior written notice given to Newco within such 60 day period, to take possession of all or any portion of such copies and records. (b) At its own expense, Spectrian (i) shall preserve and keep the books, contracts, commitments and records included in the Excluded Assets, to the extent also relating to the Acquired Assets, for a period of not less than seven (7) years from the Closing Date, or for any longer periods as may be required by any Governmental Entity or as may be made prudent by the circumstances of any ongoing litigation, and (ii) shall provide Parent and Newco with reasonable 27 29 access to the foregoing upon reasonable notice and during normal business hours during such period. (c) Newco acknowledges and agrees that Spectrian shall retain copies of certain personnel records included in the Acquired Assets which relate to Spectrian's liabilities in respect of the acquired employees' post-employment benefits. (d) All information received or retained by Spectrian or Newco or any representative of either party pursuant to paragraph (a) or (b) of this Section 7.3 shall be treated as confidential by such party and by such party's representatives and shall be subject to other confidentiality arrangements as may be mutually agreed, and, except to the extent such information is or becomes generally available, each party and its representatives shall use all commercially reasonable efforts to maintain the confidentiality of such information. If either party or any of its representatives is required to disclose any such information by or to any Governmental Entity, such party shall, to the extent feasible, prior to such disclosure, notify the other party of such requirement. Parent or Spectrian shall have the right, at its own expense, to seek confidential treatment of any information to be so disclosed. Section 7.4 Legal Conditions to Closing. Each of Spectrian, Parent and Newco agrees to take all commercially reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to the Closing (including the prompt filing of the premerger notification report under the HSR Act and the furnishing of all information required under the HSR Act), and to satisfy all applicable conditions to Closing and consummate and make effective the transactions contemplated by this Agreement, and shall cooperate with and furnish information to each other and to other parties in connection with any such legal requirements. Section 7.5 Employee Benefits. (a) Effective as of the Closing, Newco shall offer to employ all persons listed in Schedule 7.5 (the "Spectrian Employees"). Each such offer of employment shall be on terms and conditions, including employee benefit plans, that, taken as a whole, are comparable to the terms and conditions of employment, including employee benefit plans, provided to employees of Parent as of the date hereof. Each Spectrian Employee who accepts an offer of employment from Newco effective as of the Closing shall be referred to herein as a "Transferred Employee." The provisions of this Section 7.5(a) represent the present intent of Newco and Newco will exercise good faith efforts to comply with the provisions of this Section 7.5(a). Notwithstanding anything to the contrary contained herein, it is understood that Newco and Parent retain discretion to manage their respective business in the best interests of their respective shareholders, and that good faith modifications of or variances from these provisions in the exercise of such discretion are appropriate and permitted. (b) From and after the Closing Date, Newco shall recognize any prior accrued service credit, credit towards satisfying deductible expense requirements, out-of-pocket expense limits of all Transferred Employees and/or such Transferred Employees' dependants as of the Closing Date for all purposes under Newco benefit plans and Newco's benefits and compensation arrangements (including, but not limited to, eligibility to participate and vesting), 28 30 but excluding benefit accruals. Newco and Spectrian agree that where applicable with respect to any medical or dental benefit plan of Newco, Newco shall waive, with respect to any Transferred Employees, any pre-existing condition exclusion (to the extent such exclusion would not have applied under the applicable plan of Spectrian or any of its subsidiaries). (c) Newco shall provide continuation health care coverage to all Transferred Employees and their qualified beneficiaries who incur a "qualifying event" after the Closing Date in accordance with and to the extent required, under the continuation health care coverage requirements of Section 4980D of the Code and Sections 601 through 608 of ERISA ("COBRA"). Spectrian shall be responsible for providing continuation coverage and all related notices to the extent required by law to any Transferred Employees (or qualified beneficiary) who incurs a "qualifying event" under COBRA on or before the Closing Date. (d) Newco agrees to provide any required notice under the Worker Adjustment and Retraining Notification Act, as amended (the "WARN Act"), and to otherwise comply with the WARN Act with respect to any "plant closing" or "mass layoff" (as defined in the WARN Act), affecting Transferred Employees and occurring on or after the Closing Date. Newco shall indemnify and hold harmless Spectrian and its Affiliates with respect to any liability under the WARN Act arising from the actions of Newco or its Affiliates on or after the Closing Date. Section 7.6 Tax Matters. (a) All real property, personal property and ad valorem taxes that are attributable to the Acquired Assets shall be apportioned and prorated between Spectrian and Newco as of the Closing Date. If, at the time of Closing, tax rates for the then current year have not been published, then the proration of real and personal property taxes shall be made on the basis of the tax rate for the preceding tax year applied to the latest assessed valuation of the Acquired Assets, and when the tax rate is fixed for the tax year in which the Closing occurs, Spectrian and Newco agree to adjust such prorations and, if necessary, to refund or pay such sums to the other party as necessary to effect such readjustment. (b) Subject to the provisions of Section 7.2 of this Agreement, Newco and Spectrian each agrees that it will, and will cause its Affiliates to, (i) make available all such information, employees and records of or relating to the Business or the Acquired Assets to the other party and its employees and advisors as the other party may reasonably request with respect to matters relating to Taxes (including, without limitation, Tax Returns, Tax compliance packages and any other relevant information collected in connection with the filing of Tax Returns and/or reports relating to Taxes), (ii) provide to the other party copies of such information and records as the other party may reasonably request, and (iii) cooperate as reasonably requested by the other party with respect to all matters relating to Taxes (including, without limitation, the preparation of Tax compliance packages, the filing of Tax Returns, the filing of any amended Tax Return if reasonably requested by the other party, audits, and proceedings). (c) Subject to the provisions of Section 10 of this Agreement, Spectrian shall indemnify and hold Newco harmless against all Taxes relating to the Business or the Acquired Assets for Pre-Closing Periods; provided, however, that in the event that a Tax matter arises that 29 31 could give rise to liability of Spectrian pursuant to this Section 7.6(c), Newco shall promptly provide written notice thereof to Spectrian, Spectrian, at its option and expense, shall control all actions taken in connection with such Tax matter, and neither Parent nor Newco shall agree to or settle such Tax matter without Spectrian's prior written consent. Any Tax refunds relating to the Business or the Acquired Assets for Pre-Closing Periods that are received by Newco, and any amounts credited against any Tax to which Newco becomes entitled that relate to Pre-Closing Periods or are attributable to any adjustment by a Taxing Authority to Taxable income, loss or Tax liability for Pre-Closing Periods, shall be for the account of Spectrian. Newco shall pay over to Spectrian any such refund or the amount of any such credit within five (5) business days after the earlier of the receipt thereof by Newco in the case of a refund or, in the case of a credit, within five (5) business days of the due date of the Tax Return for the Tax to which the credit is applied. (d) Notwithstanding any other provision of this Agreement, all transfer, registration, stamp, documentary, sales, use and similar Taxes (including, but not limited to, all applicable real estate transfer or gains Taxes) incurred in connection with this Agreement and the transactions contemplated hereby shall be the responsibility of and be paid by Spectrian. The parties shall cooperate in the timely making of all filings, Tax Returns, reports and forms as may be required in connection therewith. At the Closing, Spectrian and Newco shall deliver to each other such properly completed resale exemption certificates and other similar certificates or instruments as are necessary to claim available exemptions from the payment of sales, transfer, use or other similar Taxes under applicable law. (e) If Newco or Spectrian or either of their Affiliates receives any written notice from any Taxing Authority proposing any adjustment that could affect the liability of the other party under this Agreement for any Tax relating to the Business or the Acquired Assets, such party shall give prompt written notice thereof to the other party, which notice shall describe in detail each proposed adjustment. (f) The "consideration" (within the meaning of Code Section 1060) paid by Newco pursuant to the terms hereof shall be allocated among the assets acquired by Newco hereunder in the manner required by Code Section 1060 and the Treasury Regulations thereunder. Newco shall prepare and deliver a schedule setting forth the fair market value of the assets and the amount of the liabilities taken into account under Treasury Regulations sections 1.1060-1T, 1.338-4T, -5T and -6T for review and comment by Spectrian within thirty (30) days after the Closing Date, and Spectrian shall be deemed to have accepted such determination unless Spectrian notifies Newco in writing of an objection within thirty (30) days after receipt of Newco's schedule. If Spectrian gives such notice of objection to Newco's schedule, and if Newco and Spectrian are unable to resolve such objection through commercially reasonable efforts within thirty (30) days of Newco's receipt of Spectrian's notice, then the objection shall be submitted to and reviewed by an internationally recognized firm of independent public accountants mutually chosen and jointly engaged by Newco and Spectrian (the "Resolution CPA Firm"), whose determination shall be conclusive and binding upon Newco and Spectrian. In connection with the foregoing, Newco and Spectrian shall make readily available to the Resolution CPA Firm all relevant items reasonably requested by the Resolution CPA Firm. Further, Newco and Spectrian shall instruct the Resolution CPA Firm to deliver its written determination to Newco and Spectrian no later than thirty (30) days after the matter is referred to 30 32 the Resolution CPA Firm. The fees and expenses of the Resolution CPA Firm shall be borne equally by Newco and Spectrian. Newco and Spectrian agree that (i) Newco and Spectrian shall file with their respective federal income Tax Returns (and applicable foreign, state and local Tax Returns) consistent IRS Forms 8594 (and comparable foreign, state and local forms), including any required amendments thereto, which shall reflect the allocation determined in accordance herewith, and (ii) such allocation (subject to appropriate adjustments to reflect any subsequent change in the consideration hereunder) shall be binding on Newco and Spectrian for all federal, state, local and foreign Tax purposes. (g) Notwithstanding any other provision of this Agreement, the covenants contained in Section 7.6 (relating to Taxes) shall survive indefinitely. Section 7.7 Expenses. Whether or not the Closing occurs and except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. Any finders' or investment banking fee due by Spectrian in connection with this Agreement or the transactions contemplated hereby shall be paid by Spectrian directly, and not out of the Business. Notwithstanding the foregoing or any other provisions of this Agreement, Newco and Spectrian agree that all fees incurred in connection with any filing made pursuant to the HSR Act shall be paid by Newco or Parent. Section 7.8 Financial Information. Subject to the provisions of Section 7.2 and 7.6(b) and after the Closing, upon reasonable written notice, Newco and Spectrian shall furnish or cause to be furnished to each other and their respective accountants, counsel and other representatives reasonable access, during normal business hours, to such information (including records pertinent to the Business) and assistance relating to the Business as is reasonably necessary for financial reporting and accounting matters, the preparation and filing of any returns, reports or forms or the defense of any Tax audit, proceeding, claim or assessment. Section 7.9 Bulk Transfer Laws. Newco hereby waives compliance by Spectrian with the provisions of any so-called "bulk transfer law" (including, without limitation, bulk transfer laws relating to Taxes) of any jurisdiction in connection with the sale of the Acquired Assets to Newco. Spectrian shall indemnify and hold harmless Newco against any and all liabilities, including applicable interest and penalties, that may be asserted by third parties (including any Taxing Authority) against Newco as a result of noncompliance with any such bulk transfer law. Section 7.10 Actions of Newco and Spectrian. Neither party shall knowingly take any action that would reasonably be expected to result in any of the representations or warranties made by such party in the Transaction Agreements becoming untrue in any material respect or in any of the conditions of the Closing set forth in Article VIII not being satisfied. Section 7.11 No Additional Representations. Newco acknowledges that it and its representatives have been permitted full and complete access to the Acquired Assets that it and its representatives have desired or requested to see or review, and that its representatives have had a full opportunity to meet with Spectrian and representatives of Spectrian and employees of the Business to discuss the Business. Newco acknowledges that it and its representatives have received or have had an opportunity to review prior to the date hereof all written materials which Spectrian is required to deliver or make available, as the case may be, to Newco pursuant to this Agreement on or prior to the date hereof. Newco acknowledges that neither Spectrian nor any other person has made any representation or warranty, express or implied, as to the accuracy or 31 33 completeness of any information regarding the Business or the Acquired Assets except as expressly set forth in this Agreement and the schedules attached hereto, and that neither Spectrian nor any other person will be subject to any liability to Newco or any other person resulting from the distribution to Newco, or Newco's use of, any such information in any form, including the preliminary Private Placement Memorandum dated June 9, 2000 relating to the Business, any documents or materials made available to Newco in any "data room," and any management presentation in expectation of the transactions contemplated hereby (subject to the provisions of Section 11.3). Spectrian acknowledges that it and its representatives have received or have had an opportunity to review prior to the date hereof all written materials which Parent or Newco is required to deliver or make available, as the case may be, to Spectrian pursuant to this Agreement on or prior to the date hereof. Spectrian acknowledges that neither Parent, Newco nor any other person has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the business of either Parent or Newco except as expressly set forth in this Agreement and the schedules attached hereto, and that neither Parent, Newco nor any other person will be subject to any liability to Spectrian or any other person resulting from the distribution to Spectrian, or Spectrian's use of, any such information in any form (subject to the provisions of Section 11.3). Section 7.12 Hart-Scott-Rodino Act. As soon as possible after the execution of this Agreement, but in no event later than ten business days thereafter, Spectrian and Parent shall prepare and file all documents with the Federal Trade Commission and the United States Department of Justice as are required to comply with the HSR Act. Spectrian and Parent shall use commercially reasonable efforts to respond as promptly as reasonably practicable to any inquiries received from the FTC and the DOJ for additional information or documentation and to respond as promptly as reasonably practicable to all inquiries and requests from any Governmental Entity in connection with antitrust matters. Spectrian and Parent shall use its commercially reasonable efforts to overcome any objections which may be raised by the FTC, DOJ or any Governmental Entity having jurisdiction over antitrust matters. Notwithstanding anything to the contrary in this Agreement, if Spectrian, in its reasonable business judgment, considers the imposition of a condition upon the transactions by a Governmental Entity to be materially adverse to Spectrian or any of its affiliates, Spectrian may terminate this Agreement. Section 7.13 Lease. As of the Closing Date, Newco and Spectrian shall enter into a sublease with respect to the Facility under terms and conditions substantially similar to the terms and conditions set forth in the Lease (as defined below) which are applicable to the Facility; provided, however, the parties agree that the economic terms and conditions which are applicable to the Facility shall be the same with respect to the sublease as those set forth in the Lease. Such sublease shall, in any event, (i) be subject and subordinate to, and be made in accordance with, the terms of the Lease, (ii) provide for cross-indemnities (with customary carve-outs) pursuant to which Newco shall indemnify Spectrian with respect to events, matters and circumstances occurring or arising from and after the date of such sublease, and Spectrian shall indemnify Newco with respect to events, matters and circumstances occurring or arising prior to the date of such sublease, and (iii) provide for such other terms and conditions as Newco and Spectrian may agree. For purposes of this Section 7.13, the term "Lease" means that certain Spectrian Lease Agreement, dated as of November 19, 1996, by and between SPEC (CA) QRS 12-20, Inc., a California corporation, as lessor ("SPEC"), and Spectrian, as lessee. After Spectrian and Newco enter into such sublease, Spectrian agrees to use commercially reasonable 32 34 efforts to obtain a non-disturbance agreement from SPEC with terms acceptable to SPEC, Spectrian and Newco. Section 7.14 Delivery of Audited Financial Statements. Spectrian agrees to use commercially reasonable efforts to deliver to Parent the financial statements of the Business prepared in accordance with GAAP and audited by PricewaterhouseCoopers LLP for each of the fiscal years ended March 31, 2000, March 31, 1999 and March 31, 1998 (but excluding a balance sheet for the fiscal year ended March 31, 1998) (the "Audited Financial Statements") at the earlier of (i) three (3) days prior to the Closing Date or (ii) within 30 days of the date hereof. The Audited Financial Statements shall present fairly the financial condition of the Business as of such dates and the results of operations of the Business for such periods will be correct and complete in all material respects, and will be consistent with the books and records of the Business and Spectrian (which books and records will be correct and complete in all material respects) and shall be consistent, in all material respects, with Financial Information. Section 7.15 Stub Period Financial Information. Spectrian agrees to use commercially reasonable efforts to deliver to Parent unaudited financial information of the Business as required of the Parent for its Form 8-K filing requirements for the six month period ended October 1, 2000 (the "Unaudited Stub Period Financial Information") at the earlier of (i) three (3) days prior to the Closing Date or (ii) within 30 days of the date hereof. The unaudited financial information will be prepared from the books and records of Spectrian and the Business on a basis consistent with the Audited Financial Statements. Section 7.16 Listing of Additional Shares. Promptly following the date hereof, Parent shall use its reasonable best efforts to file with the NASDAQ National market, to the extent required, a Notification Form for Listing of Additional Shares with respect to the Shares of Parent Common Stock to be issued at the Closing by Parent as a result of the Acquisition. Section 7.17 Non-Competition; Non-Solicitation. (a) For a period of two (2) years following the Closing Date, Spectrian shall not directly or indirectly engage in the business of developing, manufacturing and supplying radio frequency power semiconductors in the Semiconductor Field (the "Competing Business"). For purposes of this Section 7.17, Spectrian shall be deemed to engage in a business if it, directly or indirectly, engages or invests in, owns, manages, operates, controls or participates in the ownership, management, operation or control of, or renders services or advice to, any business engaged in the Business; provided, however, that Spectrian may invest in the securities of any enterprise (but without otherwise participating in the activities of such enterprise) if (i) such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 and (ii) Spectrian does not beneficially own (as defined Rule 13d-3 promulgated under the Securities Exchange Act of 1934) in excess of 5% of the outstanding equity of such enterprise. The foregoing shall not prevent Spectrian from either (A) working with venders of semiconductor components to develop such components for use in amplifiers and amplifier subsystems manufactured by Spectrian, or (B) being acquired by a company or a subsidiary, division or business unit of a company (each, a "Separate Unit") where the Separate Unit itself is not engaged in the Competing Business and where Spectrian has no business relationship with any other parts of the company that are engaged in the Competing 33 35 Business and where Spectrian is not involved, directly or indirectly, in any part of the company's (or any other Separate Unit's) Competing Business activities. (b) During the same period as the restrictions of paragraph (a) above shall apply, neither Spectrian, Parent or Newco shall (i) request, induce or attempt to influence any distributor or supplier of goods or services to any other party to curtail or cancel any business they may transact with the other party, (ii) request, induce or attempt to influence any customers of any other party that have done business with or potential customers which have been in contact with the other party to curtail or cancel any business they may transact with the other party, (iii) request, induce or attempt to influence any employee of any other party to terminate his or her employment or consulting agreement with such other party or (iv) request, induce or attempt to influence any Governmental Entity or regulatory authority to terminate, revoke or materially and adversely alter or impair any license held, owned, used or reserved for the other party. Section 7.18 Orderly Disposition of Stock Consideration. Spectrian agrees that during the five (5) business days immediately after the Closing Date, it shall not (without the consent of Parent) sell into the public markets in excess of 25,000 shares of Parent Common Stock during any one business day. Spectrian agrees that during the next 55 days, it shall not sell into the public markets in excess of 75,000 shares of Parent Common Stock during any one (1) business day, nor shall it sell more than an aggregate of 300,000 shares of Parent Common Stock during any one (1) calendar week. In addition, Spectrian agrees that it shall make all public sales of Parent Common Stock through a registered market maker and otherwise in accordance with Rule 145 under the Securities Act. This Section 7.18 shall not apply to the Immediately Available Consideration. Section 7.19 Exclusivity. From the date hereof until the earlier of the Closing Date or such time as this Agreement is terminated pursuant to Article 9 herein, Spectrian agrees that it will not, and will cause its affiliates, directors, officers, employees and representatives not to, directly or indirectly, (i) initiate, solicit, encourage, discuss, negotiate, entertain or accept any inquiries, proposals or offers (whether initiated by them or otherwise) with respect to (A) the acquisition of any shares of capital stock or any other voting securities or debt securities of the Business or Spectrian or any interest therein, (B) the acquisition of all or a material portion of the assets and properties of the Business or Spectrian or any interest therein (C) the merger, consolidation or combination of the Business or Spectrian, (D) the liquidation, dissolution or reorganization of the Business or Spectrian (each of the foregoing, a "Potential Transaction"), (ii) provide information relating to the Business in connection with a Potential Transaction or (iii) enter into any contract, agreement arrangement or understanding concerning or relating to a Potential Transaction, in each case with a third party other than Parent. In the event that Spectrian or the Business, or any of their respective affiliates, directors, officers, employees or representatives, receives an unsolicited inquiry, proposal or offer with respect to a Potential Transaction or obtains information that such an inquiry, proposal or offer is likely to be made, Spectrian or the Business or such affiliate director officer employee or representative, will provide Parent with immediate notice thereof, subject to the confidentiality provisions contained herein, which notice shall include the terms of and the identity of the person or persons making such inquiry proposal or offer; provided, however, that Spectrian shall not be subject to this paragraph to the extent a Potential Transaction involves Spectrian alone and does not 34 36 contemplate the inclusion of the Business unless such Potential Transaction would impair or otherwise affect the consummation of the Acquisition. Section 7.20 Registration Rights. In the event the shares of Parent Common Stock issuable pursuant to this Agreement (the "Registrable Securities") do not become exempt from registration under applicable federal and state laws for any reason prior to the Closing Date, Parent hereby agrees to enter into a Registration Rights Agreement in the form attached hereto. Section 7.21 Parent's Investigation Period. (a) As used herein, the term "Parent's Investigation Period" shall mean the period commencing on the date hereof and ending on the Closing Date. As used herein, the term "Parent's Investigation" shall mean Parent's right, prior to the expiration of the Parent's Investigation Period and at Parent's sole expense, to conduct any inspections and investigations reasonably requested by Parent with respect to the physical or environmental condition of the Facility or the Acquired Assets (collectively referred to hereinafter from time to time as the "Property") as shall be deemed desirable by Parent, including conducting and taking studies, surveys, tests (including specifically soil and/or groundwater testing), sampling and borings on or under the Property (including without limitation the performance of Phase I and Phase II environmental audits of the Property). (b) Parent, its agents, employees, contractors or other representatives, shall have the rights of access to the Property at all reasonable times during the Parent's Investigation Period for the purpose of conducting any and all above-referenced inspections and investigations. Spectrian hereby agrees to cooperate with and assist Parent in inspecting and investigating the Property during Parent's Investigation Period. Within three (3) business days of the date hereof, Spectrian shall deliver to Parent copies of all surveys, engineering reports, appraisals, environmental audits, construction documents (including without limitation all related plans and specifications), governmental permits, access agreements, and utility agreements, if any, relating to the Property in Spectrian's possession, as well as any other agreements to be assigned to Parent under the terms of this Agreement. (c) Parent shall be