0000950147-95-000110.txt : 19950811 0000950147-95-000110.hdr.sgml : 19950811 ACCESSION NUMBER: 0000950147-95-000110 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERPROBE CORP CENTRAL INDEX KEY: 0000725259 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 860312814 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11370 FILM NUMBER: 95560845 BUSINESS ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 6029677885 MAIL ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 10QSB 1 FORM 10-QSB FORM 10-Q SB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: June 30, 1995 Commission File Number: 0-11370 CerProbe Corporation -------------------------------------------------------------------------------- (Exact Name of Registrant As Specified In Its Charter) Delaware 86-0312814 -------------------------------------------------------------------------------- (State of Incorporation) (IRS E.I.N.) 600 South Rockford Drive, Tempe, Arizona 85281 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (602) 967-7885 -------------------------------------------------------------------------------- (Registrant's Telephone Number Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months, (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes X No --- ---- 4,069,517 Shares of Common Stock issued and outstanding as of July 25, 1995 -------------------------------------------------------------------------------- (Number of Shares of Common Stock Outstanding) Traditional Small Business Disclosure Format (check one): Yes No X ---------- ---------- This Report Consists of 14 Pages CERPROBE CORPORATION -------------------- (INDEX) Page Number ----------- Part I. Financial Information Balance Sheets - at June 30, 1995 and December 31, 1994 3 Statements of Operations and Retained Earnings (Deficit) - Six and Three Months Ended June 30, 1995 and June 30, 1994 4 Statements of Cash Flows - Six Months Ended June 30, 1995 and June 30, 1994 5 Notes To Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II Other Information 12 CERPROBE CORPORATION BALANCE SHEETS June 30, 1995 December 31 (unaudited) 1994 ASSETS -------------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 1,100,819 $ 738,319 Trade accounts receivable, net of allowance for doubtful accounts (Notes B & D) 3,248,569 2,201,712 Inventories (Notes C & D) 2,246,758 1,693,198 Deferred income taxes 45,879 93,974 ------------ ------------ TOTAL CURRENT ASSETS 6,642,025 4,727,203 ------------ ------------ PROPERTY AND EQUIPMENT (Notes D and E) Manufacturing tools and equipment 3,957,916 3,056,849 Office furniture and equipment 1,563,388 839,521 Leasehold improvements 500,389 439,894 Construction in progress 110,512 41,620 Patents and technology 116,875 0 Computer software 39,775 39,775 ------------ ------------ 6,288,855 4,417,659 Less accumulated depreciation and amortization (2,922,734) (2,271,579) ------------ ------------ 3,366,121 2,146,080 ------------ ------------ GOODWILL, net of amortization 2,056,024 0 OTHER ASSETS 96,050 142,090 ------------ ------------ TOTAL ASSETS $ 12,160,220 $ 7,015,373 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable $ 838,543 $ 443,559 Accrued payroll and related taxes 644,743 204,297 Accrued income taxes 219,701 376,442 Other accrued expenses 174,619 32,907 Grant/Loan Scotland 10,925 3,602 Deferred revenue 37,874 46,656 Current portion of long-term debt (Note E) 302,799 100,312 ------------ ------------ TOTAL CURRENT LIABILITIES 2,229,204 1,207,775 ------------ ------------ DEFERRED RENT 26,146 35,374 LONG TERM DEFERRED REVENUE 48,889 58,554 LONG TERM DEBT (Note E) 429,315 195,716 SUBORDINATED DEBENTURES (Note E) 595,000 595,000 STOCKHOLDERS' EQUITY: Common stock, par value $.05 per share: Authorized, 10,000,000 shares; Issued and outstanding 4,009,517 and 3,223,351 200,476 161,167 Additional paid-in-capital 6,386,530 3,685,432 Foreign currency translation 1,059 12,138 Retained earnings 2,243,601 1,064,217 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 8,831,666 4,922,954 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,160,220 $ 7,015,373 ============ ============ CERPROBE CORORATION STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) (Unaudited) Six Months Ended Three Months Ended June 30 June 30 ----------------------- ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- NET SALES $11,134,194 $6,734,286 $6,171,529 $3,395,927 COST OF GOODS SOLD 5,839,115 3,797,828 3,148,314 1,898,221 ----------- ---------- ---------- ---------- GROSS MARGIN 5,295,079 2,936,458 3,023,215 1,497,706 ----------- ---------- ---------- ---------- EXPENSES: Engineering and product development 329,323 203,988 208,186 109,471 Selling, general and administrative 2,912,433 1,549,274 1,763,010 813,309 ----------- ---------- ---------- ---------- 3,241,756 1,753,262 1,971,196 922,780 ----------- ---------- ---------- ---------- OPERATING INCOME 2,053,323 1,183,196 1,052,019 574,926 ----------- ---------- ---------- ---------- OTHER REVENUE AND (EXPENSES): Interest expense (83,934) (71,771) (47,466) (36,075) Other income 114,995 24,408 52,096 15,578 ----------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 2,084,384 1,135,833 1,056,649 554,429 PROVISION FOR INCOME TAXES 905,000 390,000 442,000 181,000 ----------- ---------- ---------- ---------- NET INCOME 1,179,384 745,833 614,649 373,429 DIVIDENDS PAID (89,477) (89,477) RETAINED EARNINGS (DEFICIT), beginning of period 1,064,217 (59,129) 1,628,952 313,275 ----------- ---------- ---------- ---------- RETAINED EARNINGS (DEFICIT), end of period $2,243,601 $597,227 $2,243,601 $597,227 ========== ========== ========== ========= NET INCOME PER COMMON EQUIVALENT SHARE PRIMARY: NET INCOME PER SHARE $0.31 $0.23 $0.15 $0.11 ========== ========== ========== ========= WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 3,815,297 3,270,681 4,194,089 3,299,604 ========== ========== ========== ========= FULLY DILUTED: NET INCOME PER SHARE $0.26 $0.19 $0.13 $0.09 ========== ========== ========== ========= WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,499,737 3,952,929 4,858,662 3,952,929 ========== ========== ========== ========= CERPROBE CORPORATION STATEMENTS OF CASH FLOW (UNAUDITED) Six months ended June 30 --------------------------- 1995 1994 --------- -------- OPERATING ACTIVITIES: Net income $ 1,179,384 $ 745,833 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 167,230 189,687 Gain on sale of fixed assts 6,444 (50) Deferred income taxes 48,095 Changes in operating assets and liabilities: Trade accounts receivable (276,105) (533,898) Inventories (402,893) (232,179) Other assets (62,671) 31,263 Trade accounts payable and other accrued expenses 167,028 226,259 Accrued payroll and related taxes 342,325 17,676 Accrued income taxes (156,741) 264,180 Deferred rent and other revenue (20,352) (13,539) ----------- ----------- Net cash provided by operating activities 991,744 695,232 ----------- ----------- INVESTING ACTIVITIES: Capital expenditures (573,015) (728,123) Cost incurred in Fresh Test Technology acquisition (402,865) Cash acquired in purchase of Fresh Test Technology 321,167 Proceeds from sale of fixed assets 43,613 50 ----------- ----------- Net cash used in investing activities: (611,100) (728,073) ----------- ----------- FINANCING ACTIVITIES: Dividends paid (89,477) Proceeds from issuance of long-term debt (88,983) Principal payments on long-term debt and capital lease (95,582) Net proceeds from issuance of common stock 77,438 6,379 ----------- ----------- Net cash used in financing activities (18,144) (172,081) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 362,500 (204,922) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 738,319 509,446 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,100,819 304,524 =========== =========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Property acquired under capital lease $ 266,455 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION : Interest paid $ 69,311 $ 58,277 =========== =========== Income taxes paid $ 1,060,476 $ 101,817 =========== =========== Issuance of stock for purchase of assets and assumption of liabilities of Fresh Test Technology $ 2,662,969 =========== =========== CERPROBE CORPORATION NOTES TO FINANCIAL STATEMENTS PERIOD ENDING JUNE 30, 1995 A. NOTE TO FINANCIAL STATEMENT (UNAUDITED) The balance sheet as of June 30, 1995, the statements of operations for the six and three month periods ended June 30, 1995 and June 30, 1994, and the statements of cash flows for the six month periods ended June 30, 1995 and June 30, 1994 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1994 Annual Report. The results of operations of the interim periods are not necessarily indicative of the results to be obtained for the entire year. B. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts at June 30, 1995 and December 31, 1994 was $69,000 and $23,000, respectively. C. INVENTORIES Inventories are stated at the lower of cost (determined on the first-in, first-out method) or market and consist of the following: June 30, December 31, 1995 1994 ---------- ------------- Raw Materials $1,115,197 $777,199 Work-In-Process 1,233,561 967,999 Reserve for Obsolete Inventory (102,000) (52,000) ------------ ----------- Total $2,246,758 $1,693,198 ============ =========== D. NOTES PAYABLE On June 12, 1995, CerProbe Corporation (the "Company") renewed a loan agreement with First Interstate Bank. The loan agreement provides up to $750,000 in revolving credit for accounts receivable financing. The revolving credit agreement expires April 27, 1996. The revolving credit agreement was collaterized by accounts receivable, inventories, equipment, contract rights and intangibles. At June 30, 1995, there was no amount outstanding under this agreement. As of June 12, 1995, the interest rate under the revolving credit agreement is 0.25 percent above the First Interstate Bank index rate. The index rate as of June 30, 1995 was 9.00%. On April 3, 1995, due to the acquisition of Fresh Test Technology, the Company acquired three notes payable. One note is for an exclusive license for probe card technology which provides for monthly payments of $2,500 per month. At June 30, 1995 the outstanding balance was $22,500. The other notes are payable to a former officer and director of Fresh Test Technology. At June 30, 1995 the outstanding balance was $100,303.79. These two notes were paid in full on July 17, 1995. E. LONG-TERM DEBT AND COMMITMENTS In March and April 1991, the Company issued $1,000,000 in aggregate principal amount of Convertible Subordinated Debentures. The Debentures are convertible into shares of the Company's Common Stock at a conversion price equal to $1.00 per share, subject to adjustment. To assist the Company in meeting the minimum stockholders' equity requirement for listing on NASDAQ, certain holders of the Debentures agreed to convert $360,000 in principal amount of the Debentures into 360,000 shares of the Company's Common Stock in October 1992. On September 3, 1993, $5,000 in principal amount of the Debentures was converted into 5,000 shares of the Company's Common Stock. On September 21, 1994, an additional $40,000 in principal amount of the Debentures was converted into 40,000 shares of the Company's Common Stock. Accordingly, $595,000 in principal amount of the Debentures was outstanding at June 30, 1995, $495,000 of which is due in December 1996 ($480,000 of which bears interest at 12 1/2% and $15,000 of which bears interest at 25%, payable semi-annually in June and December of each year) and the remaining $100,000 of which is due in March 1996 and bears interest at 25% payable quarterly in January, April, July and October of each year. The proceeds from the sale of the Debentures were used by the Company to refinance $440,000 of short term indebtedness, purchase capital equipment, and provide additional working capital. In May 1993, the Company signed a Lease Agreement with Norwest Equipment Finance, Inc. The agreement provided up to $200,000 on open credit for a term of 36 months for equipment leasing. The interest rate is 7.785%. In accordance with this agreement, in 1993, various manufacturing equipment with an aggregate cost of $160,798 was leased from Norwest Equipment Finance, Inc. The long term portion of the Norwest Equipment Finance, Inc. leases was $7,224 on June 30, 1995. In December 1994, the Company re-negotiated the equipment leasing arrangement with Norwest Equipment Finance, Inc. in the aggregate amount of up to $500,000. The lease term varies from 36 months to 60 months depending on the equipment leased. Pursuant to the lease, the Company is required to make monthly lease payments together with interest at a rate fixed at the obligation of the lease with respect to any equipment. As of June 30, 1995, the Company had leased no equipment pursuant to this new arrangement. 7 In June 1994, the Company signed a Lease Agreement with First Interstate Bank of Arizona. The agreement provided up to $2,000,000 on open credit for a term of 11 months for equipment leasing. In accordance with this agreement, on March 15, 1995, various manufacturing equipment with an aggregate cost of $95,200 was leased from First Interstate Bank of Arizona. The interest rate is 9.18%. The long term portion of the First Interstate Bank of Arizona lease was $74,770 on June 30, 1995. In addition, on April 11, 1995, various manufacturing equipment with an aggregate cost of $171,255 was leased from First Interstate Bank of Arizona. The interest rate is 8.96%. The long term portion of the First Interstate Bank of Arizona lease was $127,934 on June 30, 1995. In June 1995, the Company renewed the Lease Agreement with First Interstate Bank of Arizona. The new agreement provides up to $1,000,000 on open credit for a term of 11 months for equipment leasing. As of June 30, 1995, the Company had leased no equipment pursuant to this new arrangement. In August 1994, the Company signed a Lease Agreement with PFC, Inc. The agreement provided up to $1,000,000 on open credit for a term of 11 months for equipment leasing. The interest rate is 8.777%. In accordance with this agreement, on August 9, 1994, various manufacturing equipment with an aggregate cost of $190,233 was leased from PFC, Inc. The long term portion of the PFC, Inc. lease was $127,934 on June 30, 1995. On July 18, 1995, the Company signed a new building lease for the Santa Clara, California facility for seven years and one month commencing on August 1, 1995 and ending on August 30, 2002. On June 30, 1995, the Company signed a new building lease for the Westboro, Massachusetts facility for five years commencing on July 1, 1995 and ending June 30, 2000. On June 29, 1995, the Company signed a month-to-month lease for the Colorado customer service office. The lease provides that either the landlord or the tenant, without cause or approval of the other party, may terminate this lease upon 30 days written notice. On June 23, 1995, the Company signed a letter of intent to lease the building for the Singapore facility for three years commencing on September 3, 1995 and ending on September 2, 1998. Pursuant to the acquisition of Fresh Test Technology on April 3, 1995, the Company acquired a building lease for the Chandler, Arizona facility for two years commencing on November 1, 1993 and ending October 31, 1995. Additional building space was leased for the Chandler, Arizona facility for five years commencing on December 1, 1993 and ending on November 30, 1998. Additional building space was leased for three years commencing on October 8, 1990 and ending on October 7, 1993. This lease was amended for an additional three years commencing on November 3, 1992 and ending on November 2, 1995. This facility is currently subleased to another tenant for twenty months commencing on February 1, 1994 and ending on October 31, 1995. F. PRO FORMA DATA - FRESH TEST TECHNOLOGY ACQUISITION Six Months Ended Three Months Ended June 30 Ended June 30 ----------------- --------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net sales 12,637,352 8,444,229 6,171,529 2,793,122 Net income (loss) 1,256,310 557,089 614,649 371,945 Primary earnings per share .26 .14 .15 .11 Fully diluted earnings .23 .12 .13 .09 per share MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Since its inception in 1976, the Company has engaged primarily in developing, manufacturing and marketing electronic testing products such as probe cards and automated testing equipment interface products. Manufacturing and repair operations are conducted at the Company's corporate headquarters in Tempe, Arizona and at its regional facilities in Santa Clara, California, Austin, Texas and Westboro, Massachusetts. Product sales are made both by Company sales people and by distributors. On February 9, 1994, the Company established CerProbe Europe, Limited, a wholly-owned subsidiary of the Company. The operations of CerProbe Europe are located in Scotland and are similar to those of its parent. On April 3, 1995, the Company completed the acquisition of Fresh Test Technology Corporation. In connection with the acquisition, Cerprobe issued 712,500 shares of its common stock to the shareholders of Fresh Test Technology Corporation. Fresh Test Technology, based in Chandler, Arizona, was founded in 1987 and specializes in the design and manufacturing of controlled impedance, high frequency, ATE interface boards and systems for testing digital, mixed signals and analog integrated circuits. This acquisition will allow the combination of product lines and the consolidation of engineering expertise to provide customers with a single source for their wafer test fixturing needs. SECOND QUARTER OF 1995 AND 1994 COMPARISONS - RESULTS OF OPERATIONS Revenues for the second quarter of 1995 were $6,171,529 compared with $3,395,927 for the second quarter of 1994, an increase of 82 percent. Revenues for the first six months of 1995 were $11,134,194 compared with $6,734,826 for the comparable period last year, an increase of 65 percent. Income before income taxes for the second quarter was $1,056,649 compared with $554,929 for the second quarter of 1994, an increase of 91%. Income before income taxes for the fist six months of 1995 were $2,084,384 compared with $1,135,833 for the comparable period last year, an increase of 84 percent. Net income for the second quarter of 1995 was $614,649 compared with $373,429 for the second quarter of 1994, an increase of 65 percent. Net income for the first six months of 1995 were $1,179,384 compared with $745,833 for the comparable period last year, an increase of 58 percent. Gross margin for the six months of 1995 was $5,295,079 compared with $2,936,458 for the comparable period last year. Gross margin as a percentage of sales increased from 43.60 percent in 1994 to 47.56 percent in 1995. The increase in gross margin resulted primarily from the increase in net sales and the positive effect of inventory and direct labor costs being spread over a larger revenue base. Total selling, general and administrative (SG&A) for the six months of 1995 was $3,241,756 compared with $922,780 for the comparable period last year. Total SG&A as a percentage of sales increased from 27.17 percent in 1994 to 29.12 percent in 1995. The increase in total SG&A resulted primarily from the increase of fixed costs due to the Company's continued facility expansion and acquisition of Fresh Test Technology. The Company has used all of its available loss carryforwards and has begun to feel the full impact of the income tax rates. Additionally, for the six months ended June 30, 1995, the Company's full service manufacturing facility in Scotland experienced a net loss of $310,249, with no resulting tax benefit, which translates into a $.07 primary and $.06 fully diluted effect on earnings per share for the year. The Scottish facility is expected to continue to have some negative impact on earnings through the third quarter 1995, but less than that felt in 1994. The Company's wholly-owned subsidiary, Cerprobe Europe Ltd., continued production, training and the build up of inventory in the second quarter. Scotland accounted year-to-date for revenues of $156,759. Capital and training grants from the local Economic Development Agency helped defray start up costs for this facility and are being recognized as income over 36 months. LIQUIDITY AND CAPITAL RESOURCES On June 12, 1995, the Company signed a Loan Agreement with First Interstate Bank of Arizona. First Interstate's Loan Agreement provides up to $750,000 in revolving credit for accounts receivable financing. The interest rate on the revolving credit agreement is 0.25 percentage points above the First Interstate index rate. The Company entered into an equipment financing arrangement with Norwest Equipment Finance in May 1993. The Company has leased equipment valued at $160,798 for a term of 36 months. The interest rate is 7.785%. At the end of the lease term, the Company will purchase the equipment for $1.00. The Company entered into an equipment financing arrangement with First Interstate in June 1994. The Company has leased equipment valued at $95,200 for a term of 60 months. The interest rate is 9.18%. At the end of the lease term, the Company will purchase the equipment for $1.00. On June 12, 1995, the Company renewed the Lease Agreement with First Interstate Bank of Arizona. No equipment has been leased pursuant to this new arrangement. The Company entered into an equipment financing arrangement with PFC, Inc. in August 1994. The Company has leased equipment valued at $190,233 for a term of 60 months. The interest rate is 8.777%. At the end of the lease term, the Company will purchase the equipment for $1.00. On July 7, 1994, CerProbe Europe Ltd. signed a month-to-month building lease for the East Kilbride, Scotland facility. In November 1994, the Company approved a formal lease for five years commencing on August 28, 1994 and ending August 27, 1999. The lease provides that unless the tenant gives a six week notice prior to the end of the term, the lease will continue to run year to year. In 1994, the Company received a grant from Locate in Scotland, an economic development agency of the British government. The Company has already met 2 of the 3 tiers with respect to the grant and has received pound 70,000 (approximately $113,000 at the exchange rate in effect on June 30, 1995). The receipt of the funds pursuant to the grant has helped the Company defray start-up expenses in connection with establishing this facility. PART II - OTHER INFORMATION Item 1 Legal Proceedings a. None Item 2 Changes in Securities a. None Item 3 Defaults on Senior Securities a. None Item 4 Submission of Matters to Vote of Security Holders a. The annual meeting of the stockholders of the Company was held on June 27, 1995 in Tempe, Arizona. The table below briefly describes the proposals and results from the annual meeting of the stockholders. 1. Election of Directors For Against Withheld Abstain --- ------- -------- ------- Ross J. Mangano 3,065,774 0 2,336 0 C. Zane Close 3,065,574 0 2,536 0 Kenneth W. Miller 2,944,724 0 123,386 0 Donald F. Walter 2,936,524 0 131,586 0 William A. Fresh 2,944,524 0 123,586 0 For Against Withheld Abstain --- ------- -------- ------- 2. Proposal to Approve 2,079,858 132,530 0 9,915 the Company's 1995 Stock Option Plan 3. For Against Withheld Abstain --- ------- -------- ------- Ratify Appointment 3,065,394 598 0 2,118 of KPMG Peat Marwick as Independent Auditors of the Company for the Fiscal Year ending December 31, 1995. Item 5 Other Information a. Appointment of Officers and Directors 1. On April 7, 1995, the Company appointed Robert K. Bench as Chief Financial Officer. 2. On April 7, 1995, the Company appointed William A. Fresh as a Director. Item 6 Exhibits and Reports on Form 8K a. Exhibits required by Item 601 of Regulation S-K 1. Lease Agreement between the Company and Realtec Properties I, L.P. dated July 17, 1995. 2. Lease Agreement between the Company and East Point Realty Trust dated June 30, 1995 3. Amendment to Loan Agreement between the Company and First Interstate Bank of Arizona, N.A. dated April 30, 1995 and related Promissory Note. 4. Amendment to Master Lease Agreement between the Company and First Interstate Bank of Arizona, N.A. dated April 30, 1995. 5. Letter of intent between the Company and Technology Parks PTE, LTD dated June 23, 1995 to lease a building for the Singapore facility. b. Reports on Form 8-K 1. Form 8-K/A2 filed on April 3, 1995 to report the acquisition of Fresh Test Technology. The following financial statements were filed with the form 8-K/A2: Pro Forma Condensed Combined Statements of Earnings (unaudited) for Year Ended December 31, 1994. Pro Forma Condensed Combined Balance Sheet (unaudited) as of March 31, 1995. Pro Forma Condensed Combined Statement of Earnings (unaudited) for the Three Months Ended March 31, 1995. Notes to Pro Forma Condensed Combined Financial Statements. Fresh Test Technology Corporation Financial Statements as of March 31, 1994 and 1993. 2. Form 8-K filed on April 19, 1995 to report a change in certifying accountants. KPMG Peat Marwick was appointed as the Company's independent auditors for the fiscal year 1995. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CERPROBE CORPORATION /s/ C. Zane Close --------------------- C. Zane Close President, Chief Executive Officer July 25, 1995 EX-1 2 LEASE AGREEMENT NET LEASE AGREEMENT (Single Tenant) by and between CERPROBE CORPORATION, a Delaware Corporation ("Tenant") and REALTEC PROPERTIES I, L.P., a California Limited Parntership ("Landlord") TABLE OF CONTENTS 1. Summary of Lease Provisions............................................. 1 1.13 Summary Provisions in General................................ 