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Joint Escrow Instructions

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Sectors: Manufacturing
Governing Law: California , View California State Laws
Effective Date: March 06, 2000
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EXHIBIT 10.13


AGREEMENT FOR OPTION TO AMEND SUBLEASE, AMENDMENT OF SUBLEASE
AND JOINT ESCROW INSTRUCTIONS


This AGREEMENT FOR OPTION TO AMEND SUBLEASE, AMENDMENT OF SUBLEASE AND JOINT ESCROW INSTRUCTIONS (the "AGREEMENT") is made and entered into as of this 6th day of March 2000, by and between 3333 Hillview Associates, LLC, a Delaware limited liability company or its assignee ("ASSOCIATES") and Watkins-Johnson Company, a California corporation ("W-J").


R E C I T A L S:


A. By that certain Lease dated September 1, 1972, as amended attached hereto as EXHIBIT A (the "MASTER LEASE"), the Board of Trustees of the Leland Stanford Junior University, a body having corporate powers under the laws of the State of California ("STANFORD") leased certain unimproved real property located in the City of Palo Alto, County of Santa Clara, consisting of approximately eight and four hundred thirty-nine-one thousandths (8.439) acres, which property is identified as Santa Clara County Assessor's Parcel Number 142-17-020, commonly known as 3333 Hillview Avenue, Building 6, and more particularly described in the Master Lease (the "LEASED LAND") to W J, predecessor in interest to Associates. By that certain Assignment of Lease dated October 31, 1975, WJ assigned its rights as tenant under the Master Lease to Morrco Properties Company, a California limited partnership ("MORRCO"), and by that certain Lease and Agreement, also dated October 31, 1975 (the "WJ SUBLEASE"), Morrco subleased the Leased Land with Building 6, back to WJ. A copy of the WJ Sublease is attached hereto as EXHIBIT B and incorporated herein by reference.


B. WJ caused to be constructed upon the Leased Land certain improvements consisting of a single light industrial building containing approximately one hundred six thousand (106,000) gross square feet (the "BUILDING").


C. By that certain Commercial Sub-Sublease (Building 6), that commenced November 1, 1997, as amended (the "SUBLEASE"), WJ has subleased portions of the Leased Land and the Building (the "SUBLEASED PREMISES") to W-J TSMD, INC., a California corporation, doing business as Stellex ("SUBTENANT" or "STELLEX"). A copy of the Sublease is attached hereto as EXHIBIT C and incorporated herein by reference.


D. By that certain Lease dated November 1, 1959, as amended (the "BUILDINGS 3/4/5 GROUND LEASE"), Stanford leased certain additional unimproved real property consisting of approximately sixteen and three hundred five-one thousandths (16.305) acres, located in the City of Palo Alto, County of Santa Clara, identified as Santa Clara County Assessor's Parcel Number 142-17-014, commonly known as 3333 Hillview Avenue, Buildings 3, 4, and 5, (the "BUILDINGS 3/4/5 PROPERTY"), to Kern County Land Company, a California corporation, predecessor in interest to WJ. By that certain Agreement for Assignment of Leasehold Interest, Sublease of Property, Leaseback of Real Property and Joint Escrow Instructions, dated September 30, 1999 (the "STANFORD LEASE ASSIGNMENT AGREEMENT"), between Stanford and W J, Stanford granted a license to WJ (the "STANFORD PROPERTY DRIVEWAY LICENSE"), on the terms and conditions set forth


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in the Stanford Lease Assignment Agreement, over the portion of the driveway described in EXHIBIT C-1 attached hereto and incorporated herein by reference (the "DRIVEWAY") located within the real property described in EXHIBIT C-2 attached hereto and incorporated herein by reference (the "STANFORD PROPERTY DRIVEWAY LAND"), and WJ granted a license to Stanford (the "LEASED LAND DRIVEWAY LICENSE"), on the terms and conditions set forth in the Stanford Lease Assignment Agreement, over the portion of the Driveway located within the Leased Land (the "LEASED LAND DRIVEWAY LAND").


E. Associates and Morrco have entered an agreement pursuant to which, at or before the Close of Escrow contemplated herein, Morrco will assign to Associates its interest in the WJ Sublease and the Building.