responsible for the management and disposal of any investigation-derived waste (including, without limitation, drill cuttings and purge water), and shall properly close all soil borings and groundwater wells in compliance with all applicable requirements of law. Parent shall provide Spectrian split samples from each sampling point properly packaged and preserved and copies of all sampling logs and related information necessary for independent analysis of such samples by Spectrian. (d) Except to the extent caused by the negligence or misconduct of Spectrian, its Affiliates, employees, contractors or agents, Parent agrees to indemnify and hold harmless Spectrian and all of its officers, directors, employees, representatives and agents (the "Indemnified Parties") from and against all damages to the Property (and all improvements and personal property thereon) caused by the Parent's Investigation, and Parent agrees to indemnify and hold harmless the Indemnified Parties from and against any and all liability, cost and expense (including, without limitation, attorneys' fees and expenses of any of the Indemnified Parties) arising from the handling, transportation, treatment, storage or disposal of samples of 35 37 environmental media generated in connection with the Parent's Investigation. This Section 7.21(d) shall survive the termination of this Agreement and shall be subject to the indemnification procedures set forth in Article 10. (e) Parent shall provide Spectrian with copies of all reports (including, without limitation, analysis results) prepared in connection with the Parent's Investigation. Parent shall use any reports prepared or information generated in connection with the Parent's Investigation solely in connection with the transactions contemplated by Parent and Spectrian, and Parent shall not disclose or permit the disclosure of such reports or information to any person (other than agents and representatives of Parent and Newco which persons shall be subject to confidentiality agreements) for any reason at any time; provided, however, that, after providing written notice thereof to Spectrian, Parent may disclose such reports or information as required by law or court order. This Section 7.21(e) shall survive the termination of this Agreement. (f) In the event Parent's investigation identifies any Environmental Condition that would constitute a breach by Spectrian of Section 5.18 herein, then Parent shall have the right to give written notice thereof to Spectrian and elect to terminate this Agreement. If Parent provides such notice to Spectrian and does not elect to terminate, Spectrian may either (i) cure any problems or defects noted by Parent (at Spectrian's sole cost and expense), (ii) provide for the cure of any such problems or defects (at Spectrian's sole cost and expense), or (iii) refuse to cure any such problems or defects. In the event Spectrian elects to cure, or provide for the cure, of any such noted problems or defects, Spectrian shall so notify Parent of such election within 10 business days of Spectrian's receipt of such notice. If Spectrian (i) elects not to cure said problems or defects, or provide for the cure of said problems or defects, or (ii) fails to timely notify Parent of such election, or (iii) fails for any reason to cure said problems or defects within a mutually agreed upon cure period, then Parent shall have the option of either accepting the Property in its then-present condition or terminating this Agreement, in which case Parent shall have no further obligations hereunder, except as may otherwise be provided herein. (g) Neither Parent's performance of any additional due diligence activities hereunder nor anything else contained in this Section 7.21 shall diminish, waive or have any impact or effect on the warranties and representations of Spectrian contained herein, or on any rights or remedies to which Parent or Newco may be entitled hereunder. Section 7.22 Employee Benefits. No later than 10 calendar days after the Closing Date, Spectrian shall provide to the employees of the Business the benefits, including any payments due, in accordance with the terms and conditions of Schedule 7.22. ARTICLE 8 CONDITIONS PRECEDENT Section 8.1 Conditions to Each Party's Obligations. The obligation of Newco and Parent to purchase the Acquired Assets and assume the Assumed Liabilities and the obligation of Spectrian to sell, assign, convey and deliver the Acquired Assets to Newco shall be subject to the satisfaction prior to the Closing of the following conditions: 36 38 (a) HSR. Any applicable waiting period under the HSR Act shall have expired or been terminated. (b) No Litigation, Injunctions, or Restraints. No temporary restraining order, preliminary or permanent injunction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect. Section 8.2 Conditions to Obligations of Parent and Newco. The obligation of Parent and Newco to purchase the Acquired Assets and assume the Assumed Liabilities is subject to the satisfaction on and as of the Closing of each of the following additional conditions: (a) Representations and Warranties. The representations and warranties of Spectrian set forth in the Transaction Agreements shall be true and correct as of the Closing as though made on and as of the Closing, except (i) to the extent such representations and warranties relate to an earlier date (in which case such representations and warranties shall be true and correct as of such earlier date with the exception of the Schedule 5.11 which shall be updated as of the Closing Date) and (ii) except for breaches of representations and warranties that are not qualified as to "materiality", "Material Adverse Effect" or a similar term which shall be true as to matters that, individually or in the aggregate are not reasonably likely to have a Material Adverse Effect on the Business and the Acquired Assets (representations and warranties that are qualified as to "materiality", "Material Adverse Effect" or a similar term shall be true and correct when made at and as of the Closing as if made as at and as of such time), and Newco shall have received a certificate of Spectrian to such effect. (b) Performance of Obligations of Spectrian. Spectrian shall have performed or complied in all material respects with all obligations, conditions and covenants required to be performed by it under the Transaction Agreements at or prior to the Closing, and Newco shall have received a certificate of Spectrian to such effect. (c) Deliveries. Spectrian shall have delivered to Parent the Audited Financial Statements, the Unaudited Stub Period Financial Information, a certified copy of its charter and a certificate of good standing from the State of Delaware. Spectrian shall have executed and delivered to Newco (i) bills of sale conveying the personal property included in the Acquired Assets, (ii) the Transaction Agreements, and (iii) any required transfer tax forms and affidavits. (d) FIRPTA Compliance. On the Closing Date, Spectrian shall deliver to Newco a properly executed statement pursuant to Treasury Regulations Section 1.1445-2(b)(2) for purposes of satisfying Newco's obligation under Section 1445 of the Code and the regulations thereunder. (e) Lease. The lessor shall have consented to the sub-lease of the Lease in accordance with the provisions of Section 7.13. (f) Absence of Changes. There shall not have occurred after the date hereof any change in or effect on the Business that could have a Material Adverse Effect on the Business or Spectrian; provided, however, that in no case shall a decrease in Spectrian's share price or a 37 39 general decline in the industry as a whole constitute a Material Adverse Effect for the purpose of this Section 8.2(f). (g) Third Party Consents. Spectrian shall have received consent to the assignment of the Contracts listed on Schedule 8.2(g). (h) Legal Opinion. Parent and Newco shall have received an opinion addressed to Parent and Newco from legal counsel to Spectrian reasonably acceptable to Parent and Newco as to such matters as Parent and Newco shall reasonably request. (i) Patent Opinion. Parent and Newco shall have received an opinion addressed to Parent and Newco from Townsend and Townsend and Crew LLP, or other counsel of Spectrian reasonably acceptable to Parent, as described in Schedule 8.2(i). (j) Employees. At least ninety percent (90%) of the employees listed in Schedule 7.5 hereto shall have accepted employment with Newco. (k) Liens. All Liens on the Acquired Assets will have been terminated or released by the holders of the Liens and evidence of such release or termination shall have been provided. Section 8.3 Conditions to the Obligations of Spectrian. The obligations of Spectrian to sell, assign, convey, and deliver the Acquired Assets, or to cause the Acquired Assets to be sold, assigned, conveyed or delivered, as applicable, is subject to the satisfaction on and as of the Closing of each of the following conditions: (a) Representations and Warranties. The representations and warranties of Parent and Newco set forth in the Transaction Agreements shall be true and correct in all material respects as of the Closing as though made on and as of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct as of such earlier date), and Spectrian shall have received a certificate signed by authorized officers of Parent and Newco to such effect. (b) Performance of Obligations of Newco. Parent and Newco shall have performed in all material respects all obligations required to be performed by each under the Transaction Agreements at or prior to the Closing, and Spectrian shall have received a certificate signed by authorized officers of Parent and Newco to such effect. (c) Deliveries. Parent and Newco shall have delivered to Spectrian a certified copy of its charter and a certificate of good standing from the State of North Carolina, and Parent and Newco shall have executed and delivered the Transaction Agreements and any required transfer tax forms and affidavits. (d) Absence of Changes. There shall not have occurred after the date hereof any change in or effect on the Parent that could have a Material Adverse Effect on the Parent; provided, however, that in no case shall a decrease in Parent's share price or a general decline in the industry as a whole constitute a Material Adverse Effect for the purpose of this Section 8.3(d). 38 40 (e) Legal Opinion. Spectrian shall have received an opinion addressed to Spectrian from Smith, Anderson, Dorsett, Mitchell & Jernigan L.L.P. as to such matters as Spectrian shall reasonably request. ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER Section 9.1 Termination. (a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing: (i) by mutual written consent of Spectrian and Parent; (ii) by Spectrian if the condition set forth in Section 3.1(b) is met or if any of the conditions set forth in Sections 8.1 or 8.3 shall have become incapable of fulfillment and shall not have been waived by Spectrian; or (iii) by Newco if any of the conditions set forth in Sections 8.1 or 8.2 shall have become incapable of fulfillment and shall not have been waived by Newco; or (iv) by Spectrian or Newco if the Closing does not occur on or prior to February 1, 2001; provided, however, that the party seeking termination pursuant to clause (ii), (iii) or (iv) is not in breach in any material respects of any of its representations, warranties, covenants or agreements contained in this Agreement or whose action or failure to act shall have been a principal cause of or resulted in the failure of the transactions contemplated by this Agreement or such conditions having become incapable of fulfillment. (b) In the event of termination by Spectrian, on the one hand, or Newco, on the other hand, pursuant to this Section 9.1, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein: (i) Newco shall return all documents and other material received from Spectrian relating to the Business and to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to Spectrian; and (ii) all confidential information received by Newco with respect to Spectrian or the Business shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement. 39 41 (c) Notwithstanding Section 7.7 above, and without limiting the availability of any other remedy, in the event of termination of this Agreement by Spectrian under Section 9.1(a)(ii) on the basis of a material uncured breach by Parent or Newco or of termination by Parent or Newco under Section 9.1(a)(iii) on the basis of a material uncured breach by Spectrian, the breaching party shall reimburse, within five (5) business days after termination, the terminating party's out-of-pocket costs and expenses incurred in connection with this Agreement and the transactions contemplated solely hereby; provided, however, the aggregate amount of such out-of-pocket costs and expenses shall in no case be deemed to exceed $750,000. (d) If this Agreement is terminated and the transactions contemplated hereby are abandoned, this Agreement shall become null and void and of no further force and effect, except for the provisions of Sections 7.7, 9.1, 11.7 and 11.8. Nothing in this Section 9.1 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement. Section 9.2 Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing, Parent, on the one hand, or Spectrian, on the other hand, may waive compliance by the other party with any term or provision of this Agreement that such other party was or is obligated to comply with or perform. ARTICLE 10 INDEMNIFICATION Section 10.1 Indemnification by Spectrian. (a) Spectrian hereby agrees to indemnify, defend and hold Parent, Newco and its Affiliates and their respective officers, directors and employees (the "Newco Indemnified Parties") against, and agrees to hold them harmless from, any Loss to the extent such Loss arises from or in connection with: (i) any breach by Spectrian of any representation or warranty contained in this Agreement or any other agreement or documents delivered in connection herewith; (ii) any breach by Spectrian of any of its covenants contained in this Agreement; or (iii) any Excluded Liability. (b) Notwithstanding the foregoing, the indemnification in favor of the Newco Indemnified Parties contained in this Section 10.1 (i) shall not be effective until the aggregate dollar amount of all Losses indemnified against under this Section 10.1 exceeds one (1) half of one (1) percent (0.5%) of the Purchase Price ("Spectrian's Threshold Amount"), and then only to the extent such aggregate amount exceeds Spectrian's Threshold Amount; and (ii) shall terminate once the aggregate dollar amount of all Losses indemnified against under this Section 10.1 aggregates 25% of the Purchase Price ("Spectrian's Cap Amount"), and Spectrian shall thereafter have no further obligations or liabilities with respect to any of such losses; provided, however, 40 42 that in the event there are Losses asserted against, imposed upon or incurred by the Newco Indemnified Parties resulting from breaches of Sections 5.13, 5.18, 5.20, 7.6 or 7.21 of this Agreement, there shall be no Spectrian Threshold Amount and Spectrian's Cap Amount shall be unlimited, with respect to Losses asserted against, imposed upon or incurred by the Newco Indemnified Parties resulting from breaches of Sections 5.13, 5.18, 5.20, 7.6 and 7.21 of this Agreement, only; provided, further, that the foregoing limitations on Spectrian's indemnification obligations pursuant to this Section 10.1 shall not apply to any indemnification by Spectrian for any Losses asserted against, imposed upon or incurred by the Newco Indemnified Parties resulting from any Excluded Liability or from fraud or willful misconduct. (c) Parent, Newco and Spectrian acknowledge and agree that their sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this Section 10.1 (with respect to Parent and Newco) and Section 10.2 (with respect to Spectrian). In furtherance of the foregoing, Parent and Newco hereby waive, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action each may have against Spectrian arising under or based upon any Governmental Rule; provided, however, Spectrian acknowledges that money damages would not be sufficient or adequate remedy for any breach or violation of, or default under Section 7.17, 7.19 or 9.1(c) of this Agreement, and Spectrian agrees that with respect to Section 7.17, 7.19 or 9.1(c) of this Agreement Parent shall be entitled to the fullest extent permitted by law to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including, without limitation, specific performance. (d) Amounts payable to Parent for indemnification claims under this Section 10.1 shall first be paid from the escrow account under the Escrow Agreement. To the extent the foregoing is not sufficient to pay such claim, such claim shall be paid by Spectrian. Section 10.2 Indemnification by Parent and Newco. (a) Newco and Parent hereby agree to indemnify Spectrian and its Affiliates and their respective officers, directors and employees (the "Spectrian Indemnified Parties") against, and agrees to hold them harmless from, any Loss to the extent such Loss arises from or in connection with: (i) any breach by Newco or Parent of any representation or warranty contained in this Agreement or any other agreement or document (other than the Purchase and Supply Agreement) delivered in connection herewith; (ii) any breach by Newco or Parent of any covenant contained in this Agreement; (iii) the operation of the Business after the Closing Date; or (iv) any Assumed Liability. (b) Notwithstanding the foregoing, the indemnification in favor of the Spectrian Indemnified Parties contained in this Section 10.2 (i) shall not be effective until the aggregate 41 43 dollar amount of all Losses indemnified against under this Section 10.2 exceeds one (1) half of one (1) percent (0.5%) of the Purchase Price ("Parent's Threshold Amount"), and then only to the extent such aggregate amount exceeds Parent's Threshold Amount; and (ii) shall terminate once the aggregate dollar amount of all Losses indemnified against under this Section 10.2 aggregates 25% of the Purchase Price, and Parent shall thereafter have no further obligations or liabilities with respect to any of such losses Section 10.3 Losses Net of Insurance, etc. The amount of any Loss for which indemnification is provided under this Article 10 shall be net of any actual cash insurance recoveries or recoveries of indemnities from any third parties. Neither party shall have an obligation to seek an insurance recovery or third party indemnification and if a party does so and obtains a recovery, the party's indemnity claim shall not be offset to the extent of the party's expenses in obtaining such recovery and an amount equal to anticipated premium increases for the following three (3) years. Section 10.4 Termination of Indemnification. The obligations to indemnify and hold harmless any party, (a) pursuant to Sections 10.1(a)(i) and 10.2(a), shall terminate when the applicable representation or warranty terminates pursuant to Section 11.3, and (b) pursuant to the other clauses of Sections 10.1 and 10.2 shall not terminate. Section 10.5 Procedure. (a) For an indemnified party (the "indemnified party") to be entitled to any indemnification provided for under this Agreement, such indemnified party shall, following the discovery of the matters giving rise to any Loss, notify the indemnifying party (the "indemnifying party") in writing of its claim for indemnification for such Loss, specifying in reasonable detail the nature of such Loss and the amount of the liability estimated to accrue therefrom; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure (except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, within five business days after the indemnified party's receipt of such notice, all information and documentation reasonably requested by the indemnifying party with respect to such Loss. (b) If the indemnification sought pursuant hereto involves a claim made by a third party against the indemnified party (a "Third Party Claim"), the indemnifying party shall be entitled to participate in the defense of such Third Party Claim and, if it so chooses, to assume the defense of such Third Party Claim with counsel selected by the indemnifying party. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the 42 44 defense thereof (other than during any period in which the indemnified party shall have failed to give notice of the Third Party Claim as provided above). If the indemnifying party chooses to defend or prosecute a Third Party Claim, all of the parties hereto shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party's request) the provision to the indemnifying party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. If the indemnifying party chooses to defend or prosecute any Third Party Claim, the indemnified party will agree to any settlement, compromise or discharge of such Third Party Claim which the indemnifying party may recommend and which by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim. Whether or not the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party's prior written consent. ARTICLE 11 GENERAL PROVISIONS Section 11.1 Notices. All notices, requests and other communications hereunder shall be in writing and shall be sent, delivered or mailed, addressed as follows: if to Parent, to: Cree, Inc. 4600 Silicon Drive Durham, North Carolina 27703 Attention: Adam H. Broome, General Counsel and Secretary Fax: (919) 313-5456 with a copy (which shall not constitute notice) to: Smith, Anderson, Dorsett, Mitchell & Jernigan L.L.P. 2500 First Union Capitol Center Raleigh, North Carolina 27601 Attention: Gerald F. Roach Fax: (919) 821-6800 and if to Spectrian, to: Spectrian Corporation 350 West Java Drive Sunnyvale, California 94809 Attention: Michael D. Angel Fax: (408) 541-0262 with a copy (which shall not constitute notice) to: Dewey Ballantine LLP 800 Menlo Ave., Suite 215 Menlo Park, California 94025 Attention: Robert M. Smith Fax: (650) 462-7499 43 45 Each such notice, request or other communication shall be given (i) by hand delivery, (ii) by certified mail or (iii) by nationally recognized courier service. Each such notice, request or communication shall be effective when delivered at the address specified in this Section 11.1 (or in accordance with the latest unrevoked direction from the receiving party). Section 11.2 Headings. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 11.3 Survival of Representations and Warranties. All representations and warranties of Spectrian and Newco and Parent contained herein or made pursuant hereto shall survive the Closing Date for a period of 18 months after the Closing Date, notwithstanding any investigation or examination of or knowledge with respect to, the subject matter thereof by or on behalf of Spectrian, Newco or Parent; provided, however, such representations and warranties shall survive for the applicable statute of limitations in the event of fraud or intentional misrepresentation with respect thereto; provided, further, the representations and warranties made pursuant to Section 5.13 shall survive for a period of 24 months after the Closing Date; provided, further, the representations and warranties made pursuant to Sections 5.18 and 5.20 shall survive for the applicable statute of limitations. Any right of indemnification pursuant to Article 10 hereof with respect to a claimed breach of a representation or warranty shall expire at the date of termination of the representation or warranty claimed to be breached (the "Termination Date"), unless on or prior to the Termination Date the party from whom indemnification is sought shall have received notice in accordance with the provisions of Section 10.5 herein and the Escrow Agreement. Section 11.4 Severability. If any provision of this Agreement, or the application thereof to any person, place or circumstances, shall be held by a court of competent jurisdiction to be invalid, unenforceable, or void, the remainder of this Agreement and such provisions as applied to other persons, places, and circumstances shall remain in full force and effect; provided, however, that in the event that the terms and conditions of this Agreement are materially altered as a result of this paragraph, the parties hereto will renegotiate the terms and conditions of this Agreement to resolve any inequities. Section 11.5 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 11.6 Entire Agreement; No Third Party Beneficiaries. This Agreement and the Confidentiality Agreement constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof. Except as specifically provided herein or therein, such agreements are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder or thereunder. 44 46 Section 11.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, regardless of the laws that might otherwise govern under applicable principles of conflicts of law. Section 11.8 Publicity. Except as may be required by applicable securities laws upon the advice of counsel, neither Spectrian, on the one hand, nor Newco or Parent, on the other hand, shall issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. Section 11.9 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that Parent may assign its rights, interests and obligations hereunder to a wholly-owned subsidiary of Parent without the prior written consent of Spectrian, provided that, prior to any such assignment, Parent executes and delivers to Spectrian a written guaranty, in form reasonably satisfactory to Spectrian, of the performance of all of Newco's obligations under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. In addition, in the event Spectrian sells all or substantially all of its assets, Spectrian shall cause the buyer thereof to assume Spectrian's obligations hereunder and, subject to the confidentiality provisions contained herein, shall notify Parent in writing of the proposed sale and provide evidence of the assumption of Spectrian's obligations by the buyer of its assets. * * * [THIS SPACE LEFT INTENTIONALLY BLANK] 45 47 IN WITNESS WHEREOF, Parent, Newco and Spectrian have caused this Agreement to be signed by their respective parties thereunto duly authorized, all of the date first written above. CREE, INC. By: /s/ F. Neal Hunter ------------------ F. Neal Hunter Chairman and Chief Executive Officer ZOLTAR ACQUISITION, INC. By: /s/ F. Neal Hunter ------------------ F. Neal Hunter Chief Executive Officer SPECTRIAN CORPORATION By: /s/ Garrett A. Garrettson ------------------------- Garrett A. Garrettson Chairman of the Board LIST OF OMITTED EXHIBITS AND ATTACHMENTS The following schedules and attachments have been omitted from this filing: Schedule 2.2(a)(ii), Software Schedule 2.2(a)(ii), Business Equipment Schedule 2.2(a)(v), Acquired Contracts Schedule 2.3(a)(ii)(A), Business Accounts Payable Schedule 5.4(i), UltraRF Statement of Business Assets and Liabilities as of March 31, 1999 and March 31, 2000 (Unaudited) Schedule 5.4(ii), UltraRF Statement of Operations, Fiscal Years Ending March 31, 1998, March 31, 1999, and March 31, 2000 (Unaudited) Schedule 5.4(iii), UltraRF Statement of Operations for Six Month Period Ended October 1, 2000 (Unaudited) Schedule 5.4(iv), UltraRF Statement of Business Assets and Liabilities as of October 1, 2000 (Unaudited) Schedule 5.5, Title to Acquired Assets Schedule 5.6, Absence of Certain Changes or Events Schedule 5.7, Employment Matters Schedule 5.8, Employee Benefit Plans and Amounts of Unfunded Retirement Liabilities Schedule 5.9, Litigation Schedule 5.10, Compliance with Laws Schedule 5.11, Contracts 46 48 Schedule 5.13, Intellectual Property Schedule 5.18, Environmental Compliance Schedule 5.20, Taxes Schedule 7.1, Covenants of Spectrian Relating to Conduct of Business Schedule 7.5, Employee Benefits Schedule 7.22, Employee Benefits Schedule 8.2(g), Required Third Party Consents Schedule 8.2(i), Patent Opinion Annex I: Form of Escrow Agreement Form of Development Agreement Employment Agreement with Johan Darmawan Employment Agreement with Joe Hornung Employment Agreement with John P. Quinn Employment Agreement with Christopher Tubis Employment Agreement with Jay Vyas Form of Transition Services Agreement Form of Purchase and Supply Agreement Form of Registration Rights Agreement Form of Assignment and License Agreement Cree hereby agrees to furnish supplementally to the Commission a copy of any omitted exhibit or attachment upon request. 47 EX-10.01 3 g66404ex10-01.txt SUBLEASE AGREEMENT 1 EXHIBIT 10.01 ZOLTAR ACQUISITION, INC. SUBLEASE AGREEMENT 160 Gibraltar Court Sunnyvale, California 94089 December 29, 2000 1 2 TABLE OF CONTENTS