2 2. Property Leased......................................................... 2 2.1 Premises..................................................... 2 2.2 Improvements................................................. 2 2.3 Acceptance of Premises....................................... 3 3. Term.................................................................... 3 3.1 Commencement Date............................................ 3 3.2 Delay of Commencement Date................................... 4 3.3 Early Occupancy.............................................. 4 3.4 Tenant to Physically Occupy Premises......................... 4 3.5 Option to Extend Lease Term.................................. 5 4. Rent.................................................................... 5 4.1 Rent......................................................... 5 4.2 Late Charge.................................................. 5 4.3 Additional Rent.............................................. 6 4.4 Cost of Living Adjustment.................................... 6 4.5 Rent During Extended Term.................................... 6 5. Security, Deposit....................................................... 7 6. Use of Premises......................................................... 8 6.1 Permitted Uses............................................... 8 6.2 Tenant to Comply with Legal Requirements..................... 8 6.3 Prohibited Uses.............................................. 8 6.4 Hazardous Materials.......................................... 9 7. Taxes.................................................................. 10 7.1 Personal Property Taxes..................................... 10 7.2 Other Taxes Payable Separately by Tenant.................... 10 7.3 Common Taxes................................................ 11 (a) Definition of Taxes..................................... 11 (b) Operating Expense....................................... 11 8. Insurance; Indemnity; Waiver........................................... 12 8.1 Insurance by Landlord....................................... 12 (a) Property Insurance...................................... 12 (b) Liability Insurance..................................... 12 (c) Other................................................... 13 8.2 Insurance by Tenant......................................... 13 (a) Personal Property Insurance............................. 13 (b) Liability Insurance..................................... 13 (c) Other................................................... 13 (d) Form of the Policies.................................... 13 8.3 Failure by Tenant to Obtain Insurance....................... 13 8.4 Indemnification............................................. 13 8.5 Claims by Tenant............................................ 13 8.6 Mutual Waiver of Subrogation................................ 14 9. Utilities.............................................................. 14 10. Repairs and Maintenance................................................ 14 10.1 Landlord's Responsibilities................................. 14 10.2 Tenant's Responsibilities................................... 14 11. Common Area............................................................ 15 11.1 In General.................................................. 15 11.2 Maintenance by Landlord..................................... 15 12. Operating Expenses..................................................... 16 12.1 Definition.................................................. 16 12.2 Payment of Operating Expenses by Tenant..................... 16 12.3 Exclusions From Common Area Charges......................... 17 (a) Losses Caused by Others and Construction Defects........ 17 (b) Condemnation Costs...................................... 17 (c) Reimbursable Expenses................................... 17 (d) Reserves................................................ 17 (e) Mortgages............................................... 17 (f) Hazardous Materials..................................... 17 (g) Management.............................................. 17 (h) Capital Improvements Required by Law.................... 17 13. Alterations and Improvements........................................... 17 13.1 In General ................................................. 18 13.2 Removal Upon Lease Termination.............................. 18 13.3 Landlord's Improvements..................................... 18 14. Default and Remedies................................................... 18 14.1 Events of Default........................................... 18 14.2 Remedies.................................................... 19 14.2.1 Termination......................................... 19 14.2.2 Continuance of Lease................................ 20 15. Damage or Destruction.................................................. 20 15.1 Definition of Terms......................................... 20 15.2 Insured Casualty............................................ 21 15.2.1 Rebuilding Required................................. 21 15.2.2 Landlord's Election................................. 21 15.2.3 Continuance of Lease................................ 21 15.3 Uninsured Casualty.......................................... 21 15.3.1 Landlord's Election................................. 21 15.3.2 Tenant's Ability to Continue Lease.................. 21 15.4 Tenant's Election........................................... 21 15.5 Damage or Destruction Near End of Lease .................... 22 15.6 Termination of Lease........................................ 22 15.7 Abatement of Rentals........................................ 22 15.8 Liability for Personal Property............................. 22 15.9 Waiver of Civil Code Remedies............................... 22 16. Condemnation........................................................... 22 16.1 Definition of Terms......................................... 22 16.2 Rights...................................................... 23 16.3 Total Taking................................................ 23 16.4 Partial Taking.............................................. 23 17. Liens.................................................................. 23 17.1 Premises to Be Free of Liens................................ 23 17.2 Notice of Lien; Bond........................................ 23 18. Landlord's Right of Access to Premises................................. 24 19. Landlord's Right to Perform Tenant's Covenants......................... 24 20. Lender Requirements.................................................... 24 20.1 Subordination............................................... 24 20.2 Subordination Agreements.................................... 24 20.3 Approval by Lenders......................................... 25 20.4 Attornment.................................................. 25 20.5 Estoppel Certificates and Financial Statements.............. 25 (a) Delivery by Tenant...................................... 25 (b) Nondelivery by Tenant................................... 25 21. Holding Over........................................................... 26 22. Notices................................................................ 26 23. Attorneys' Fees........................................................ 26 24. Assignment, Subletting and Hypothecation............................... 26 24.1 In General.................................................. 26 24.2 Voluntary Assignment and Subletting......................... 27 (a) Notice to Landlord...................................... 27 (b) Offer to Terminate...................................... 27 (c) Landlord's Consent...................................... 27 (d) Assumption of Obligations............................... 28 24.3 Collection of Rent.......................................... 28 24.4 Corporations and Partnerships............................... 28 24.5 Reasonable Provisions....................................... 28 24.6 Attorneys' Fees............................................. 29 24.7 Involuntary Transfer........................................ 29 24.8 Hypothecation............................................... 29 24.9 Binding on Successors....................................... 29 25. Successors............................................................. 29 26. Landlord Default; Mortgagee Protection................................. 29 27. Exhibits............................................................... 29 28. Surrender of Lease Not Merger.......................................... 30 29. Waiver................................................................. 30 30. General................................................................ 30 30.1 Captions and Headings....................................... 30 30.2 Definitions................................................. 30 (a) Landlord................................................ 30 (b) Agents.................................................. 30 (c) Interpretation of Terms................................. 30 30.3 Copies...................................................... 31 30.4 Time of Essence............................................. 31 30.5 Severability................................................ 31 30.6 Governing Law............................................... 31 30.7 Joint and Several Liability................................. 31 30.8 Construction of Lease Provisions............................ 31 30.9 Tenant's Financial Statements............................... 31 30.10 Withholding of Landlord's Consent........................... 31 31. Signs.................................................................. 31 32. Landlord as Party Defendant............................................ 32 33. Landlord Not a Trustee................................................. 32 34. Interest............................................................... 32 35. Surrender of Premises.................................................. 32 36. No Partnership or Joint Venture........................................ 32 37. Entire Agreement....................................................... 32 38. Submission of Lease.................................................... 32 39. Quiet Enjoyment........................................................ 33 40. Authority.............................................................. 33 41. Addendum............................................................... 34 NET LEASE AGREEMENT (Single Tenant) For and in consideration of the rentals, covenants, and conditions hereinafter set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, the following described Premises for the term, at the rental and subject to and upon all of the terms, covenants and agreements set forth in this Net Lease Agreement, including Landlord's right to recover the Premises pursuant to Paragraph 24 below ("Lease"): 1. Summary of Lease Provisions. 1..l Tenant: CERPROBE CORPORATION, a Delaware Corporation, ("Tenant"). 1..2 Landlord: REALTEC PROPERTIES I, L.P., a California Limited Partnership, ("Landlord"). l..3 Date of Lease, for reference purposes only: July 17, 1995. l..4 Premises: That certain building located in the City of San Jose, County of Santa Clara, State of California, shown cross-hatched on the site plan attached hereto as Exhibit A, and commonly referred to as 30 West Montague Expressway. 1..5 Term: Seven (7) Years and One (1) Month (Paragraph 3) One (1) Five (5) Year Option (Paragraph 3.5) 1..6 Commencement Date: August 1, 1995, subject to the provisions of Paragraph 3 below. (Paragraph 3) l..7 Ending Date: August 30, 2002, unless sooner terminated pursuant to the terms of this Lease. (Paragraph 3) l..8 Rent: (Paragraph 4) August 1, 1995 to August 30,1995 $0.00 September 1, 1995 to August 30, 2002 $25,627.00/Per Month Cost of Living Adjustment: Every Twelve (12) calendar months during Lease Term. First such adjustment on the first day of the Fourteenth (14th) month of the Lease Term. (Paragraph 4.4) Rent During Option Period: (Paragraph 4.5) Receipt of the Second (2nd) month's Rent is hereby acknowledged by Landlord. 1..9 Use of Premises: General office, storage, distribution, marketing, and other related legal uses. (Paragraph 6) 1..10 Security Deposit: Thirty Thousand Dollars ($30,000.00) (Paragraph 5) 1..11 Addresses for Notices: To Landlord: Realtec Properties I, L.P. 987 University Avenue, Suite 3 Los Gatos, CA 95030 To Tenant: To the Premises, with a courtesy copy to: C. Zane Close 600 South Rockford Drive Tempe, Arizona 85281 1..12 Nonexclusive Right to Use No More Than: One Hundred Thirty-Two (132) parking spaces within the Common Area. (Paragraph 2.1) 1..13 Summary Provisions in General. Parenthetical references in this Paragraph 1 to other paragraphs in this Lease are for convenience of reference, and designate some of the other Lease paragraphs where applicable provisions are set forth. All of the terms and conditions of each such referenced paragraph shall be construed to be incorporated within and made a part of each of the above referring Summary of Lease Provisions. In the event of any conflict between any Summary of Lease Provision as set forth above and the balance of the Lease, the latter shall control. 2. Property Leased. 2..1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, upon the terms and conditions herein set forth, that certain building ("Premises") referred to in Paragraph 1.4 above, shown cross-hatched on the site plan attached hereto as Exhibit A. In addition, Tenant shall have the following rights with respect to the real property more particularly described in the legal description attached as Exhibit B hereto (if applicable) and outlined in red on Exhibit A ("Common Area"): (i) the exclusive right to use no more than the number of parking spaces set forth in Paragraph 1.12 above, as shown on Exhibit A, the location of which may be redesignated from time to time by Landlord; (ii) the nonexclusive right to use any other parking spaces within the Common Area not allocated for the exclusive use of another tenant of Landlord; and (iii) such other rights as are necessary and convenient to Tenant's possession of the Premises or performance of Tenant's obligations under this Lease. (Notwithstanding the number of parking spaces designated for Tenant's exclusive use, in the event by reason of any rule, regulation, order, law, statute, ordinance or other requirement of any governmental or quasi-governmental authority now or hereafter in effect (collectively, "Laws") relating to or affecting parking on the Common Area, or any other cause beyond Landlord's reasonable control, Landlord is required to reduce the number of parking spaces on the Common Area, Landlord shall have the right to proportionately reduce the number of parking spaces designated herein for Tenant's exclusive use.) In addition, Landlord grants to Tenant a non-exclusive easement for vehicular ingress and egress in and over the paved roadways in the Common Area and pedestrian ingress and egress in and over the Common Area. Landlord reserves the right to grant to tenants of the buildings or improvements which now exist or may hereafter be constructed upon the Common Area or upon real property owned by Landlord adjacent to the Common Area, and to the agents, employees, servants, invitees, contractors, guests, employees, servants, invitees, contractors, guests, customers and representatives of such tenants or to any other user authorized by Landlord, the non-exclusive right to use the Common Area for pedestrian and vehicular ingress and egress and vehicular parking and the exclusive right to use parking spaces on the Common Area (excluding only that portion of the Common Area designated herein for Tenant's exclusive use for vehicular parking). 2..2 Improvements. The improvements to be constructed by Landlord for Tenant's use in the Premises are set forth in detail on the attached Exhibit C. The work described in Exhibit C includes any additional improvements to the Premises and/or the Common Area that may be required pursuant to Title 24 and Title III of the Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq., and the regulations promulgated thereunder (the "ADA") by reason of the construction of the improvements in the Premises. In the event of changes to any of the work set forth in Exhibit C (whether such changes are required by any public agency, or by reason of any error or omission in plans because of information provided to Landlord by Tenant, or because requested in writing by Tenant and accepted in writing by Landlord), Tenant shall pay to Landlord Landlord's costs related to such changes before work in regard to such changes is commenced; provided, however, in no event shall Landlord's failure to demand such payment before commencement of work in regard to such changes, or Tenant's failure to pay for the same before commencement of work in regard to such changes be deemed to be a waiver of Landlord's right to require or enforce collection of such payment for changes at any time thereafter. Landlord's costs related to the changes shall include, without limitation, all architectural, contractor, and engineering expenses, and the cost of all building and other permits and inspection fees. Tenant acknowledges that Landlord or a person or entity related to Landlord and/or controlled by Landlord may serve as Landlord's architect, engineer and/or contractor in regard to the above-described work and in the event of any changes, Landlord's costs shall be deemed to include architect, engineering and/or contractor expenses at the rates charged to third parties by Landlord and/or such related person or entity for such services, unless otherwise expressly provided in this Lease. Since any construction work on the Premises by Tenant prior to substantial completion of the work required of Landlord pursuant to this Paragraph 2.2 may interfere with the work required of Landlord or with Landlord's ability to obtain a certificate of occupancy (or equivalent) therefor, any such work by Tenant shall be subject to the provisions of Paragraph 13.1 hereof, and Landlord may in its reasonable discretion withhold its consent to any such work by Tenant. 2..3 Acceptance of Premises. By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in good and sanitary order, condition and repair and to have accepted the Premises in their condition existing as of the date Tenant takes possession of the Premises, subject to all applicable laws, covenants, conditions, restrictions, easements and other matters of public record and the reasonable rules and regulations from time to time promulgated by Landlord (and non-discriminatorily applied) governing the use of the Premises and Common Area, and further, to have accepted tenant improvements to be constructed by Landlord (if any) as being completed in accordance with the plans and specifications for such improvements, subject only to completion of items on Landlord's punch list. Tenant acknowledges that neither Landlord nor Landlord's agents have made any representation or warranty as to the suitability of the Premises for the conduct of Tenant's business, the condition of the Premises, or the use or occupancy which may be made thereof and Tenant has independently investigated and is satisfied that the premises are suitable for Tenant's intended use and that the Premises meets all governmental requirements for such intended use. In addition, except for such improvements as may be included in Exhibit C, Landlord makes no representation or warranty as to the compliance of the Premises or the Common Area with the requirements of the ADA. Notwithstanding anything to the contrary contained in this Lease, Tenant's acceptance of the Premises or submission of a "punchlist" shall not be deemed a waiver of Tenant's right to have defects in the improvements constructed by Landlord pursuant to Paragraph 2.2 or in the Premises repaired at no cost to Tenant. Tenant shall give notice to Landlord whenever any such defect becomes reasonably apparent, and Landlord shall repair the defect as soon as practicable. Landlord also hereby assigns to Tenant all warranties with respect to the Premises, including warranties that would reduce Tenant's maintenance obligations under this Lease, and shall cooperate with Tenant to enforce such warranties. Finally, notwithstanding anything to the contrary contained in this Lease, as of the Commencement Date, the roof (including roof screens and membrane), plumbing, electrical (including all outlets), heating and air conditioning systems in the Premises shall be in good working order and repair. 3. Term. 3..1 Commencement Date. The term of this Lease ("Lease Term") shall be for the period specified in Paragraph 1.5 above, commencing on the date set forth in Paragraph 1.6 ("Commencement Date"); provided, however, in the event any improvements to be constructed by Landlord, as set forth on Exhibit C, are not completed by the aforesaid Commencement Date or are completed prior to such Commencement Date, then the Commencement Date shall be deemed to be the date on which the improvements to be constructed by Landlord are substantially completed. Such improvements shall be deemed to be substantially completed upon the occurrence of the earlier of the following: (a) The date on which all improvements to be constructed by Landlord have been substantially completed except for punch list items which do not prevent Tenant from using the Premises for its intended use, and the appropriate governmental approvals for occupancy of the Premises have been issued; or (b) The date on which all improvements to be constructed by Landlord would have been substantially completed except for such work as Landlord is required to perform but which is delayed because of any of the following (each, a "Tenant Delay"): (i) fault or neglect of Tenant, acts of Tenant or Tenant's agents (including without limitation delays caused by work done on the Premises by Tenant or Tenant's agents or by acts of Tenant's contractors or subcontractors); (ii) delays caused by change orders requested by Tenant or required because of any errors or omissions in plans submitted by Tenant; and (iii) such work as Landlord is required to perform but cannot complete until Tenant performs necessary portions of construction work it has elected or is required to do; or (c) The date Tenant opens for business in the Premises. If the improvements to be constructed by Landlord are deemed to be substantially completed pursuant to Paragraph 3.1(b) above, Tenant acknowledges that the Commencement Date shall occur, and therefore Tenant's obligation to pay Rentals shall commence, earlier than the date of actual completion of such improvements. The improvements to be constructed by Landlord shall be deemed to be substantially completed one day earlier than the date of actual completion for each day that actual completion is delayed by reason of a Tenant Delay. If the Commencement Date is a date other than the date set forth in Paragraph 1.6, then the Ending Date set forth in Paragraph 1.7, the rental adjustment dates set forth in Paragraph 1.8 and any other certain dates specified herein shall be adjusted accordingly. When the Commencement Date. Ending Date, rental adjustment dates, and such other dates become ascertainable, Landlord and Tenant shall specify the same in writing, in the form of the attached Exhibit D, which writing shall be deemed incorporated herein. Tenant's failure to execute and deliver the letter attached hereto as Exhibit D within thirty (30) days after Tenant receives written request from Landlord to do so (subject to any legitimate disagreement by Tenant with the terms thereof. which both parties shall use reasonable efforts to resolve) shall be a Default by Tenant hereunder. The expiration of the Lease Term or sooner termination of this Lease is referred to herein as the "Lease Termination". 3..2 Delay of Commencement Date. Landlord shall not be liable for any damage or loss incurred by Tenant for Landlord's failure for whatever cause to deliver possession of the Premises by any particular date (including the Commencement Date), nor shall this Lease be void or voidable on account of such failure to deliver possession of the Premises; provided that if Landlord does not deliver possession of the Premises to Tenant by the date which is ninety (90) days from the date this Lease is executed by both parties, Tenant shall have the right to terminate this Lease by written notice delivered to Landlord within five (5) days thereafter, and Landlord and Tenant shall be relieved of their respective obligations hereunder; provided further that said ninety (90) day period shall be extended by the number of days work on the Premises is delayed due to fault or neglect of Tenant, acts of Tenant or Tenant's agents, or due to acts of God, labor disputes, strikes, fires, rainy or stormy weather, acts or failures to act of public agencies, inability to obtain labor or materials, earthquake, war, insurrection, riots and other causes beyond Landlord's reasonable control, excluding, however, delays caused solely by Landlord, its agents, employees, contractors or invitees. 3..3 Early Occupancy. If Tenant takes possession of the Premises prior to the Commencement Date, Tenant shall do so subject to all of the terms and conditions hereof and shall pay the Rentals provided for herein. 3..4 Tenant to Physically Occupy Premises. Tenant shall, no later than thirty (30) days after the Commencement Date, go into actual physical occupancy of the Premises and open the Premises for business in accordance with the uses specified in Paragraph 6 below; provided, however, the date of Tenant's physical occupancy of the Premises shall in no event extend the Commencement Date, the Lease Termination date or the date the payment of Rentals hereunder commences. Time is of the essence. 