F. WJ and Associates desire to enter an agreement granting Associates the option to implement Amendment No. 2 (defined below), which provides, among other terms and conditions, for the term of the WJ Sublease to be shortened to the later of the Closing Date or October 31, 2000 (the "LEASE EXPIRATION DATE"), subject to the rights of Stanford under the Leased Land Driveway License, and the assignment by WJ to Associates of the Stanford Property Driveway License over the Stanford Property Driveway Land on the terms and conditions set forth in the Stanford Lease Assignment Agreement.


NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Associates and WJ hereby agree that the terms and conditions of this Agreement and the instructions to First American Title Guaranty Company ("ESCROW HOLDER") with regard to the escrow ("ESCROW") created pursuant hereto are as follows:


AGREEMENT:


1. CERTAIN BASIC DEFINITIONS. For purposes of this Agreement, the following terms shall have the following definitions:


(a) "BUSINESS DAY" means any day that is NOT (i) a Saturday, Sunday, (ii) a holiday as defined in the California Government Code, or (iii) an optional bank holiday as defined in Section 7.1 of the California Civil Code.


(b) "CLOSING DATE" means the date upon which the "CLOSE OF ESCROW" (as defined in Section 1(c) below) shall occur.


(c) "CLOSE OF ESCROW" means the date that the documents evidencing the transfers contemplated by this Agreement are recorded in the Official Records and/or are delivered to the parties entitled thereto.


(d) "ESCROW HOLDER" or "TITLE COMPANY" means First American Title Guaranty Company.


(e) "ESCROW HOLDER'S ADDRESS" means:


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Attention: Ms. Peg Larkin
First American Title Guaranty Company
1737 North First Street
San Jose, California 95112
Facsimile No.: (408) 451-7836
Telephone No.: (408) 451-7828


(f) "FINAL CLOSING DATE" shall have the meaning ascribed to it in Section 2(c) hereof.


(g) "PROPERTY" means the Leased Land, the Building and all other improvements on the Leased Land.


(h) "PURCHASE PRICE" means the sum of Twenty Eight Million Five Hundred Thousand Dollars ($28,500,000.00).


(i) "OFFICIAL RECORDS" means the official records maintained by the office of the County Recorder of Santa Clara, State of California.


(j) "OPENING OF ESCROW" shall have the meaning set forth in Section 4(a) below.


(k) "WJ'S ADDRESS" means:


Watkins-Johnson Company
Attn: Rainer Growitz
Stanford Research Park
3333 Hillview Avenue
Palo Alto, CA 94304-1204
Facsimile No.: (650) 813-2434
Telephone No.: (650) 813-2190


COPY TO:


Wray Thorne
Fox Paine & Company, LLC
950 Tower Lane, Suite 1150
Foster city, California 94404
Facsimile No. (650) 525-2056
Telephone No.: (650) 235-2075


Roy S. Geiger, Esq.
Irell & Manwell, LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071-3042


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(l) "ASSOCIATES' ADDRESSES" means:


3333 Hillview Associates, LLC
c/o Jeff Johnson
Ellman, Burke, Hoffman & Johnson
One Ecker, Suite 200
San Francisco, CA 94105
Facsimile No.: (415) 495-7587
Telephone No.: (41.5) 777-2727


cc: Steve Dostart
Dostart Development Co.
499 Hamilton Avenue, #140
Palo Alto, CA 94301
Facsimile No.: (650) 322-0333
Telephone No.: (650) 322-0777


(m) "HAZARDOUS MATERIALS" means any hazardous or toxic materials, substances or wastes, as so defined or classified as of the date of execution of this Agreement, including, without limitation: (i) those materials identified in Sections 66680 through 66685 and Sections 66693 through 66740 of Title 22 of the California Administrative Code, Division 4, Chapter 30, as amended from time to time, (ii) those materials defined in Section 255010 of the California Health and Safety Code, (iii) any materials, substances or wastes which are toxic, ignitable, corrosive or reactive and which are regulated by any local governmental authority, any agency of the State of California or any agency of the United States Government, (iv) asbestos, (v) petroleum and petroleum based products, (vi) urea formaldehyde foam insulation, (vii) polychlorinated biphenyls (PCBs), and (viii) freon and other chlorofluorocarbons.


(n) "SITE CLOSURE CERTIFICATION" means and shall collectively refer to site closure certification(s) concerning the Property, if any, that WJ and/or Stellex is required to obtain from the City of Palo Alto Fire Department (the "CERTIFYING AGENCY") before possession of the Property, and/or any portions thereof, may legally be surrendered by WJ.