Page 1 Demise of Premises..........................................................................................1 2 Certain Definitions.........................................................................................1 3 Title and Condition.........................................................................................8 4 Use of Leased Premises; Quiet Enjoyment....................................................................10 5 Term.......................................................................................................10 6 Basic Rent.................................................................................................11 7 Additional Rent............................................................................................12 8 Net Lease; Non-Terminability...............................................................................13 9. Payment of Impositions.....................................................................................14 10. Compliance with Laws and Easement Agreements; Environmental Matters........................................15 11. Liens; Recording...........................................................................................16 12. Maintenance and Repair.....................................................................................17 13. Alterations and Improvements...............................................................................17 14. Permitted Contests.........................................................................................18 15. Indemnification............................................................................................19 16. Insurance..................................................................................................22 17. Casualty and Condemnation..................................................................................26 18. Termination Events.........................................................................................27 19. Restoration................................................................................................29 20. Procedures Upon Purchase...................................................................................30 21. Assignment and Subletting; Prohibition against Leasehold Financing.........................................30 22. Events of Default..........................................................................................32 23. Remedies and Damages Upon Default..........................................................................33 24. Notices....................................................................................................36 25. Estoppel Certificate.......................................................................................36 26. Surrender..................................................................................................37 27. No Merger of Title.........................................................................................37 28. Books and Records..........................................................................................37 29. Determination of Value.....................................................................................38 30. Non-Recourse as to Landlord................................................................................40 31. Financing..................................................................................................41 32. Subordination..............................................................................................41 33. Financial Covenants........................................................................................41 34. Right to Vacate; Rejectable Offer Upon Vacation............................................................41 35. Tax Treatment; Reporting...................................................................................42 36. Right of First Refusal.....................................................................................42 37. Security Deposit...........................................................................................42 38. Miscellaneous..............................................................................................43
i 3
EXHIBITS - -------- Exhibit "A" - Premises Exhibit "B" - Machinery and Equipment Exhibit "B-1" - Tenant's Property Exhibit "C" - Schedule of Permitted Encumbrances Exhibit "D" - Rent Schedule Exhibit "E" - Acquisition Costs Exhibit "F" - Approved Investments Exhibit "G" - Covenants Exhibit "H" - Form of Guaranty of Lease
ii 4 This SUBLEASE AGREEMENT (this "Sublease") is made as of December 29, 2000, between SPECTRIAN CORPORATION, a California corporation ("Landlord"), with an address at 350 West Java Drive, Sunnyvale, California 94089, and ZOLTAR ACQUISITION, INC., a North Carolina corporation to be known as UltraRF, Inc. ("Tenant"), with an address of 160 Gibraltar Court, Sunnyvale, California 94089. RECITALS A. SPEC (CA) QRS 12-20, INC., a California corporation ("Master Landlord") and Landlord are parties to that certain Spectrian Lease Agreement dated November 19, 1996, as amended by that certain First Amendment to Lease dated March 26, 1997 (as amended, the "Master Lease"), with regard to certain premises comprised of two (2) distinct parcels of real property, one of which is located at 350 W. Java Drive, Sunnyvale, California 94089 (as more particularly described in the Master Lease, the "West Java Premises"), and the other located at 160 Gibraltar Court, Sunnyvale, California 94089 (as more particularly described in the Master Lease, the "Gibraltar Premises"). B. Pursuant to that certain Asset Purchase Agreement dated as of November 20, 2000 (the "Asset Purchase Agreement"), by and among Landlord, Tenant and Cree, Inc., a North Carolina corporation ("Cree"), Landlord has agreed to sell a portion of its business and assets to Tenant and Cree. As part of such contemplated sale (the "Sale Transaction"), Landlord intends to sublease to Tenant, and Tenant intends to sublease from Landlord, all of Landlord's right, title and interest under the Master Lease in and to the Gibraltar Premises, all in accordance with the terms of this Sublease. In consideration of the rents and provisions herein stipulated to be paid and performed, Landlord and Tenant hereby covenant and agree as follows: 1. Demise of Premises. Landlord hereby demises and lets to Tenant, and Tenant hereby takes and leases from Landlord, for the term and upon the provisions hereinafter specified, the following described property (hereinafter referred to as the "Leased Premises", which premises is more particularly described in the applicable description in Exhibit "A" attached hereto and made a part hereof and shall include the portions of items (a), (b) and (c) of this Paragraph 1 located thereon or therein and appertaining thereto): (a) the premises described in Exhibit "A" hereto, together with the Appurtenances (collectively, the "Land"); (b) the buildings, structures and other improvements now or hereafter constructed on the Land (collectively, the "Improvements"); and (c) the fixtures, machinery, equipment and other property described in Exhibit "B" hereto (collectively, the "Equipment"). 2. Certain Definitions. "Additional Rent" shall mean Additional Rent as defined in Paragraph 7. "Adjoining Property" shall mean all sidewalks, driveways, curbs, gores and vault spaces adjoining the Leased Premises. "Alterations" shall mean all changes, additions, improvements or repairs to, all alterations, reconstructions, renewals, replacements or removals of and all substitutions or 1 5 replacements for any of the Improvements or Equipment, both interior and exterior, structural and non-structural, and ordinary and extraordinary. "Appurtenances" shall mean all tenements, hereditaments, easements, rights-of-way, rights, privileges in and to the Land, including (a) easements over other lands granted by any Easement Agreement and (b) any streets, ways, alleys, vaults, gores or strips of land adjoining the Land. "Assignment" shall mean any assignment of rents and leases from Landlord or Master Landlord to a Lender which (a) encumbers any of the Leased Premises and (b) secures Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified from time to time. "Basic Rent" shall mean Basic Rent as defined in Paragraph 6. "Basic Rent Adjustment Date" shall mean Basic Rent Adjustment Date as defined in Exhibit "D" hereto. "Basic Rent Payment Dates" shall mean the Basic Rent Payment Dates as defined in Paragraph 6. "Casualty" shall mean any injury to or death of any person or any loss of or damage to any property (including the Leased Premises) included within or related to the Leased Premises or arising from the Adjoining Property. "Commencement Date" shall mean December 29, 2000. "Condemnation" shall mean a Taking. "Condemnation Notice" shall mean notice or knowledge of the institution of or intention to institute any proceeding for Condemnation. "Costs" of a Person or associated with a specified transaction shall mean all reasonable costs and expenses incurred by such Person or associated with such transaction, including without limitation, attorneys' fees and expenses, court costs, brokerage fees, escrow fees, title insurance premiums, mortgage commitment fees, mortgage points, recording fees and transfer taxes, as the circumstances require. "Covenants" shall mean the covenants and agreements described on Exhibit "G" hereto. "CPI" shall mean CPI as defined in Exhibit "D" hereto. "Default Rate" shall mean the Default Rate as defined in Paragraph 7(a)(v). "Default Termination Amount" shall mean the greater of (a) Fair Market Value or (b) the sum of the Floor Amount and any Prepayment Premium which Landlord will be required to pay in prepaying any Loan with the proceeds of the Default Termination Amount. 2 6 "Easement Agreement" shall mean any conditions, covenants, restrictions, easements, declarations, licenses and other agreements listed as Permitted Encumbrances or as may, hereafter affect any Leased Premises. "Environmental Law" shall mean (i) whenever enacted or promulgated, any applicable federal, state, foreign and local law, statute, ordinance, rule, regulation, license, permit, authorization, approval, consent, court order, judgment, decree, injunction, code, requirement or agreement with any governmental entity (x) relating to pollution (or the cleanup thereof), or the protection of air, water vapor, surface water, groundwater, drinking water supply, land (including land surface or subsurface), plant, aquatic and animal life from injury caused by a Hazardous Substance or (y) concerning exposure to, or the use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, handling, labeling, production, disposal or remediation of Hazardous Substances, Hazardous Condition or Hazardous Activity, in each case as amended and as now or hereafter in effect, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations or injuries or damages due to or threatened as a result of the presence of, exposure to, or ingestion of, any Hazardous Substance. The term Environmental Law includes, without limitation, the federal Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the federal Water Pollution Control Act, the federal Clean Air Act, the federal Clean Water Act, the federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act, the federal Occupational Safety and Health Act of 1970, the federal National Environmental Policy Act and the federal Hazardous Materials Transportation Act, each as amended and as now or hereafter in effect and any similar state or local Law. "Environmental Violation" shall mean (a) any direct or indirect discharge, disposal, spillage, emission, escape, pumping, pouring, injection, leaching, release, seepage, filtration or transporting of any Hazardous Substance at, upon, under, onto or within the Leased Premises, or from the Leased Premises to the environment, in violation of any Environmental Law or which results in any liability to or any claim against Landlord, Tenant or Lender, any Federal, state or local government or any other Person for the costs of any removal or remedial action or natural resources damage or for bodily injury or property damage, (b) any deposit, storage, dumping, placement or use of any Hazardous Substance at, upon, under or within the Leased Premises or which extends to any Adjoining Property in violation of any Environmental Law or which results in any claim or liability to any Federal, state or local government or to any other Person for the costs of any removal or remedial action or natural resources damage or for bodily injury or property damage, (c) the abandonment or discarding of any barrels, containers or other receptacles containing any Hazardous Substances in violation of any Environmental Laws, (d) any activity, occurrence or condition which results in any claim, liability, cost or expense to Landlord or Lender or any other owner or occupier of the Leased Premises, or which could result in a creation of a lien on the Leased Premises (or any portion thereof or interest therein) under any Environmental Law or (e) any violation of or noncompliance with any Environmental Law. "Equipment" shall mean the Equipment as defined in Paragraph 1. 3 7 "Escrow Holder" shall mean a nationally recognized title insurance company or any Person that would otherwise qualify as a Lender. "Event of Default" shall mean an Event of Default as defined in Paragraph 22(a). "Facility Representations" means, collectively, only the following: (i) each of the express representations and warranties made by Landlord under Sections 5.10(a) and 5.18 of the Asset Purchase Agreement to the extent that, under the terms of the Asset Purchase Agreement, they expressly apply to the Leased Premises, and (ii) each of the express representations and warranties made by Landlord under Sections 5.5, 5.6(c), 5.9, 5.10, 5.11, 5.18, 5.19 and 5.20 of the Asset Purchase Agreement to the extent that, under the terms of the Asset Purchase Agreement, they expressly apply to: (A) Equipment, and (B) that portion of Improvements which constitute leasehold improvements. "Fair Market Value" shall mean the fair market value of the Leased Premises as of the Relevant Date as affected and encumbered by this Sublease. For all purposes of this Sublease, Fair Market Value shall be determined in accordance with the procedure specified in Paragraph 29. "Fair Market Rental Value" shall mean the fair market rental value of the Leased Premises as of the Relevant Date for the relevant Renewal Term determined in accordance with the procedure specified in Paragraph 29. "Fair Market Value Date" shall mean the date when the Fair Market Value is determined in accordance with Paragraph 29. "Federal Funds" shall mean federal or other immediately available funds which at the time of payment are legal tender for the payment of public and private debts in the United States of America. "Floor Amount" shall mean the amount set forth on Exhibit "E" hereto. "Hazardous Activity" means any activity, process, procedure or undertaking which directly or indirectly (i) procures, generates or creates any Hazardous Substance; (ii) causes or results in the release, seepage, spill, leak, flow, discharge or emission of any Hazardous Substance into the environment (including the air, ground water, watercourses or water systems), (iii) involves the containment or storage of any Hazardous Substance; or (iv) would cause any of the Leased Premises or any portion thereof to become a hazardous waste treatment, recycling, reclamation, processing, storage or disposal facility within the meaning of any Environmental Law. "Hazardous Condition" means any condition which would support any claim or liability under any Environmental Law, including the presence of underground storage tanks. "Hazardous Substance" means (i) any substance, material, product, petroleum, petroleum product, derivative, compound or mixture, mineral (including asbestos), chemical, gas, medical waste, or other pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous or acutely hazardous to the 4 8 environment or public health or safety or (ii) any substance supporting a claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. Hazardous Substances include, without limitation, any toxic or hazardous waste, pollutant, contaminant, industrial waste, petroleum or petroleum-derived substances or waste, radon, radioactive materials, asbestos, asbestos containing materials, urea formaldehyde foam insulation, lead and polychlorinated biphenyls. "Impositions" shall mean the Impositions as defined in Paragraph 9(a). "Improvements" shall mean the Improvements as defined in Paragraph 1. "Initial Term" shall mean Initial Term as defined in Paragraph 5(a). "Insurance Requirements" shall mean the requirements of all insurance policies maintained in accordance with this Sublease. "Land" shall mean the Land as defined in Paragraph 1. "Landlord Indemnitee" shall mean a Landlord Indemnitee as defined in Paragraph 15. "Law" shall mean any constitution, statute, rule of law, code, ordinance, order, judgment, decree, injunction, rule, regulation, requirement or administrative, or judicial determination, even if unforeseen or extraordinary, of every duly constituted governmental authority, court or agency, now or hereafter enacted or in effect. "Lease Year" shall mean, with respect to the first Lease Year, the period commencing on the Commencement Date and ending at midnight on the last day of the twelfth (12th) consecutive calendar month following the month in which the Commencement Date occurred, and each succeeding twelve (12) month period during the Term. "Leased Premises" shall mean the Leased Premises as defined in Paragraph 1. "Legal Requirements" shall mean the requirements of all present and future Laws (including but not limited to Environmental Laws) and all covenants, restrictions and conditions now or hereafter of record which may be applicable to Tenant or to any of the Leased Premises, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or restoration of any of the Leased Premises, even if compliance therewith necessitates structural changes or improvements or results in interference with the use or enjoyment of any of the Leased Premises. "Lender" shall mean any person or entity (and their respective successors and assigns) which may, after the date hereof, make a Loan to Landlord or Master Landlord or is the holder of any Note and which is a bank, insurance company, bank affiliate or wholly-owned subsidiary of any such bank, credit company, public or private pension plan, investment bank, institutionally managed fund or any other Person that is in the business of, directly or indirectly, making commercial mortgage loans and whose Mortgage provides that any Net Award shall be held and applied in accordance with the terms of this Sublease. 5 9 "Loan" shall mean any loan made by one or more Lenders to Landlord or Master Landlord, which loan is secured by a Mortgage and an Assignment and evidenced by a Note. "Master Lease" shall mean as defined in Recital A of this Sublease. "Master Lease Basic Rent" shall mean, collectively, the sum of the Basic Rent (as defined in the Master Lease) due from Landlord to Master Landlord for the Gibraltar Premises and the West Java Premises. "Master Lease Term" shall mean the term of the Master Lease as defined in Paragraph 5 and other applicable provisions thereof. "Monetary Obligations" shall mean Rent and all other sums payable by Tenant under this Sublease to Landlord, to any third party on behalf of Landlord or to any Indemnitee. "Mortgage" shall mean any first leasehold mortgage or leasehold deed of trust from Landlord and/or Master Landlord to a Lender which (a) encumbers Landlord's or Master Landlord's interest in the Leased Premises or this Sublease, and (b) secures Landlord's or Master Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified. "Net Award" shall mean (a) the entire award payable to Master Landlord, Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or by agreement or otherwise, or (b) the entire proceeds of any insurance required under clauses (i), (ii) (to the extent payable to Master Landlord, Landlord or Lender), (iv), (v) or (vi) of Paragraph 16(a), as the case may be, less any expenses incurred by Master Landlord, Landlord and Lender in collecting such award or proceeds. "Note" shall mean any promissory note evidencing Landlord's or Master Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified. "Partial Casualty" shall mean any Casualty which does not constitute a Termination Event. "Partial Condemnation" shall mean any Condemnation which does not constitute a Termination Event. "Permitted Encumbrances" shall mean those covenants, restrictions, reservations, liens, conditions and easements and other encumbrances, other than any Mortgage or Assignment, listed on Exhibit "C" hereto (but such listing shall not be deemed to revive any such encumbrances that have expired or terminated or are otherwise invalid or unenforceable). "Person" shall mean an individual, partnership, association, corporation or other entity. "Prepayment Premium" shall mean any payment (other than a payment of principal and/or interest) which Landlord or Master Landlord is required to make under a Note or a Mortgage by reason of any prepayment by Landlord or Master Landlord of any principal up to and including but not in excess of Ten Million Dollars ($10,000,000), due under a Note or 6 10 Mortgage, and which may be (in lieu of such prepayment premium or prepayment penalty) a "make whole" clause requiring a prepayment premium in an amount sufficient to compensate the Lender for the loss of the benefit of the Loan due to prepayment. "Prime Rate" shall mean the interest rate per annum as published, from time to time, in the Wall Street Journal as the "Prime Rate" in its column entitled "Money Rate". The Prime Rate may not be the lowest rate of interest charged by any "large U.S. money center commercial banks" and Landlord makes no representations or warranties to that effect. In the event the Wall Street Journal ceases publication or ceases to publish the "Prime Rate" as described above, the Prime Rate shall be the "Prime Rate" as published by Bank of America, or if not published, the "Prime Rate" shall be the average per annum discount rate (the "Discount Rate") on ninety-one (91) day bills ("Treasury Bills") issued from time to time by the United States Treasury at its most recent auction, plus three hundred (300) basis points. If no such 91-day Treasury Bills are then being issued, the Discount Rate shall be the discount rate on Treasury Bills then being issued for the period of time closest to ninety-one (91) days. "Relevant Date" shall mean (a) the date immediately prior to the event which gives rise to an Event of Default for the purpose of determining the Default Termination Amount under Paragraph 23, (b) the date when Fair Market Value is redetermined, in the event of a redetermination of Fair Market Value pursuant to Paragraph 20(c), and (c) the first day of the applicable Renewal Term. "Renewal Term" shall mean Renewal Term as defined in Paragraph 5. "Rent" shall mean, collectively, Basic Rent and Additional Rent. "Security Deposit" shall mean Security Deposit as defined in Paragraph 37. "Site Assessment" shall mean a Site Assessment as defined in Paragraph 10(c). "State" shall mean the State of California. "Surviving Obligations" shall mean any obligations of Tenant or Landlord under this Sublease, actual or contingent, which arise on or prior to the expiration or prior termination of this Sublease or which survive such expiration or termination by their own terms. "Taking" shall mean any taking or damaging of all or a portion of any of the Leased Premises (i) in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or (ii) by reason of any agreement with any condemnor in settlement of or under threat of any such condemnation or other eminent domain proceeding, or (iii) by any other means. The Taking shall be considered to have taken place as of the later of the date actual physical possession is taken by the condemnor, or the date on which the right to compensation and damages accrues under the law applicable to the Leased Premises. "Tenant Indemnitee" shall mean a Tenant Indemnitee as defined in Paragraph 15. "Tenant's Property" shall mean the Tenant's Property as defined in Exhibit B-1. 7 11 "Term" shall mean the Term as defined in Paragraph 5. "Termination Amount" shall mean the sum of the Floor Amount and any Prepayment Premium which Landlord will be required to pay in its or the Master Landlord's prepaying of any Loan with proceeds of the Termination Amount. "Termination Date" shall mean the Termination Date as defined in Paragraph 18. "Termination Event" shall mean a Termination Event as defined in Paragraph 18. "Termination Notice" shall mean Termination Notice as defined in Paragraph 18(a). "Third Party Purchaser" shall mean the Third Party Purchaser as defined in Paragraph 21(g). 3. Title and Condition. (a) The Leased Premises are demised and let subject to (i) the Mortgage and Assignment presently in effect, (ii) the rights of any Persons in possession of the Leased Premises, (iii) the existing state of title of any of the Leased Premises, including any Permitted Encumbrances, (iv) any state of facts which an accurate survey or physical inspection of the Leased Premises might show, (v) all Legal Requirements, including any existing violation of any thereof, and (vi) the condition of the Leased Premises as of the commencement of the Term, without representation or warranty by Landlord. In addition, this Sublease is and shall be at all times subject to all of the terms, covenants and conditions of the Master Lease and shall in all respects be limited to the estate granted to Landlord by Master Landlord pursuant to the Lease. Excluding only the obligations with regard to the payment of Rent (which obligations are governed by this Sublease), Tenant assumes and agrees to be bound by the terms of and to perform all of the obligations and duties of Landlord under the Master Lease with respect to the Leased Premises. Tenant shall not commit or permit to be committed any act or omission which shall violate any terms, covenants or conditions of the Lease. Each of Landlord and Tenant agrees that it shall promptly forward to the other any and all notices or other communications it receives from the Master Landlord under the Lease. Where any approval or consent shall be required of Master Landlord pursuant to the provisions of the Lease, Landlord may, without limitation, condition its approval or consent upon Landlord's obtaining the approval or consent of the Master Landlord. Landlord agrees to use commercially reasonable efforts to request such consent from the Master Landlord; provided, however, that in no event shall Landlord be obligated to file any judicial, administrative or other proceeding in connection with requesting or obtaining any consent from Master Landlord. To the extent that the terms of this Sublease are more restrictive than the terms of the Lease, the terms of this Sublease shall prevail. (b) Tenant acknowledges that the Leased Premises are in good condition and repair at the inception of this Sublease. LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR 8 12 REPRESENTATION; EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION OR (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE; AND ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE LEASED PREMISES HAVE BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN AGREEING TO ENTER INTO THIS SUBLEASE, TENANT IS RELYING SOLELY ON ITS OWN JUDGMENT WITH RESPECT TO THE RESULTS OF ITS INSPECTION OF THE LEASED PREMISES. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE. (c) Tenant represents to Landlord that Tenant has examined the title to the Leased Premises prior to the execution and delivery of this Sublease and has found the same to be satisfactory for the purposes contemplated hereby. Tenant acknowledges and agrees that (i) Tenant has only the subleasehold right of possession and use of the Leased Premises as provided herein, (ii) the Improvements conform to all material Legal Requirements and all Insurance Requirements, (iii) all easements necessary or appropriate for the use or operation of the Leased Premises have been obtained, (iv) all contractors and subcontractors who have performed work on or supplied materials to the Leased Premises have been fully paid, and all materials and supplies have been fully paid for, (v) the Improvements have been fully completed in all material respects in a workmanlike manner, and (vi) all Equipment necessary or appropriate for the use or operation of the Leased Premises has been installed and is presently fully operative in all material respects. (d) Landlord hereby assigns to Tenant, without recourse or warranty whatsoever, all warranties, guaranties, indemnities and similar rights which Landlord may have against any manufacturer, seller, engineer, contractor or builder in respect of any of the Leased Premises. Such assignment shall remain in effect until an Event of Default occurs or until the expiration or earlier termination of this Sublease, whereupon such assignment shall cease and all of said warranties, guaranties, indemnities and other rights shall automatically revert to Landlord. (e) Landlord and Tenant acknowledge and agree that nothing in this Sublease (including, without limitation, Sections 3(a) through 3(d)) is intended, nor shall any provision of 9 13 this Sublease be construed, to supersede, limit or otherwise adversely affect or expand in scope any of the Facility Representations; provided, however, that each Facility Representation shall, for purposes of this Sublease, cease to have legal force and effect from and after the expiration of the survival period applicable to and designated for such Facility Representation under Section 11.3 of the Asset Purchase Agreement. 