3..5 Option to Extend Lease Term. In consideration for Tenant never having been in default under this Lease, Landlord hereby grants to Tenant the option to extend the Lease Term for a period of Five (5) years ("Extended Term"), on the following terms and conditions: (a) Tenant shall give Landlord written notice of its exercise of the option to extend the Lease Term no earlier than two hundred ten (210) days nor later than one hundred eighty (180) days before the date the Lease Term would end but for said exercise. Time is of the essence. (b) Tenant may not extend the Lease Term pursuant to this Paragraph 3.5 if Tenant has been in default in the performance of any of the terms and conditions of this Lease at any time prior to the date of Tenant's notice of exercise of this option, or if Tenant shall have assigned or otherwise transferred its interest in this Lease and/or the Premises, whether or not Landlord's consent to such assignment or transfer has been given. If Tenant is in default under this Lease on the date that the Extended Term is to commence, then Landlord may elect to terminate this Lease notwithstanding any notice given by Tenant of an exercise of its option to extend. (c) All terms and conditions of this Lease shall apply during the Extended Term, except that the Rent for the Extended Term shall be determined in accordance with Paragraph 4.4. (d) Once Tenant delivers notice of its exercise of the option to extend the Lease Term, Tenant may not withdraw such exercise and, subject to the provisions of this Paragraph 3.5, such notice shall operate to extend the Lease Term. Upon the extension of the Lease Term pursuant to this Paragraph 3.5, the term "Lease Term" as used in this Lease shall thereafter include the Extended Term and the Lease Termination date shall be the expiration date of the Extended Term. 4. Rent. 4..1 Rent. Tenant shall pay to Landlord as rent for the Premises ("Rent"), in advance, on the first day of each calendar month, commencing on the date specified in Paragraph 1.6 and continuing throughout the Lease Term until adjusted pursuant to Paragraph 4.4 below the Rent set forth in Paragraph 1.8 above. Rent shall be prorated, based on thirty (30) days per month, for any partial month during the Lease Term. Rent shall be payable without deduction, offset, prior notice or demand in lawful money of the United States to Landlord at the address herein specified for purposes of notice or to such other persons or such other places as Landlord may designate in writing. 4..2 Late Charge. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or deed of trust covering the Premises. Accordingly, Tenant shall pay to Landlord, as Additional Rent (as defined in Paragraph 4.3 below), without the necessity of prior notice or demand, a late charge equal to ten percent (10%) of any installment of Rent which is not received by Landlord within ten (10) days after the due date for such installment. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In no event shall this provision for a late charge be deemed to grant to Tenant a grace period or extension of time within which to pay any installment of Rent or prevent Landlord from exercising any right or remedy available to Landlord upon Tenant's failure to pay such installment of Rent when due, including without limitation the right to terminate this Lease. In the event any installment of Rent is not received by Landlord by the thirtieth (30th) day after the due date for such installment, such installment shall bear interest at the annual rate set forth in Paragraph 34 below, commencing on the thirty-first (31st) day after the due date for such installment and continuing until such installment is paid in full. 4..3 Additional Rent. All taxes, charges, costs and expenses and other sums which Tenant is required to pay hereunder (together with all interest and charges that may accrue thereon in the event of Tenant's failure to pay the same), and all damages, costs and reasonable expenses which Landlord may incur by reason of any Default by Tenant shall be deemed to be additional rent hereunder ("Additional Rent"). Additional Rent shall accrue commencing on the Commencement Date. In the event of nonpayment by Tenant of any Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for the nonpayment of Rent. The term "Rentals" as used in this Lease shall mean Rent and Additional Rent. 4..4 Cost of Living Adjustment. The Rent payable hereunder shall be adjusted pursuant to this Paragraph 4.4, at the times specified in Paragraph 1.8, and the Rent as adjusted shall be payable monthly pursuant to the terms of Paragraph 4.1 above until the next adjustment under this Paragraph 4.4. As used herein the term "Adjustment Date" shall mean the effective date of a Rent adjustment pursuant to this Paragraph 4.4. As of each Adjustment Date, the Rent shall be increased to a sum equal to the product obtained by multiplying the then current Rent by a fraction, the numerator of which is the New Index as of the applicable Adjustment Date and the denominator of which is the Initial Index. In the event the New Index is not available on the Adjustment Date, Landlord shall notify Tenant of the adjustment as soon as the New Index becomes available, and Tenant shall immediately pay any amount that has accrued since the Adjustment Date. For the purposes of adjusting the Rent as provided in this Paragraph 4.4, the following definitions shall apply: (a) "Index" means the Consumer Price Index (all items) for All Urban Consumers as published by the United States Department of Labor, Bureau of Labor Statistics, for the San Francisco, Oakland, San Jose, California Area (1982-1984=100); (b) "Initial Index" means in regard to the first adjustment pursuant to this Paragraph 4.4, the Index published for the month nearest but prior to the Commencement Date and in regard to all subsequent adjustments, the Index published nearest but prior to the immediately preceding Adjustment Date; (c) "New Index" means the Index published nearest but prior to the applicable Adjustment Date. (d) The Cost of Living Adjustment shall not be less than Four Percent (4%) nor more than Six Percent (6%) per annual adjustment. If, at any time when the Rent is to be adjusted as provided above, the Index is changed so that the base year differs from the base year used for the Initial Index, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. In the event the Index is otherwise changed or discontinued during the Lease Term, the most nearly comparable official price index of the United States Government (as determined in Landlord's reasonable discretion) shall be used for computing the adjustments to Rent. In no event shall the Rent following any adjustment pursuant to this Paragraph 4.4 be less than the current Rent immediately prior to the applicable Adjustment Date. 4..5 Rent During Extended Term. If Tenant elects to extend the Lease Term pursuant to Paragraph 3.5 the Rent for the Extended Term shall be an amount equal to ninety-five percent (95%) of the fair market rental value of the Premises in relation to market conditions at the time of the extension (including, but not limited to, rental rates for comparable space with comparable tenant improvements and taking into consideration any adjustments to rent based upon direct costs (operating expenses) and taxes, load factors, financing charges, and/or cost of living or other rental adjustments; the relative strength of the tenants; the size of the space; and any other factors which affect market rental values at the time of extension), subject to annual cost of living adjustments as called for in Paragraph 4.4 of the Lease; provided, that the Rent for the First Year of the Extended Term shall in no event be lower than the Rent for the last Lease Year of the original term. The Rent for the Extended Term shall be determined as follows: (a) Mutual Agreement. After timely receipt by Landlord of Tenant's notice of exercise of the option to extend the Lease Term, Landlord and Tenant shall have a period of thirty (30) days in which to agree on the Rent and any cost of living adjustment for the Extended Term. If Landlord and Tenant agree on said Rent during that period, they shall immediately execute an amendment to this Lease stating the Rent and any cost of living adjustment for the Extended Term. If Landlord and Tenant are unable to agree on the Rent and any cost of living adjustment for the Extended Term as aforesaid, the provisions of Paragraph 4.4(b) shall apply. (b) Appraisal. Within five (5) days after the expiration of the thirty (30) day period described in Paragraph 4.4(a) above, each party, at its cost and by giving notice to the other party, shall appoint an M.A.I. real estate appraiser with at least five (5) years full-time commercial appraisal experience in the area in which the Premises are located, to appraise and set the fair market rental value of the Premises and determine market cost of living adjustments, if any. If a party does not appoint an appraiser within five (5) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the fair market rental value and determine market cost of living adjustments, if any. The cost of such sole appraiser shall be borne equally by the parties. If two appraisers are appointed by the parties as provided in this Paragraph, the two appraisers shall meet promptly and attempt to set the fair market rental value and determine market cost of living adjustments, if any. If they are unable to agree within twenty (20) days after the last appraiser has been appointed, then the two appraisers shall select a third appraiser meeting the qualifications stated in this Paragraph 4.4(b) within ten (10) days after the last day the two appraisers are given to set the fair market rental value and determine market cost of living adjustments, if any. If they are unable to agree on the third appraiser, either of the parties to this Lease, by giving ten (10) days notice to the other party, may apply to the presiding judge of the Superior Court of Santa Clara County for the selection of a third appraiser who meets the qualifications stated above. Each of the parties shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser's fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either party. Within twenty (20) days after the selection of the third appraiser, the majority of the appraisers shall set the fair market rental value and determine market cost of living adjustments, if any. If the majority of the appraisers are unable to set the fair market rental value and determine market cost of living adjustments, if any, within said twenty (20) day period, the three value appraisals shall be added together and the total divided by three; the resulting quotient shall be the fair market rental value. Ninety-five percent (95%) of said amount shall be the Rent for the Extended Term. Provided, however, that if any appraisal differs from the median appraisal by an amount equal to more than ten percent (10%) of such median appraisal, that appraisal shall be disregarded, and the average of the remaining appraisals (or the remaining appraisal) shall be the fair market rental value. The appraisers shall jointly determine any market cost of living adjustment to be applied to said amount during the Extended Term. In establishing the fair market rental value and market cost of living adjustments, if any, the appraiser or appraisers shall consider the reasonable market rental value for the highest and best use for the Premises (including, but not limited to, rental rates for comparable space with comparable tenant improvements and any adjustments to rent based upon direct costs (operating expenses) and taxes, load factors, financing charges, and/or cost of living or other rental adjustments the relative strength of the tenants; and the size of the space); without regard to the existence of this Lease but taking into consideration the absolute nature of this Lease. 5. Security Deposit 5. Security Deposit. Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord a security deposit ("Security Deposit") in the amount set forth in Paragraph 1.10 above. The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of each and every term, covenant and condition of this Lease applicable to Tenant, and not as prepayment of Rent. If Tenant shall at any time fail to keep or perform any term, covenant or condition of this Lease applicable to Tenant, including, without limitation, the payment of Rentals or those provisions requiring Tenant to repair damage to the Premises caused by Tenant or to surrender the Premises in the condition required pursuant to Paragraph 35 below, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, use, apply or retain the whole or any part of the Security Deposit reasonably necessary for the payment of any amount which Landlord may spend by reason of Tenant's default or as necessary to compensate Landlord for any loss or damage which Landlord may suffer by reason of Tenant's default. In the event Landlord uses or applies any portion of the Security Deposit, Tenant shall, within five (5) business days after written demand by Landlord, remit to Landlord sufficient funds to restore the Security Deposit to its original sum. Failure by Tenant to so remit funds shall be a Default by Tenant. Should Tenant comply with all of the terms, covenants and conditions of this Lease applicable to Tenant, the balance of the Security Deposit shall be returned to Tenant within fourteen (14) days after Lease Termination and surrender of the Premises by Tenant; provided, however, if any portion of the Security Deposit is to be applied to repair damages to the Premises caused by Tenant or Tenant's agents, to clean the Premises, or to remove alterations and restore the Premises pursuant to Paragraph 13.2 below, then the balance of the Security Deposit shall be returned to Tenant no later than thirty (30) days after the date Landlord receives possession of the Premises. 6. Use of Premises. 6..1 Permitted Uses. Tenant shall use the Premises and the Common Area only in conformance with applicable Laws for the purposes set forth in Paragraph 1.9 above, and for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, provided that such other use is in conformance with applicable Laws. Any change in use of the Premises or the Common Area without the prior written consent of Landlord shall be a Default by Tenant. Tenant and Tenant's agents shall comply with the provisions of any Declaration of Covenants, Conditions, and Restrictions affecting the Premises and the Common Area. 6..2 Tenant to Comply with Legal Requirements. Tenant shall, at its sole cost, promptly comply with all Laws relating to or affecting Tenant's particular use or occupancy of the Premises or the Common Area, now in force, or which may hereafter be in force, including without limitation those relating to utility usage and load or number of permissible occupants or users of the Premises, whether or not the same are now contemplated by the parties; with the provisions of all recorded documents affecting the Premises or the Common Area insofar as the same relate to or affect Tenant's particular use or occupancy of the Premises or use of the Common Area; and with the requirements of any board of fire underwriters (or similar body now or hereafter constituted) relating to or affecting Tenant's particular use or occupancy of the Premises or use of the Common Area. Tenant's obligations pursuant to this Paragraph 6.2 shall include, without limitation, maintaining or restoring the Premises and the Common Area and making structural and non-structural alterations and additions in compliance and conformity with all Laws and recorded documents (including, without limitation, alterations or additions to the Premises and/or Common Area that are required pursuant to the ADA), each relating to Tenant's particular use or occupancy of the Premises during the Lease Term or alterations made to the Premises by Tenant. Any alterations or additions undertaken by Tenant pursuant to this Paragraph 6.2 shall be subject to the requirements of Paragraph 13.1 below. At Landlord's option, Landlord may make the required alteration, addition or change, and Tenant shall pay the cost thereof as Additional Rent. The foregoing notwithstanding, Landlord shall make any alteration or addition required to bring the Premises or the Common Area into compliance with legal requirements in effect at the time the Premises, any improvements installed therein by Landlord, or the Common Area, respectively, were originally constructed. The cost of any structural alterations as may be hereafter required due to a change in laws and unrelated to Tenant's specific use of the Premises shall be the responsibility of Landlord. Tenant shall obtain prior to taking possession of the Premises any permits, licenses or other authorizations required for the lawful operation of its business at the Premises. The judgment of any court of competent jurisdiction or the admission of Tenant in any action or proceeding against Tenant. regardless of whether Landlord is a party thereto or not, that Tenant has violated such Law or recorded document relating to Tenant's particular use or occupancy of the Premises or use of the Common Area shall be conclusive of the fact of such violation by Tenant. 6..3 Prohibited Uses. Tenant and Tenant's agents shall not commit or suffer to be committed any waste upon the Premises. Tenant and Tenant's agents shall not do or permit anything to be done in or about the Premises or Common Area which will in any way obstruct or interfere with the rights of any authorized users of the Common Area or occupants of neighboring property, or injure or annoy them. Tenant shall not conduct or permit any auction or sale open to the public to be held or conducted on or about the Premises or Common Area. Tenant and Tenant's agents shall not use or allow the Premises to be used for any unlawful, immoral or hazardous purpose or any purpose not permitted by this Lease, nor shall Tenant or Tenant's agents cause, maintain, or permit any nuisance in, on or about the Premises. Tenant and Tenant's agents shall not do or permit anything to be done in or about the Premises or Common Area nor bring or keep anything in the Premises or Common Area which will in any way increase the rate of any insurance upon the Premises or Common Area or any part thereof or any of its contents, or cause a cancellation of any insurance policy covering the Premises or Common Area or any part thereof or any of its contents, nor shall Tenant or Tenant's agents keep, use or sell or permit to be kept, used or sold in or about the Premises any articles which may be prohibited by a standard form policy of fire insurance. In the event the rate of any insurance upon the Premises or Common Area or any part thereof or any of its contents is increased because of Tenant's particular use of the Premises or that of Tenant's agents, Tenant shall pay, as Additional Rent, the full cost of such increase; provided however this provision shall in no event be deemed to constitute a waiver of Landlord's right to declare a default hereunder by reason of the act or conduct of Tenant or Tenant's agents causing such increase or of any other rights or remedies of Landlord in connection therewith. Tenant and Tenant's agents shall not place any loads upon the floor. walls or ceiling of the Premises which would endanger the Premises or the structural elements thereof, nor place any harmful liquids in the drainage system of the Premises. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or Common Area except in enclosed trash containers designated for that purpose by Landlord. No materials, supplies, equipment, finished products (or semifinished products), raw materials, or other articles of any nature shall be stored upon, or be permitted to remain on, any portion of the Common Area. 6..4 Hazardous Materials. Neither Tenant nor Tenant's agents shall permit the introduction, placement, use, storage, manufacture, transportation, release or disposition (collectively "Release") of any Hazardous Material(s) (defined below) on or about any portion of the Premises or Common Area without the prior written consent of Landlord, which consent may be withheld in the sole and absolute discretion of Landlord without any requirement of reasonableness in the exercise of that discretion. Notwithstanding the immediately preceding sentence to the contrary, Tenant may use de minimis quantities of the types of materials which are technically classified as Hazardous Materials but commonly used in domestic or office use to the extent not in an amount, which, either individually or cumulatively, would be a "reportable quantity" under any applicable Law. Tenant covenants that, at its sole cost and expense, Tenant will comply with all applicable Laws with respect to the Release by Tenant, its agents, employees, contractors or invitees of such permitted Hazardous Materials. Any Release beyond the scope allowed in this paragraph shall be subject to Landlord's prior consent, which may be withheld in Landlord's sole and absolute discretion, and shall require an amendment to the Lease in the event Landlord does consent which shall set forth the materials, scope of use, indemnification and any other matter required by Landlord in Landlord's sole and absolute discretion. Tenant shall indemnify, defend and hold Landlord and Landlord's agents harmless from and against any and all claims, losses, damages, liabilities, or expenses arising in connection with the Release of Hazardous Materials in violation of Hazardous Materials Laws by Tenant, Tenant's agents or any other person using the Premises with Tenant's knowledge and consent or authorization. Tenant's obligation to defend, hold harmless and indemnify pursuant to this Paragraph 6.4 shall survive Lease Termination. The foregoing indemnity shall not apply to, and Tenant shall not be responsible for, the presence of Hazardous Materials on, under, or about the Premises or Common Area to the extent caused by any third parties or by Landlord or Landlord's employees, agents, contractors or invitees. Notwithstanding anything to the contrary contained in this Lease, Landlord hereby represents and warrants to Tenant that, to the best of Landlord's knowledge, (i) the Premises and the Common Area are in compliance with all laws regarding Hazardous Materials ("Hazardous Materials Laws"); (ii) no asbestos-containing materials exist in or on the Premises or the Common Area; and (iii) any handling, transportation, storage or use of Hazardous Materials that occurred in the Premises or the Common Area prior to the Commencement Date is now in compliance with all Hazardous Materials Laws. Landlord farther represents and warrants that, to the best of Landlord's knowledge, no litigation has been brought or threatened, nor any settlements reached with any governmental or private party, concerning the actual or alleged presence of Hazardous Materials on or about the Premises or the Common Area, nor has Landlord received any notice of any violation, or alleged violation, of any Hazardous Materials Laws, pending claims or pending investigations with respect to the presence of Hazardous Materials on or about the Premises or the Common Area. Landlord's representations and warranties set forth in this paragraph shall survive termination of this Lease. As used in this Lease, the term "Hazardous Materials" means any chemical, substance, waste or material which has been or is hereafter determined by any federal, state or local governmental authority to be capable of posing risk of injury to health or safety, including without limitation, those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances," or "solid waste" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, and the Hazardous Materials Transportation Act, as amended, and in the regulations promulgated pursuant to said laws; those substances defined as "hazardous wastes" in section 25117 of the California Health & Safety Code, or as "hazardous substances" in section 25316 of the California Health & Safety Code, as amended, and in the regulations promulgated pursuant to said laws; those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or designated by the Environmental Protection Agency (or any successor agency) as hazardous substances (see, e.g., 40 CFR Part 302 and amendments thereto) such other substances, materials and wastes which are or become regulated or become classified as hazardous or toxic under any Laws, including without limitation the California Health & Safety Code, Division 20, and Title 26 of the California Code of Regulations; and any material, waste or substance which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv) designated as a "hazardous substance" pursuant to section 311 of the Clean Water Act of 1977, 33 U.S.C. sections 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to section 307 of the Clean Water Act of 1977 (33 U.S.C. ss. 1317), as amended (v) flammable explosives (vi) radioactive materials; or (vii) radon gas. Landlord shall have the right, upon reasonable advance notice to Tenant, to inspect, investigate, sample and/or monitor the Premises and Common Area, including any soil, water, groundwater, or other sampling, to the extent reasonably necessary to determine whether Tenant is complying with the terms of this Lease with respect to Hazardous Materials. Unless a previous inspection has disclosed a violation by Tenant of the covenants contained in this Paragraph 6.4, such inspections, investigations, sampling and/or monitoring shall be performed not more often than semi-annually. In connection therewith, Tenant shall provide Landlord with reasonable access to all portions of the Premises; provided, however, that Landlord shall avoid any unreasonable interference with the operation of Tenant's business on the Premises. All costs incurred by Landlord in performing such inspections, investigation, sampling and/or monitoring shall be reimbursed by Tenant to Landlord as Additional Rent within ten (10) days after Landlord's demand for payment. 