2. OPTION TO AMEND SUBLEASE; CONSIDERATION.


(a) GRANT OF OPTION. WJ hereby grants Associates the option ("OPTION") to amend the WJ Sublease pursuant to the terms and conditions of that certain Amendment No. 2 to Lease (Short Term) in the form and on the terms and conditions of EXHIBIT D attached hereto and incorporated herein by reference ("SHORT TERM AMENDMENT TO LEASE").


(b) INITIAL OPTION TERM AND EXTENDED OPTION TERMS. The option term (the "INITIAL OPTION TERM") shall commence on the date on which WJ receives Amendment No. 1 to Lease in the form and on the terms and conditions of EXHIBIT E attached hereto and incorporated herein by reference ("Long Term Amendment to Lease"), duly executed by Morrco, and unless duly exercised prior thereto pursuant to Section 2(c) hereof or duly extended prior thereto pursuant to this Section 2(b), shall expire on May 7, 2000 (the "INITIAL OPTION EXPIRATION DATE").


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The Long Term Amendment to Lease shall be effective and enforceable against Morrco and W-J upon execution and delivery thereof pursuant to this Section 2(b). Promptly on receipt by WJ of the Long Term Amendment to Lease duly executed by Morrco, WJ shall execute and deliver to Morrco and Associates a counterpart copy of the Long Term Amendment to Lease. Associates may extend the Initial Option Term beyond the Initial Option Expiration Date to a date no later than the Final Closing Date by paying WJ the Cash Option Consideration on or before (i) the Initial Option Expiration Date in order to extend the Initial Option Term, and (ii) the Extended Option Expiration Date for each Extended Option Term. As used herein, the "EXTENDED OPTION EXPIRATION DATE" for an Extended Option Term shall mean the last day of the Extended Option Term. As used herein, "EXTENDED OPTION TERM" shall mean the period of time beyond the Initial Option Term or any Extended Option Term for which Associates has paid WJ Cash Option Consideration on or before the Initial Option Expiration Date or the Extended Option Expiration Date, as the case may be. As used herein, "OPTION EXPIRATION DATE" shall mean the date that this Option expires without exercise on the expiration of the Initial Option Term or Extended Option Term, as applicable. As used herein, the term "CASH OPTION CONSIDERATION" shall mean an amount equal to (x) $100,000.00 for each calendar month beyond the Initial Option Period through October 31, 2000, and (y) $100,000.00 for each calendar month from November 1, 2000 through the Final Closing Date, if the Option Extension Conditions have been fulfilled on or before October 31, 2000 or any later Extended Option Expiration Date, as the case may be, or $250,000.00 if the Option Extension Conditions have not been so fulfilled. Cash Option Consideration for the period May 8, 2000 through May 31, 2000 shall be $100,000 and otherwise the Cash Option Consideration shall be prorated for any periods less than a full calendar month. As an example, and not as a limitation, if Associates fails to pay WJ at least $100,000.00 on or before May 7, 2000, the Option shall expire on May 7, 2000 unless on or before such date, Associates exercises the Option. If Associates pays $300,000.00 on or before May 7, 2000, the Extended Option Expiration Date will be August 7, 2000. If Associates then fails to exercise the Option on or before August 7, 2000 or pay additional Cash Option Consideration by such date, the Option will expire on such date. If the Option shall expire without being exercised, WJ shall retain all consideration for the Option and shall have no further obligation to implement the Short Term Amendment to Lease nor any further obligation hereunder and Associates shall have no further rights hereunder. As used herein, the term "OPTION EXTENSION CONDITIONS" shall mean either that: Associates shall have delivered to WJ each of the following: (I) a commitment signed by and binding on an institutional lender to provide financing for the acquisition of the Leased Land in an amount equal to at least the amount of the Purchase Price, subject to customary conditions; and (II) one or more leases satisfying the leasing commitments of the lender described in Clause (I) or a letter from such lender stating that such leasing requirements have been satisfied; and (III) evidence that the Palo Alto Architectural Review Board and Stanford have reviewed and approved the design for the improvements to be constructed on the Leased Land by Associates following the transfer of the Leased Land to Associates. All Cash Option Consideration actually received by WJ shall be applicable to the Purchase Price.