4. Use of Leased Premises; Quiet Enjoyment. (a) Tenant may occupy and use the Leased Premises for office, research and development, assembly, manufacturing (including without limitation semi-conductor wafer fabrication and electronics manufacturing), storage, warehousing and all related uses, and, subject to Landlord's consent, which consent shall not be unreasonably withheld, any other use permitted by Law. Tenant shall not use or occupy or permit any of the Leased Premises to be used or occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner which would (i) violate any Law or Legal Requirement, (ii) make void or voidable or cause any insurer to cancel any insurance required by this Sublease, or make it impossible to obtain any such insurance at commercially reasonable rates, (iii) cause structural injury to any of the Improvements or (iv) constitute a public or private nuisance or waste. (b) Subject to the provisions hereof, so long as no Event of Default has occurred and is continuing, Tenant shall have the right to quietly hold, occupy and enjoy the Leased Premises throughout the Term, without any hindrance, ejection or molestation by Landlord with respect to matters that arise after the date hereof, provided that Landlord or Master Landlord, or their respective agents may enter upon and examine any of the Leased Premises at such reasonable times as Landlord or Master Landlord may select and upon reasonable notice to Tenant (except in the case of any emergency, in which event no notice shall be required) for the purpose of inspecting the Leased Premises, verifying compliance or non-compliance by Tenant with its obligations hereunder and the existence or non-existence of an Event of Default or event which with the passage of time and/or notice would constitute an Event of Default, showing the Leased Premises to prospective Lenders and purchasers and taking such other action with respect to the Leased Premises as is permitted by any provision hereof. When showing the Leased Premises to prospective Lenders and purchasers, Landlord agrees to use reasonable efforts to minimize disruption to Tenant's business and operations on the Leased Premises. Landlord shall indemnify Tenant for any damages, losses, and costs and expenses caused directly by Landlord's failure to use reasonable efforts to minimize disruption to Tenant's business and operations in connection with Landlord's inspections of the Leased Premises. 5. Term. (a) Subject to the provisions hereof, Tenant shall have and hold the Leased Premises for an initial term (the "Initial Term") (the Initial Term, as extended or renewed in accordance with the provisions hereof, being called the "Term") commencing on the Commencement Date and ending on the date which is one calendar day prior to the Expiration Date (as defined in the Master Lease) of the Initial Term (as defined in the Master Lease) of the Master Lease (the "Expiration Date"). Accordingly, the Expiration Date of the Initial Term (as defined in this Sublease) is November 29, 2011. 10 14 (b) Provided that if, on or prior to the Expiration Date or any other Renewal Date (as hereinafter defined) this Sublease shall not have been terminated pursuant to any provision hereof, then on the Expiration Date and on the fifth (5th) and tenth (10th) anniversaries of the Expiration Date (the Expiration Date and each such anniversary being a "Renewal Date"), the Term shall be extended for an additional period of five (5) years (a "Renewal Term"), so long as (i) Tenant shall have notified Landlord in writing in recordable form at least one (1) year prior to the next Renewal Date that Tenant is electing to so extend this Sublease as of the next Renewal Date, and (ii) on or before the applicable Renewal Date, Landlord shall have extended the term of the Master Lease by a period of time that is equal to or greater than the time period of the applicable Renewal Term, Landlord having the right but not the obligation to so extend the term of the Master Lease. Any such extension of the Term shall be subject to all of the provisions of this Sublease, as the same may be amended, supplemented or modified. Each Renewal Term shall expire one calendar day prior to the corresponding Renewal Term (as defined in the Master Lease) under the Master Lease. (c) If Tenant fails to exercise its option pursuant to Paragraph 5(b) to extend the Term, or if Landlord fails to extend the term of the Master Lease by a period of time equal to or greater than any particular Renewal Term to which Tenant desires to extend the Term under this Sublease, or if an Event of Default has occurred and is continuing, then Landlord shall have the right during the remainder of the Term then in effect and, in any event, Landlord shall have the right during the last year of the Term, to (i) advertise the availability of any of the Leased Premises for sale or reletting and to erect upon any of the Leased Premises signs indicating such availability and (ii) show any of the Leased Premises to prospective purchasers or tenants or their agents at such reasonable times as Landlord may select. 6. Basic Rent. Tenant shall pay to Landlord in advance, as annual rent for the Leased Premises during the Term, the amounts determined in accordance with Exhibit "D" hereto ("Basic Rent"), commencing on the Commencement Date, and continuing on the first day of each March, June, September and December thereafter during the Term (each such day being a "Basic Rent Payment Date"). Each such rental payment shall be made, at Landlord's sole discretion, (a) to Landlord at its address set forth above and/or to such one or more other Persons, at such addresses and in such proportions as Landlord may direct by fifteen (15) days' prior written notice to Tenant (in which event Tenant shall give Landlord notice of each such payment concurrent with the making thereof), and (b) by a check mailed at least seven (7) days before the applicable Basic Rent Payment Date, or in Federal Funds. Pro rata Basic Rent for the period from the Commencement Date through the last calendar day of February, 2001 shall be paid on the Commencement Date. 11 15 7. Additional Rent. (a) Tenant shall pay and discharge, as additional rent (collectively, "Additional Rent"): (i) except as otherwise specifically provided herein, all out-of-pocket costs and expenses of Tenant and Landlord which are reasonably incurred by Landlord or Tenant in connection or associated with (A) the ownership, use, non-use, occupancy, possession, operation, condition, design, construction, maintenance, alteration, repair or restoration of any of the Leased Premises (except payments on any Loan, third party management fees, replacement reserves for the Equipment and Improvements, real estate commissions, costs related to the sale of the Leased Premises to any Person and costs related to obtaining and closing any Loan or any other loan unless such costs are part of any other Cost of Landlord unrelated to the Leased Premises and Impositions (which are governed by Paragraph 9 hereof)), (B) the performance of any of Tenant's obligations under this Sublease, (C) any transfer of any of the Leased Premises to Tenant under this Sublease, (D) any Condemnation proceedings, (E) the adjustment, settlement or compromise of any insurance claims involving or arising from any of the Leased Premises, (F) the prosecution, defense or settlement of any litigation involving or arising from any of the Leased Premises, this Sublease, or the sale of the Leased Premises to Landlord excluding litigation by Tenant against Landlord in which Tenant is the prevailing party and excluding litigation or any proceeding concerning any Loan or any other loan secured by the Leased Premises unless such litigation or proceeding arises out of any action or non-action by Tenant under this Sublease, (G) the exercise or enforcement by Landlord, its successors and assigns, of any of its rights under this Sublease if Landlord is the prevailing party, (H) any amendment to or modification or termination of this Sublease made at the request of Tenant, (I) Costs of Landlord's counsel incurred in connection with any act undertaken by Landlord (or its counsel) at the request of Tenant, or incurred in connection with any act of Landlord performed at the request of Tenant or if Tenant fails to perform its obligations under this Sublease, and (J) any other items specifically required to be paid by Tenant under this Sublease; (ii) payments to be made to or on behalf of any Landlord pursuant to Paragraph 15 hereof; (iii) after the date all or any portion of any installment of Basic Rent is due and not paid, an amount equal to three percent (3%) of the amount of such unpaid installment or portion thereof, provided, however, that with respect to the first late payment of all or any portion of any installment of Basic Rent in any Lease Year, the Late Charge shall not be due and payable unless the Basic Rent has not been paid within seven (7) days following the due date thereof; (iv) a sum equal to any late charge or default penalties in excess of the amount of Late Charge and Default Rate paid by Tenant on that portion of the Basic Rent equal to payments of principal and interest payable by Master Landlord and/or Landlord on any Note then in effect and legal fees and expenses of Lender, which are payable by Master Landlord and/or Landlord to any Lender under any Note by reason of Tenant's late payment or non-payment of Basic Rent or by reason of an Event of Default; and 12 16 (v) interest at the rate (the "Default Rate") of three percent (3%) over the Prime Rate per annum on the following sums until paid in full: (A) all overdue installments of Basic Rent from the respective due dates thereof and (B) all overdue amounts of Additional Rent relating to obligations which Landlord shall have paid on behalf of Tenant, from the date of payment thereof by Landlord. (b) Tenant shall pay and discharge (i) any Additional Rent referred to in Paragraph 7(a)(i) when the same shall become due, provided that amounts which are billed to Landlord or any third party, but not to Tenant, shall be paid within seven (7) days after Tenant's receipt of Landlord's written demand for payment thereof, and (ii) any other Additional Rent, within seven (7) days after Tenant's receipt of Landlord's written demand for payment thereof. (c) In no event shall amounts payable under Paragraph 7(a)(iii), (iv) and (v) exceed the maximum amount permitted by applicable Law. 8. Net Lease; Non-Terminability. (a) This is a net lease and, except as otherwise specifically provided herein, all Monetary Obligations shall be paid without notice or demand (provided that notice of increases in Basic Rent payments shall be given as required under Exhibit "D" and in accordance with the provisions of Paragraph 24) and without set-off, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense (collectively, a "Set-Off"). (b) Except as otherwise expressly provided herein, this Sublease and the rights of Landlord and the obligations of Tenant hereunder shall not be affected by any event or for any reason, including the following: (i) any damage to or theft, loss or destruction of any of the Leased Premises, (ii) any Condemnation, (iii) Tenant's acquisition of ownership of any of the real property upon which the Leased Premises are situated, (iv) any default on the part of Master Landlord under any Note, Mortgage, Assignment or any other agreement, (v) any latent or other defect in any of the Leased Premises, (vi) the breach of any warranty of any seller or manufacturer of any of the Equipment, (vii) any violation of Paragraph 4(b) or any other provision of this Sublease by Landlord, (viii) the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution or winding-up of, or other proceeding affecting Master Landlord or Landlord, (ix) the exercise of any remedy, including foreclosure, under any Mortgage or Assignment, (x) any action with respect to this Sublease (including the disaffirmance hereof) which may be taken by Landlord, any trustee, receiver or liquidator of Landlord or any court under the Federal Bankruptcy Code or otherwise, (xi) any interference with Tenant's use of the Leased Premises, (xii) market or economic changes, (xiii) any default under the Master Lease by Master Landlord or Landlord, or (xiv) any other cause, whether similar or dissimilar to the foregoing, any present or future Law to the contrary notwithstanding. The foregoing shall not limit Tenant's right to recover damages or obtain any equitable remedy in the event of a default by Landlord, subject in any event to the provisions, of Paragraph 30(a). (c) The obligations of Tenant hereunder shall be separate and independent covenants and agreements, all Monetary Obligations shall continue to be payable in all events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and the obligations of Tenant hereunder shall continue unaffected unless the requirement to pay or perform the same shall have 13 17 been terminated pursuant to an express provision of this Sublease. All Rent payable by Tenant hereunder shall constitute "rent" for all purposes (including Section 502 (b)(6) of the Bankruptcy Code). (d) Except as otherwise expressly provided herein, Tenant shall have no right and hereby waives all rights which it may have under any Law (i) to quit, terminate or surrender this Sublease or any of the Leased Premises, or (ii) to any Set-Off of any Monetary Obligations. 9. Payment of Impositions. (a) Tenant shall, before interest or penalties are due thereon, pay and discharge all taxes (including real and personal property, franchise, sales and rent taxes), all charges for any easement or agreement maintained for the benefit of any of the Leased Premises, all assessments and levies, all permit, inspection and license fees, all rents and charges for water, sewer, utility and communication services relating to any of the Leased Premises, and all other public charges whether of a like or different nature, even if unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii) Tenant's possessory interest in the Leased Premises, (iii) any of the Leased Premises, (iv) Landlord as a result of or arising in respect of the acquisition, ownership, occupancy, leasing, use, possession or sale of any of the Leased Premises, any activity conducted on any of the Leased Premises, or the Rent, or (v) any Lender by reason of any tax or charge payable to or on behalf of Lender which is not imposed as of the date hereof, is customarily paid by tenants or by borrowers pursuant to then prevailing mortgage practices and which is a substitute for any ad valorem tax payable on the Leased Premises or any portion thereof and (as to this clause (v)) which Landlord has agreed to pay (collectively, the "Impositions"); provided, that nothing in this Sublease shall obligate Tenant to pay (A) income, excess profits or other taxes of Landlord (or Lender) which are determined on the basis of Landlord's (or Lender's) net income or net worth, (B) any estate, inheritance, succession, gift or similar tax imposed on Landlord or (C) any capital gains or transfer tax imposed on Landlord in connection with the sale of the Leased Premises to any Person except for a sale of the Leased Premises or any part thereof to Tenant or to any nominee or designee of Tenant. If any Imposition may be paid in installments without penalty, Tenant shall have the option to pay such Imposition in installments; in such event, Tenant shall be liable only for those installments which accrue or become due and payable during the Term. Tenant shall prepare and file all tax reports required by governmental authorities which relate to the Impositions. Tenant shall deliver to Landlord (1) copies of all settlements and notices pertaining to the Impositions which may be issued by any governmental authority within ten (10) days after Tenant's receipt thereof, (2) receipts for payment of all taxes required to be paid by Tenant hereunder within thirty (30) days after the due date thereof and (3) receipts for payment of all other Impositions within ten (10) days after Landlord's request therefor. (b) Landlord shall have the right during the occurrence of an Event of Default to require Tenant to pay to Landlord an additional monthly sum (each an "Escrow Payment") sufficient to pay the Escrow Charges (as hereinafter defined) as they become due. As used herein, "Escrow Charges" shall mean real estate taxes on the Leased Premises or payments in lieu thereof and premiums on any insurance required by this Sublease. Landlord shall determine, in a commercially reasonable manner, the amount of the Escrow Charges and of each Escrow Payment. The Escrow Payments may be commingled with other funds of Landlord or other 14 18 Persons and no interest thereon shall be due or payable to Tenant. Landlord shall apply the Escrow Payments to the payment of the Escrow Charges in such order or priority as Landlord shall determine or as required by law. If at any time the Escrow Payments theretofore paid to Landlord shall be insufficient for the payment of the Escrow Charges, Tenant, within ten (10) days after Landlord's demand therefor, shall pay the amount of the deficiency to Landlord. 10. Compliance with Laws and Easement Agreements; Environmental Matters. (a) Subject to Landlord's indemnity obligations set forth in Section 15(c) of this Sublease, Tenant shall, at its expense, comply with and conform to, and cause the Leased Premises and any other Person occupying any part of the Leased Premises to comply with and conform to, all Insurance Requirements and Legal Requirements (including all applicable Environmental Laws) and shall maintain in full force and effect all permits, licenses and utility services required for the use and occupancy of the Leased Premises. Tenant shall not at any time (i) cause, permit or suffer to occur any Environmental Violation or (ii) permit any sublessee, assignee or other Person occupying the Leased Premises under or through Tenant to cause, permit or suffer to occur any Environmental Violation. (b) Tenant, at its sole cost and expense, will at all times promptly and faithfully abide by, discharge and perform all of the covenants, conditions and agreements contained in any Easement Agreement on the part of Landlord or the occupier to be kept and performed thereunder. Tenant will not alter, modify, amend or terminate any Easement Agreement, give any consent or approval thereunder, or enter into any new Easement Agreement without, in each case, prior written consent of Landlord, which will not be unreasonably withheld. (c) Upon prior written notice from Landlord and/or Master Landlord, Tenant shall permit such persons as Landlord and/or Master Landlord may designate ("Site Reviewers") to visit the Leased Premises and perform, environmental site investigations and assessments ("Site Assessments") on the Leased Premises for the purpose of determining whether there exists on the Leased Premises any Environmental Violation or any condition which could result in any Environmental Violation. Such Site Assessments may include both above and below the ground testing for Environmental Violations and such other tests as may be necessary, in the opinion of the Site Reviewers, to conduct the Site Assessments. Tenant shall supply to the Site Reviewers such historical and operational information regarding the Leased Premises as may be reasonably requested by the Site Reviewers to facilitate the Site Assessments, and shall make available for meetings with the Site Reviewers appropriate personnel having knowledge of such matters. The cost of performing and reporting any Site Assessment which discloses an Environmental Violation that first occurs or arises on or after the Commencement Date shall be paid by Tenant. The cost of performing and evaluating any Site Assessment that fails to disclose an Environmental Violation that first occurred or arose on or after the Commencement Date shall be paid by Landlord. (d) If an Environmental Violation first arises or occurs during the Term of this Sublease and, in Landlord's reasonable judgment, the cost of remediation of the same is likely to exceed $100,000, Tenant shall provide to Landlord, within ten (10) days after Landlord's request therefor, adequate financial assurances that Tenant will effect such remediation in accordance with applicable Environmental Laws. 15 19 (e) Notwithstanding any other provision of this Sublease, if an Environmental Violation first arises or occurs on or after the Commencement Date, the Term would otherwise terminate or expire and Landlord, after good faith efforts, shall have been unable to relet the Leased Premises solely because of the existence of such Environmental Violation, then, at the option of Landlord, the Term shall be automatically extended beyond the date of termination or expiration and this Sublease shall remain in full force and effect beyond such date until the earliest to occur of (i) the completion of remedial action to the extent necessary to make the Leased Premises relettable, (ii) the date specified in a written notice from Landlord to Tenant terminating this Sublease or (iii) the date on which Tenant obtains a bona-fide replacement tenant for the Leased Premises on terms reasonably satisfactory to Master Landlord and Landlord (and in this regard Landlord and its broker shall reasonably cooperate with Tenant with respect to Tenant's marketing efforts). (f) If Tenant fails to comply with any requirement of any Environmental Law in connection with any Environmental Violation which first occurs or arises on or after the Commencement Date, Landlord and/or the Master Landlord shall have the right (but no obligation) to take any and all actions as the Site Reviewers shall deem necessary in order to cure such Environmental Violation. (g) Tenant shall notify Landlord immediately alter becoming aware of any Environmental Violation (or alleged Environmental Violation) or noncompliance with any of the covenants contained in this Paragraph 10 and shall forward to Landlord immediately upon receipt thereof copies of all orders, reports, notices, permits, applications or other communications relating to any such violation or noncompliance. 11. Liens; Recording. (a) Tenant shall not, directly or indirectly, create or permit to be created or to remain and shall promptly discharge or remove any lien, levy or encumbrance on any of the Leased Premises or on any Rent or any other sums payable by Tenant under this Sublease, other than any Mortgage or Assignment, the Permitted Encumbrances and any mortgage, lien, encumbrance or other charge created by or resulting solely from any act or omission of Landlord or Master Landlord. NOTICE IS HEREBY GIVEN THAT NEITHER LANDLORD NOR MASTER LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD OR MASTER LANDLORD IN AND TO ANY OF THE LEASED PREMISES. LANDLORD OR MASTER LANDLORD MAY AT ANY TIME POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD OR MASTER LANDLORD. (b) Tenant shall execute, deliver and record, file or register (collectively, "record") all such instruments as may be required or permitted by any present or future Law in order to evidence the respective interests of Landlord, Master Landlord and Tenant in any of the Leased Premises, and shall cause a memorandum of this Sublease (or, if such a memorandum 16 20 cannot be recorded, this Sublease), and any supplement hereto or thereto, to be recorded in such manner and in such places as may be required or permitted by any present or future Law in order to protect the validity and priority of this Sublease. 12. Maintenance and Repair. (a) Tenant shall at all times maintain the Leased Premises and the Adjoining Property in as good repair and appearance as each is in on the date hereof and fit to be used for their intended use in accordance with the better of the practices generally recognized as then acceptable by other companies in its industry, or observed by Tenant with respect to the other real properties owned or operated by it, and, in the case of the Equipment, in as good mechanical condition as it was on the later of the date hereof or the date of its installation, except for ordinary wear and tear. Tenant shall take every other action necessary or appropriate for the preservation and safety of the Leased Premises. Tenant shall promptly make all Alterations of every kind and nature, whether foreseen or unforeseen, which may be required to comply with the foregoing requirements of this Paragraph 12(a). Landlord shall not be required to make any Alteration, whether foreseen or unforeseen, or to maintain the Leased Premises or Adjoining Property in any way, and Tenant hereby expressly waives any right which may be provided for in any Law now or hereafter in effect to make Alterations at the expense of Landlord or to require Landlord to make Alterations. Any Alteration made by Tenant pursuant to this Paragraph 12 shall be made in conformity with the provisions of Paragraph 13. (b) If any Improvement, now or hereafter constructed by Tenant, shall (i) encroach upon any setback or any property, street or right-of-way adjoining any of the Leased Premises, (ii) violate the provisions of any restrictive covenant affecting any of the Leased Premises, (iii) hinder or obstruct any easement or right-of-way to which any of the Leased Premises is subject or (iv) impair the rights of others in, to or under any of the foregoing, Tenant shall, promptly after receiving notice or otherwise acquiring knowledge thereof, either (A) obtain from all necessary parties waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation, hindrance, obstruction or impairment, whether the same shall affect Landlord, Tenant or both, or (B) take such action as shall be necessary to remove all such encroachments, hindrances or obstructions and to end all such violations or impairments, including, if necessary, making Alterations. 13. Alterations and Improvements. (a) Tenant shall have the right, without having obtained the prior written consent of Landlord, Master Landlord and Lender, to make (i) non-structural Alterations to the Leased Premises, (ii) structural Alterations or a series of related structural Alterations that, as to any such Alterations or series of related Alterations, do not cost in excess of $250,000 with respect to the Leased Premises and (iii) to install Equipment in the Improvements or accessions to the Equipment that, as to such Equipment or accessions, do not cost in excess of $250,000, so long as at the time of construction or installation of any such Equipment or Alterations no Event of Default exists and the value and utility of the Leased Premises is not materially diminished thereby. For any other Alterations or Equipment or accessions thereto the cost of which is in excess of $250,000, the prior written approval of Landlord, Master Landlord and Lender shall be required, such approval not to be unreasonably withheld, delayed or conditioned and such 17 21 approval shall not, in any event, include any requirement that the space to be improved must be returned to its original condition at the end of the Term if the Alterations are of general utility and do not adversely affect the value of the Leased Premises. Tenant shall not construct upon the Land any additional buildings without having first obtained the prior written consent of Landlord, Master Landlord and Lender. (b) If Tenant makes any Alterations pursuant to this Paragraph 13 or as required by Paragraph 12 or 17 (such Alterations and actions being hereinafter collectively referred to as "Work"), then (i) the market value of the Leased Premises shall not be lessened in any material respect by any such Work or its usefulness impaired, (ii) all such Work shall be performed by Tenant or its contractors in a good and workmanlike manner, (iii) all such Work shall be expeditiously completed in compliance with all Legal Requirements, (iv) all such Work shall comply with the requirements of all insurance policies required to be maintained by Tenant hereunder, (v) if any such Work involves the replacement of Equipment or parts thereto, all replacement Equipment or parts shall have a value and useful life equal to the greater of (A) the value and useful life on the date hereof of the Equipment being replaced or (B) the value and useful life of the Equipment being replaced immediately prior to the occurrence of the event which required its replacement (assuming such Replaced Equipment was then in the condition required by this Sublease), (vi) Tenant shall promptly discharge or remove all liens filed against any of the Leased Premises arising out of such Work, (vii) Tenant shall procure and pay for all permits and licenses required in connection with any such Work, (viii) all such Work shall be the property of Landlord and shall be subject to this Sublease, and Tenant shall execute and deliver to Landlord any document requested by Landlord evidencing the assignment to, Landlord of all estate, right, title and interest (other than the leasehold estate created hereby) of Tenant or any other Person thereto or therein, and (ix) Tenant shall comply, to the extent requested by Landlord or required by this Sublease, with the provisions of Paragraph 19(a), whether or not such Work involves restoration of the Leased Premises. (c) Tenant shall have the right at any time during the Term to install and remove Tenant's Property which shall remain Tenant's Property (subject to Tenant's obligations to repair and restore). 