7. Taxes. 7..1 Personal Property Taxes. Tenant shall cause Tenant's trade fixtures, equipment, furnishings, furniture, merchandise, inventory, machinery, appliances and other personal property installed or located on the Premises (collectively the "personal property") to be assessed and billed separately from the Premises. Tenant shall pay before delinquency any and all taxes. assessments and public charges levied, assessed or imposed upon or against Tenant's personal property. If any of Tenant's personal property shall be assessed with the real property comprising the Common Area or with the Premises, Tenant shall pay to Landlord, as Additional Rent, the amounts attributable to Tenant's personal property within thirty (30) days after receipt of a written statement from Landlord setting forth the amount of such taxes, assessments and public charges attributable to Tenant's personal property. Tenant shall comply with the provisions of any Law which requires Tenant to file a report of Tenant's personal property located on the Premises. 7..2 Other Taxes Payable Separately by Tenant. Tenant shall pay (or reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to delinquency or within thirty (30) days after receipt of Landlord's statement thereof, any and all taxes, levies, assessments or surcharges payable by Landlord or Tenant and relating to this Lease or the Premises (other than Landlord's net income, succession, transfer, gift, franchise, estate or inheritance taxes, and Taxes, as that term is defined in Paragraph 7.3(a) below, payable as an Operating Expense), whether or not now customary or within the contemplation of the parties hereto, whether or not now in force or which may hereafter become effective, including but not limited to taxes: (a) Upon, allocable to, or measured by the area of the Premises or the Rentals payable hereunder, including without limitation any gross rental receipts, excise, or other tax levied by the state, any political subdivision thereof, city or federal government with respect to the receipt of such Rentals; (b) Upon or with respect to the use, possession, occupancy, leasing, operation and management of the Premises or any portion thereof; (c) Upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; or (d) Imposed as a means of controlling or abating environmental pollution or the use of energy or any natural resource (including without limitation gas, electricity or water), including, without limitation, any parking taxes, levies or charges or vehicular regulations imposed by any governmental agency. Tenant shall also pay, prior to delinquency, all privilege, sales, excise, use, business, occupation, or other taxes, assessments, license fees or charges levied, assessed or imposed upon Tenant's business operations conducted at the Premises. In the event any such taxes are payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord for such taxes, then the Rentals payable hereunder shall be increased to net Landlord the same net Rental after imposition of any such tax upon Landlord as would have been payable to Landlord prior to the imposition of any such tax. 7..3 Common Taxes. (a) Definition of Taxes. The term "Taxes" as used in this Lease shall collectively mean (to the extent any of the following are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes and general and special assessments (including, but not limited to, assessments for public improvements or benefit); personal property taxes; taxes based on vehicles utilizing parking areas on the Common Area; taxes computed or based on rental income or on the square footage of the Premises (including without limitation any municipal business tax but excluding federal, state and municipal net income taxes); environmental surcharges; excise taxes; gross rental receipts taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies, assessments and other charges in the nature of taxes or assessments (including, but not limited to, assessments for public improvements or benefit); and all other governmental, quasi-governmental or special district impositions of any kind and nature whatsoever; regardless of whether any of the foregoing are now customary or within the contemplation of the parties hereto and regardless of whether resulting from increased rate and/or valuation, or whether extraordinary or ordinary, general or special, unforeseen or foreseen, or similar or dissimilar to any of the foregoing and which during the Lease Term are laid, levied, assessed or imposed upon Landlord and/or become a lien upon or chargeable against the Premises and/or Common Area under or by virtue of any present or future laws, statutes, ordinances, regulations, or other requirements of any governmental, quasi-governmental or special district authority whatsoever. The term "environmental surcharges" shall include any and all expenses, taxes, charges or penalties imposed by the Federal Department of Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or any regulations promulgated thereunder, or imposed by any other local, state or federal governmental agency or entity now or hereafter vested with the power to impose taxes, assessments or other types of surcharges as a means of controlling or abating environmental pollution or the use of energy or any natural resource in regard to the use, operation or occupancy of the Premises and/or the Common Area. The term "Taxes" shall include (to the extent the same are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above), without limitation, all taxes, assessments, levies, fees, impositions or charges levied, imposed, assessed, measured, or based in any manner whatsoever upon or with respect to the use, possession, occupancy, leasing, operation or management of the Premises and/or Common Area or in lieu of or equivalent to any Taxes set forth in this Paragraph 7.3(a). In the event any such Taxes are payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord for such Taxes, then the Rentals payable hereunder shall be increased to net Landlord the same net Rental after imposition of any such Tax upon Landlord as would have been payable to Landlord prior to the imposition of any such Tax. Notwithstanding anything to the contrary contained in this Lease, Tenant shall not be required to pay any portion of any tax or assessment (i) in excess of the amount which would be payable if the tax or assessment were paid in installments over the longest possible term; or (ii) imposed on land and improvements other than the Common Area. (b) Operation Expense. All Taxes which are levied or assessed or which become a lien upon the Premises and/or Common Area or which become due or accrue during the Lease Term shall be an Operating Expense, and Tenant shall pay as Additional Rent each month during the Lease Term 1/12th of such Taxes, based on Landlord's estimate thereof, pursuant to Paragraph 12 below. Taxes during any partial tax fiscal year(s) within the Lease Term shall be prorated according to the ratio which the number of days during the Lease Term or of actual occupancy of the Premises by Tenant, whichever is greater, during such year bears to 365. 8. Insurance; Indemnity; Waiver. 8..1 Insurance by Landlord. Landlord shall, during the Lease Term, procure and keep in force the following insurance, the cost of which shall be an Operating Expense, payable by Tenant pursuant to Paragraph 12 below: (a) Property Insurance. "All risk" property insurance, including, without limitation, boiler and machinery (if applicable); sprinkler damage; vandalism; malicious mischief; full coverage plate glass insurance; and demolition, increased cost of construction and contingent liability from change in building laws on the Premises and Common Area, including any improvements or fixtures constructed or installed on the Premises and Common Area by Landlord. Such insurance shall be in the full amount of the replacement cost of the foregoing, with reasonable deductible amounts, which deductible amounts shall be an Operating Expense, payable by Tenant pursuant to Paragraph 12. Such insurance shall also include rental income insurance, insuring that one hundred percent (100%) of the Rentals (as the same may be adjusted hereunder) will be paid to Landlord for a period of up to twelve (12) months if the Premises are destroyed or damaged, or such longer period as may be required by any beneficiary of a deed of trust or any mortgagee of any mortgage affecting the Premises. Such insurance shall not cover any leasehold improvements installed in the Premises by Tenant at its expense, or Tenant's equipment, trade fixtures inventory, fixtures or personal property located on or in the Premises; (b) Liability Insurance. Comprehensive general liability (lessor's risk) insurance against any and all claims for personal injury, death or property damage occurring in or about the Premises or Common Area. Such insurance shall have a combined single limit of not less than Three Million Dollars ($3,000,000) per occurrence and Five Million Dollars ($5,000,000) aggregate; and (c) Other. Such other insurance as Landlord deems necessary and prudent. 8..2 Insurance by Tenant. Tenant shall, during the Lease Term, at Tenant's sole cost and expense, procure and keep in force the following insurance: (a) Personal Property Insurance. "All risk" property insurance, including, without limitation, coverage for boiler and machinery (if applicable); sprinkler damage; vandalism; malicious mischief; and demolition, increased cost of construction and contingent liability from changes in building laws on all leasehold improvements installed in the Premises by Tenant at its expense (if any), and on all equipment, trade fixtures, inventory, fixtures aid personal property located on or in the Premises, including improvements or fixtures hereinafter constructed or installed on the Premises. Such insurance shall be in an amount equal to the full replacement cost of the aggregate of the foregoing and shall provide coverage comparable to the coverage in the standard ISO all risk form, when such form is supplemented with the coverages required above. (b) Liability Insurance. Comprehensive general liability insurance for the mutual benefit of Landlord and Tenant, against any and all claims for personal injury, death or property damage occurring in or about the Premises and Common Area, or arising out of Tenant's or Tenant's agents' use of the Common Area, use or occupancy of the Premises or Tenant's operations on the Premises. Such insurance shall have a combined single limit of not less than One Million Dollars ($1,000,000) per occurrence and Three Million Dollars ($3,000,000) aggregate. Such insurance shall contain a cross-liability (severability of interests) clause and an extended ("broad form") liability endorsement, including blanket contractual coverage. The minimum limits specified above are the minimum amounts required by Landlord, and may be revised by Landlord from time to time to meet changed circumstances, including without limitation to reflect (i) changes in the purchasing power of the dollar, (ii) changes indicated by the amount of plaintiffs' verdicts in personal injury actions in the State of California, or (iii) changes consistent with the standards required by other landlords in the county in which the Premises are located. Such liability insurance shall be primary and not contributing to any insurance available to Landlord, and Landlord's insurance (if any) shall be in excess thereto. Such insurance shall specifically insure Tenant's performance of the indemnity, defense and hold harmless agreements contained in Paragraph 8.4, although Tenant's obligations pursuant to Paragraph 8.4 shall not be limited to the amount of any insurance required of or carried by Tenant under this Paragraph 8.2(b). Tenant shall be responsible for insuring that the amount of insurance maintained by Tenant is sufficient for Tenant's Purposes. (c) Other. Such other insurance as required by law, including, without limitation, workers' compensation insurance. (d) Form of the Policies. The policies required to be maintained by Tenant pursuant to Paragraphs 8.2(a), (b), and (c) above shall be with companies, on forms, with deductible amounts (if any), and loss payable clauses reasonably satisfactory to Landlord, shall include Landlord and the beneficiary or mortgagee of any deed of trust or mortgage encumbering the Premises and/or the real property comprising the Common Area as additional insureds, and shall provide that such parties may, although additional insureds recover for any loss suffered by Tenant's negligence. Certified copies of policies or certificates of insurance shall be delivered to Landlord prior to the Commencement Date; a new policy or certificate shall be delivered to Landlord at least ten (10) business days prior to the expiration date of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Premises and to Tenant as required by this Lease. Tenant shall obtain a written obligation on the part of Tenant's insurer(s) to notify Landlord and any beneficiary or mortgagee of a deed of trust or mortgage encumbering the Premises and/or the real property comprising the Common Area in writing of any delinquency in premium payments and at least thirty (30) days prior to any cancellation or modification of any policy. Tenant's policies shall provide coverage on an occurrence basis and not on a claims made basis. In no event shall the limits of any policies maintained by Tenant be considered as limiting the liability of Tenant under this Lease. 8..3 Failure by Tenant to Obtain Insurance. If Tenant does not take out the insurance required pursuant to Paragraph 8.2 or keep the same in full force and effect, Landlord may, but shall not be obligated to, take out the necessary insurance and pay the premium therefor, and Tenant shall repay to Landlord, as Additional Rent, the amount so paid promptly upon demand. In addition, Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and all reasonable expenses (including reasonable attorneys' fees) and damages which Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance, it being expressly declared that the expenses and damages of Landlord shall not be limited to the amount of the premiums thereon. 8..4 Indemnification. Tenant shall indemnify, hold harmless, and defend Landlord with competent counsel reasonably satisfactory to Landlord (except for Landlord's negligence or willful misconduct, or that of its agents, employees, contractors or invitees) against all claims, losses, damages, expenses or liabilities for injury or death to any person or for damage to or loss of use of any property arising out of any occurrence in, on or about the Premises or Common Area, if caused or contributed to by Tenant or Tenant's agents, or arising out of any occurrence in, upon or at the Premises or on account of the use, condition, occupational safety or occupancy of the Premises. Tenant's indemnification, defense and hold harmless obligations under this Lease shall include and apply to reasonable attorneys' fees, investigation costs, and other costs actually incurred by Landlord. Tenant shall further indemnify, defend and hold harmless Landlord from and against any and all claims, losses, damages, liabilities or expenses arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease. The provisions of this Paragraph 8.4 shall survive Lease Termination with respect to any damage, injury, death, breach or default occurring prior to such termination. Except as set forth in this Paragraph 8.4, this Lease is made on the express condition that Landlord shall not be liable for, or suffer loss by reason of, injury to person or property, from whatever cause, in any way connected with the condition, use, occupational safety or occupancy of the Premises specifically including, without limitation, any liability for injury to the person or property of Tenant or Tenant's agents. 8..5 Claims by Tenant. Except as expressly provided in Paragraph 8.4, Landlord shall not be liable to Tenant, and Tenant waives all claims against Landlord, for injury or death to any person, damage to any property, or loss of use of any property in the Premises or Common Area by and from all causes, including without limitation, any defect in the Premises or Common Area and/or any damage or injury resulting from fire, steam, electricity, gas, water or rain, which may leak or flow from or into any part of the Premises, or from breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether the damage or injury results from conditions arising upon the Premises or Common Area or from other sources. Neither Landlord nor Tenant shall be liable for any damages arising from any act or negligence of any other user of the Common Area. Tenant or Tenant's agents shall immediately notify Landlord in writing of any known defect in the Premises or Common Area. The provisions of this Paragraph 8.5 shall not apply to any damage or injury caused by Landlord's willful misconduct or negligence, or that of its agents, employees, contractors or invitees. 8..6 Mutual Waiver of Subrogation. Landlord hereby releases Tenant, and Tenant hereby releases Landlord, and their respective officers, agents, employees and servants, from any and all claims or demands of damages, loss, expense or injury to the Premises or the Common Area, or to the furnishings, fixtures, equipment, inventory or other property of either Landlord or Tenant in, about or upon the Premises or the Common Area, which is caused by or results from perils, events or happenings which are the subject of insurance carried by the respective parties pursuant to this Paragraph 8 and in force at the time of any such loss, whether due to the negligence of the other party or its agents and regardless of cause or origin; provided, however, that such waiver shall be effective only to the extent permitted by the insurance covering such loss, to the extent such insurance is not prejudiced thereby, and to the extent insured against. 9. Utilities. Tenant shall pay during the Lease Term and prior to delinquency all charges for water, gas, light, heat, power, electricity, telephone or other communication service, janitorial service, trash pick-up, sewer and all other services supplied to Tenant or consumed by Tenant on the Premises (collectively the "Services") and all taxes, levies, fees or surcharges therefor. Tenant shall arrange for Services to be supplied to the Premises and shall contract for all of the Services in Tenant's name prior to the Commencement Date. The Commencement Date shall not be delayed by reason of any failure by Tenant to so contract for Services. In the event that any of the Services cannot be separately billed or metered to the Premises, or if any of the Services are not separately metered as of the Commencement Date, the cost of such Services shall be an Operating Expense and Tenant shall pay such cost to Landlord, as Additional Rent, as provided in Paragraph 12 below, except that Tenant's proportionate share of such Services shall be the percentage obtained by dividing the gross leasable square footage contained in the Premises by the total gross leasable square footage located in all buildings utilizing such Services. The lack or shortage of any Services due to any cause whatsoever (except for a lack or shortage proximately caused by the negligent acts or willful misconduct Landlord or that of its agents, employees, contractors or invitees) shall not affect any obligation of Tenant hereunder, and Tenant shall faithfully keep and observe all the terms, conditions and covenants of this Lease and pay all Rentals due hereunder, all without diminution, credit or deduction. 10. Repairs and Maintenance. 10..1 Landlord's Responsibilities. Subject to the provisions of Paragraph 15 below, Landlord shall maintain in reasonably good order and repair the structural roof, roof membrane, structural and exterior walls (including painting thereof) and foundations of the Premises. In addition, Landlord shall maintain the service contract (covering periodic inspection and servicing) for the heating and air conditioning systems of the Premises. Tenant shall give prompt written notice to Landlord of any known maintenance work required to be made by Landlord pursuant to this Paragraph 10.1. The costs of (i) repairs and maintenance of the roof membrane, (ii) periodic inspection and regular servicing of the heating and air conditioning systems of the Premises, and (iii) painting the exterior of the Premises which are the obligation of Landlord hereunder shall be an Operating Expense and Tenant shall pay such costs to Landlord as Additional Rent, as provided in Paragraph 12 below. The costs of maintenance, repair, and replacement of the structural parts of the Premises (including foundations, floor slab, load bearing walls and roof structure) which are the obligation of Landlord hereunder shall be at the cost and expense of Landlord and shall not be an Operating Expense, except for any repairs required because of the wrongful act of Tenant or Tenant's agents, which repairs shall be made at the expense of Tenant and as Additional Rent. 10..2 Tenant's Responsibilities. Except as expressly provided in Paragraph 10.1 above, and subject to the provisions of Paragraph 2.3 above, Tenant shall, at its sole cost, maintain the entire Premises and every part thereof, including without limitation, windows, skylights, window frames, plate glass, freight docks, doors and related hardware, interior walls and partitions, and the electrical, plumbing, lighting, heating and air conditioning systems in good order, condition and repair. Tenant's obligations with respect to the heating and air conditioning systems of the Premises shall include the replacement of components thereof. If Tenant fails to make repairs or perform maintenance work required of Tenant hereunder within fourteen (14) days after written notice from Landlord specifying the need for such repairs or maintenance work, Landlord or Landlord's agents may, in addition to all other rights and remedies available hereunder or by law and without waiving any alternative remedies, enter into the Premises and make such repairs and/or perform such maintenance work. If Landlord makes such repairs and/or performs such maintenance work, Tenant shall reimburse Landlord upon demand and as Additional Rent, for the cost of such repairs and/or maintenance work. Landlord shall use reasonable efforts to avoid causing any inconvenience to Tenant or interference with the use of the Premises by Tenant or Tenant's agents during the performance of any such repairs or maintenance. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises by Tenant or Tenant's agents as a result of Landlord performing any such repairs or maintenance (except for the negligent acts or willful misconduct Landlord or that of its agents, employees, contractors or invitees). Tenant shall reimburse Landlord, on demand and as Additional Rent, for the cost of damage to the Premises and/or Common Area caused by Tenant or Tenant's agents. Tenant expressly waives the benefits of any statute now or hereafter in effect (including without limitation the provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of the California Civil Code and any similar law, statute or ordinance now or hereafter in effect) which would otherwise afford Tenant the right to make repairs at Landlord's expense (or to deduct the cost of such repairs from Rentals due hereunder) or to terminate this Lease because of Landlord's failure to keep the Premises in good and sanitary order. 11. Common Area. 11..1 In General. Subject to the terms and conditions of this Lease and such rules and regulations as Landlord may from time to time prescribe, Tenant and Tenant's agents shall have the nonexclusive right to use during the Lease Term the access roads, sidewalks, landscaped areas and other facilities on the Common Area. This right to use the Common Area shall terminate upon Lease Termination. Neither Tenant nor Tenant's agents shall at any time park or permit the parking of their vehicles in any portion of the Common Area not designated by Landlord as a parking area. Landlord reserves the right to promulgate such reasonable rules and regulations relating to the use of all or any portion of the Common Area and to amend such rules and regulations from time to time, with or without advance notice, as Landlord may deem appropriate. Any amendments to the rules and regulations shall be effective as to Tenant, and binding on Tenant, upon delivery of a copy of such rules and regulations to Tenant. Tenant and Tenant's agents shall observe such rules and regulations and any failure by Tenant or Tenant's agents to observe and comply with the rules and regulations shall be a Default by Tenant. Landlord shall not be responsible for the nonperformance of the rules and regulations by any tenants or occupants of the buildings or improvements which now exist or may hereafter be constructed upon the Common Area or upon the real property owned by Landlord adjacent to the Common Area or by any other user authorized by Landlord. Provided that Tenant's use, occupancy and enjoyment of the Premises or access to the Premises is not unreasonably interfered with, Landlord shall have the right to close, at reasonable times, all or any portion of the Common Area for any reasonable purpose, including without limitation, the prevention of a dedication thereof, or the accrual of rights of any person or public therein. 