(c) EXERCISE OF OPTION. Associates may exercise the Option to implement Short Term Amendment to Lease at any time on or before the Option Expiration Date. Associates shall notify WJ in writing (the "ASSOCIATES PURCHASE Notice") of its exercise of the Option on or before the Option Expiration Date. In the Associates Purchase Notice, Associates shall specify the date Associates intends to deposit into Escrow (as defined herein) the net


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amount of the Purchase Price due WJ (the "ESTIMATED CLOSING DATE"); however, in no event shall the Estimated Closing Date be earlier than five (5) calendar days after delivery to WJ of the Associates Purchase Notice nor later than the Final Closing Date. Associates shall deposit in escrow the net amount of the Purchase Price due WJ on or before the Final Closing Date. As used herein, the term "FINAL CLOSING DATE" shall mean the earlier to occur of (I) December 31, 2000 as extended, if at all, by the ARB Extension and/or the Possession Extension, and (II) ten (10) calendar days following the Option Expiration Date immediately following the delivery of the Option Exercise Notice to WJ. The "ARB Extension" shall mean the number of days (not exceeding sixty (60)) beyond the earlier of (x) August 15, 2000 or (y) ninety (90) days following application for such approval, that the Palo Alto Architectural Review Board (referred to in clause (III) of Subparagraph (b) above) approves the application submitted by Associates and referred to in said clause (III).


(d) POSSESSION EXTENSION. If delivery of possession of the Property free of the continued possession of Stellex and/or WJ is a condition precedent to the funding of the Purchase Price at Close of Escrow at Close of Escrow and if Associates is otherwise prepared to complete Close of Escrow and if Stellex and/or WJ have not vacated the Property (which shall be conclusively established if confirmed in writing in a letter or certificate addressed to Associates by the entity whose possession is in question), Associates may give written notice thereof to WJ ("Possession Notice"). Any payments of Cash Option Consideration that would otherwise come due after the date of the Possession Notice shall not be required. Upon vacation of the Property by WJ and Stellex, WJ shall give written notice thereof to Associates ("Vacation Notice"). The term "Possession Extension" shall mean the number of days from the Possession Notice to a date ten (10) days following the Vacation Notice (but excluding any such period preceding October 31, 7000). Following vacation of the Property by Stellex and/or WJ, Associates shall allow Stellex and/or WJ access to the Property in order to comply with the obligations of Lessee under the Short Term Amendment to Lease.


(e) If Associates fails timely to exercise the Option in the manner prescribed in this Section 2(c), or fails timely to consummate the transaction contemplated by this Agreement following the exercise of the Option, WJ shall have no further obligation to implement the Short Term Amendment to Lease, the Long Term Amendment to Lease shall remain in full force and effect (subject to the Termination Option contained therein) and WJ shall retain all Cash Option Consideration theretofore received by WJ.


3. PURCHASE PRICE; PAYMENT OF PURCHASE PRICE. If Associates exercises the Option granted hereunder, Associates shall pay the Purchase Price to WJ at the Close of Escrow. The Purchase Price, plus Escrow Holder's estimate of Associates' share of closing costs and charges payable by Associates pursuant to this Agreement, shall be paid by Associates in cash no later than 5:00 p.m. Pacific Standard Time on the Final Closing Date.


4. ESCROW.


(a) OPENING OF ESCROW. For purposes of this Agreement, the Escrow shall be deemed opened on the date Escrow Holder shall have received a fully executed original or originally executed counterparts of this Agreement from Associates and WJ (the "OPENING OF


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ESCROW"). Associates and WJ agree to execute, deliver and be bound by any reasonable supplemental escrow instructions of Escrow Holder or other instruments as may reasonably be required by Escrow Holder in order to consummate the transactions contemplated by this Agreement. Any such supplemental instructions shall not conflict with, amend or supersede any portions of this Agreement unless expressly consented or agreed to in writing by Associates and WJ.


(b) CLOSE OF ESCROW. The Close of Escrow shall occur not later than the Final Closing Date.


5. CONDITION OF TITLE. Associates shall accept the Short Term Amendment to Lease subject to the following matters of record ("APPROVED CONDITIONS OF TITLE"):


(a) Any lien to secure payment of general and special real property taxes and assessments, not delinquent (collectively, "SPECIAL TAXES");


(b) All exceptions which are disclosed by the Preliminary Report Number 517177 ("PRELIMINARY REPORT") dated as of September 1, 1999 at 7:30 a.m. prepared by Title Company. A copy
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