14. Permitted Contests. Notwithstanding any other provision of this Sublease, Tenant shall not be required to (a) pay any Imposition, (b) discharge or remove any lien referred to in Paragraph 11 or 13, (c) take any action with respect to any encroachment, violation, hindrance, obstruction or impairment referred to in Paragraph 12(b), or (d) comply with any Legal Requirements (such non-compliance with the terms hereof being hereinafter referred to collectively as "Permitted Violations"), so long as at the time of such non-compliance no Event of Default exists and so long as Tenant shall contest, in good faith, the existence, amount or validity thereof or the manner in which compliance with Legal Requirements is to be achieved, the amount of the damages caused thereby, or the extent of its or Landlord's liability therefor by appropriate proceedings which shall operate during the pendency thereof to prevent or stay (i) the collection of, or other realization upon, the Permitted Violation so contested, (ii) the sale, forfeiture or loss of any of the Leased Premises or any Rent to satisfy or to pay any damages caused by any Permitted Violation, (iii) any material interference with the use or occupancy of any of the Leased Premises, (iv) any interference with the payment of any Rent, (v) the cancellation or increase in the rate of any insurance policy or a statement by the carrier that 18 22 coverage will be denied or (vi) the enforcement or execution of any injunction, order or Legal Requirement with respect to the Permitted Violation. Tenant shall provide Landlord and Master Landlord security which is required by Law or, if not required, which is satisfactory, in Landlord's and Master Landlord's reasonable judgment (which shall be based, among other things, on an analysis of Tenant's creditworthiness), to assure that such Permitted Violation is corrected, including all Costs, interest and penalties that may be incurred or become due in connection therewith. While any proceedings which comply with the requirements of this Paragraph 14 are pending and the required security is held by Landlord and Master Landlord, neither Landlord nor Master Landlord shall have the right to correct any Permitted Violation thereby being contested unless Landlord or Master Landlord is required by law to correct such Permitted Violation and Tenant's contest does not prevent or stay such requirement as to Landlord or Master Landlord. Each such contest shall be promptly and diligently prosecuted by Tenant to a final conclusion, except that Tenant, so long as the conditions of this Paragraph 14 are at all times complied with, has the right to attempt to settle or compromise such contest through negotiations. Tenant shall pay any and all losses, judgments, decrees and Costs in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest and Costs thereof or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof. No such contest shall subject Landlord or Master Landlord to the risk of any civil or criminal liability. 15. Indemnification. (a) Tenant shall pay, protect, indemnify, defend, save and hold harmless Landlord, Master Landlord, Lender and all other Persons described in Paragraph 30 (each a "Landlord Indemnitee") from and against, any and all liabilities, losses, damages (including punitive damages), penalties, Costs (including reasonable attorneys' fees and costs), causes of action, suits, claims, demands or judgments of any nature whatsoever, howsoever caused, without regard to the form of action and whether based on strict liability, gross negligence, negligence or any other theory of recovery at law or in equity, arising, directly or indirectly, from any of the following matters, events, circumstances, conditions or occurrences: (i) any matter, event, occurrence, condition or circumstance that occurs during the Term of this Sublease (as such Term may be extended from time to time in accordance with the terms of this Sublease) pertaining to the ownership, leasing, use, non-use, occupancy, operation, management, condition, design, construction, maintenance, repair or restoration of any of the Leased Premises or Adjoining Property, (ii) any claim by a third party based on personal injury or property damage where such injury or damage occurs during the Term and is caused, directly or indirectly, by any casualty, event, or circumstances in any manner arising from any of the Leased Premises or Adjoining Property, (iii) any violation by Tenant of any provision of this Sublease (and/or any act or omission by Tenant that directly or indirectly causes a violation of the Master Lease), any contract or agreement to which Tenant is a party, any Legal Requirement or any Permitted Encumbrance, (iv) any alleged, threatened or actual Environmental Violation and/or Hazardous Activity first arising or occurring during the Term of this Sublease, including (A) liability for response costs and for costs of removal and remedial action incurred by the United States Government, any state or local governmental unit or any other Person, or damages from injury to or destruction or loss of natural resources, including the reasonable costs of assessing such 19 23 injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any successor section or act or provision of any similar state or local Law, (B) liability for costs and expenses of abatement, correction or clean-up, fines, damages, response costs or penalties which arise from the provisions of any of the other Environmental Laws and (C) liability for personal injury or property damage arising under any statutory or common-law tort theory, including damages assessed for the maintenance of a public or private nuisance or for carrying on of a dangerous activity; (v) any migration of Hazardous Substances from the Leased Premises to the West Java Premises; (vi) any latent defects within the Leased Premises or Adjoining Property first arising or occurring at any time on or after the Commencement Date of the Term; (vii) any patent defects within the Leased Premises or Adjoining Property first arising or occurring at any time on or after the Commencement Date of the Term; (viii) any latent and/or patent defect arising or occurring at any time prior to the Commencement Date of the Term to the extent the same does not constitute a breach by Landlord of any Facility Representation; and (ix) any act or omission of Tenant during the Term of this Sublease. Notwithstanding the foregoing, Tenant's indemnification and other obligations under the foregoing provisions of this Subparagraph 15(a) shall not be applicable with respect to (1) any Landlord Indemnitee due to the gross negligence or willful misconduct of such Landlord Indemnitee or its agents, employees or contractors, (2) Landlord for any matter caused solely by Landlord's breach of this Sublease or any document evidencing or securing a Loan (so long as such breach is not caused by Tenant's breach of this Sublease), (3) any Landlord Indemnitee with respect to any misrepresentation made by such Landlord Indemnitee, (4) any Lender for non-payment of principal, interest or penalties due on any Loan, or (5) any claim brought or threatened in writing against Landlord prior to the Commencement Date of the Term; provided, however, that Tenant's indemnification and other obligations under this Subparagraph 15(a) shall continue to apply to the extent such claim arises, directly or indirectly, from any act or omission of Tenant. The term "actual knowledge" as used in this Sublease means the actual, conscious (and not imputed) knowledge of the officers of Landlord and of the persons listed on Schedule 1 hereof as of the Commencement Date, without making any investigation or inquiry, and without any duty or obligation to make any investigation or inquiry. Landlord represents to Tenant that the persons listed on Schedule 1 are the persons employed by Landlord that are most familiar with the daily business and operations of the Leased Premises as of the last calendar day immediately preceding the Commencement Date. As used in this Sublease, the terms "latent defect" and "patent defect" shall have the meanings ascribed to such terms under California statutory and common laws; provided, however, that patent defects shall be deemed to include any defects which are discoverable or could have been discovered by Tenant through reasonable inspection. (b) In case any action or proceeding is brought against any Landlord Indemnitee by reason of any such claim, (i) Tenant may, except in the event of a conflict of interest or a dispute between Tenant and any such Landlord Indemnitee or during the continuance of an Event of Default, retain its own counsel and defend such action (it being understood that Landlord may employ counsel of its choice to monitor the defense of any such action at its cost) and (ii) such Landlord Indemnitee shall notify Tenant to resist or defend such action or proceeding by retaining counsel reasonably satisfactory to such Landlord Indemnitee, and such Landlord Indemnitee will cooperate and assist in the defense of such action or proceeding if reasonably requested to do so by Tenant. In the event of a conflict of interest or dispute or during the continuance of an Event of Default, Landlord shall have the right to select counsel, and the cost of such counsel shall be paid by Tenant. 20 24 (c) Landlord shall pay, protect, indemnify, defend, save and hold harmless Tenant and any director, officer, general partner, limited partner, employee or agent of Tenant, or any general partner of Tenant, any of its general partners or shareholders (or any legal representative, heir, estate, successor or assign of any thereof), any predecessor or successor partnership or corporation (or other entity) of Tenant or any of its general partners, either directly or through Tenant or its general partners or any predecessor or successor partnership or corporation or their shareholders, officers, directors, employees or agents (or other entity) (each a "Tenant Indemnitee") from and against, any and all liabilities, losses, damages (including punitive damages), penalties, Costs (including reasonable attorneys' fees and costs), causes of action, suits, claims, demands or judgments of any nature whatsoever, howsoever caused, without regard to the form of action and whether based on strict liability, gross negligence, negligence or any other theory of recovery at law or in equity, arising, directly or indirectly, from any of the following matters, events, circumstances, conditions or occurrences: (i) any matter, event, occurrence, condition or circumstance that occurs during the period of time from the commencement date of the Master Lease Term through the date which is one (1) calendar day immediately prior to the Commencement Date (such period being the "Pre-Existing Period"), pertaining to the leasing, use, non-use, occupancy, operation, management, construction, maintenance, repair or restoration of any of the Leased Premises, Adjoining Property, but only to the extent such matter, event, occurrence or circumstance would also constitute a breach of any Facility Representation, (ii) any claim by a third party based on personal injury or property damage where such injury or damage occurs during the Pre-Existing Period and is caused, directly or indirectly, by any casualty, event or circumstances in any manner arising from any of the Leased Premises or Adjoining Property; (iii) any violation by Landlord of any provision of this Sublease, or any other contract or agreement to which Landlord is a party (including the Master Lease), (iv) any violation by Landlord during the Pre-Existing Term of any Legal Requirement or any Permitted Encumbrance; (v) any alleged, threatened or actual Environmental Violation and/or Hazardous Activity arising or occurring during the Pre-Existing Term, including (A) liability for response costs and for costs of removal and remedial action incurred by the United States Government, any state or local governmental unit or any other Person, or damages from injury to or destruction or loss of natural resources, including the reasonable costs of assessing such injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any successor section or act or provision of any similar state or local Law, (B) liability for costs and expenses of abatement, correction or clean-up, fines, damages, response costs or penalties which arise from the provisions of any of the other Environmental Laws, and (C) liability for personal injury or property damage arising under any statutory or common-law tort theory, including damages assessed for the maintenance of a public or private nuisance or for carrying on of a dangerous activity; and (vi) any migration of Hazardous Substances from the West Java Premises to the Leased Premises. Notwithstanding the foregoing, Landlord's indemnification and other obligations under the foregoing provisions of this Subparagraph 15(c) shall not be applicable with respect to (i) any Tenant Indemnitee due to the gross negligence or willful misconduct of such Tenant Indemnitee or its agents, employees or contractors, (ii) Tenant for any matter caused solely by Tenant's breach of this Sublease or any document evidencing or securing a Loan (so long as such breach is not caused by Landlord's breach of this Sublease), (iii) any Tenant Indemnitee with respect to any misrepresentation made by such Tenant Indemnitee, (iv) any latent defects within the Leased Premises arising at any time for which Landlord has no actual knowledge, (vi) any latent defects within the Leased Premises arising 21 25 during the Pre-Existing Term for which Landlord has actual knowledge and which Landlord discloses in writing to Tenant prior to the Commencement Date, or (vii) any patent defects within the Leased Premises arising at any time. To the extent based or triggered by any matter, event, occurrence or circumstance which constitutes a breach of a Facility Representation or any other representation or warranty made by Landlord hereunder, the indemnity and other obligations of Landlord under Subparagraph 15(c) hereof shall terminate when the survival period applicable to any such representation or warranty (including, but not limited to, any Facility Representation) expires. (d) In case any action or proceeding is brought against any Tenant Indemnitee by reason of any such claim, (i) Landlord may, except in the event of a conflict of interest or a dispute between Landlord and any such Tenant Indemnitee or during the continuance of an Event of Default, retain its own counsel and defend such action (it being understood that Landlord may employ counsel of its choice to monitor the defense of any such action at its cost) and (ii) such Tenant Indemnitee shall notify Landlord to resist or defend such action or proceeding by retaining counsel reasonably satisfactory to such Tenant Indemnitee, and such Tenant Indemnitee will cooperate and assist in the defense of such action or proceeding if reasonably requested to do so by Landlord. In the event of a conflict of interest or dispute, Tenant shall have the right to select counsel, and the cost of such counsel shall be paid by Landlord. (e) The obligations of Tenant and Landlord under this Paragraph 15 shall survive any termination, expiration or rejection in bankruptcy of this Sublease with respect to any indemnified matter, including any condition, that existed, occurred or arose out of a matter or condition that existed or occurred prior to the date of such termination, expiration or rejection, whether or not known or actionable at such date. 16. Insurance. (a) Tenant shall maintain the following insurance on or in connection with the Leased Premises: (i) (A) Insurance against physical loss or damage to the Improvements and Equipment as provided under a standard "All Risk" property policy (but excluding earthquake and flood coverage) in amounts not less than the actual replacement cost of the Improvements and Equipment and (B) subject to the provisions of the last two (2) sentences of this Paragraph 16 (a) (i) , earthquake and flood coverage in the amount of $5,000,000. The policies described in clause (A) above shall contain Replacement Cost and Agreed Amount Endorsements and shall contain deductibles not more than $100,000 per occurrence and the earthquake and flood policy described in clause (B) shall contain deductibles of not more than $1,000,000. The amount of such insurance shall not be reduced and the amount of such deductible shall not be increased as long as such insurance is available. If such insurance is not available, the amounts of coverage and deductibles may be reduced or increased, respectively, as applicable. (ii) Commercial general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or as a result of the use of the Leased Premises, in an amount not less than $10,000,000 per occurrence/annual aggregate 22 26 including but not limited to incidental medical malpractice, and all other coverage extensions that are usual and customary for properties of this size and type; provided, however, that Landlord shall have the right to require such higher limits as may be reasonable and customary for properties of this size and type. (iii) Worker's compensation insurance covering all persons employed by Tenant in connection with any work done on or about any of the Leased Premises for which claims for death, disease or bodily injury may be asserted against Landlord, Tenant or any of the Leased Premises or, in lieu of such worker's compensation insurance, a program of self-insurance complying with the rules, regulations and requirements of the appropriate agency of the State or States in which the Leased Premises are located. (iv) If applicable, comprehensive boiler and machinery insurance on any of the Equipment or any other equipment on or in the Leased Premises, including but not limited to service interruption, expediting expenses, ammonia contamination, hazardous clean-up and comprehensive object definition, in an amount not less than $5,000,000 for damage to property, bodily injury or death resulting from such covered perils as found in a standard comprehensive boiler & machinery policy. Such policies shall contain a deductible not to exceed $100,000. (v) Loss of rents insurance on an actual loss sustained basis with a period of indemnity not less than one year from the time of loss. (vi) During any period in which substantial Alterations at the Leased Premises are being undertaken, builder's risk insurance covering the total completed value including any "soft costs" with respect to the Improvements being altered or repaired (on a completed value, non-reporting basis), replacement cost of work performed and equipment, supplies and materials furnished in connection with such construction or repair of Improvements or Equipment, together with such "soft cost" endorsements and such other endorsements as Landlord may reasonably require and general liability, worker's compensation and automobile liability insurance with respect to the Improvements being constructed, altered or repaired. (vii) Such other insurance (or other terms with respect to any insurance required pursuant to this Paragraph 16 except for the earthquake coverage described in Paragraph 16 (a)(i), including without limitation amounts of coverage, deductibles and form of mortgagee clause) on or in connection with any of the Leased Premises as Landlord or Lender may reasonably require, which at the time is usual and commonly obtained in connection with properties similar in type of building size, use and location to the Leased Premises. (b) The insurance required by Paragraph 16(a) shall be written by companies which have a Best's rating of at least A:X (unless a lesser rating is approved by Landlord) and are admitted in, and approved to write insurance policies by, the State Insurance Department for the states in which the Leased Premises are located. The insurance policies (i) shall be on such terms as Landlord may reasonably approve and (ii) shall be in amounts sufficient at all times to satisfy any coinsurance requirements thereof. The insurance referred to in Paragraphs 16 (a)(i), 16(a)(iv) and 16(a)(vi) shall name Master Landlord and Landlord as additional insureds and Lender as loss payee and Tenant as its interest may appear. The insurance referred to in 23 27 Paragraph 16(a)(ii) shall name Master Landlord, Landlord and Lender as additional insureds, and the insurance referred to in Paragraph 16(a)(v) shall name Tenant as insured and Lender, Master Landlord and Landlord as loss payee. If said insurance or any part thereof shall expire, be withdrawn, become void, voidable, unreliable or unsafe for any reason, including a breach of any condition thereof by Tenant or the failure or impairment of the capital of any insurer, or if for any other reason whatsoever said insurance shall become reasonably unsatisfactory to Landlord, Tenant shall immediately obtain new or additional insurance reasonably satisfactory to Landlord. (c) Each insurance policy referred to in clauses (i), (iv), (v) and (vi) of Paragraph 16 (a) shall contain standard non-contributory mortgagee clauses in favor of and acceptable to Lender. Each policy required by any provision of Paragraph 16 (a), except clause (iii) thereof, shall provide that it may not be cancelled except after thirty (30) days' prior notice to Landlord and Lender. Each such policy shall also provide that any loss otherwise payable thereunder shall be payable notwithstanding (i) any act or omission of Landlord or Tenant which might, absent such provision, result in a forfeiture of all or a part of such insurance payment, (ii) the occupation or use of any of the Leased Premises for purposes more hazardous than those permitted by the provisions of such policy, (iii) any foreclosure or other action or proceeding taken by Lender pursuant to any provision of the Mortgage, Note, Assignment or other document evidencing or securing the Loan upon the happening of an event of default therein or (iv) any change in title to or ownership of any of the Leased Premises. (d) Tenant shall pay as they become due all premiums for the insurance required by Paragraph 16(a), shall renew or replace each policy and deliver to Landlord evidence of the payment of the full premium therefor or installment then due at least thirty (30) days prior to the expiration date of such policy, and shall promptly deliver to Landlord all original policies or certified copies thereof. In the event that, within seven (7) calendar days after Tenant's receipt of Landlord's demand, Tenant fails to deliver to Landlord such evidence of the payment of the full premium of any insurance policy required hereunder, and/or the original of such insurance policy or a certified copy thereof, then Landlord shall have the right, but not the obligation, to obtain such insurance policy in the form required hereunder and pay the premiums and commissions associated with such insurance policy, in which event Tenant shall reimburse landlord for all costs and expenses incurred by Landlord in connection with obtaining such policy, including, without limitation, insurance premiums, commissions and reasonable attorneys' fees and costs. (e) Anything in this Paragraph 16 to the contrary notwithstanding, any insurance which Tenant is required to obtain pursuant to Paragraph 16(a) may be carried under a "blanket" or umbrella policy or policies covering other properties or liabilities of Tenant, provided that such "blanket" or umbrella policy or policies otherwise comply with the provisions of this Paragraph 16 and provided further that such policies shall provide for a reserved amount thereunder with respect to the Leased Premises so as to assure that the amount of insurance required by this Paragraph 16 will be available notwithstanding any losses with respect to other property covered by such blanket policies. The amount of the total insurance allocated to the Leased Premises, which amount shall be not less than the amounts required pursuant to this Paragraph 16, shall be specified either (i) in each such "blanket" or umbrella policy or (ii) in a written statement, which Tenant shall deliver to Landlord, from the insurer thereunder. The original or a certified copy of each such "blanket" or umbrella policy shall promptly be delivered to Landlord. 24 28 (f) Tenant shall have the replacement cost and insurable value of the Improvements and Equipment determined from time to time as required by the replacement cost and agreed amount endorsements and shall deliver to Landlord the new replacement cost and agreed amount endorsement or certificate evidencing such endorsement promptly upon Tenant's receipt thereof. (g) Tenant shall promptly comply with and conform to (i) all provisions of each insurance policy required by this Paragraph 16 and (ii) all requirements of the insurers thereunder applicable to Landlord, Tenant or any of the Leased Premises or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of any of the Leased Premises, even if such compliance necessitates Alterations or results in interference with the use or enjoyment of any of the Leased Premises. (h) Tenant shall not carry separate insurance concurrent in form or contributing in the event of a Casualty with that required in this Paragraph 16 unless (i) Landlord and Lender are included therein as named insureds, with loss payable as provided herein, and (ii) such separate insurance complies with the other provisions of this Paragraph 16. Tenant shall immediately notify Landlord of such separate insurance and shall deliver to Landlord the original policies or certified copies thereof. (i) All policies shall contain effective waivers by the carrier against all claims for insurance premiums against Landlord and shall contain full waivers of subrogation against Landlord. (j) All proceeds of any insurance required under Paragraph 16(a) shall be payable as follows: (i) Except for proceeds payable to a Person other than Master Landlord, Landlord, Tenant or Lender, all proceeds of insurance required under clauses (ii), (iii), (iv), (v) and (vii) of Paragraph 16(a) and proceeds attributable to the general liability coverage provisions of Builder's Risk insurance under clause (vi) of Paragraph 16(a) shall be payable to Escrow Holder or, if required by the Mortgage, to Lender who shall apply such proceeds to the Persons legally entitled thereto for the benefit of the named insureds as their interests appear. (ii) Proceeds of insurance required under clause (i) of Paragraph 16 (a) and proceeds attributable to Builder's Risk insurance (other than its general liability coverage provisions) under clause (vi) of Paragraph 16 (a) shall be payable to Escrow Holder (or Lender) and applied as set forth in Paragraph 17 or Paragraph 18, as applicable. If Tenant is obligated to restore the Leased Premises, then Escrow Holder or Lender, as the case may be, shall make the proceeds available to Tenant in accordance with the applicable provisions hereof and Tenant shall apply the Net Award to restoration of the Leased Premises in accordance with the applicable provisions of this Sublease. (iii) Each insurer is hereby authorized and directed to make payment under said policies directly to Escrow Holder or, if required by the Mortgage, to Lender instead 25 29 of to Master Landlord, Landlord and Tenant jointly, and Tenant hereby appoints each of Escrow Holder and Lender as Tenant's attorneys-in-fact to endorse any draft therefor. 