11..2 Maintenance by Landlord. Landlord shall maintain the Common Area in good repair and condition and shall manage the Common Area to reasonable and customary standards. The expenditures for such maintenance shall be at the reasonable discretion of Landlord. The cost of such maintenance shall be an "Operating Expense", and Tenant shall pay such costs to Landlord, as Additional Rent, as provided in Paragraph 12 below. Alternatively, Landlord may elect at any time, at its option, to require Tenant to operate, manage and maintain all or any portion of the Common Area. If Landlord so elects, Tenant shall operate, manage and maintain that portion of the Common Area designated by Landlord at Tenant's sole cost and expense. 12. Operating Expenses. 12..1 Definition. "Operating Expense" or "Operating Expenses" as used in this Lease shall mean and include all items identified in other paragraphs of this Lease as an Operating Expense and the total cost paid or incurred by Landlord for the operation, maintenance, repair, and management of the Premises and Common Area, which costs shall include, without limitation: the cost of Services and utilities supplied to the Premises and Common Area (to the extent the same are not separately charged or metered to Tenant); water; sewage; trash removal; fuel; electricity; heat; lighting systems; fire protection systems; storm drainage and sanitary sewer systems; periodic inspection and regular servicing of the heating and air conditioning systems of the Premises; maintaining, repairing and replacing the roof membrane; property and liability insurance covering the Premises and any other insurance carried by Landlord pursuant to Paragraph 8 above; window cleaning; cleaning, sweeping, striping, resurfacing of parking and driveway areas; cleaning the Common Area following storms or other severe weather; cleaning and repairing of sidewalks, curbs, stairways; costs related to irrigation systems; the cost of complying with Laws, including, without limitation, maintenance, alterations and repairs required in connection therewith (subject to the provisions of Paragraph 12.3 hereof); costs related to landscape maintenance; and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses. If the Common Area is used by more than one (1) building at any time during the Lease Term, then the term "Operating Expenses" shall mean and include all of the Operating Expenses allocable to the Premises and a proportionate share (based on the square footage of gross leasable area in the Premises as a percentage of the total of square footage of gross leasable area of the buildings utilizing the Common Area at the time in question) of all Operating Expenses which are related to such buildings in general and are not allocated to any one building utilizing the Common Area. Operating Expenses shall also include a management fee to Landlord in an amount equal to ten percent (10%) of the total Operating Expenses. The cost of (i) capital repair items (i.e., items which Landlord is required to capitalize and not expense in the current year for federal income tax purposes), (ii) replacement of the roof membrane, (iii) resurfacing the parking lot, and (iv) repainting the exterior of the Premises, shall be amortized at ten percent (10%) over the useful life of the repair or item, and be paid monthly by Tenant from the date of installation or repair through Lease Termination. The specific examples of Operating Expenses stated in this Paragraph 12.1 are in no way intended to and shall not limit the costs comprising Operating Expenses, nor shall such examples be deemed to obligate Landlord to incur such costs or to provide such services or to take such actions except as Landlord may be expressly required in other portions of this Lease, or except as Landlord, in its reasonable discretion, may elect. All reasonable costs incurred by Landlord in good faith for the operation, maintenance, repair and management of the Premises and Common Area shall be deemed conclusively binding on Tenant. Notwithstanding anything to the contrary contained in this Lease, within thirty (30) days after receipt by Tenant of Landlord's statement of Operating Expenses prepared pursuant to Paragraph 12.2 hereof for any prior annual period during the Lease Term, Tenant or its authorized representative shall have the right to inspect the books of Landlord during the business hours of Landlord at Landlord's office or, at Landlord's option, such other location as Landlord reasonably may specify, for the purpose of verifying the information contained in the statement. Unless Tenant asserts specific errors within thirty (30) days after receipt of the statement, the statement shall be deemed correct as between Landlord and Tenant, except as to individual components subsequently determined to be in error by future audit. 12..2 Payment of Operation Expenses by Tenant. Prior to the Commencement Date, and annually thereafter, Landlord shall deliver to Tenant an estimate of Operating Expenses for the succeeding year. Tenant's payment of Operating Expenses shall be based upon Landlord's estimate of Operating Expenses and shall be payable in equal monthly installments in advance on the first day of each calendar month commencing on the date specified in Paragraph 1.6 and continuing throughout the Lease Term. Tenant shall pay the Operating Expenses to Landlord as Additional Rent and without deduction or offset. Landlord shall revise its estimate of Operating Expenses on an annual basis, and Landlord may adjust the amount of Tenant's monthly installment in the event of a material change in Operating Expenses during any year. Landlord shall furnish Tenant an annual statement (and a statement within one hundred eighty (180) days after Lease Termination) showing the actual Operating Expenses for the period to which Landlord's estimate pertains and shall concurrently either bill Tenant for the balance due (payable upon demand by Landlord) or credit Tenant's account for the excess previously paid. Alternatively, Operating Expenses actually incurred or paid by Landlord but not theretofore billed to Tenant, as invoiced by Landlord, shall be payable by Tenant within ten (10) days after receipt of Landlord's invoice, but not more often than once each calendar month. 12..3 Exclusions From Common Area Charges. Notwithstanding anything to the contrary contained in this Lease, in no event shall Tenant have any obligation to perform, to pay directly, or to reimburse Landlord for, all or any portion of the following repairs, maintenance, improvements, replacements, premiums, claims, losses, fees, commissions, charges, disbursements, attorneys' fees, experts' fees, costs and expenses (collectively, "Costs"). (a) Losses Caused by Others and Construction Defects. Costs occasioned by the act, omission or violation of Law by Landlord, or Landlord's agents, employees or contractors, or Costs to correct any construction defect in the Premises (other than alterations constructed by Tenant), or costs arising out of the failure to construct the Premises, tenant improvements installed by Landlord pursuant to Paragraph 2.2, or Common Areas in accordance with Laws and private restrictions applicable at the time of construction thereof. (b) Condemnation Costs. Costs occasioned by the exercise of the power of eminent domain. (c) Reimbursable Expenses. Costs for which Landlord has a right of reimbursement from others, or Costs which Tenant pays directly to a third person. (d) Reserves. Depreciation, amortization or other expense reserves. (e) Mortgages. Interest, charges and fees incurred on debt, payments or mortgages and rent under ground leases. (f) Hazardous Materials. Costs incurred to investigate the presence of any Hazardous Material, Costs to respond to any claim of Hazardous Material contamination or damage, Costs to remove any Hazardous Material from the Premises or Common Area or to remediate any Hazardous Material contamination, and any judgments or other Costs incurred in connection with any Hazardous Material exposure or release, except to the extent such Costs are incurred by Landlord in accordance with Paragraph 6.4 or incurred by Landlord or caused by reason of the storage, use or disposal of the Hazardous Material in question by Tenant, its agents, employees, contractors or invitees. (g) Management. Any fee, profit or compensation retained by Landlord or its affiliates for management and administration of the Premises in excess of the management fee and accounting fee specified in Paragraph 12.1. (h) Capital Improvements Required by Law. Costs for structural alterations required by Law that do not relate solely to Tenant's particular use or occupancy of the Premises, and Costs of retrofitting any part of the Common Area in order to comply with the ADA (other than as they be required in connection with the improvements installed by Landlord pursuant to Paragraph 2.2.). 13. Alterations and Improvements. 13..1 In General. Tenant shall not make, or permit to be made, any alterations, removals, changes, enlargements, improvements or additions (collectively "Alterations") in, on, about or to the Premises, or any part thereof, including Alterations required pursuant to Paragraph 6.2, without the prior written consent of Landlord (which consent shall not be unreasonably withheld or delayed) and without acquiring and complying with the conditions of all permits required for such Alterations by any governmental authority having jurisdiction thereof. The term "Alterations" as used in this Paragraph 13 shall also include all heating, lighting, electrical (including all wiring, conduit, outlets, drops, buss ducts, main and subpanels), air conditioning, and partitioning in the Premises made by Tenant, regardless of how affixed to the Premises. As a condition to the giving of its consent, Landlord may impose such reasonable requirements as Landlord reasonably may deem necessary, including without limitation, the manner in which the work is done; a right of approval of the contractor by whom the work is to be performed; the requirement that Tenant post a completion bond in an amount and form reasonably satisfactory to Landlord; and the requirement that Tenant reimburse Landlord, as Additional Rent, for Landlord's actual costs for outside consultants incurred in reviewing any proposed Alteration, whether or not Landlord's consent is granted. In the event Landlord consents to the making of any Alterations by Tenant, the same shall be made by Tenant at Tenant's sole cost and expense, in accordance with the plans and specifications approved by Landlord. Tenant shall give written notice to Landlord five (5) days prior to employing any laborer or contractor to perform services related to, or receiving materials for use upon the Premises, and prior to the commencement of any work of improvement on the Premises. Any Alterations to the Premises made by Tenant shall be made in accordance with applicable Laws and in a first-class workmanlike manner. In making any such Alterations, Tenant shall, at Tenant's sole cost and expense, file for and secure and comply with any and all permits or approvals required by any governmental departments or authorities having jurisdiction thereof and any utility company having an interest therein. In no event shall Tenant make any structural changes to the Premises or make any changes to the Premises which would weaken or impair the structural integrity of the Premises. 13..2 Removal Upon Lease Termination. At the time Tenant requests Landlord's consent, Tenant shall request a decision from Landlord in writing as to whether Landlord will require Tenant, at Tenant's expense, to remove any such Alterations and restore the Premises to their prior condition at Lease Termination. In the event Tenant fails to earlier obtain Landlord's written decision as to whether Tenant will be required to remove any Alteration, then no less than ninety (90) nor more than one hundred twenty (120) days prior to the expiration of the Lease Term, Tenant by written notice to Landlord shall request Landlord to inform Tenant whether or not Landlord desires to have any of such Alterations by Tenant removed at Lease Termination. Following receipt of such notice, Landlord may elect to have all or a portion of such Alterations removed from the Premises at Lease Termination, and Tenant shall, at its sole cost and expense, remove at Lease Termination such Alterations designated by Landlord for removal and repair all damage to the Premises and Common Area arising from such removal. In the event Tenant fails to so request Landlord's decision or fails to remove any such Alterations designated by Landlord for removal, Landlord may remove any Alterations made to the Premises by Tenant and repair all damage to the Premises and Common Area arising from such removal, and may recover from Tenant all reasonable costs and expenses incurred thereby. Tenant's obligation to pay such costs and expenses to Landlord shall survive Lease Termination. Unless Landlord elects to have Tenant remove (or, upon Tenant's failure to obtain Landlord's decision, Landlord removes) any such Alterations, all such Alterations, except for moveable furniture, personal property and equipment, and trade fixtures of Tenant not affixed to the Premises, shall become the property of Landlord upon Lease Termination (without any payment therefor) and remain upon and be surrendered with the Premises at Lease Termination. 13..3 Landlord's Improvements. All fixtures, improvements or equipment which are installed, constructed on or attached to the Premises or Common Area by Landlord shall be a part of the realty and belong to Landlord. 14. Default and Remedies. 14..1 Events of Default. The term "Default by Tenant" as used in this Lease shall mean the occurrence of any of the following events: (a) Tenant's failure to pay when due any Rentals; (b) Commencement and continuation for at least sixty (60) days of any case, action or proceeding by, against or concerning Tenant under any federal or state bankruptcy, insolvency or other debtor's relief law, including without limitation, (i) a case under Title 11 of the United States Code concerning Tenant, whether under Chapter 7, 11, or 13 of such Title or under any other Chapter, or (ii) a case, action or proceeding seeking Tenant's financial reorganization or an arrangement with any of Tenant's creditors; (c) Voluntary or involuntary appointment of a receiver, trustee, keeper, or other person who takes possession for more than sixty (60) days of substantially all of Tenant's assets or of any asset used in Tenant's business on the Premises, regardless of whether such appointment is as a result of insolvency or any other cause (d) Execution of an assignment for the benefit of creditors of substantially all assets of Tenant available by law for the satisfaction of judgment creditors; (e) Commencement of proceedings for winding up or dissolving (whether voluntary or involuntary) the entity of Tenant, if Tenant is a corporation or a partnership (f) Levy of a writ of attachment or execution on Tenant's interest under this Lease, if such writ continues for a period of thirty (30) days; (g) Transfer or attempted Transfer of this Lease or the Premises by Tenant contrary to the provisions of Paragraph 24 below; or (h) Breach by Tenant of any term, covenant, condition, warranty, or other provision contained in this Lease or of any other obligation owing or due to Landlord. 14..2 Remedies. Upon any Default by Tenant, Landlord shall have the following remedies, in addition to all other rights and remedies provided by law, to which Landlord may resort cumulatively, or in the alternative: 14..2.1 Termination. Upon any Default by Tenant, Landlord shall have die right (but not the obligation) to give written notice to Tenant of such default and terminate this Lease and Tenant's right to possession of the Premises if (i) such default is in the payment of Rentals and is not cured within seven (7) days after any such notice, or, (ii) with respect to the defaults referred to in subparagraphs 14.1(d), (e), (g) and (h), such default is not cured within thirty (30) days after any such notice (or if a default under subparagraph 14.1(h) cannot be reasonably cured within thirty (30) clays, if Tenant does not commence to cure the default within the thirty (30) day period or does not diligently and in good faith prosecute the cure to completion), or, (iii) with respect to the defaults specified in subparagraphs 14.1(b), (c) and (f), such default is not cured within the respective time periods specified in those subparagraphs. The parties agree that any notice given by Landlord to Tenant pursuant to this Paragraph 14.2.1 shall be sufficient notice for purposes of California Code of Civil Procedure Section 1161 and Landlord shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding. Upon termination of this Lease and Tenant's right to possession of the Premises, Landlord shall have the right to recover from Tenant: (a) The worth at the time of award of the unpaid Rentals which had been earned at the time of termination; (b) The worth at the time of award of the amount by which the Rentals 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; (c) The worth at the time of award (computed by discounting at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent) of the amount by which the Rentals for the balance of the Lease Term after the time of award exceed the amount of such rental loss that Tenant proves could be reasonably avoided; (d) Any other amounts necessary to compensate Landlord for all detriment proximately caused by the Default by Tenant or which in the ordinary course of events would likely result, including without limitation the following: (i) Expenses in retaking possession of the Premises; (ii) Expenses for cleaning, repairing or restoring the Premises; (iii) Any unamortized real estate brokerage commission paid in connection with this Lease; (iv) Expenses for removing, transporting, and storing any of Tenant's property left at the Premises (although Landlord shall have no obligation to remove, transport, or store any such property); (v) Expenses of reletting the Premises, including without limitation, brokerage commissions and reasonable attorneys' fees; (vi) Reasonable attorneys' fees and court costs; and (vii) Costs of carrying the Premises such as repairs, maintenance, taxes and insurance premiums, utilities and security precautions (if any). (e) The "worth at the time of award" of the amounts referred to in subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by allowing interest at an annual rate equal to the greater of: ten percent (10%); or five percent (5%) plus the rate established by the Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the month immediately preceding the Default by Tenant, on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to time amended, not to exceed the maximum rate allowable by law. l4..2.2 Continuance of Lease. Upon any Default by Tenant and unless and until Landlord elects to terminate this Lease pursuant to Paragraph 14.2.l above, this Lease shall continue in effect after the Default by Tenant and Landlord may enforce all its rights and remedies under this Lease, including without limitation, the right to recover payment of Rentals as they become due. Neither efforts by Landlord to mitigate damages caused by a Default by Tenant nor the acceptance of any Rentals shall constitute a waiver by Landlord of any of Landlord's rights or remedies, including the rights and remedies specified in Paragraph 14.2.1 above. 15. Damage or Destruction. 15..1 Definition of Terms. For the purposes of this Lease, the term: (a) "Insured Casualty" means damage to or destruction of the Premises from a cause actually insured against, or required by this Lease to be insured against, for which the insurance proceeds paid or made available to Landlord are sufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction; and (b) "Uninsured Casualty" means damage to or destruction of the Premises from a cause not actually insured against, or not required to be insured against, or from a cause actually insured against but for which the insurance proceeds paid or made available to Landlord are for any reason insufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction, or from a cause actually insured against but for which the insurance proceeds are not paid or made available to Landlord within ninety (90) days of the event of damage or destruction. 15..2 Insured Casualty. 15..2.1 Rebuilding Required. In the event of an Insured Casualty where the extent of damage or destruction is less than twenty-five percent (25%) of the then full replacement cost of the Premises, Landlord shall rebuild or restore the Premises to the condition existing immediately prior to the damage or destruction, provided the damage or destruction was not a result of a negligent or willful act of Tenant, and that there exist no governmental codes or regulations that would interfere with Landlord's ability to so rebuild or restore. 15..2.2 Landlord's Election. In the event of an Insured Casualty where the extent of damage or destruction is equal to or greater than twenty-five percent (25%) of the then full replacement cost of the Premises, Landlord may, at its option and at its sole discretion, rebuild or restore the Premises to the condition existing immediately prior to the damage or destruction, or terminate this Lease. Landlord shall notify Tenant in writing within sixty (60) days after the event of damage or destruction of Landlord's election to either rebuild or restore the Premises or terminate this Lease. 15.2.3 Continuance of Lease. If Landlord is required to rebuild or restore the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to rebuild or restore the Premises pursuant to Paragraph 15.2.2, this Lease shall remain in effect and Tenant shall have no claim against Landlord for compensation for inconvenience or loss of business during any period of repair or restoration. 15..3 Uninsured Casualty. 15..3.1 Landlord's Election. In the event of an Uninsured Casualty, Landlord may, at its option and at its sole discretion (i) rebuild or restore the Premises as soon as reasonably possible at Landlord's expense (unless the damage or destruction was caused by a negligent or willful act of Tenant, in which event Tenant shall pay all costs of rebuilding or restoring), in which event this Lease shall continue in full force and effect or (ii) terminate this Lease, in which event Landlord shall give written notice to Tenant within sixty (60) days after the event of damage or destruction of Landlord's election to terminate this Lease as of the date of the event of damage or destruction, and if the damage or destruction was caused by a negligent or willful act of Tenant, Tenant shall be liable therefor to Landlord. 15..3.2 Tenant's Ability to Continue Lease. If Landlord elects to terminate this Lease and the extent of damage or destruction is less than twenty-five percent (25%) of the then full replacement cost of the Premises or the proceeds paid or made available to Landlord are for any reason insufficient to rebuild or restore the Premises under then-existing building codes to the condition existing immediately prior to the damage or destruction, and if there exist no governmental codes or regulations that would interfere with Landlord's ability to so repair or restore, then Tenant may nevertheless cause the Lease to continue in effect by (i) notifying Landlord in writing within ten (10) days after Landlord's notice of termination of Tenant's agreement to pay all costs of rebuilding or restoring not covered by insurance, and (ii) providing Landlord with reasonable security for or assurance of such payment. Tenant shall pay to Landlord in cash no later than thirty (30) days prior to the date of commencement of construction the reasonable estimated cost of rebuilding or restoring. In the event Tenant fails to pay such cost to Landlord by the date specified, Landlord may immediately terminate the Lease and recover from Tenant all reasonable costs incurred by Landlord in preparation for construction. If the actual cost of rebuilding or restoring exceeds the estimated cost of such work, Tenant shall pay the difference to Landlord in cash upon notification by Landlord of the final cost. If the cost of rebuilding or restoring is less than the estimated cost of such work, Tenant shall be entitled to a refund of the difference upon completion of the rebuilding or restoring and determination of final cost. 15..4 Tenant's Election. Notwithstanding anything to the contrary contained in this Paragraph 15, Tenant may elect to terminate this Lease in the event the Premises are damaged or destroyed and, in the reasonable opinion of Land1ord's architect or construction consultants, the restoration of the Premises cannot be substantially completed within one hundred eighty (180) days after the event of damage or destruction. Tenant's election shall be made by written notice to Landlord within ten (10) days after Tenant receives from Landlord the estimate of the time needed to complete repair or restoration of the Premises. If Tenant does not deliver said notice within said ten (10) day period, Tenant may not later terminate this Lease even if substantial completion of the rebuilding or restoration occurs subsequent to said one hundred eighty (180) day period, provided that Landlord is proceeding with diligence to rebuild or restore the Premises. If Tenant delivers said notice within said ten (10) day period, this Lease shall terminate as of the date of the event of damage or destruction. 15..5 Damage or Destruction Near End of Lease Term. Notwithstanding anything to the contrary contained in this Paragraph 15, in the event the Premises are damaged or destroyed in whole or in part (regardless of the extent of damage) from any cause during the last twelve (12) months of the Lease Term, Landlord or Tenant may, at its option, terminate this Lease as of the date of the event of damage or destruction by giving written notice to the other of its election to do so within thirty (30) days after the event of such damage or destruction. For purposes of this Paragraph 15.5, if Tenant has been granted an option to extend or renew the Lease Term pursuant to another provision of this Lease, then the damage or destruction shall be deemed to have occurred during the last twelve (12) months of the Lease Term if Tenant fails to exercise its option to extend or renew within twenty (20) days after the event of damage or destruction. 15..6 Termination of Lease. If the Lease is terminated pursuant to this Paragraph 15, the unused balance of the Security Deposit shall be refunded to Tenant. The current Rent shall be proportionately reduced during the period following the event of damage or destruction until the date on which Tenant surrenders the Premises, based upon the extent to which the damage or destruction interferes with Tenant's business conducted in the Premises, as reasonably determined by Landlord and Tenant, to the extent such loss is covered as an insured peril by the insurance carried by Landlord pursuant to Paragraph 8.1. All other Rentals due hereunder shall continue unaffected during such period. The proceeds of insurance carried by Tenant pursuant to Paragraph 8.2 shall be paid to Landlord and Tenant, as their interests appear. 15..7 Abatement of Rentals. If the Premises are to be rebuilt or restored pursuant to this Paragraph 15, the then current Rentals shall be proportionately reduced during the period of repair or restoration, based upon the extent to which the making of repairs interferes with Tenant's business conducted in the Premises, as reasonably determined by Landlord and Tenant, to the extent such loss is covered as an insured peril by the insurance carried, or required to be carried, by Landlord pursuant to Paragraph 8.1. 15..8 Liability for Personal Property. Except for the negligent acts or willful misconduct Landlord or that of its agents, employees, contractors or invitees, in no event shall Landlord have any liability for, nor shall it be required to repair or restore, any injury or damage to any Alterations to the Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or any other property installed by Tenant or at the expense of Tenant. If Landlord or Tenant do not elect to terminate this Lease pursuant to this Paragraph 15, Tenant shall be obligated to promptly rebuild or restore the same to the condition existing immediately prior to the damage or destruction in accordance with the provisions of Paragraph 13.1. 15..9 Waiver of Civil Code Remedies. Landlord and Tenant acknowledge that the rights and obligations of the parties upon damage or destruction of the Premises are as set forth herein; therefore Tenant hereby expressly waives any rights to terminate this Lease upon damage or destruction of the Premises, except as specifically provided by this Lease, including without limitation any rights pursuant to the provisions of Subdivision 2 of Section 1932 and Subdivision 4 of Section 1933 of the California Civil Code, as amended from time to time, and the provisions of any similar law hereinafter enacted, which provisions relate to the termination of the hiring of a thing upon its substantial damage or destruction. 16. Condemnation. 16..1 Definition of Terms. For the purposes of this Lease, the term: (a) "Taking" means a taking of the Premises or Common Area or damage related to the exercise of the power of eminent domain and includes, without limitation, a voluntary conveyance, in lieu of court proceedings, to any agency, authority, public utility, person or corporate entity empowered to condemn property; (b) "Total Taking" means the Taking of the entire Premises or so much of the Premises or Common Area as to prevent or substantially impair the use thereof by Tenant for the uses herein specified provided, however, that in no event shall the Taking of less than twenty percent (20%) of the Premises be considered a Total Taking; (c) "Partial Taking" means the Taking of only a portion of the Premises or Common Area which does not constitute a Total Taking; (d) "Date of Taking" means the date upon which the title to the Premises or Common Area or a portion thereof, passes to and vests in the condemnor or the effective date of any order for possession if issued prior to the date title vests in the condemnor; and (e) "Award" means the amount of any award made, consideration paid, or damages ordered as a result of a Taking. 16..2 Rights. The parties agree that in the event of a Taking all rights between them or in and to an Award shall be as set forth herein. 16..3 Total Taking. In the event of a Total Taking during the Lease Term: (a) the rights of Tenant under this Lease and the leasehold estate of Tenant in and to the Premises shall cease and terminate as of the Date of Taking; (b) Landlord shall refund to Tenant any prepaid Rent and the unused balance of the Security Deposit (c) Tenant shall pay Landlord any Rentals due Landlord under the Lease, prorated as of the Date of Taking; (d) to the extent the Award is not payable to the beneficiary or mortgagee of a deed of trust or mortgage affecting the Premises, Tenant shall receive from the Award those portions of the Award attributable to trade fixtures of Tenant; and (e) the remainder of the Award shall be paid to and be the property of Landlord. Nothing contained in this Paragraph 16.3 shall be deemed to deny Tenant its right to recover awards made by the condemning authority for moving costs, relocation costs, and costs attributable to goodwill and leasehold improvements installed by Tenant. 16..4 Partial Taking. In the event of a Partial Taking during the Lease Term: (a) the rights of Tenant under the Lease and the leasehold estate of Tenant in and to the portion of the Premises taken shall cease and terminate as of the Date of Taking; (b) from and after the Date of Taking the Rent shall be an amount equal to the product obtained by multiplying the then current Rent by the quotient obtained by dividing the fair market value of the Premises immediately after the Taking by the fair market value of the Premises immediately prior to the Taking; (c) to the extent the Award is not payable to the beneficiary or mortgagee of a deed of trust or mortgage affecting the Premises, Tenant shall receive from the Award the portions of the Award attributable to trade fixtures of Tenant; and (d) the remainder of the Award shall be paid to and be the property of Landlord. Each party waives the provisions of California Code of Civil Procedure Section 1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a Partial Taking. Nothing contained in this Paragraph 16.4 shall be deemed to deny Tenant its right to recover awards made by the condemning authority for moving costs, relocation costs, and costs attributable to goodwill and leasehold improvements installed by Tenant. 17. Liens. 17..1 Premises To Be Free of Liens. Tenant shall pay for all labor and services performed for, and all materials used by or furnished to Tenant, Tenant's agents, or any contractor employed by Tenant with respect to the Premises. Tenant shall indemnify, defend and hold Landlord harmless from and keep the Premises and Common Area free from any liens, claims, demands, encumbrances, or judgments, including all costs, liabilities and attorneys' fees with respect thereto, created or suffered by reason of any labor or services performed for, or materials used by or furnished to Tenant or Tenant's agents or any contractor employed by Tenant with respect to the Premises. Landlord shall have the right, at all times, to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper, for the protection of Landlord and the Premises and Common Area, and any other party having an interest therein, from mechanics' and materialmen's liens, including without limitation a notice of non-responsibility. In the event Tenant is required to post an improvement bond with a public agency in connection with any work performed by Tenant on or to the Premises, Tenant shall include Landlord as an additional obligee. 17..2 Notice of Lien; Bond. Should any claims of lien be filed against, or any action be commenced affecting, the Premises, Tenant's interest in the Premises or the Common Area, Tenant shall give Landlord notice of such lien or action within five (5) business days after Tenant receives notice of the filing of the lien or the commencement of the action. In the event that Tenant shall not, within twenty (20) days following the imposition of any such lien, cause such lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien or posting of a Proper bond. All such sums paid by Landlord and all expenses incurred by Landlord in connection therewith, including attorneys' fees and costs, shall be payable to Landlord by Tenant as Additional Rent on demand. 18. Landlord's Right of Access to Premises. Landlord reserves and shall have the right and Tenant and Tenant's agents shall Permit Landlord and Landlord's agents to enter the Premises at any reasonable time during normal business hours (except in the event of an emergency) and subject to any security measures of Tenant that are applied to visitors to the Premises on a non-discriminatory basis for the purpose of (i) inspecting the Premises, (ii) performing Landlord's maintenance and repair responsibilities set forth herein, (iii) posting notices of nonresponsibility, (iv) placing upon the Premises at any time "For Sale" signs, (v) placing on the Premises ordinary "For Lease" signs at any time within one hundred eighty (180) days prior to Lease Termination, or at any time Tenant is in uncured default hereunder, or at such other times as agreed to by Landlord and Tenant, (vi) protecting the Premises in the event of an emergency, and (vii) exhibiting the Premises to prospective purchasers or lenders at any reasonable time or to prospective tenants within one hundred eighty (180) days prior to Lease Termination. In the event of an emergency, Landlord shall have the right to use any and all means which Landlord reasonably may deem proper to gain access to the Premises. Any entry to the Premises by Landlord or Landlord's agents in accordance with this Paragraph 18 or any other provision of this Lease shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises, or an eviction of Tenant from the Premises or any portion thereof nor give Tenant the right to abate the Rentals payable under this Lease. Except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees, contractors or invitees, Tenant hereby waives any claims for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by Landlord's or Landlord's agents' entry into the premises as permitted by this Paragraph 18 or any other provision of this Lease. Notwithstanding anything to the contrary contained in this Lease, Landlord and Landlord's agents, except in the case of emergency, shall provide Tenant with twenty-four (24) hours' notice prior to entry of the Premises. Any entry by Landlord and Landlord's agents shall not impair Tenant's operations more than reasonably necessary, and Tenant shall have the right to have an employee accompany Landlord at all times that Landlord is present on the Premises. 19. Landlord's Right to Perform Tenant's Covenants. Except as otherwise expressly provided herein, if Tenant shall at any time fail to make any payment or perform any other act required to be made or performed by Tenant under this Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, make such payment or perform such other act to the extent that Landlord may deem desirable, and in connection therewith, pay expenses and employ counsel. All reasonable sums so paid by Landlord and all penalties, interest and reasonable costs in connection therewith shall be due and payable by Tenant as Additional Rent upon demand. 20. Lender Requirements. 20..l Subordination. This Lease, at Landlord's option, shall be subject and subordinate to the lien of any mortgages or deeds of trust (including all advances thereunder, renewals, replacements, modifications, supplements, consolidations, and extensions thereof) in any amount(s) whatsoever now or hereafter placed on or against or affecting the Premises and/or the real property comprising the Common Area or Landlord's interest or estate therein, without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. If any mortgagee or beneficiary shall elect to have this Lease prior to the lien of its mortgage or deed of trust, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage or deed of trust, whether this Lease is dated prior or subsequent to the date of such mortgage or deed of trust or the date of the recording thereof. 20..2 Subordination Agreements. Tenant shall execute and deliver without charge therefor, such further instruments evidencing subordination of this Lease to the lien of any mortgages or deeds of trust affecting the Premises and/or real property comprising the Common Area as may be required by Landlord within ten (10) days following Landlord's request therefor; provided that such mortgagee or beneficiary under such mortgage or deed of trust agrees in writing that this Lease shall not be terminated or modified in any material way in the event of any foreclosure if Tenant is not in default under this Lease. Failure of Tenant to execute such instruments evidencing subordination of this Lease shall constitute a Default by Tenant hereunder. 20..3 Approval by Lenders. Tenant recognizes that the provisions of this Lease may be subject to the approval of any financial institution that may make a loan secured by a new or subsequent deed of trust or mortgage affecting the Premises and/or real property comprising the Common Area. If the financial institution should require, as a condition to such financing, any modifications of this Lease in order to protect its security interest in the Premises, including without limitation, modification of the provisions relating to damage to and/or condemnation of the Premises, Tenant agrees to negotiate in good faith with Landlord and such financial institution to agree on mutually acceptable modifications and execute the appropriate amendments; provided, however, that no modification shall substantially change the size, location or dimension of the Premises, or increase the Rentals payable by Tenant hereunder. If Tenant refuses to execute any such amendment, Landlord may, in Landlord's reasonable discretion, terminate this Lease. 20..4 Attornment. In the event of foreclosure or the exercise of the power of sale under any mortgage or deed of trust made by Landlord and covering the Premises and/or real property comprising the Common Area, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease, provided such purchaser expressly agrees in writing to be bound by the terms of the Lease, including, but not limited to, the quiet enjoyment provisions of Paragraph 39. 20..5 Estoppel Certificates and Financial Statements. (a) Delivery by Tenant. Tenant shall, within ten (10) business days following request by Landlord therefor and without charge, execute and deliver to Landlord any and all documents, estoppel certificates, and current financial statements of Tenant reasonably requested by Landlord in connection with the sale or financing of the Premises and/or real property comprising the Common Area, or requested by any lender making a loan affecting the Premises and/or real property comprising the Common Area. Landlord may require that Tenant in any estoppel certificate shall (i) certify that this Lease is unmodified and in full force and effect (or, if modified, state the nature of such modification and certify that this Lease, as so modified, is in full force and effect) and has not been assigned, (ii) certify the date to which Rentals are paid in advance, if any, (iii) acknowledge that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specify such defaults if claimed, (iv) evidence the status of this Lease as may be required either by a lender making a loan to Landlord to be secured by a deed of trust or mortgage covering the Premises and/or real property comprising the Common Area or a purchaser of the Premises and/or real property comprising the Common Area from Landlord, (v) warrant that in the event any beneficiary of any security instrument encumbering the Premises and/or real property comprising the Common Area forecloses on the security instrument or sells the Premises and/or real property comprising the Common Area pursuant to any power of sale contained in such security instrument, such beneficiary shall not be liable for the Security Deposit, unless the Security Deposit actually has been received by the beneficiary from Landlord, (vi) certify the date Tenant entered into occupancy of the Premises and that Tenant is conducting business at the Premises, (vii) certify that all improvements to be constructed on the Premises by Landlord have been substantially completed except for punch list items which do not prevent Tenant from using the Premises for its intended use, and (viii) certify such other matters relating to the Lease and/or Premises as may be reasonably requested by a lender making a loan to Landlord or a purchaser of the Premises and/or real property comprising the Common Area from Landlord. Any such estoppel certificate may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises and/or real property comprising the Common Area. Any financial statements of Tenant shall include an opinion of a certified public accountant (if available) and a balance sheet and profit and loss statement for the most recent fiscal year, or a reasonable substitute for the form of such financial information, all prepared in accordance with generally accepted accounting principles consistently applied. (b) Nondelivery by Tenant. Tenant's failure to deliver an estoppel certificate as required pursuant to Paragraph 20.5(a) above shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord and has not been assigned, (ii) there are now no uncured defaults in Landlord's performance, (iii) no Rentals have been paid in advance except those that are set forth in this Lease, (iv) no beneficiary of any security instrument encumbering the Premises and/or real property comprising the Common Area shall be liable for the Security Deposit in the event of a foreclosure or sale under such security instrument, unless the Security Deposit actually has been received by the beneficiary from Landlord, (v) the improvements to be constructed on the Premises by Landlord have been substantially completed except for punch list items which do not prevent Tenant from using the Premises for its intended use and (vi) Tenant has entered into occupancy of the Premises on such date as may be represented by Landlord and is open and conducting business at the Premises. Tenant's failure to deliver any financial statements, estoppel certificates or other documents as required pursuant to Paragraph 20.5(a) above shall be a Default by Tenant. 21. Holding Over. This Lease shall terminate without further notice at the expiration of the Lease Term. It is the desire of Landlord either to enter into a new lease with Tenant for the Premises prior to the expiration of the Lease Term, or to have Tenant vacate the Premises upon expiration of the Lease Term pursuant to Paragraph 35 below. Therefore, any holding over by Tenant after Lease Termination shall not constitute a renewal or extension of the Lease Term, nor give Tenant any rights in or to the Premises except as expressly provided in this Lease. Any holding over after Lease Termination with the consent of Landlord shall be construed to be a tenancy from month to month, at one hundred fifty percent (150%) of the monthly Rent for the month preceding Lease Termination in addition to all Additional Rent payable hereunder, and shall otherwise be on the terms and conditions herein specified insofar as applicable. If Tenant remains in possession of the Premises after Lease Termination without Landlord's consent, Tenant shall indemnify, defend and hold Landlord harmless from and against any loss, damage, expense, claim or liability resulting from Tenant's failure to surrender the Premises, including without limitation, any claims made by any succeeding tenant based on delay in the availability of the Premises. 22. Notices. Any notice required or desired to be given under this Lease shall be in writing, and all notices shall be given by personal delivery or mailing. All notices personally given on Tenant may be delivered to any person apparently in charge at the Premises, on any corporate officer or agent of Tenant if Tenant is a corporation, or on any one signatory party if more than one party signs this Lease on behalf of Tenant; any notice so given shall be binding upon all signatory parties as if served upon each such party personally. Any notice given pursuant to this Paragraph 22 shall be deemed to have been given when personally delivered, or if mailed, when three (3) business days have elapsed from the time when such notice was deposited in the United States mail, certified or registered mail and postage prepaid, addressed to the party at the last address given for purposes of notice pursuant to the provisions of this Paragraph 22. At the date of execution of this Lease, the addresses of Landlord and Tenant are set forth in Paragraph 1.11 above. 23. Attorneys' Fees. In the event either party hereto shall bring any action or legal proceeding for damages for an alleged breach of any provision of this Lease, to recover Rentals, to enforce an indemnity defense or hold harmless obligation, to terminate the tenancy of the Premises, or to enforce, protect, interpret, or establish any term, condition, or covenant of this Lease or right or remedy of either party, the prevailing party shall be entitled to recover, as a part of such action or proceeding, reasonable attorneys' fees and court costs, including reasonable attorneys' fees and costs for appeal, as may be fixed by the court or jury. Notwithstanding anything to the contrary contained in this Lease, "prevailing party" as used in this paragraph shall include the party who dismisses an action for recovery hereunder in exchange for sums allegedly due, performance of covenants allegedly breached or considerations substantially equal to the relief sought in the action. 24. Assignment, Subletting and Hypothecation 24..1 In General. Tenant shall not voluntarily sell, assign or transfer all or any part of Tenant's interest in this Lease or in the Premises or any part thereof, sublease all or any part of the Premises, or permit all or any part of the Premises to be used by any person or entity other than Tenant or Tenant's employees, except as specifically provided in this Paragraph 24. 