17. Casualty and Condemnation. (a) If any Casualty to the Leased Premises occurs, Tenant shall give Master Landlord, Landlord and Lender immediate notice thereof. So long as no Event of Default has occurred and is continuing Tenant is hereby authorized to adjust, collect and compromise all claims under any of the insurance policies required by Paragraph 16(a) (except public liability insurance claims payable to a Person other than Tenant, Master Landlord, Landlord or Lender) and to execute and deliver on behalf of Master Landlord and Landlord all necessary proofs of loss, receipts, vouchers and releases required by the insurers and Master Landlord and Landlord shall have the right to join with Tenant therein. Any final adjustment, settlement or compromise of any such claim shall be subject to the prior written approval of Master Landlord and Landlord, which shall not be unreasonably withheld or delayed, and Master Landlord and Landlord shall have the right to prosecute or contest, or to require Tenant to prosecute or contest, any such claim, adjustment, settlement or compromise. If an Event of Default has occurred and is continuing, Tenant shall not be entitled to adjust, collect or compromise any such claim or to participate with Master Landlord or Landlord in any adjustment, collection and compromise of the Net Award payable in connection with a Casualty. Tenant agrees to sign, upon the request of Master Landlord or Landlord, all such proofs of loss, receipts, vouchers and releases. The rights of Master Landlord and Landlord under this Paragraph 17(a) shall be extended to Lender if and to the extent that any Mortgage so provides. (b) Tenant, immediately upon receiving a Condemnation Notice, shall notify Master Landlord, Landlord and Lender thereof. So long as no Event of Default has occurred and is continuing, Tenant is authorized to collect, settle and compromise the amount of any Net Award and Master Landlord and Landlord shall have the right to join with Tenant herein. If an Event of Default has occurred and is continuing, Master Landlord and Landlord shall be authorized to collect, settle and compromise the amount of any Net Award and Tenant shall not be entitled to participate with Master Landlord and Landlord in any Condemnation proceeding or negotiations under threat thereof or to contest the Condemnation or the amount of the Net Award therefor. No agreement with any condemnor in settlement or under threat of any Condemnation shall be made by Tenant without the written consent of Master Landlord and Landlord, which shall not be unreasonably withheld. Subject to the provisions of this Paragraph 17(b), Tenant hereby irrevocably assigns to Master Landlord and Landlord any award or payment to which Tenant is or may be entitled by reason of any Condemnation, whether the same shall be paid or payable for Tenant's leasehold interest hereunder or otherwise; but nothing in this Sublease shall impair Tenant's right to any award or payment on account of Tenant's trade fixtures, equipment or other tangible property which is not part of the Equipment, moving expenses or loss of business, if available, to the extent that and so long as (i) Tenant shall have the right to make, and does make, a separate claim therefor against the condemnor and (ii) such claim, does not in any way reduce either the amount of the award otherwise payable to Master Landlord and Landlord for the Condemnation of Master Landlord's fee interest in, and Landlord's leasehold interest in, the Leased Premises or the amount of the award (if any) otherwise payable for the Condemnation of Tenant's leasehold interest hereunder. The rights of Master Landlord and Landlord under this 26 30 Paragraph 17(b) shall also be extended to Lender if and to the extent that any Mortgage so provides. (c) If any Partial Casualty (whether or not insured against) or Partial Condemnation shall occur to the Leased Premises, this Sublease shall continue, notwithstanding such event, and there shall be no abatement or reduction of any Monetary Obligations, except to the extent of proceeds received by Landlord from the insurance described in Paragraph 16(a)(v) hereof. Promptly after such Partial Casualty or Partial Condemnation, Tenant, as required in Paragraph 12 (a), shall commence and diligently continue to restore the Leased Premises as nearly as possible to their value, condition and character immediately prior to such event (assuming the Leased Premises to have been in the condition required by this Sublease). So long as no Event of Default has occurred and is continuing, any Net Award up to and including $250,000 shall be paid by Escrow Holder to Tenant and Tenant shall restore the Leased Premises in accordance with the requirements of Paragraph 13(b)of this Sublease. Any Net Award in excess of $250,000 shall (unless such Casualty resulting in the Net Award is a Termination Event) be made available by Escrow Holder (or Lender if the terms of the Mortgage so require) to Tenant for the restoration of any of the Leased Premises pursuant to and in accordance with and subject to the provisions of Paragraph 19 hereof. If any Casualty or Condemnation which is not a Partial Casualty or Partial Condemnation shall occur, Tenant shall comply with the terms and conditions of Paragraph 18. 18. Termination Events. (a) If (i) all the Leased Premises shall be taken by a Taking, or (ii) (A) any substantial portion of the Leased Premises shall be taken by a Taking (and provided that the Taking of such portion would materially adversely affect Tenant's use and occupation of the Leased Premises and its operations thereon) or (B) all or any substantial portion of the Leased Premises shall be damaged or destroyed by a Casualty (and provided that the damage caused by such casualty would materially adversely affect Tenant's use and occupation of the Leased Premises and its operations thereon), and (1) as to such Casualty Tenant shall provide evidence satisfactory to Master Landlord, Landlord and Lender that it shall be unable to rebuild the Leased Premises by the beginning of the ninth (9th) calendar month following the date of such Casualty, or (2) the Casualty was an earthquake or the insurer is insolvent so that proceeds (exclusive of the required deductible) sufficient to rebuild the Leased Premises are not available and, in any such case, Tenant certifies and covenants to Master Landlord and Landlord that it will forever abandon operations at the Leased Premises, (each of the events described in the above clauses (i) and (ii) shall hereinafter be referred to as a "Termination Event"), then (x) in the case of (i) above, Tenant shall be obligated, within thirty (30) days after Tenant receives a Condemnation Notice, and (y) in the case of (ii) above Tenant shall have the option within thirty (30) days after Tenant receives a Condemnation Notice or thirty (30) days after the Casualty, as the case may be, to give to Master Landlord and Landlord written notice (a "Termination Notice") of Tenant's election to terminate this Sublease as to the Leased Premises in the form described in Paragraph 18(b). (b) A Termination Notice shall contain (i) notice of Tenant's intention to terminate this Sublease as to the Leased Premises on the first Basic Rent Payment Date which occurs at least sixty (60) days after the date of the Termination Notice (the "Termination Date"), 27 31 (ii) a binding and irrevocable offer of Tenant to pay the Termination Amount, and (iii) if the Termination Event is an event described in Paragraph 18(a)(ii), the certification and covenant described therein and a certified resolution of the Board of Directors of Tenant authorizing the same. (c) Upon the Termination Date, Tenant shall pay the Termination Amount and all unpaid Monetary Obligations to Landlord, and this Sublease shall terminate as to the Leased Premises; provided that, if Tenant has not satisfied all Monetary Obligations as to the Leased Premises (collectively, "Remaining Obligations") on or prior to the Termination Date, then Master Landlord and/or Landlord may, at its option, extend the date on which this Sublease may terminate as to the Leased Premises to a date which is no later than the first Basic Rent Payment Date after the Termination Date on which Tenant has satisfied all Remaining Obligations; provided, however, the parties acknowledge that if this Sublease Lease is terminated pursuant to this Paragraph 18(c) the Tenant has no obligation to repair or restore any damage to the Leased Premises. Upon such termination (i) all obligations of Tenant hereunder as to the Leased Premises shall terminate except for any Surviving Obligations, (ii) Tenant shall immediately vacate and shall have no further right, title or interest in or to any of the Leased Premises and (iii) the Net Award shall be retained by Landlord. Notwithstanding anything to the contrary hereinabove contained, if on the date when this Sublease would otherwise terminate as provided above, Landlord shall not have received the full amount of the Net Award payable by reason of the applicable Termination Event, then the date on which this Sublease is to terminate automatically shall be extended to the first Basic Rent Payment Date after the receipt by Landlord of the full amount of the Net Award; provided that, if Tenant has not satisfied all Remaining Obligations on such date, then Landlord may, at its option, extend the date on which this Sublease shall terminate to a date which is no later than the first Basic Rent Payment Date after such date on which Tenant has satisfied all such Remaining Obligations. (d) Landlord and Tenant acknowledge and agree, that pursuant and subject to the terms of Section 18(d) of the Master Lease, Master Landlord may be required to convey the West Java Premises and/or Gibraltar Premises to Landlord. In the event that, pursuant to the provisions of Section 18 of the Master Lease, Master Landlord conveys the Gibraltar Premises to Landlord, Landlord shall promptly thereafter convey the Gibraltar Premises to Tenant pursuant to a quitclaim deed. Notwithstanding the foregoing, such conveyance by Landlord to Tenant is and shall be contingent upon: (i) Tenant not being in default under this Sublease at the time of such conveyance, and (ii) the payment by Tenant to Landlord of a sum equal to the Termination Amount plus any other amounts paid by Landlord to Master Landlord under Section 18, Section 20 and other applicable provisions of the Master Lease with respect to the Gibraltar Premises (i.e., if Master Landlord conveys only the Gibraltar Premises to Landlord, then Tenant shall pay to Landlord a sum equal to the aggregate amounts and other moneys paid by Landlord to Master Landlord with respect to the Gibraltar Premises under the Master Lease, and if Master Landlord conveys both the West Java Premises and Gibraltar Premises to Landlord, then Tenant shall pay to Landlord a sum equal to 45% of the aggregate amounts and other moneys paid by Landlord to Master Landlord with respect to the West Java Premises and Gibraltar Premises under the Master Lease). 28 32 19. Restoration. (a) Escrow Holder (or Lender if required by any Mortgage) shall hold any Net Award in excess of $250,000 in a fund (the "Restoration Fund") and disburse amounts from the Restoration Fund only in accordance with the following conditions: (i) prior to commencement of restoration, (A) the architects, general construction contract, general contractor and plans and specifications for the restoration shall have been approved by Master Landlord and Landlord, such approval not to be unreasonably withheld, (B) Master Landlord, Landlord and Lender shall be provided with mechanics' lien insurance (if available) and performance and payment bonds reasonably acceptable to Master Landlord and Landlord which insure satisfactory completion of and payment for the restoration, are in an amount and form and have a surety acceptable to Master Landlord and Landlord, and name Master Landlord, Landlord and Lender as additional dual obligees, and (C) appropriate waivers of mechanics' and materialmen's liens shall have been filed; (ii) at the time of any disbursement, no Event of Default shall exist and no mechanics' or materialmen's liens shall have been filed against any of the Leased Premises and remain undischarged; (iii) disbursements shall be made from time to time in an amount not exceeding the cost of the work completed since the last disbursement, upon receipt of (A) satisfactory evidence, including architects' certificates, of the stage of completion, the estimated total cost of completion and performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (B) waivers of liens, (C) contractors' and subcontractors' sworn statements as to completed work and the cost thereof for which payment is requested, (D) a satisfactory bringdown of title insurance and (E) other evidence of cost and payment so that Master Landlord, Landlord and Lender can verify that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics' and materialmen's lien claims; (iv) each request for disbursement shall be accompanied by a certificate of Tenant, signed by the president or a vice president of Tenant, describing the work for which payment is requested, stating the cost incurred in connection therewith, stating that Tenant has not previously received payment for such work and, upon completion of the work, also stating that the work has been fully completed and complies with the applicable requirements of this Sublease; (v) Master Landlord or Landlord may retain ten percent (10%) of the Restoration Fund until the restoration is fully completed; (vi) the Restoration Fund shall not be commingled with other funds and shall bear interest at the short term rate of interest then generally available from Lender or through Escrow Agent for such escrow arrangements; and (vii) such other reasonable conditions as Lender may impose. 29 33 (b) Prior to commencement of restoration and at any time during restoration, if the estimated cost of completing the restoration work free and clear of all liens, as determined by Master Landlord and Landlord, exceeds the amount of the Net Award available for such restoration, the amount of such excess shall, upon demand by Master Landlord or Landlord, be paid by Tenant to Escrow Holder to be added to the Restoration Fund. Any sum so added by Tenant which remains in the Restoration Fund upon completion of restoration shall be refunded to Tenant. For purposes of determining the source of funds with respect to the disposition of funds remaining after the completion of restoration, the Net Award shall be deemed to be disbursed prior to any amount added by Tenant. (c) If any sum remains in the Restoration Fund after completion of the restoration and any refund to Tenant pursuant to Paragraph 19(b), such sum shall be retained by Master Landlord or Landlord or, if required by a Note or Mortgage, paid by Master Landlord or Landlord to a Lender. 20. Intentionally Omitted. 21. Assignment and Subletting; Prohibition against Leasehold Financing. (a) (i) Tenant shall have the right, upon thirty (30) days prior written notice to Master Landlord, Landlord and Lender, with no consent of Master Landlord or Landlord or Lender being required or necessary ("Preapproved Assignment") to assign this Sublease (A) as specifically permitted in Section 1 of Exhibit "G" or (B) to any Person that, immediately following such assignment has a publicly traded unsecured senior debt rating of "BBB" or better from Moody's Investors Services, Inc. or a rating of "Baa" or better from Standard & Poor's Corporation, and in the event all of such rating agencies cease to furnish such ratings, then a comparable rating by any rating agency reasonably acceptable to Master Landlord, Landlord and Lender. (ii) Any assignment or sublease of this Sublease except for a Preapproved Assignment shall require the prior written consent of Master Landlord, Landlord and Lender. Such prior written consent by Landlord shall not be unreasonably withheld. Tenant shall, not less than ninety (90) days prior to the date on which it desires to make an assignment or sublease, submit to Master Landlord, Landlord and Lender information regarding the following with respect to the assignee or sublessee (the "Criteria") : (i) credit, (ii) capital structure, (iii) management, (iv) operating history, (v) proposed use of the Leased Premises, and (vi) risk factors associated with the proposed use of the Leased Premises by the proposed assignee or sublessee, taking into account factors such as environmental concerns, product liability and the like. Master Landlord, Landlord and Lender shall review the Criteria, advise Tenant no later than the fifteenth (15th) day following receipt of the Criteria if additional information is required and shall approve or disapprove the assignee no later than the thirtieth (30th) day following receipt of all required information, and Master Landlord, Landlord and Lender shall be deemed to have acted reasonably in granting or withholding consent if such grant or disapproval is based on their review of the Criteria. Any purported assignment that is not a Preapproved Assignment or otherwise consented to under this Paragraph 21(a) shall be null and void. Landlord shall have no liability for Master Landlord's failure to review the Criteria or provide any consent required hereunder by the due dates set forth above. 30 34 (b) Tenant shall have the right, without obtaining the consent of Master Landlord or Landlord, to have under sublease at any time up to and including but not in excess of twenty-five percent (25%) of the net leaseable space in the Leased Premises. Any sublease that, when added to all other subleases then in effect, would result in more than twenty-five percent (25%) of the leaseable area of the Leased Premises being under sublease at any one time shall require the prior written approval of Master Landlord, Landlord and Lender which shall not be unreasonably withheld. (c) If Tenant assigns all its rights and interest under this Sublease, the assignee under such assignment shall expressly assume all the obligations of Tenant hereunder, actual or contingent, including obligations of Tenant which may have arisen on or prior to the date of such assignment, by a written instrument delivered to Master Landlord and Landlord at the time of such assignment. Each sublease of the Leased Premises shall be subject and subordinate to the provisions of this Sublease and the Master Lease and shall be for a term that expires no later than one (1) day prior to the expiration of the Term and two (2) days prior to the expiration of the Master Lease Term. No assignment or sublease shall affect or reduce any of the obligations of Tenant hereunder, and all such obligations shall continue in full force and effect as obligations of a principal and not as obligations of a guarantor, as if no assignment or sublease had been made. No assignment or sublease shall impose any additional obligations on Landlord under this Sublease. (d) Tenant shall, within ten (10) days after the execution and delivery of any assignment or sublease, deliver a duplicate original copy thereof to Master Landlord and Landlord which, in the event of an assignment, shall be in recordable form. (e) As security for performance of its obligations under this Sublease, Tenant hereby grants, conveys and assigns to Landlord all right, title and interest of Tenant in and to all subleases now in existence or hereafter entered into for any or all of the Leased Premises, any and all extensions, modifications and renewals thereof and all rents, issues and profits therefrom. Landlord hereby grants to Tenant a license to collect and enjoy all rents and other sums of money payable under any sublease of any of the Leased Premises, provided, however, that Landlord shall have the absolute right at any time following the occurrence of an Event of Default to revoke said license and to collect such rents and sums of money and to retain the same. Tenant shall not consent to, cause or allow any modification or alteration of any of the terms, conditions or covenants of any of the subleases or the termination thereof, without the prior written approval of Landlord, which approval shall not be unreasonably withheld, nor shall Tenant accept any rents more than thirty (30) days in advance of the accrual thereof nor do nor permit anything to be done, the doing of which, nor omit or refrain from doing anything, the omission of which, will or could be a breach of or default in the terms of any of the subleases. (f) Tenant shall not have the power to mortgage, pledge or otherwise encumber its interest under this Sublease or any sublease of the Leased Premises, and any such mortgage, pledge or encumbrance made in violation of this Paragraph 21 shall be void. (g) Landlord may transfer its interest in this Sublease at any time without Tenant's consent to any third party (each a "Third Party Purchaser"). In the event of any such transfer, Tenant shall attorn to any Third Party Purchaser as Landlord so long as such Third Party 31 35 Purchaser and Landlord notify Tenant in writing of such transfer and the Third Party Purchaser agrees to be bound by the terms of this Sublease applicable to Landlord. At the request of Landlord, Tenant will execute such documents confirming the agreement referred to above and such other agreements as Landlord may reasonably request, provided that such agreements do not increase the liabilities and obligations of Tenant hereunder. 22. Events of Default. (a) The occurrence of any one or more of the following (after expiration of any applicable cure period as provided in Paragraph 22 (b)) shall, at the sole option of Landlord, constitute an "Event of Default" under this Sublease: (i) a failure by Tenant to make any payment of any Monetary Obligation, regardless of the reason for such failure; (ii) a failure by Tenant duly to perform and observe, or a violation or breach of, any other provision hereof not otherwise specifically mentioned in this Paragraph 22(a); (iii) any representation or warranty made by Tenant herein or in any certificate, demand or request made pursuant hereto proves to be materially incorrect, now or hereafter, in any material respect; (iv) Tenant shall (A) voluntarily be adjudicated a bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or trustee for itself or for the Leased Premises, (C) file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, (D) make a general assignment for the benefit of creditors, or (E) admit in writing its inability to pay its debts as they mature; (v) a court shall enter an order, judgment or decree appointing, without the consent of Tenant, a receiver or trustee for it or for the Leased Premises or approving a petition filed against Tenant which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and such order, judgment or decree shall remain undischarged or unstayed sixty (60) days after it is entered; (vi) the Leased Premises shall have been vacated for a period of more than one (1) year or the Leased Premises shall have been abandoned; (vii) Tenant shall be liquidated or dissolved or shall begin proceedings towards its liquidation or dissolution; (viii) the estate or interest of Tenant in the Leased Premises shall be levied upon or attached in any proceeding and such estate or interest is about to be sold or transferred or such process shall not be vacated or discharged within sixty (60) days after it is made; (ix) a failure by Tenant to perform or observe, or a violation or breach of, or a misrepresentation by Tenant under, any provision of any Assignment or any other written 32 36 document between Tenant and Lender or specifically for the benefit of Lender that is executed by Tenant, if such failure, violation, breach or misrepresentation gives rise to a default beyond any applicable cure period with respect to any Loan and the Lender commences to exercise its remedies under the documents evidencing and securing such Loan; (x) a failure by Tenant to maintain in effect any license or permit necessary for the use, occupancy or operation of the Leased Premises; or (xi) The breach of any Covenant shall occur. (b) No notice or cure period shall be required in any one or more of the following events: (A) the occurrence of an Event of Default under clause (i) (except as otherwise set forth below) , (iii), (iv), (v), (vi), (vii), (viii), (ix), or (xi) of Paragraph 22 (a); (B) the default consists of a failure to provide any insurance as required by and in accordance with Paragraph 16 (a) (i) or (a) (iv) that does not substantially comply with the requirements thereof or an assignment or sublease entered into in violation of Paragraph 21; or (C) the default is such that any delay in the exercise of a remedy by Landlord could reasonably be expected to cause material and irreparable harm to Landlord. If the default consists of the failure to pay any Monetary Obligation under clause (i) of Paragraph 22(a), the applicable cure period shall be three (3) days from the date on which notice is received by Tenant, but Landlord shall not be obligated to give notice of, or allow any cure period for, any default in the payment of Basic Rent more than one (1) time within any consecutive twelve (12) month period. If the default consists of a default under clause (ii) or (x) of Paragraph 22 (a) , other than the events specified in clauses (B) and (C) of the first sentence of this Paragraph 22(b), the applicable cure period shall be twenty (20) days from the date on which notice is received by Tenant or, if the default cannot be cured within such twenty (20) day period and delay in the exercise of a remedy would not cause any material adverse harm to Landlord or any of the Leased Premises, the cure period shall be extended for the period required to cure the default (but such cure period, including any extension, shall not in the aggregate exceed one hundred twenty (120) days), provided that Tenant shall commence to cure the default within the said twenty-day period and shall actively, diligently and in good faith proceed with and continue the curing of the default until it shall be fully cured. The notices described in this Paragraph 22 (b) are in lieu of and not in addition to the notice under California Civil Code 1161. 