24..2 Voluntary Assignment and Subletting. (a) Notice to Landlord. Tenant shall, by written notice, advise Landlord of Tenant's desire on a stated date (which date shall not be less than fifteen (15) days nor more than ninety (90) days after the date of Tenant's notice) to assign this Lease or to sublet all or any part of the Premises for any part of the Lease Term. Said notice shall state that the notice constitutes an offer to terminate the Lease pursuant to Paragraph 24.2(b) if the notice applies to a proposed assignment of the Lease or Tenant's interest herein. Tenant's notice shall state the name, legal composition and address of the proposed assignee or subtenant, and Tenant shall provide the following information to Landlord with said notice: a true and complete copy of the proposed assignment agreement or sublease a financial statement of the proposed assignee or subtenant prepared in accordance with generally accepted accounting principles within one year prior to the proposed effective date of the assignment or sublease; the nature of the proposed assignee's or subtenant's business to be carried on in the Premises; the payments to be made or other consideration to be given on account of the assignment or sublease; a current financial statement of Tenant; and such other pertinent information as may be requested by Landlord, all in sufficient detail to enable Landlord to evaluate the proposed assignment or sublease and the prospective assignee or subtenant. Tenant's notice shall not be deemed to have been served or given until such time as Tenant has provided Landlord with all information reasonably requested by Landlord pursuant to this Paragraph 24.2. Tenant shall immediately notify Landlord of any modification to the proposed terms of such assignment or sublease. Tenant may withdraw its notice at any time prior to or after exercise by Landlord of Landlord's right to terminate as described in Paragraph 24.2(b). (b) Offer to Terminate. If Tenant notifies Landlord of its desire to assign this Lease or Tenant's interest herein, Tenant's notice shall constitute an offer to terminate this Lease and Landlord shall have the right, to be exercised by giving written notice to Tenant within fifteen (15) days after receipt of Tenant's notice, to terminate the Lease. If Landlord elects to terminate, then within ten (10) days after receipt of Landlord's election, Tenant shall have the right to rescind its request to assign, and this Lease shall continue in full force and effect. If Tenant does not rescind its request, this Lease shall terminate on the date stated in the notice given by Tenant pursuant to Paragraph 24.2(a), subject to any obligations which have accrued and are unfulfilled as of such date. (c) Landlord's Consent. If Landlord does not exercise its right to terminate pursuant to Paragraph 24.2(b) within fifteen (15) days after receipt of Tenant's notice or if Tenant proposes a sublease, Landlord shall not unreasonably withhold or delay its consent to the proposed assignment or subletting, on the terms and conditions specified in said notice. If Tenant's notice fails to state that it constitutes an offer to terminate the Lease as may be required pursuant to Paragraph 24.2(a), such notice shall be deemed insufficient for the purposes of this Paragraph 24.2, and Landlord may withhold its consent to the proposed assignment in Landlord's absolute discretion. Without otherwise limiting the criteria upon which Landlord may withhold its consent to any proposed assignment or sublease, if Landlord withholds its consent where Tenant is in default at the time of the giving of Tenant's notice or at any time thereafter, or where the net worth of the proposed assignee (according to generally accepted accounting principles) is less than the greater of (i) the net worth of Tenant immediately prior to the assignment (ii) or the net worth of Tenant at the time this Lease is executed, such withholding of consent shall be presumptively reasonable. Fifty percent (50%) of any and all rent paid by an assignee or subtenant in excess of the Rentals to be paid under this Lease (prorated in the event of a sublease of less than the entire Premises), after Tenant's deduction therefrom of all reasonable costs to effect the assignment or subletting, including without limitation, brokerage commissions, attorneys' fees, and the cost of leasehold improvements or alterations installed or redecorating performed by Tenant for the sublessee, shall be paid directly to Landlord, as Additional Rent, at the time and place specified in this Lease. For the purposes of this Paragraph 24, the term "rent" shall include any consideration of any kind received, or to be received, by Tenant from an assignee or subtenant, if such sums are related to Tenant's interest in this Lease or in the Premises, including, but not limited to key money, bonus money, and payments (in excess of the fair market value thereof) for Tenant's assets, fixtures, trade fixtures, inventory, accounts, goodwill, equipment, furniture, general intangibles, and any capital stock or other equity ownership interest of Tenant. Any assignment or subletting without Landlord's consent shall be voidable at Landlord's option, and shall constitute a Default by Tenant. Landlord's consent to any one assignment or sublease shall not constitute a waiver of the provisions of this Paragraph 24 as to any subsequent assignment or sublease nor a consent to any subsequent assignment or sublease further, Landlord's consent to an assignment or sublease shall not release Tenant from Tenant's obligations under this Lease, and Tenant shall remain jointly and severally liable with the assignee or subtenant. (d) Assumption of Obligations. In the event Landlord consents to any assignment, such consent shall be conditioned upon the assignee expressly assuring and agreeing to be bound by each of Tenant's covenants, agreements and obligations contained in this Lease, pursuant to a written assignment and assumption agreement in a form reasonably approved by Landlord. Landlord's consent to any assignment or sublease shall be evidenced by Landlord's signature on said assignment and assumption agreement or on said sublease or by a separate written consent. In the event Landlord consents to a proposed assignment or sublease, such assignment or sublease shall be valid and the assignee or subtenant shall have the right to take possession of the Premises only if an executed original of the assignment or sublease is delivered to Landlord, and such document contains the same terms and conditions as stated in Tenant's notice to Landlord given pursuant to Paragraph 24.2(a) above, except for any such modifications to which Landlord has consented in writing. 24..3 Collection of Rent. Tenant hereby irrevocably gives to and confers upon Landlord, as security for Tenant's obligations under this Lease, the right, power and authority to collect all rents from any assignee or subtenant of all or any part of the Premises as permitted by this Paragraph 24, or otherwise, and Landlord, as assignee of Tenant, or a receiver for Tenant appointed on Landlord's application, may collect such rent and apply it toward Tenant's obligations under this Lease; provided, however, that until the occurrence of any Default by Tenant, subject to applicable cure periods, or except as provided by the provisions of Paragraph 24.2(c) above, Tenant shall have the right to collect such rent. Upon the occurrence of any Default by Tenant, Landlord may at any time without notice in Landlord's own name sue for or otherwise collect such rent, including rent past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys' fees, toward Tenant's obligations under this Lease. Landlord's collection of such rents shall not constitute an acceptance by Landlord of attornment by such subtenants. In the event of a Default by Tenant, Landlord shall have all rights provided by this Lease and by law, and Landlord may, upon re-entry and taking possession of the Premises, eject all parties in possession or eject some and not others, or eject none, as Landlord shall determine in Landlord's sole discretion. 24..4 Corporations and Partnerships. If Tenant is a partnership, any withdrawal or substitution (whether voluntary, involuntary, or by operation of law and whether occurring at one time or over a period of time) of any partner(s) owning fifty percent (50%) or more (cumulatively) of the partnership, any assignment(s) of fifty percent (50%) or more (cumulatively) of any interest in the capital or profits of the partnership, or the dissolution of the partnership shall be deemed an assignment of this Lease requiring the prior written consent of Landlord. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, any sale or transfer (or cumulative sales or transfers) of the capital stock of Tenant in excess of fifty percent (50%), or any sale (or cumulative sales) of all of the assets of Tenant shall be deemed an assignment of this Lease requiring the prior written consent of Landlord. Any such withdrawal or substitution of partners or assignment of any interest in or dissolution of a partnership tenant, and any such sale of stock or assets of a corporate tenant without the prior written consent of Landlord shall be a Default by Tenant hereunder. The foregoing notwithstanding, the sale or transfer of any or all of the capital stock of a corporation, the capital stock of which is now or hereafter becomes publicly traded, shall not be deemed an assignment of this Lease. Notwithstanding anything to the contrary contained in this Lease, Tenant, without Landlord's prior written consent (but with notice to Landlord), may sublet the Premises or assign this Lease to (i) a subsidiary, affiliate, division or corporation controlled by or under common control with Tenant; (ii) a successor corporation related to Tenant by merger, consolidation, non-bankruptcy reorganization or government action; or (iii) a purchaser of substantially all of Tenant's assets located at the Premises, provided that in either of the latter two instances the successor or purchaser has a net worth not less than the net worth of Tenant at the tinge that Tenant executes this Lease (each, a "Permitted Assignee"). Notwithstanding that a Transfer is made to a Permitted Assignee, Tenant shall not be released from any of its obligations under this Lease and such Permitted Assignee shall be required to assume all of Tenant's obligations hereunder as a condition to such transfer being permitted without Landlord's prior written consent. 24..5 Reasonable Provisions. Tenant expressly agrees that the provisions of this Paragraph 24 are not unreasonable standards or conditions for purposes of Section 1951.4(b)(2) of the California Civil Code, as amended from time to time, under bankruptcy laws, or for any other purpose. 24..6 Attorneys' Fees. Tenant shall pay, as Additional Rent, Landlord's reasonable attorneys fees for reviewing, investigating, processing and/or documenting any requested assignment or sublease, whether or not Landlord's consent is granted. 24..7 Involuntary Transfer. No interest of Tenant in this Lease shall be assignable, involuntarily or by operation of law, including, without limitation, the transfer of this Lease by testacy or intestacy. Each of the following acts shall be considered an involuntary assignment: (a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or a proceeding under any bankruptcy law is instituted in which Tenant is the bankrupt; or, if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; (b) Levy of a writ of attachment or execution on this Lease; (c) Appointment of a receiver with authority to take possession of the Premises in any proceeding or action to which Tenant is a party; or (d) Foreclosure of any lien affecting Tenant's interest in the Premises, which lien was not consented to by Landlord pursuant to Paragraph 24.9. An involuntary assignment shall constitute a Default by Tenant and Landlord shall have the right to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant. In the event the Lease is not terminated, the provisions of Paragraph 24.2(c) regarding rents paid by an assignee or subtenant shall apply. If a writ of attachment or execution is levied on this Lease, or if any involuntary proceeding in bankruptcy is brought against Tenant or a receiver is appointed, Tenant shall have sixty (60) days in which to cause the attachment or execution to be removed, the involuntary proceeding dismissed, or the receiver removed. 24..8 Hypothecation. Tenant shall not hypothecate, mortgage or encumber Tenant's interest in this Lease or in the Premises or otherwise use this Lease as a security device in any manner without the consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Consent by Landlord to any such hypothecation or creation of a lien or mortgage shall not constitute consent to an assignment or other transfer of this Lease following foreclosure of any permitted lien or mortgage. 24..9 Binding on Successors. The provisions of this Paragraph 24 expressly apply to all heirs, successors, sublessees, assignees and transferees of Tenant. 25. Successors. Subject to the provisions of Paragraph 24 above and Paragraph 30.2(a) below, the covenants, conditions, and agreements contained in this Lease shall be binding on the parties hereto and on their respective heirs, successors and assigns. 26. Landlord Default; Mortgage Protection. Landlord shall not be in default under this Lease unless Tenant shall have given Landlord written notice of the breach and, within thirty (30) days after notice, Landlord has not cured the breach or, if the breach is such that it cannot reasonably be cured under the circumstances within thirty (30) days, has not commenced diligently to prosecute the cure to completion. Any money judgment obtained by Tenant based upon Landlord's breach of this Lease shall be satisfied only out of the proceeds of the sale or disposition of Landlord's interest in the Premises (whether by Landlord or by execution of judgment). In the event of any default on the part of Landlord under this Lease, Tenant shall give notice by registered or certified mail to any beneficiary of a deed of trust or any mortgagee of a mortgage affecting the Premises and/or the real property comprising the Common Area whose address shall have been furnished to Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises by power of sale or judicial foreclosure, if such should prove necessary to effect a cure. 27. Exhibits. All exhibits attached to this Lease shall be deemed to be incorporated herein by the individual reference to each such exhibit, and all such exhibits shall be deemed to be a part of this Lease as though set forth in full in the body of the Lease. 28. Surrender of Lease Not Merger. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at the option of Landlord, terminate all or any existing subleases or subtenants, or may, at the option of Landlord, operate as an assignment to Landlord of any or all such subleases or subtenants. 29. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein contained (or the acceptance by Landlord of any performance by Tenant after the time the same shall become due) shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach thereof or of any other term, covenant or condition herein contained, unless otherwise expressly agreed to by Landlord in writing. The acceptance by Landlord of any sum less than that which is required to be paid by Tenant shall be deemed to have been received only on account of the obligation for which it is paid (or for which it is allocated by Landlord, in Landlord's reasonable discretion, if Tenant does not designate the obligation as to which the payment should be credited), and shall not be deemed an accord and satisfaction notwithstanding any provisions to the contrary written on any check or contained in any letter of transmittal. The acceptance by Landlord of any sum tendered by a purported assignee or transferee of Tenant shall not be deemed a consent by Landlord to any assignment or transfer of Tenant's interest herein. No custom or practice which may arise between the parties hereto in the administration of the terms of this Lease shall be construed as a waiver or diminution of Landlord's right to demand performance by Tenant in strict accordance with the terms of this Lease. 30. General. 30..1 Captions and Headlines. The captions and paragraph headings used in this Lease are for convenience of reference only. They shall not be construed to limit or extend the meaning of any part of this Lease, and shall not be deemed relevant in resolving any question of interpretation or construction of any paragraph of this Lease. 30..2 Definitions. (a) Landlord. The term Landlord as used in this Lease, so far as the covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner at the time in question of the fee title to the Premises. In the event of any transfer(s) of such interest, the Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall have no further liability under this Lease to Tenant except as to matters of liability which have accrued and are unsatisfied as of the date of such transfer, it being intended that the covenants and obligations contained in this Lease on the part of Landlord shall be binding on Landlord and its successors and assigns only during and in respect of their respective periods of ownership of the fee provided that any funds in the possession of Landlord or the then grantor and as to which Tenant has an interest, less any deductions permitted by law or this Lease, shall be turned over to the grantee. The covenants and obligations contained in this Lease on the part of Landlord shall, subject to the provisions of this Paragraph 30.2(a), be binding upon each Landlord and such Landlord's heirs, personal representatives, successors and assigns only during its respective period of ownership. Except as provided in this Paragraph 30.2(a), this Lease shall not be affected by any transfer of Landlord's interest in the Premises, and Tenant shall attorn to any transferee of Landlord provided that all of Landlord's obligations hereunder are assumed in writing by such transferee. (b) Agents. For purposes of this Lease and without otherwise affecting the definition of the word "agent" or the meaning of an "agency", the term "agents" shall be deemed to include the agents, employees, officers, directors, servants, invitees, contractors, successors, representatives subcontractors, guests, customers, suppliers, partners, affiliated companies, and any other person or entity related in any way to the respective party, Tenant or Landlord. (c) Interpretation of Terms. The words "Landlord" and "Tenant" as used herein shall include the plural as well as the singular. Words in the neuter gender include the masculine and feminine and words in the masculine or feminine gender include the neuter. 30..3 Copies. Any executed copy of this Lease shall be deemed an original for all purposes. 30..4 Time of Essence. Time is of the essence as to each and every provision in this Lease requiring performance within a specified time. 30..5 Severabilitv. In case any one or more of the provisions contained herein 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 Lease, but this Lease shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein. However, if Tenant's obligation to pay the Rentals is determined to be invalid or unenforceable, this Lease at the option of Landlord shall terminate. 30..6 Governing Law. This Lease shall be construed and enforced in accordance with the laws of the State of California. 30..7 Joint and Several Liability. If Tenant is more than one person or entity, each such person or entity shall be jointly and severally liable for the obligations of Tenant hereunder. If Tenant is a husband and wife, the obligations hereunder shall extend to their sole and separate property as well as community property. 30..8 Construction of Lease Provisions. Although printed provisions of this Lease were prepared by Landlord, this Lease shall not be construed either for or against Tenant or Landlord, but shall be construed in accordance with the general tenor of the language to reach a fair and equitable result. 30..9 Tenant's Financial Statements. Tenant hereby warrants that all financial statements delivered by Tenant to Landlord are true, correct, and complete, and prepared in accordance with generally accepted accounting principles. Tenant acknowledges and agrees that Landlord is relying on such financial statements in accepting this Lease, and that a breach of Tenant's warranty as to such financial statements shall constitute a Default by Tenant. Notwithstanding anything to the contrary contained in this Lease, Landlord shall keep confidential all such financial information received from Tenant, except that Landlord may provide such financial information to Landlord's lenders or prospective lenders with respect to the Premises. 30..10 Withholding of Landlord's Consent. Notwithstanding any other provision of this Lease, where Tenant is required to obtain the consent (whether written or oral) of Landlord to do any act, or to refrain from the performance of any act, Tenant agrees that if Tenant is in default with respect to any term, condition, covenant or provision of this Lease, then Landlord shall be deemed to have acted reasonably in withholding its consent if said consent is, in fact, withheld. 31. Signs Tenant shall not place or permit to be placed any sign or decoration on the Common Area or the exterior of the Premises or that would be visible from the exterior of the Premises, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed. Tenant may place "for lease" signs in connection with efforts to assign or sublease the Premises, subject to the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed; provided that all such signs shall be removed not later than the one hundred eightieth (180th) day prior to Lease Termination. In no event shall any such sign revolve, rotate, move or create the illusion of revolving, rotating or moving or be internally illuminated and there shall be no exterior spotlighting or other illumination on any such sign. Tenant, upon written notice by Landlord, shall immediately remove any of Tenant's signs or decorations that are visible from the exterior of the Premises or that Tenant has placed or permitted to be placed on the Common Area or the exterior of the Premises without the prior written consent of Landlord, or which remain beyond the one hundred eightieth (180th) day prior to Lease Termination. If Tenant fails to so remove such sign or decoration within five (5) days after Landlord's written notice, Landlord may enter the Premises and remove such sign or decoration and Tenant shall pay Landlord, as Additional Rent upon demand, the cost of such removal. All signs placed on the Premises or Common Area by Tenant shall comply with all recorded documents affecting the Premises, including but not limited to any Declaration of Conditions, Covenants and Restrictions: the sign criteria attached hereto as Exhibit E, if applicable (as the same may be amended from time to time); and applicable statutes, ordinances, rules and regulations of governmental agencies having jurisdiction thereof. At Landlord's option, Tenant shall at Lease Termination remove any sign which it has placed on the Premises or the Common Area, and shall, at its sole cost, repair any damage caused by the installation or removal of such sign. 32. Landlord as Party Defendant. If, by reason of any act or omission by Tenant or Tenant's agents, Landlord is made a party defendant concerning this Lease, the Premises, or the Common Area, Tenant shall indemnify Landlord against all liability actually incurred (or threatened against) Landlord as a party defendant, including all damages, costs and reasonable attorneys' fees. 33. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee of any funds paid to Landlord by Tenant (or held by Landlord for Tenant) pursuant to this Lease, including without limitation the Security Deposit. Landlord shall not be required to keep any such funds separate from Landlord's general funds. Any funds held by Landlord pursuant to this Lease shall not bear interest. 34. Interest. Any payment due from Tenant to Landlord, except for Rent received by Landlord within thirty (30) days after the same is due, shall bear interest from the date due until paid, at an annual rate equal to the greater of: ten percent (10%); or five percent (5%) plus the rate established by the Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the month immediately preceding the due date, on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter from time to time amended. In addition, Tenant shall pay all costs and reasonable attorneys' fees incurred by Landlord in the collection of such amounts. 35. Surrender of Premises. On the last day of the Lease Term or upon the sooner termination of this Lease, Tenant shall, to the reasonable satisfaction of Landlord, surrender the Premises to Landlord in good condition (reasonable wear and tear, acts of God, casualty, condemnation, Hazardous Materials other than those stored, used or disposed of by Tenant, its agents, employees, contractors or invitees, and alterations concerning which Landlord has not reserved the right to require removal excepted) with all originally painted interior walls washed, or re-painted if marked or damaged, and other interior walls cleaned and repaired or replaced, all carpets cleaned and in good condition, the air conditioning, ventilating and heating equipment inspected, serviced and repaired by a reputable and licensed service firm (unless Landlord has elected to maintain heating and air conditioning systems pursuant to Paragraph 10. 1 above), and all floors cleaned and waxed. Tenant shall remove all of Tenant's personal property and trade fixtures from the Premises, and all property not so removed shall be deemed abandoned by Tenant. Furthermore, Tenant shall immediately repair all damage to the Premises and Common Area caused by any such removal. If the Premises are not so surrendered at Lease Termination, Tenant shall indemnify, defend and hold Landlord harmless from and against any loss, damage, expense, claim or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant or losses to Landlord due to lost opportunities to lease to succeeding tenants. 36. No Partnership or Joint Venture. Nothing in this Lease shall be construed as creating a partnership or joint venture between Landlord, Tenant, or any other party, or cause Landlord to be responsible for the debts or obligations of Tenant or any other party. 37. Entire Agreement. Any agreements, warranties, or representations not expressly contained herein shall in no way bind either Landlord or Tenant, and Landlord and Tenant expressly waive all claims for damages by reason of any statement, representation, warranty, promise or agreement, if any, not contained in this Lease. This Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, whether written or oral, between Landlord and its agents and Tenant and its agents with respect to the Premises, Common Area or this Lease. This Lease constitutes the entire agreement between the parties hereto and no addition to, or modification of, any term or provision of this Lease shall be effective until and unless set forth in a written instrument signed by both Landlord and Tenant. 38. Submission of Lease. Submission of this instrument for Tenant's examination or execution does not constitute a reservation of space nor an option to lease. This instrument shall not be effective until executed by both Landlord and Tenant. Execution of this Lease by Tenant shall constitute an offer by Tenant to lease the Premises, which offer shall be deemed accepted by Landlord when this Lease is executed by Landlord and delivered to Tenant. 39. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon Tenant paying Rentals and performing its covenants and conditions under the Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises for the Lease Term, subject, however, to the terms of this Lease and of any mortgages or deeds of trust affecting the Premises and/or the real property comprising the Common Area, and the rights reserved by Landlord hereunder. Any purchaser upon any foreclosure or exercise of the power of sale under any mortgage or deed of trust made by Landlord and covering the Premises to whom Tenant attorns pursuant to Paragraph 20.4 above shall be bound by the terms of this Paragraph 39. 