23. Remedies and Damages Upon Default. (a) If an Event of Default shall have occurred and is continuing, Landlord shall have the right, at its sole option, then or at any time thereafter, to exercise its remedies and to collect damages from Tenant in accordance with this Paragraph 23, subject in all events to applicable Law, without demand upon or notice to Tenant except as otherwise provided in Paragraph 22 (b) and this Paragraph 23. (i) Landlord may give Tenant notice of Landlord's intention to terminate this Sublease on a date specified in such notice and upon such date, this Sublease, the estate hereby granted and all rights of Tenant hereunder shall expire and terminate, provided, that if and only if the Event of Default that gave rise to such notice is the failure to pay Rent as and when due such termination shall be of no force and effect if Tenant cures such Event of Default 33 37 within three (3) days after receipt of such notice from Landlord. Upon such termination, Tenant shall immediately surrender and deliver possession of the Leased Premises to Landlord in accordance with Paragraph 26. If Tenant does not so surrender and deliver possession of all of the Leased Premises, Landlord may repossess any of the Leased Premises not surrendered, with legal process, by summary proceedings, ejectment or any other lawful means or procedure. Upon or at any time after taking possession of any of the Leased Premises, Landlord may, by peaceable means or legal process, remove any Persons or property therefrom. Landlord shall be under no liability for or by reason of any such entry, repossession or removal. Notwithstanding such entry or repossession, Landlord may collect the damages set forth in Paragraph 23(c). (ii) After repossession of any of the Leased Premises pursuant to clause (i) above, Landlord shall have the right to relet any of the Leased Premises to such tenant or tenants, for such term or terms, for such rent, on such conditions and for such uses as Landlord in its sole discretion may determine, and collect and receive any rents payable by reason of such reletting. Landlord may make such Alterations in connection with such reletting as it may deem advisable in its sole discretion. Notwithstanding any such reletting, Landlord may collect the damages set forth in Paragraph 23(c). (b) In addition to its other rights under this Sublease, Landlord has the remedy described in California Civil Code Section 1951.4 which provides substantially as follows: Landlord may continue the Master Lease in effect after Tenant's breach and abandonment and recover the Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations. In accordance with California Civil Code Section 1951.4 (or any successor statute), Tenant acknowledges that in the event Tenant breaches this Sublease and abandons the Leased Premises, this Sublease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of its rights and remedies under this Sublease, including the right to recover the Rent as it becomes due under this Sublease. Tenant acknowledges that the limitations on subletting and assignment set forth in Paragraph 21 are reasonable. Acts of maintenance or preservation or efforts to relet the Leased Premises or the appointment of a receiver upon initiative of Landlord to protect Landlord's interest under this Sublease shall not constitute a termination of Tenant's right to possession. (c) If Landlord elects to terminate this Sublease upon the occurrence of an Event of Default, Landlord may collect from Tenant damages computed in accordance with the following provisions in addition to Landlord's other remedies under this Sublease: (i) the worth at the time of award of any unpaid Rent which has been earned at the time of such termination; plus (ii) the worth at the time of the award of the amount by which any unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus 34 38 (iv) any other reasonable cost necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Sublease or which in the ordinary course of things would be likely to result therefrom including, without limitation, brokerage commissions, the cost of repairing and reletting the Leased Premises and reasonable attorneys' fees; plus (v) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable state law. Damages shall be due and payable from the date of termination. For purposes of clauses (i) and (ii) of this Paragraph, the "worth at the time of award" shall be computed by adding interest at the Default Rate to the past due Rent. For the purposes of clause (iii) of this Paragraph 23 (c), the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%). (d) Landlord shall be entitled to apply the Security Deposit to any amounts due under Paragraph 23 (a) or 23 (c) if this Sublease shall be terminated, or, if this Sublease shall remain in full force and effect, to any amounts due under Paragraph 23 (b) and in either event in the following order (i) to past due Basic Rent and (ii) to cure any other monetary Event of Default. (e) Notwithstanding anything to the contrary herein contained, in lieu of or in addition to any of the foregoing remedies and damages, Landlord may exercise any remedies and collect any damages available to it at law or in equity. If Landlord is unable to obtain full satisfaction pursuant to the exercise of any remedy, it may pursue any other remedy which it has hereunder or at law or in equity. (f) If any Law shall validly limit the amount of any damages provided for herein to an amount which is less than the amount agreed to herein, Landlord shall be entitled to the maximum amount available under such Law. (g) No termination of this Sublease, repossession or reletting of any of the Leased Premises, exercise of any remedy or collection of any damages pursuant to this Paragraph 23 shall relieve Tenant of any Surviving Obligations. (h) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD HEREUNDER, LANDLORD AND TENANT WAIVE ANY RIGHT TO A TRIAL BY JURY. Landlord and Tenant agree that this Sublease constitutes a written consent to waiver of trial by jury pursuant to the provisions of California Code of Civil Procedure Section 631, and each of Landlord and Tenant does appoint the other Person as its true and lawful attorney-in-fact, which appointment is coupled with an interest, and does hereby authorize and empower the other Person, in its name, place and stead, to file this Sublease with the clerk of any court of competent jurisdiction as statutory written consent to waiver of trial by jury. (i) Upon the occurrence of any Event of Default, Landlord shall have the right (but no obligation) to perform any act required of Tenant hereunder and, if performance of such 35 39 act requires that Landlord enter the Leased Premises, Landlord may enter the Leased Premises for such purpose., (j) No failure of Landlord (i) to insist at any time upon the strict performance by Tenant of any provision of this Sublease or (ii) to exercise any option, right, power or remedy contained in this Sublease shall be construed as a waiver, modification or relinquishment thereof. A receipt by Landlord of any sum in satisfaction of any Monetary Obligation with knowledge of the breach of any provision hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision hereof shall be deemed to have been made unless expressed in a writing signed by Landlord. No failure of Tenant (i) to insist at any time upon the strict performance by Landlord of any provision of this Sublease or (ii) to exercise any option, right, power or remedy contained in this Sublease shall be construed as a waiver, modification or relinquishment thereof EXCEPT with respect to Tenant's extension option(s) under Paragraph 5(b) of this Sublease or EXCEPT as otherwise expressly provided to the contrary elsewhere in this Sublease. (k) Tenant hereby waives and surrenders, for itself and all those claiming under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future Law to redeem any of the Leased Premises or to have a continuance of this Sublease after termination of this Sublease or of Tenant's right of occupancy or possession pursuant to any court order or any provision hereof if the Event of Default is an Event of Default under Paragraph 22 (a) (iv) or 22 (a)(xi), and (ii) the benefits of any present or future Law which exempts property from liability for debt or for distress for rent. (l) Except as otherwise provided herein, all remedies are cumulative and concurrent and no remedy is exclusive of any other remedy. Each remedy may be exercised at any time an Event of Default has occurred and is continuing and may be exercised from time to time. No remedy shall be exhausted by any exercise thereof. 24. Notices. All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given pursuant to the provisions of this Sublease shall be in writing and shall be deemed to have been given and received for all purposes when delivered in person or by Federal Express or other reliable 24-hour delivery service or five (5) business days after being deposited in the United States mail, by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address stated above or when delivery is refused. A copy of any notice given by Tenant to Landlord shall simultaneously be given by Tenant to Dewey Ballantine LLP, 333 South Hope Street, 30th Floor, Los Angeles, California 90071, Attention: Rafael A. Stone, Esq. A copy of any notice given by Landlord to Tenant shall simultaneously be given by Landlord to Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500 First Union Capitol Center, Raleigh, North Carolina 27601, Attention: Stephen T. Parascandola, Esq. For the purposes of this Paragraph, any party may substitute another address stated above (or substituted by a previous notice) for its address by giving fifteen (15) days' notice of the new address to the other party, in the manner provided above. 25. Estoppel Certificate. At any time upon receipt of not less than ten (10) days' prior written request by either Landlord or Tenant (the "Requesting Party") to the other party (the 36 40 "Responding Party"), the Responding Party shall deliver to the Requesting Party a statement in writing, executed by an authorized officer of the Responding Party, certifying (a) that, except as otherwise specified, this Sublease is unmodified and in full force and effect, (b) the dates to which Basic Rent, Additional Rent and all other Monetary Obligations have been paid, (c) that, to the knowledge of the signer of such certificate and except as otherwise specified, no default by either Landlord or Tenant exists hereunder, (d) such other matters as the Requesting Party may reasonably request, and (e) if Tenant is the Responding Party, that, except as otherwise specified, there are no proceedings pending or, to the knowledge of the signer, threatened, against Tenant before or by any court or administrative agency which, if adversely decided, would materially and adversely affect the financial condition and operations of Tenant. Any such statements by the Responding Party may be relied upon by the Requesting Party, any Person whom the Requesting Party notifies the Responding Party in its request for the certificate is an intended recipient or beneficiary of the certificate, Master Landlord, any Lender or their assignees and by any prospective purchaser or mortgagee of any of the Leased Premises. Any certificate required under this Paragraph 25 and delivered by Tenant shall state that, in the opinion of each person signing the same, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to the subject matter of such certificate, and shall briefly state the nature of such examination or investigation. 26. Surrender. Upon the expiration or earlier termination of this Sublease, Tenant shall peaceably leave and surrender the Leased Premises to Landlord in the same condition in which the Leased Premises was at the commencement of this Sublease, except as repaired, rebuilt, restored, altered, replaced or added to as permitted or required by any provision of this Sublease, and except for ordinary wear and tear and damage by Casualty or a Taking if Landlord rejects Tenant's offer under Paragraph 18 hereof. Upon such surrender, Tenant shall (a) remove from the Leased Premises all property which is owned by Tenant or third parties other than Landlord and (b) repair any damage caused by such removal. Property not so removed shall become the property of Landlord, and Landlord may thereafter cause such property to be removed from the Leased Premises. The cost of removing and disposing of such property and repairing any damage to any of the Leased Premises caused by such removal shall be paid by Tenant to Landlord upon demand. Landlord shall not in any manner or to any extent be obligated to reimburse Tenant for any such property which becomes the property of Landlord pursuant to this Paragraph 26. 27. No Merger of Title. There shall be no merger of the leasehold estate created by this Sublease with the fee estate in any of the Leased Premises by reason of the fact that the same Person may acquire or hold or own, directly or indirectly, (a) the leasehold estate created hereby or any part thereof or interest therein and (b) the fee estate in any of the Leased Premises or any part thereof or interest therein, unless and until all Persons having any interest in the interests described in (a) and (b) above which are sought to be merged shall join in a written instrument effecting such merger and shall duly record the same. 28. Books and Records. (a) Tenant shall keep adequate records and books of account with respect to the finances and business of Tenant generally and with respect to the Leased Premises, in accordance with generally accepted accounting principles ("GAAP") consistently applied, and 37 41 shall permit Master Landlord, Landlord and Lender by their respective agents, accountants and attorneys, upon reasonable notice to Tenant, to visit and inspect the Leased Premises and examine (and make copies of) the records and books of account and to discuss the finances and business with the officers of Tenant, at such reasonable times as may be requested by Master Landlord, Landlord or Lender. Upon the request of Master Landlord, Landlord or Lender (either telephonically or in writing), Tenant shall provide the requesting party with copies of any information to which such party would be entitled in the course of a personal visit. (b) Tenant shall deliver to Master Landlord, Landlord and to Lender, within ninety (90) days of the close of each fiscal year, annual audited financial statements of Tenant prepared by a firm of nationally recognized independent certified public accountants. Tenant shall also furnish to Landlord within forty-five (45) days after the end of each of the three remaining quarters unaudited financial statements and all other quarterly reports of Tenant, certified by Tenant's chief financial officer, and all filings, if any, of Form 10-K, Form 10-Q and other required filings with the Securities and Exchange Commission pursuant to the provisions of the Securities Exchange Act of 1934, as amended, or any other Law. All financial statements of Tenant shall be prepared in accordance with GAAP consistently applied. All annual financial statements shall be accompanied (i) by an opinion of said accountants stating that (A) there are no qualifications as to the scope of the audit and (B) the audit was performed in accordance with GAAP and (ii) by the affidavit of the president or a vice president of Tenant, dated within five (5) days of the delivery of such statement, stating that (C) the affiant knows of no Event of Default, or event which, upon notice or the passage of time or both, would become an Event of Default which has occurred and is continuing hereunder or, if any such event has occurred and is continuing, specifying the nature and period of existence thereof and what action Tenant has taken or proposes to take with respect thereto and (D) except as otherwise specified in such affidavit, that Tenant has fulfilled all of its obligations under this Sublease which are required to be fulfilled on or prior to the date of such affidavit. 29. Determination of Value. (a) Whenever a determination of Fair Market Value is required pursuant to any provision of this Sublease, or under the Master Lease with respect to the Leased Premises, such Fair Market Value shall be determined in accordance with the following procedure: (i) Landlord and Tenant shall endeavor to agree upon such Fair Market Value within thirty (30) days after the date (the "Applicable Initial Date") on which Landlord provides Tenant with notice of its intention to redetermine Fair Market Value pursuant to Paragraph 20(c). Landlord and Tenant shall endeavor to agree on Fair Market Rental Value on the date (also, an "Applicable Initial Date") which is six (6) calendar months prior to the expiration of the then current Term unless Tenant has failed to previously exercise its option to extend the Term pursuant to Paragraph 5(b). Upon reaching such agreement, the parties shall execute an agreement setting forth the amount of such Fair Market Value or Fair Market Rental Value. (ii) If the parties shall not have signed such agreement within thirty (30) days after the Applicable Initial Date, Tenant shall within fifty (50) days after the Applicable Initial Date select an appraiser and notify Landlord in writing of the name, address 38 42 and qualifications of such appraiser. Within twenty (20) days following Landlord's receipt of Tenant's notice of the appraiser selected by Tenant, Landlord shall select an appraiser and notify Tenant of the name, address and qualifications of such appraiser. Such two appraisers shall endeavor to agree upon Fair Market Value or Fair Market Rental Value based on a written appraisal made by each of them as of the Relevant Date (and given to Landlord by Tenant). If such two appraisers shall agree upon a Fair Market Value or Fair Market Rental Value, the amount of such Fair Market Value or Fair Market Rental Value as so agreed shall be binding and conclusive upon Landlord and Tenant. (iii) If such two appraisers shall be unable to agree upon a Fair Market Value or Fair Market Rental Value within twenty (20) days after the selection of an appraiser by Landlord, then such appraisers shall advise Landlord and Tenant of their respective determinations of Fair Market Value or Fair Market Rental Value and shall select a third appraiser to make the determination of Fair Market Value or Fair Market Rental Value. The selection of the third appraiser shall be binding and conclusive upon Landlord and Tenant. (iv) If such two appraisers shall be unable to agree upon the designation of a third appraiser within ten (10) days after the expiration of the twenty (20) day period referred to in clause (iii) above, or if such third appraiser does not make a determination of Fair Market Value or Fair Market Rental Value within twenty (20) days after his selection, then such third appraiser or a substituted third appraiser, as applicable, shall, at the request of either party hereto (with respect to the other party), be appointed by the President or Chairman of the American Arbitration Association in New York, New York. The determination of Fair Market Value or Fair Market Rental Value made by the third appraiser appointed pursuant hereto shall be made within twenty (20) days after such appointment. (v) If a third appraiser is selected, Fair Market Value or Fair Market Rental Value shall be the average of the determination of Fair Market Value or Fair Market Rental Value made by the third appraiser and the determination of Fair Market Value or Fair Market Rental Value made by the appraiser (selected pursuant to Paragraph 29(a)(ii) hereof) whose determination of Fair Market Value or Fair Market Rental Value is closest to the total dollar value to that of the third appraiser. Such average shall be binding and conclusive upon Landlord and Tenant. (vi) All appraisers selected or appointed pursuant to this Paragraph 29(a) shall (A) be independent qualified MAI appraisers, (B) have no right, power or authority to alter or modify the provisions of this Sublease, (C) utilize the definition of Fair Market Value or Fair Market Rental Value hereinabove set forth, and (D) be licensed in the State if the State provides for or requires such registration. (vii) The Cost of the procedure described in this Paragraph 29(a) above shall be borne by Tenant. (b) If, by virtue of any delay, Fair Market Value is not determined by the expiration or termination of the then current Term, then the date on which the Term would otherwise expire or terminate shall be extended with respect to the Leased Premises to the date specified for termination in the particular provision of this Sublease pursuant to which the 39 43 determination of Fair Market Value is being made. If, by virtue of any delay, Fair Market Rental Value is not determined by the expiration or termination of the then current Term, then until Fair Market Rental Value is determined, Tenant shall continue to pay Basic Rent during the succeeding Renewal Term in the same amount which it was obligated under this Sublease to pay prior to the commencement of the Renewal Term. When Fair Market Rental Value is determined, the appropriate Basic Rent shall be calculated retroactive to the commencement of the Renewal Term and Tenant shall either receive a refund from Landlord (in the case of an overpayment) or shall pay any deficiency to Landlord (in the case of an underpayment). (c) In determining Fair Market Value as defined in clause (b) of the definition of Fair Market Value, the appraisers shall add (a) the present value of the Basic Rent for the remaining Term then in effect (with assumed increases in the CPI to be determined by the appraisers) using a discount rate (which may be, but shall not be required to be, determined by an investment banker retained by any appraiser electing to seek such opinion) based on the creditworthiness of Tenant and (b) the present value of the Leased Premises as of the end of such Term (without assuming the Term has been extended). The appraisers shall further assume that no default then exists under the Lease, that Tenant has complied (and will comply) with all provisions of the Lease, and that Tenant has not violated (and will not violate) any of the Covenants. (d) In determining Fair Market Rental Value, the appraisers shall determine with respect to the Leased Premises the amount that a willing tenant would pay for, and a willing landlord of the Leased Premises would accept, at arm's length for the Leased Premises, taking into account comparable buildings and also taking into account: (a) the age, quality and condition (as required by the Lease) of the Improvements; (b) that the Leased Premises will be leased as a whole or substantially as a whole to single user; (c) a lease term of five (5) years; (d) an absolute triple net lease; and (e) such other items that professional real estate appraisers customarily consider. 30. Non-Recourse as to Landlord. (a) Anything contained herein to the contrary notwithstanding, any claim based on or in respect of any liability of Landlord under this Sublease shall be enforced only against the Leased Premises and not against any other assets, properties or funds of (a) Landlord, (b) any affiliate, director, officer, shareholder, general partner, limited partner, principal, employee, attorney, or agent of Landlord (or any legal representative, heir, estate, successor or assign of any of them), (c) any predecessor or successor partnership or corporation (or other entity) of Landlord, or any of its general partners, either directly or through Landlord or its general partners or any predecessor or successor partnership or corporation or their shareholders, officers, directors, employees or agents (or other entity), (d) Master Landlord or any of its directors, officers, shareholders, general partners, limited partners, principals, employees, attorneys, or agents (or any legal representative, heir, estate, successor or assign of any of them), or (e) any other Person. (b) Notwithstanding the foregoing, Tenant shall not be precluded from instituting legal proceedings for the purpose of making a claim against Landlord on account of an alleged 40 44 violation of Landlord's obligation under this Sublease, subject, however, to Paragraph 30(a) above. (c) The provisions of this Section 30 shall not terminate or otherwise limit Landlord's liability for breaches of its obligations under the Asset Purchase Agreement. 31. Financing. If Master Landlord or Landlord desires to obtain or refinance any Loan, Tenant shall negotiate in good faith with Master Landlord and/or Landlord concerning any request made by any Lender or proposed Lender for changes or modifications in this Sublease. With respect to any Loan obtained or refinanced by Landlord, Tenant shall be obligated to negotiate in good faith changes or modifications in this Sublease to the extent that such changes or modifications do not have a material adverse effect on Tenant's rights or liabilities under this Sublease. In particular, Tenant shall agree, upon request of Master Landlord and/or Landlord, to supply any such Lender with such notices and information as Tenant is required to give to Master Landlord or Landlord hereunder and to extend the rights of Master Landlord and Landlord hereunder to any such Lender and to consent to such financing if such consent is requested by such Lender. Tenant shall provide any other reasonable consent or statement and shall execute any and all other reasonable documents that such Lender requires in connection with such financing, including any environmental indemnity agreement (so long as it is not more burdensome than the provisions relating to environmental matters set forth in this Sublease) and subordination, non-disturbance and attornment agreement, so long as the same do not adversely affect any right, benefit or privilege of Tenant under this Sublease or increase Tenant's obligations under this Sublease. Such subordination, non-disturbance and attornment agreement may require Tenant to confirm that (a) Lender and its assigns will not be liable for any misrepresentation, act or omission of Master Landlord or Landlord and (b) Lender and its assigns will not be subject to any counterclaim, demand or offset which Tenant may have against Master Landlord or Landlord. 32. Subordination. This Sublease and Tenant's interest hereunder shall be subordinate to any Mortgage or other security instrument securing a Loan hereafter placed upon the Leased Premises by Master Landlord or Landlord, and to any and all advances made or to be made thereunder, to the interest thereon, and all renewals, replacements and extensions thereof, provided that any such Mortgage or other security instrument (or a separate instrument in recordable form such as a subordination, non-disturbance and attornment agreement duly executed by the holder of any such Mortgage and Tenant and delivered to Tenant) shall provide for the recognition of this Sublease and all of Tenant's rights hereunder, including, without limitation, application of the Net Award in accordance with the terms of this Sublease unless and until an Event of Default has occurred and is continuing or Landlord shall have the right to terminate this Sublease pursuant to any applicable provision hereof. 33. Financial Covenants. Tenant hereby covenants and agrees to comply with the Covenants. 34. Right to Vacate. Tenant shall have the right to vacate the Leased Premises; provided that (i) Tenant shall notify Landlord and Lender within ten (10) days after vacation of the Leased Premises by Tenant, (ii) Tenant shall make reasonable good faith efforts to sublet the Leased Premises, which sublease or subleases shall be subject to the provisions of Paragraph 21(b) 41 45 hereof, and (iii)Tenant shall continue to perform all of its obligations under this Lease, including its obligation to maintain the Leased Premises and to pay all Rent as and when due hereunder. If at any time during the Term the Leased Premises shall be vacant for twelve (12) consecutive months, then on the first day of the thirteenth (13th) month that the Leased Premises is vacant Tenant shall cause the Leased Premises to cease to be vacant. 35. Tax Treatment; Reporting. Landlord and Tenant each acknowledge that each shall treat this transaction as a true lease for state law purposes and shall report this transaction as a lease for Federal income tax purposes. For Federal income tax purposes each shall report this Sublease as a true lease with Landlord as the owner of the Leased Premises and Equipment and Tenant as the lessee of such Leased Premises and Equipment including: (1) treating Landlord as the owner of the property eligible to claim depreciation deductions under Section 167 or 168 of the Internal Revenue Code of 1986 (the "Code") with respect to the Leased Premises and Equipment, (2) Tenant reporting its Rent payments as rent expense under Section 162 of the Code, and (3) Landlord reporting the Rent payments as rental income. 36. Intentionally Omitted. 37. Security Deposit. (a) Concurrently with the execution of this Sublease, Tenant shall deliver to Landlord cash (U.S. dollars) in the amount of One Hundred Fifty One Thousand One Hundred Sixty Four and 08/100ths Dollars ($151,164.08) (the "Security Deposit"). The Security Deposit shall be security for the payment by Tenant of the Rent and all other charges or payments to be paid hereunder and the performance of the covenants and obligations contained herein and shall be held by Landlord or, if applicable, any Lender of Landlord,, as security for Tenant's obligations under this Sublease. Landlord or such Lender, as the case may be, shall invest the Security Deposit in such investment vehicle as is designated by Tenant and approved by Landlord and such Lender, which approval shall not be unreasonably withheld, subject to the following: (i) attached to this Sublease as Exhibit "F" is a list of approved investments and each such investment is deemed to be approved by Landlord and such Lender; (ii) the Security Deposit shall be invested in one investment vehicle that is held in the name of the Landlord or such Lender; (iii) Tenant may require that the Security Deposit be transferred or reinvested from one approved investment vehicle to another, but no more frequently than one time in any 12-month period during the term of the Lease; (iv) if Landlord or such Lender reasonably determine at any time that the liquidation value of the investment vehicle in which the Security Deposit has been invested is less than the required principal amount of the Security Deposit, then within two (2) business days after demand therefor, Tenant shall deposit in cash with the holder of the Security Deposit an amount in cash which, when added to the reasonably estimated liquidation value of the investment vehicle, is equal to the required amount of the Security Deposit, which cash deposit shall be returned to Tenant when the liquidation value of the investment equals or exceeds the required amount of the Security Deposit; and (v) Tenant shall pay all transaction costs reasonably incurred by Landlord or such Lender in investing the Security Deposit in accordance with the instructions of Tenant. (b) Landlord shall have the right to assign the Security Deposit to its Lender or any other holder of a Mortgage during the term of the applicable Loan, so long as such Lender or 42 46 such other holder of a Mortgage agrees in writing that it shall have all of the rights and obligations of Landlord with respect to the Security Deposit, provided that any portion of the Security Deposit applied by such Lender shall, with respect to Tenant, be deemed applied as provided in Paragraph 23 (d) hereof. Tenant covenants and agrees to execute such agreements, consents and acknowledgments as may be reasonably requested by Landlord and such Lender from time to time to acknowledge and perfect such assignment. 38. Miscellaneous. (a) The Paragraph headings in this Sublease are used only for convenience in finding the subject matters and are not part of this Sublease or to be used in determining the intent of the parties or otherwise interpreting this Sublease. (b) As used in this Sublease, the singular shall include the plural and any gender shall include all genders as the context requires and the following words and phrases shall have the following meanings: (i) "including" shall mean "including without limitation"; (ii) "provisions" shall mean "provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall mean "lien, charge, encumbrance, title retention agreement, pledge, security interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean "obligation, duty, agreement, liability, covenant and/or condition"; (v) "any of the Leased Premises" shall mean "the Leased Premises or any part thereof or interest therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or interest therein"; (vii) "any of the Improvements" shall mean "the Improvements or any part thereof or interest therein"; (viii) "any of the Equipment" shall mean "the Equipment or any part thereof or interest therein"; and (ix) "any of the Adjoining Property" shall mean "the Adjoining Property or any part thereof or interest therein". (c) Any act which Landlord is permitted to perform under this Sublease may be performed at any time and from time to time by Landlord or any person or entity designated by Landlord. Each appointment of Landlord as attorney-in-fact for Tenant hereunder is irrevocable and coupled with an interest. Except with respect to any assignment of this Sublease or sublet that is not otherwise specifically permitted hereunder or for which a reasonableness standard is not specifically required for Landlord's consent, Landlord shall not unreasonably withhold or delay its consent whenever such consent is required under this Sublease. Time is of the essence with respect to the performance by Tenant of its obligations under this Sublease. (d) Landlord shall in no event be construed for any purpose to be a partner, joint venturer or associate of Tenant or of any subtenant, operator, concessionaire or license of Tenant with respect to any of the Leased Premises or otherwise in the conduct of their respective businesses. (e) This Sublease and any documents which may be executed by Tenant on or about the effective date hereof at Landlord's request constitute the entire agreement between the parties and supersede all prior understandings and agreements, whether written or oral, between the parties hereto relating to the Leased Premises and the transactions provided for herein. Landlord and Tenant are business entities having substantial experience with the subject matter of this Sublease and have each fully participated in the negotiation and drafting of this Sublease. 43 47 Accordingly, this Sublease shall be construed without regard to the rule that ambiguities in a document are to be construed against the drafter. (f) This Sublease may be modified, amended, discharged or waived only by an agreement in writing signed by the party against whom enforcement of any such modification, amendment, discharge or waiver is sought. (g) The covenants of this Sublease shall run with the land and bind Tenant, its successors and assigns and all present and subsequent encumbrancers and subtenants of any of the Leased Premises, and shall inure to the benefit of Landlord, its successors and assigns. If there is more than one Tenant, the obligations of each shall be joint and several. (h) Notwithstanding any provision in this Sublease to the contrary, all Surviving Obligations of Tenant shall survive the expiration or termination of this Sublease with respect to the Leased Premises. (i) If any one or more of the provisions contained in this Sublease shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Sublease, but this Sublease shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. (j) All exhibits attached hereto are incorporated herein as if fully set forth. (k) This Sublease shall be governed by and construed and enforced in accordance with the Laws of the State. (l) Tenant hereby waives the provisions of California Civil Code Sections 1941 and 1942. Landlord and Tenant waive the provisions of California Civil Code Sections 1932 and 1933, and of California Code of Civil Procedure Section 1265.130. (m) As a condition precedent to the effectiveness of this Sublease and to the performance by Landlord of its obligations hereunder, Tenant shall cause Cree to concurrently herewith execute and deliver to and for the benefit of Landlord a Guaranty of Lease in the form attached hereto as Exhibit "H". (n) Tenant acknowledges and agrees that it is subleasing the Leased Premises from Landlord subject to all of the rights and interests of the Master Landlord in and to the Leased Premises arising under the Lease, including, without limitation, rights of inspection and rights to notice of various matters, events, circumstances and materials, all as granted to Master Landlord under the Lease. In no event shall Tenant prohibit or otherwise limited the Master Landlord from exercising or receiving the benefit of any of its rights arising under the Master Lease with respect to the Leased Premises, including, without limitation, Master Landlord's rights to inspection of the Leased Premises and information related thereof, regardless of whether or not rights are provided for under this Sublease. (o) Notwithstanding any provision set forth herein that may be construed to the contrary, in no event may Tenant renew or extend the Term of this Sublease for a period which is longer than the Term (as defined in the Lease) of the Lease. 44 48 (p) Landlord represents and warrants to Tenant the following: (a) Landlord is a corporation duly formed, validly existing and in good standing under the laws of the State of California, (ii) Landlord has all requisite corporate power and authority to execute and deliver this Sublease and perform Landlord's obligations hereunder, and this Sublease has been duly executed and delivered by Landlord and constitutes the valid and binding agreement of Landlord enforceable in accordance with its terms, (iii) the execution and performance of this Sublease will not conflict with or constitute a default by Landlord under any other agreement to which Landlord is a party or is otherwise bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Landlord, except where such conflict or default would not have a material adverse effect on the ability of Landlord to perform its obligations hereunder, (iv) no consent from or notice to any federal, state or local court or federal, state, or local governmental bureau, department, commission or agency, or any person or entity whether or not governmental in character (other than Master Landlord and the Lender of Master Landlord), is required to permit Landlord to execute, deliver and perform under this Sublease in accordance with its terms, (v) the Master Lease has not been amended or supplemented other than as disclosed to Tenant, (vi) to Landlord's actual knowledge (as defined in Section 15 of this Sublease), the Master Lease has not been terminated and is in full force and effect, and (vii) to Landlord's actual knowledge (as defined in Section 15 of this Sublease), Landlord has not received any written notice from Master Landlord of any uncured default on Landlord's part under the Master Lease. Tenant represents and warrants to Landlord the following: (a) Tenant is a corporation duly formed, validly existing and in good standing under the laws of the State of North Carolina, (b) Tenant is in good standing and is qualified to conduct business under the laws of the State of California, (c) Tenant has all requisite corporate power and authority to execute and deliver this Sublease and perform Tenant's obligations hereunder, and this Sublease has been duly executed and delivered by Tenant and constitutes the valid and binding agreement of Tenant enforceable in accordance with its terms, (d) the execution and performance of this Sublease will not conflict with or constitute a default by Tenant under any agreement to which Tenant is a party or is otherwise bound, or any order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over Tenant, except where such conflict or default would not have a material adverse effect on the ability of Tenant to perform its obligations hereunder, and (e) no consent from or notice to any federal, state or local court or federal, state, or local governmental bureau, department, commission or agency, or any person or entity whether or not governmental in character (other than Master Landlord), is required to permit Tenant to execute, deliver and perform under this Sublease in accordance with its terms. [SIGNATURES ON NEXT PAGE] 45 49 IN WITNESS WHEREOF, Landlord and Tenant have caused this Sublease to be duly executed under seal as of the day and year first above written. LANDLORD: SPECTRIAN CORPORATION, a California corporation By: /s/ Michael Angel ----------------------------------------- Name: Michael Angel --------------------------------------- Title: Executive Vice President and Chief Financial Officer -------------------------------------- TENANT: ZOLTAR ACQUISITION, INC., a North Carolina corporation to be known as UltraRF, Inc. By: /s/ Adam H. Broome ----------------------------------------- Name: Adam H. Broome --------------------------------------- Title: Secretary -------------------------------------- 46 50 EXHIBIT A LEASED PREMISES (160 Gibraltar Court Premises) All that certain real property situate in the City of Sunnyvale, County of Santa Clara, State of California, described as follows: Parcel B, as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on January 31, 1977, in Book 388 of Maps, page(s) 32. 47 51 EXHIBIT B MACHINERY AND EQUIPMENT All fixtures, machinery, apparatus, equipment, fittings and appliances of every kind and nature whatsoever now or hereafter affixed or attached to or installed in any of the Leased Premises (except as hereafter provided), including all electrical, anti-pollution, heating, lighting (including hanging fluorescent lighting), incinerating, power, air cooling, air conditioning, humidification, sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and ventilating systems, devices and machinery and all engines, pipes, pumps, tanks (including exchange tanks and fuel storage tanks), motors, conduits, ducts, steam circulation coils, blowers, steam lines, compressors, oil burners, boilers, doors, windows, loading platforms, lavatory facilities, stairwells, fencing (including cyclone fencing), passenger and freight elevators, overhead cranes and garage units, together with all additions thereto, substitutions therefor and replacements thereof required or permitted by this Sublease which were leased by Master Landlord to Landlord under the Master Lease and are situated upon the Leased Premises as of the Commencement Date. 48 52 EXHIBIT B-1 TENANT'S PROPERTY Tenant's Property shall mean all "Acquired Assets" (as defined in the Asset Purchase Agreement). Tenant's Property shall not include any of the following: (a) Mechanical/HVAC equipment including Scrubber, Acid Neutralization System, Water Deionization System, Chiller, Emergency Generator and CO2 tank; (b) Water, environmental and piping systems which are and shall be Equipment; and (c) any Equipment owned by Landlord or owned by Master Landlord and not leased to Landlord under the Master Lease (whether or not described on Exhibit B). 49 53 EXHIBIT C PERMITTED ENCUMBRANCES 1. General and Special City and/or County taxes for the fiscal year 2000-2001, payable but not yet due. 2. Lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5 (commencing with Section 75) of the Revenue and Taxation Code of the State of California. 3. Easement Deed to the City of Sunnyvale, recorded October 9, 1964 in Book 6695, page 415. 4. Easement Deed to the City of Sunnyvale, recorded October 9, 1964 in Book 6695, page 437. 5. Easement Deed to the City of Sunnyvale, recorded September 2, 1966 in Book 7494, page 638, as modified by Quitclaim Deed from the City of Sunnyvale to Moffett Park Associates, recorded October 24, 1967 in Book 7903, page 280. 6. Agreement between the City of Sunnyvale and Moffett Park Associates, recorded November 2, 1966 in Book 7552, page 688; as amended, recorded April 21, 1967 in Book 7700, page 638; and as amended, recorded February 23, 1968 in Book 8034, page 631. 7. Declaration of Protective Covenants by Moffett Industrial Park No. 1, recorded January 5, 1968 in Book 7985, page 605; as amended, recorded September 27, 1968 in Book 8277, page 704; and as assigned, recorded January 17, 1977 in Book C541, page 367. 8. Easement to Pacific Gas and Electric Company, recorded January 31, 1973 in Book O217, page 330. 9. Notice Affecting Real Property - Waiver of Construction Credits, recorded September 28, 1976 in Book C307, page 346. 10. Ingress and Egress for Driveway Easement which have not been reserved or conveyed of record. 11. Easement Deed to the City of Sunnyvale, recorded January 28, 1977 in Book C565, page 679. 12. Access easement shown on plat recorded in Maps 388, page 32. 13. Easement Deed to Santa Clara County Transit District, recorded April 8, 1997 as Instrument No. 13664365. 50 54 14. The following matters shown on the ALTA/ALCM Land Title Survey prepared by Kier & Wright Civil Engineers & Surveyors, Inc., dated November 1996, last revised April 10, 1997, and bearing Job No. 85020-3. a. The fact that a concrete curb encroach onto said lands 1.08 feet. Affects the Southeasterly portion of Parcel One. b. The fact that there is a sign located near the most Southerly corner of Parcel One. c. The fact that there are water valve, fire service box, water meter and anti syph valves located on or near the Southeasterly boundary of Parcel One. d. The fact that there are traffic signals and traffic boxes located near the most Easterly corner of Parcel One. e. The fact that there are P.G. & E; Pacific Telephone and Telegraph, Telephone, Transformer and Street Light Boxes located on or near the Northeasterly boundary of Parcel One. f. The fact that there is a service pedestal located in the Northeasterly portion of Parcel One. g. The fact that there are two 0.7 wide walls located in the Northeasterly portion of Parcel One. h. The fact that there is an electrolier located in the Northwesterly portion of Parcel One. i. The fact that there are irrigation boxes located in the Northwesterly portion of Parcel One. j. The fact that there is a nitrogen line located in the Northerly and Westerly portion of Parcel Two. k. The fact that there is a gas line located in the Northerly portion of Parcel Two. 15. Deed of Trust to Spec (CA) QRS 12-20, Inc., recorded April 14, 1997 under Serial No. 13671353. 16. Assignment of Rents to State Farm Life Insurance Company, recorded April 14, 1997 as Instrument No. 13671354. 17. Unrecorded Lease between Spec (CA) QRS 12-20, Inc. and Spectrian Corporation, recorded November 19, 1996 under Serial No. 13528640, by the provision of an Agreement between Spectrian Corporation, Spec (CA) QRS 12-20, Inc. and State Farm Life Insurance Company, recorded April 14, 1997 as Instrument No. 13671355. 51 55 18. Easement Deed by and between Gibraltar Court Associates, LLC and Site One, LLC, recorded December 16, 1999 as Instrument No. 15092766. 52 56 EXHIBIT D BASIC RENT PAYMENTS 1. Basic Rent. (a) Initial Term. Subject to the adjustments provided for in Paragraphs 2, 3 and 4 below, Basic Rent payable in respect of the Term shall be $906,984.48 per annum, payable quarterly in advance on each Basic Rent Payment Date, in equal installments of $226,746.12 each. (b) Renewal Term. Subject to the adjustments provided for in Paragraphs 2, 3 and 4 below, per annum Basic Rent for each Renewal Term shall be an amount equal to the greater of $18.03 per sq. ft. triple-net (which shall be not less than 50,311 square feet for the Leased Premises) or the Fair Market Rental Value as of the first day of the applicable Renewal Term, as determined in accordance with Paragraph 29 of the Lease. 2. CPI Adjustments to Basic Rent; Arbitration of Disputes. The Basic Rent shall be subject to adjustment, in the manner hereinafter set forth, for increases in the index known as United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban Consumers, United States City Average, All Items (1982-84=100) ("CPI") or the successor index that most closely approximates the CPI. If the CPI shall be discontinued with no successor or comparable successor index, Landlord and Tenant shall attempt to agree upon a substitute index or formula, but if they are unable to so agree, then the matter shall be determined by arbitration in accordance with the rules of the American Arbitration Association then prevailing in New York City. Any decision or award resulting from such arbitration shall be final and binding upon Landlord and Tenant and judgment thereon may be entered in any court of competent jurisdiction. In no event will the Basic Rent as adjusted by the CPI adjustment be less than the Basic Rent in effect for the three (3) year period immediately preceding such adjustment or, with respect to each Renewal Term, be less than the Basic Rent determined for such Renewal Term (as described in Paragraph 1(b) above). 3. Arbitration of Disputes. NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN PARAGRAPH 2 ABOVE DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN PARAGRAPH 2 ABOVE. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. 53 57 WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN PARAGRAPH 2 ABOVE TO NEUTRAL ARBITRATION." /s/ Michael Angel /s/ AHB ----------------- ---------------- LANDLORD TENANT 4. Effective Date of CPI Adjustments. Basic Rent shall not be adjusted to reflect changes in the CPI until the third (3rd) anniversary of the Basic Rent Payment Date (as defined in the Master Lease) on which the first full quarterly installment of Master Lease Basic Rent was due and payable from Landlord to Master Landlord under the Master Lease (the "First Full Basic Rent Payment Date"). As of the third (3rd) anniversary of the First Full Basic Rent Payment Date under the Master Lease and thereafter on the sixth (6th), ninth (9th) and twelfth (12th) anniversaries of the First Full Basic Rent Payment Date under the Master Lease, Basic Rent (as defined in this Sublease) shall be adjusted to reflect increases in the CPI during the most recent three (3) year period immediately preceding each of the foregoing dates (each such date being hereinafter referred to as "Basic Rent Adjustment Date"). If the Initial Term of the Sublease is renewed, then as of the third (3rd) anniversary of the date on which the first full quarterly installment of Master Lease Basic Rent shall be due and payable for the corresponding Renewal Term (as defined in the Master Lease) under the Master Lease (each such date also a "First Full Basic Rent Payment Date"), Basic Rent (as defined under this Sublease) shall be adjusted to reflect increases in the CPI during the first three (3) years of applicable Renewal Term under this Sublease (each such date also a "Basic Rent Adjustment Date"). 5. Method of Adjustment for CPI Adjustment. (a) As of each Basic Rent Adjustment Date, the Basic Rent in effect immediately prior to such date shall be multiplied by seventy-five percent (75%) of the Aggregate CPI Increase (as hereinafter defined) and the product of such multiplication shall be added to the Basic Rent in effect immediately prior to such Basic Rent Adjustment Date. "Aggregate CPI Increase" shall mean the product of the sums of one (1) plus each of the compounded increases (but not decreases) in the Relevant CPI (as hereinafter defined) for each of the three (3) 12-month periods ending on the first, second and third anniversaries (each such anniversary being a "Calculation Date") of the first full Basic Rent Payment Date (in the case of the First Basic Rent Adjustment Date) or the preceding Basic Rent Adjustment Date (in the case of each subsequent Basic Rent Adjustment Date) over the Relevant CPI for the previous 12-month period (each an "Annual Increase") from which product shall be subtracted one (1); provided, that if the Annual Increase for any 12-month period is greater than 4.5%, then the Annual Increase for such 12-month period shall be deemed to be 4.5%. The Relevant CPI for the 12-month period ending on any Calculation Date shall be equal to the average CPI for the three (3) calendar months published on or before the forty-fifth day preceding such Calculation Date (the "Prior Months"), and the Relevant CPI for each of the preceding 12-month periods shall be equal to the average CPI for the three (3) months of such 12-month period which correspond to the Prior Months. 54 58 By way of example and not of limitation, if, immediately prior to the Basic Rent Adjustment Date occurring on the ninth (9th) anniversary of the First Full Basic Rent Payment Date, Basic Rent is $100 and the increases in the Relevant CPI for the three (3) preceding years are 2%, 0% and 12%, respectively, the Aggregate CPI Increase will be as follows: (1.02 x 1.0 x 1.045) = 1.0659 - 1 = .0659 x .75 or .0494; then, .0494 x $100 = $4.94; then $100 + $4.94 = $104.94, which is the new Basic Rent. Said another way, .0494 + 1 = 1.0494; then, $100 x 1.0494 = $104.94, which is the new Basic Rent. (b) Notice of the new annual Basic Rent shall be delivered to Tenant on or before the tenth (10th) day preceding each Basic Rent Adjustment Date. 6. Basic Rent Corresponds to Master Lease Basic Rent. Notwithstanding anything set forth in this Sublease that may be construed to the contrary, in no event shall the Basic Rent due from Tenant during the Term of this Sublease, including, without limitation, any Renewal Term, as such Basic Rent may be adjusted from time to time by the CPI adjustment provided for hereunder, be less than forty-five percent (45%) of the Master Lease Basic Rent (as the same may be adjusted from time to time under the Master Lease) due from Landlord to Master Landlord for the Gibraltar Premises and the West Java Premises under the Master Lease for the corresponding portion of the Term (as defined in the Master Lease) thereunder, including, without limitation, any Renewal Term (as defined under the Master Lease) thereunder. 55 59 EXHIBIT E FLOOR AMOUNT
Prior to From and after 12/1/2001 12/1/2001 Leased Premises $7,939,791 $7,312,500
56 60 EXHIBIT F APPROVED INVESTMENTS (A) U.S. government obligations. (B) Certificates of Deposit issued by one of the twenty (20) largest U.S. banks. (C) Corporate bonds having an AAA or better rating. 57 61 EXHIBIT G FINANCIAL COVENANTS 1. Mergers and Sale of Assets. (a) Tenant shall not consolidate with or merge with any other corporation unless, immediately following such consolidation or merger, the surviving corporation shall have, on a pro-forma basis and, after giving effect thereto, an Adjusted Consolidated Tangible Net Worth of not less than the Adjusted Consolidated Tangible Net Worth of Tenant and its Consolidated Subsidiaries immediately prior to such merger or consolidation. (b) Tenant shall not, in a single transaction or a series of related transactions, sell, convey, transfer, abandon or lease all or substantially all of its assets to any Person except for a sale, transfer, conveyance, lease or other disposition to a Person that shall assume the obligations and liabilities of Tenant under this Sublease and that, immediately following such sale, transfer or conveyance, and after given effect thereto, has an Adjusted Consolidated Tangible Net Worth of not less than Thirty Million Dollars ($30,000,000). 2. Restricted Payments. Tenant will not, directly or indirectly make, or cause or permit any Subsidiary of Tenant to make, any Restricted Payment, unless at the time thereof, and after giving effect thereto: (a) no Event of Default shall have occurred and be continuing; and (b) Tenant's Adjusted Consolidated Tangible Net Worth equals or exceeds $40,150,000 at the end of the month preceding such payment. 3. Definitions. For the purpose of this Exhibit "G" the following terms shall have the following meanings: "Adjusted Consolidated Tangible Net Worth" shall mean, at any date, the tangible net worth of any Person and its consolidated Subsidiaries on a consolidated basis, determined in accordance with GAAP. "GAAP" shall mean generally accepted accounting principles as in effect from time to time in the United States of America, applied on a consistent basis. "Person" shall mean an individual, partnership, association, corporation or other entity. "Restricted Payment" shall mean and include (a) any direct or indirect purchase, redemption or other acquisition or retirement for value of any equity security of Tenant or any option, warrant or right to acquire any such equity security, or any security convertible into or exchangeable for any such equity security by any Person other than Cree, and (b) any dividend, distribution, whether in cash or property and whether direct or indirect, to or for the benefit any Person (other than Cree) holding an equity interest in the Tenant or any affiliate of any such Person (other than Cree). 58 62 "Subsidiary" of any Person means a corporation a majority of the capital stock of which is at the time owned, or the management of which is otherwise controlled, directly or indirectly, through one or intermediaries, or both, by such Person. 59 EX-99.01 4 g66404ex99-01.txt PRESS RELEASE 1 EXHIBIT 99.01 FOR IMMEDIATE RELEASE CONTACT: Fran Barsky Investor Relations Manager Cree, Inc. (T) 919-313-5397 (F) 919-313-5452 email: fran_barsky@cree.com CREE COMPLETES ACQUISITION OF ULTRARF SEMICONDUCTOR DIVISION OF SPECTRIAN CORPORATION Durham, NC, January 2, 2001 - Cree, Inc. (Nasdaq: CREE) today announced it completed the acquisition of UltraRF, formerly a division of Spectrian Corporation (Nasdaq: SPCT) on December 29, 2000. UltraRF designs, manufactures and markets a complete line of LDMOS and bipolar radio frequency (RF) power semiconductors, the critical component utilized in building power amplifiers for wireless infrastructure applications. UltraRF, which will operate as a wholly-owned Cree subsidiary, plans to expand its product offerings to include RF power semiconductors based on Cree's proprietary silicon carbide (SiC) technology. At closing, Cree's UltraRF subsidiary acquired the assets of the UltraRF business from Spectrian and assumed certain liabilities of the business. In exchange, Cree issued to Spectrian 1,815,402 shares of Cree common stock plus additional Cree shares worth $30 million. In addition, UltraRF entered into a two-year supply agreement with Spectrian under which Spectrian will purchase UltraRF products representing a significant portion of its anticipated needs. Cree, UltraRF and Spectrian also entered into a one-year development agreement under which Cree and UltraRF will work to develop high gain driver modules and high efficiency power modules based on LDMOS materials and high power MESFET components based on SiC materials. The acquisition will be accounted for as a purchase transaction. Neal Hunter, Chairman and CEO stated, "The combination of UltraRF and Cree enables us to offer customers a range of high performance RF power components. It gives us a broad technology platform, with LDMOS, SiC and gallium nitride (GaN) capabilities unmatched in the industry today, from which to develop new RF and microwave devices. The acquisition also strengthens Cree by adding a new source of product revenues and by providing additional design, packaging and distribution capabilities for our SiC-based products and the new SiC and GaN-based devices we have under development." North Carolina-based Cree, Inc. develops and manufactures semiconductor materials and devices based on silicon carbide (SiC), gallium nitride (GaN) and related compounds. The company's products include blue and green LEDs, RF power transistors for use in wireless infrastructure applications, SiC crystals used in the production of unique gemstones and SiC wafers sold for use in research and development. Cree has new product initiatives based on its experience in SiC and GaN-based semiconductors, including blue laser diodes for optical storage applications, high frequency microwave devices for radar and other communications systems, and power devices for power conditioning and switching. For more information on Cree, visit http://www.cree.com. This press release contains forward-looking statements involving risks and uncertainties that may cause actual results to differ materially from those indicated. Actual results may differ materially due to a number of factors, including our ability to integrate the operations of the combined companies successfully, the risk that the combined companies may not achieve the results expected, the risk that the costs of integrating the companies may be greater than expected, continued growth in wireless communication and pauses in such growth as are periodically experienced in the market, our ability to manufacture new or existing products in sufficient quantity or quality, worldwide economic conditions and other factors discussed in our report on Form 10-K for the year ended June 25, 2000 and subsequent reports filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----