40. Authority. The undersigned parties hereby warrant that they have proper authority and are empowered to execute this Lease on behalf of the Landlord and Tenant, respectively. If Tenant is a corporation (or partnership), each individual executing this Lease on behalf of said corporation (or partnership) represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the by-laws of said corporation (or on behalf of said partnership in accordance with the partnership agreement of such partnership), and that this Lease is binding upon said corporation (or partnership) in accordance with its terms. If Tenant is a corporation, and this Lease is not executed by two corporate officers, Tenant shall upon execution of this Lease, deliver to Landlord evidence of the authority of the individual executing this Lease on behalf of Tenant to execute this Lease on behalf of Tenant. In the event Tenant should fail to deliver such evidence to Landlord upon execution of this Lease, Landlord shall not be deemed to have waived its right to require delivery of such evidence, and at any time during the Lease Term Landlord may request Tenant to deliver the same, and Tenant agrees it shall thereafter promptly deliver such evidence to Landlord. If Tenant is a corporation, Tenant warrants that: (a) Tenant is a valid and existing corporation; (b) Tenant is qualified to do business in California; (c) All fees and all franchise and corporate taxes are paid to date, and will be paid when due; (d) All required forms and reports will be filed when due; and (e) The signers of this Lease are properly authorized to execute this Lease. 41. Addendum. Paragraphs 42 through 42 are added hereto and made a part of this Lease. IN WITNESS WHEREOF, the parties have executed this Lease effective as of the date set forth below. LANDLORD: TENANT: REALTEC PROPERTIES I, L.P., a CERPROBE CORPORATION, a California Limited Partnership Delaware corporation By Thomas P. Masters By C. Zane Close ----------------------------- ------------------------------ Title: General Partner Title President & C.E.O. --------------------------- Date 7/19/95 Date July 18, 1995 ------------------------ ----------------------- By Henry Wong ----------------------------- Title V.P. Manufacturing ------------------------ Date July 18, 1995 -------------------------- EXHIBITS A Site Plan Paragraph 1.4 (Premises shown cross-hatched and Common Area outlined in red pursuant to Paragraph 2.1) B Legal Description Paragraph 2.1 C Improvements Paragraph 2.2 D Commencement Date Letter Paragraph 3.1 E Sign Criteria Paragraph 31 EXHIBIT "A" Site Plan Montague Expressway Orchard Drive --MAP-- North First Street Orchard Partnership EXHIBIT "C" Tenant Improvements Landlord shall provide an allowance of $26,820 for removal of existing carpet and the replacement of same with new carpet. Said Allowance is based on Shaw Carpet "Bellemeade". Any additional costs to Landlord shall be reimbursed by Tenant. EXHIBIT "D" Commencement Date Letter Date _____________________________ _____________________________ _____________________________ _____________________________ Re: Dear _______________________ ; In regard to that certain Lease dated __________________________________, by and between _______________________as Landlord, and ______________________________, as Tenant, this letter shall confirm our understandings and agreements relative to the Lease commencement date. Notwithstanding anything to the contrary contained in the Lease it is agreed that the Lease commenced on _____________________________ and shall terminate on ______________________________ . Please acknowledge receipt of this letter and your Agreement and Approval of the foregoing, by signing below and return one copy of this letter to our office. Very truly yours, EXHIBIT "E" Signage Tenant shall be entitled the use of the monument sign located on the corner of Montague Expressway and Orchard Drive subject to Landlord's approval. In the event Tenant fails to so request Landlord's decision or fails to remove any such Signage designated by landlord for removal, Landlord may remove any Signage to the Premises by Tenant, restore the Premises to their prior condition and repair all damage to the Premises and Common Area arising from such removal, and may recover from Tenant all reasonable costs and expenses incurred thereby. EX-2 3 LEASE AGREEMENT East Point Realty Trust Lease Agreement Lease dated as of the 30th day of June, 1995 by and between East Point Realty Trust having its principal place of business at 4 Bellows Road, Westborough, Massachusetts, (hereinafter called the "Lessor"), and CerProbe, Inc., a Delaware Corporation, having their principal place of business at 4 Bellows Road, Westborough, Massachusetts (hereinafter called the "Lessee"). 1. DESCRIPTION OF PROPERTY. In consideration of the rent reserved herein and the mutual covenants contained herein, the Lessor hereby leases to the Lessee and Lessee hereby leases from the Lessor, a portion of the Building (the "Building") located on Land owned by the Lessor (the "Land") at 4 Bellows Road, Westborough, MA. The entire first floor of the Building leased to the Lessee is shown on Exhibit A attached hereto, which exhibit is incorporated by reference, and consists of approximately 6,144 square feet of "Rentable" space; together with all rights and appurtenances belonging thereto (hereinafter called the "Leased Premises"). The Lessee recognizes that a portion of the "Rentable" square feet of the premises includes areas which may not be readily usable by the Lessee. The Lessee shall have the right to use in common, with others entitled thereto, the parking areas, hallways, stairways and elevator necessary for access to said Leased Premises and lavatories nearest thereto. 2. TERM. (a) Initial Term. The Lessee is to have and to hold the Leased Premises for an initial Term ("Term") of five (5) years. The Term shall commence on the 1st day of July, 1995 (hereinafter the "Lease Commencement Date"), and end on the 30th day of June, 2000. (b) The Lessee shall have the option to extend the Term of this Lease for one additional Term of two (2) years (the "Option Term"). Lessee shall have exercised this option by giving Lessor written notice of such exercise on or before the first day of March, 2000. 3. RENT. (a) Base Rent. The Lessee agrees to pay to Lessor a Base Rent ("Base Rent") at the rate of $70,656 dollars per year and Additional Rent ("Additional Rent") at the rate of $21,504 dollars per year, payable in advance in monthly installments of $7,680 for the first year of the lease Term. The Additional Rent is an estimate by Lessor of common area maintenance ("CAM"), real estate taxes and insurance charges. Monthly Monthly Monthly Lease Year Base Rent Additional Rent Rent Payment ---------- --------- --------------- ------------ One ...................... $5,888 $1,792 $7,680 Two ...................... $6,016 $1,792 $7,808 Three .................... $6,016 $1,792 $7,808 Four ..................... $6,144 $2,048 $8,192 Five ..................... $6,144 $2,048 $8,192 Thereafter, payments shall be made in equal monthly installments, in advance, on or before the first (1st) day of each and every calendar month of the Term. (b) Rent To Be Net. It is the purpose and intent of the Lessor and the Lessee that the Base Rent shall be net to the Lessor so that this Lease shall yield, net to the Lessor, the Base Rent specified in Section 3(a) hereof in each Lease Year, except for the structural repairs which shall be the responsibility of the Lessor as provided for in Section 9 of this Lease. (c) Common Area Maintenance, Taxes and Insurance Expenses. The Lessee agrees to pay 50.00% of all common area maintenance (CAM), real estate taxes, property and liability insurance coverages on the Land and the Building as Additional Rent. Said Additional Rent is estimated to be $1,792 per month by Lessor and shall be added to the monthly Base Rent. In years four and five of the lease Term, the estimated charges for Additional Rent shall increase to $2,048 per month. At the end of each calendar year or at the end of the lease Term, the Lessor shall provide a reconciliation of expenses incurred for the period. The Lessor shall either bill the Lessee for additional CAM charges due or provide the Lessee a credit for the Base Rent due for the next rental period. Upon the end of the lease Term, the Lessor will provide a reconciliation of the Additional Rent incurred by Lessee. Upon request, Lessee shall have the right to review all invoices pertaining to Additional Rent. (1) Common Area Maintenance (CAM). CAM charges shall include all Land and Building maintenance, repair, and operational costs necessary including but not limited to the following: common area electricity, all utilities not individually metered to specific tenant spaces, water and sewer charges, janitorial and cleaning, HVAC maintenance and repair, supplies, paint and wallpaper, sprinklers, window cleaning, relamping and reballasting lighting fixtures, exterior lighting, rubbish removal, property management, alarm system and inspections, security, elevator maintenance and repair, parking lot maintenance including restripping and sealcoating, landscape maintenance, snow plowing, sanding and snow removal. (2) Real Estate Taxes. Lessee shall pay to Lessor 50.00% of the real estate taxes, betterments and other assessments charged and assessed against the Building and Land at 4 Bellows Road during each year of the Term. (3) Insurance. Lessee shall pay to Lessor 50.00% of the insurance premiums for coverage on all common areas of the Building and Land at 4 Bellows Road. Lessor shall obtain such insurance for the Leased Premises, the Building, and any appurtenant parking areas as it deems appropriate, and the Lessee shall have no right to proceeds or claims thereunder. To the extent that the Lessee's use of the Leased Premises causes any additional premium for the Lessor's insurance, the Lessee shall pay such additional premium as Additional Rent within ten (10) days of Lessee's written request therefor. The Lessee shall obtain its own insurance to cover losses to its property, equipment, fixtures, or inventory and the Lessee shall be solely responsible for any losses not covered by its insurance according to Section 13. (d) Additional Rent. All Additional Rent payments for Additional rent shall be due within ten (10) days of a Notice by Lessor to Lessee that such payments are due. Lessor reserves the same rights and remedies against the Lessee for default in making Additional Rent payments as the Lessor shall have for default in the payment of the Base Rent, including but not limited to, the right to seek and recover such payments as rent under any applicable provisions of the United States Bankruptcy Code. (e) Late Charges. If Base Rent or Additional Rent for any month has not been paid by the close of business of the tenth (10th) business day of said month, the Lessee agrees to pay a late charge of five (5%) percent of the total amount due to the Lessor. An assessed late charge shall be deemed Additional Rent and shall be due and payable ten (10) days after the notification of such assessment. In the event that the Base Rent or Additional Rent has not been received within thirty (30) days following the payment due date, an additional interest charge of one and one half (1.5%) percent per month shall be payable to the Lessor from the date the payment was due and this charge shall constitute Additional Rent payable hereunder. (f) Option Term Rent. The Base Monthly Rent during the Option Term shall be equal to the then fair market rent for comparable space upon comparable terms in the Westborough area but said rent shall not be less than the Base Rent of the previous Term. 4. UTILITIES. (a) lessee shall be responsible for paying 100% of the cost of utilities to the Leased Premises until the expiration of the Term hereof or until earlier termination of this Lease. All such utilities are separately metered in the Building. (b) The Lessor shall not be liable to the Lessee in damages or otherwise if the furnishing of any one or more of the utilities is interrupted, impaired or terminated because of the failures, repairs, acts of God, installations or improvements nor shall any interruption, impairment or termination release Lessee from the performance of any of its obligations hereunder. The Lessor reserves the right to stop service on any or all utilities when necessary by reason of accident or emergency, or mechanical breakdown, or requirement of law or any cause beyond Lessor's reasonable control or for repairs, alterations, replacements or improvements which, in the judgement of the Lessor are desirable and necessary, until the reason for such stoppage shall have been eliminated. Lessor shall use reasonable efforts at all times to keep all utilities in sound working order and good repair. 5. OCCUPANCY OF THE LEASED PREMISES. The taking of occupancy of the whole or part of the Leased Premises by the Lessee, shall be conclusive evidence, as against the Lessee, that Lessee accepts possession of the same and that the Leased Premises and the Building were in good and satisfactory condition at the time occupancy was so taken. 6. USE RESTRICTIONS. (a) Lessee covenants and agrees that it will use the Leased Premises for the purpose of maintaining professional offices, for the purpose of developing, manufacturing and marketing of high performance probing and interface products for use in the testing of integrated and hybrid circuits and semiconductor-related products, as well as incidental uses thereto, and for no other purpose. (b) The Lessee will not permit the Leased Premises to be used for any unlawful or immoral purpose. Lessee in the conduct of its business, will at its own expense, comply with all applicable laws, ordinances, rules and regulations of any and all governmental authorities having jurisdiction of the Leased Premises as they specifically apply to Lessee's use of the Leased Premises, now or in the future. Lessee shall keep the inside and outside of all doors and windows and the Leased Premises clean and shall maintain the Leased Premises at its own expense in a clean, attractive and sanitary condition. Lessee covenants and agrees to maintain the temperature of the Leased premises at a minimum of fifty (50) degrees during the winter months. (c) Lessee does hereby, for itself and its heirs, successors and assigns, agree to and hereby does indemnify, defend and hold harmless, Lessor and its assigns, successors and grantees, from any and all liabilities, assessments, suits, damages, costs and expenses, attorney's fees or judgements arising out of the Lessee's handling and disposal of hazardous wastes and/or toxic substances including any and all clean-up expenses required under applicable laws and regulations. (d) It is agreed that the Leased Premises will be used for light assembly of components for printed circuit boards using hand soldering irons, hand tools and bench top electrical test equipment. These operations involve the use of common wire solder, flux and EPA approved solvents--all in small quantities. These solvents are common non-flammable cleaning agents. ln addition, the operation will involve the use of a standard office photocopier with its associated chemicals and a small bake oven for drying boards. 7. CONDITION OF THE PREMISES. Lessee accepts the Leased Premises in the condition in which they are on the date of the commencement of the Term hereof, acknowledging that it has inspected the Leased Premises and that they are in good order and condition sufficient for the uses intended by the Lessee. Lessor has made and the Lessee has relied on no representations or warranties, expressed or implied, as to the condition of or rentability for a particular use of the Leased Premises, except as may be set forth herein. 8. RESTORATION OF THE LEASED PREMISES. Upon termination of this Lease, Lessee shall, on Lessor's request, restore the Leased Premises to their original condition prior to the making of any improvements or alterations by Lessee, except for initial construction and improvements as completed by The Wellington Property Management Group prior to the Lease Commencement Date and except for reasonable wear and tear, damage by fire or other casualty and acts of God. 9. REPAIRS AND MAINTENANCE. (a) During the Term, Lessee shall, at its own cost and expense, make all necessary repairs on and to the interior of the Leased Premises so as to keep the Leased premises in the same condition. Lessee shall be responsible for the cleaning of the Leased Premises and removal of refuse from Leased Premise to be deposited into the dumpster. (b) Lessor shall be responsible for structural repairs within a reasonable time to the Building including roof replacement, Building foundation, structural columns and beams, exterior walls, replacement of HVAC system(s) and resurfacing of the parking lot with bituminous asphalt. Notwithstanding the foregoing, all damage or injury to the Building or Leased Premises caused by the moving of the Lessee's fixtures, furniture and equipment shall be repaired by the Lessee at its sole cost and expense, to the reasonable satisfaction of the Lessor. 10. ALTERATIONS AND IMPROVEMENTS. (a) The Lessee, with the prior written consent of the Lessor, shall have the right to make such alterations, additions and improvements to the Leased Premises as may be necessary or desirable for its business. (b) The Lessee, before making any alterations, additions or improvements, shall at its own expense obtain all permits, approvals and certificates required by any governmental authority and shall promptly deliver copies of same to the Lessor. The Lessee will cause the Lessee's contractors and subcontractors to carry such worker's compensation, general liability and personal and property damage insurance as the Lessor may reasonably require. The Lessee agrees to hold the Lessor free and harmless from any liability for labor or materials supplied for such work and shall keep the Leased Premises free from mechanics liens of any kind by obtaining waivers thereof and by removing or bonding any lien filed within ten (10) days from receipt of notice of the filing thereof. (c) Any and all alterations, additions or improvements to the Leased Premises made by the Lessee shall become the property of the Lessor without payment therefor by the Lessor. (d) The Lessee shall be responsible for the cost of any modifications to the existing space. The Wellington Property Management Group will provide consulting services in the form of space planning and design services free of charge. ln addition, The Wellington Property Management Group will provide the Lessee with tenant buildout and construction services at cost with no markup for overhead and profit. 11. LESSEE'S FAILURE TO PERFORM. (a) If the Lessee shall at any time fail to make any payment other than Base Rent or Additional Rent or perform any act on its part to be made or performed under this Lease, then the Lessor, after ten (10) days' notice to the Lessee, except when other notice is expressly provided for in this Lease (or without notice in case of an emergency), and without waiving or releasing the Lessee from any obligation of the Lessee contained in this Lease, may, but shall not be required to: (1) Pay any tax or assessment payable by the Lessee; (2) Take out, pay for and maintain any of the insurance policies provided for in this Lease, or (3) Make any other payments or perform or cause to be performed any act required of the Lessee under this Lease; and may enter upon the Leased Premises for any such purpose, and take all such action thereon as may be necessary therefor. (b) All sums so paid by the Lessor and all costs and expenses incurred by the Lessor in connection with the performance of any such act, together with interest thereon at the rate of eighteen percent (18%) per annum or such lesser rate as may at the time be the maximum rate permitted by law, from the respective dates of the Lessor's making of such payment or incurring of each such cost and expense, shall be paid by the Lessee to the Lessor on demand as Additional Rent hereunder. 12. DEFAULT. This Lease and the term and estate hereby granted are subject to the limitation that if the Lessee shall (1) fail to pay when due any installment of Base Rent and/or Additional Rent; (2) default in the observance or performance of any term, covenant or condition of this Lease on Lessee's part to be observed or performed; (3) liquidate or cease to exist, declare insolvency, seek relief under law for the relief of debtors, make an assignment for the benefit of creditors, or be the subject of a voluntary or involuntary petition in bankruptcy or receivership then the Lessor may immediately give to Lessee a written notice of intention to end the term as of the date specified in such notice with the same effect as if the notice were the expiration of this Lease. If this Lease and the term shall terminate as provided above or by or under any summary proceeding or any other action or proceeding, then, in any of said events: (a) Lessee shall pay to Lessor all Rent to the date upon which this Lease and the term shall have terminated or to the date of re-entry upon the Leased Premises by the Lessor as the case may be. (b) Lessor shall be entitled to retain all monies, if any, paid by Lessee to Lessor, but such monies shall be credited by Lessor against any Rent due at the time of such termination or re-entry or against any damages payable by Lessee. (c) Lessee shall be liable for and shall pay to Lessor as damages, any deficiency between the Rent payable hereunder for the period which otherwise would have constituted the unexpired portion of the term and the net amount, if any, of rents collected under any reletting for any part of such period, first deducting from the rents collected under any such reletting all of Lessor's expenses in connection with the termination of this Lease or Lessor's re-entry upon the Leased Premises and in connection with such reletting including all repossession costs, brokerage commissions, legal expenses, attorney's fees, alteration costs and other expenses of preparing the Leased Premises for such reletting. (d) Lessor and Lessor's agents may immediately re-enter the Leased Premises or any part thereof, without notice, by summary proceedings or by any other applicable court action or proceeding (without being liable to indictment, prosecution or damages therefor), and may repossess the Leased Premises and dispossess Lessee and any other persons from the Leased Premises and remove any and all of its or their property and effects from the Leased Premises and in no event shall re-entry be deemed an acceptance of surrender of this Lease. (e) The Lessor shall provide the Lessee with written notice that the Lessee has 10 days to cure any and all payments past due for Base Rent and Additional Rent together with any late charges or penalties that have accrued and Lessor may accelerate all Rent due for the balance of the term of this Lease and declare the same to be immediately due and payable if the Lessee owes to the Lessor Base Rent, Additional Rent and Late Charges in excess of fifteen thousand ($15,000) dollars and fails to remit the total balance due Lessor within 10 days of the written notice. Each right of Lessor provided for in this Lease shall be cumulative and shall be in addition to every other right provided for in this Lease or now or hereafter existing at law or in equity, by statute or otherwise, and the exercise or beginning of the exercise by Lessor of any one or more of such rights shall not preclude the simultaneous or later exercise by Lessor of any or all other rights provided for in this Lease or now or hereafter existing at law or in equity, by statute or otherwise. 13. INSURANCE. (a) From and after the Lease Commencement Date, the Lessee shall at its own cost obtain and keep in full force and effect public liability insurance in the amount of one million ($1,000,000.00) dollars combined single limit for bodily injury, death and property damage arising out of any one occurrence, protecting Lessor, Lessor's agents and Lessor's employees against any and all claims for bodily injury, death or property damage arising directly or indirectly out of Lessee's use of the Leased Premises and the Land and Building. Such policy or policies shall name the Lessor as an additional insured. (b) From and after the earlier of the Lease Commencement Date or Occupancy Date ("Occupancy Date"), the Lessee shall at its own cost obtain and keep in full force and effect insurance against loss or damage by fire, and other risks and hazards (including burglary, vandalism, malicious mischief, theft and breakage of glass within the Leased Premises) to Lessee's property and improvements for full replacement value thereof. (c) The policies required hereunder shall be issued by insurance companies licensed to do business in the Commonwealth of Massachusetts and shall provide for at least twenty (20) days' notice to the Lessor before cancellation. Upon execution of this Lease, Lessee shall deliver to Lessor certificates of insurance showing the coverage in force from the earlier of the Lease Commencement Date or Occupancy Date, as well as any replacement certificates issued during the Term. (d) Lessee shall not carry any stock of goods or do anything in or about the Leased Premises which will in any way tend to increase the insurance rates on the Leased Premises and/or the Land and Building. 14. ESTOPPEL CERTIFICATE. Upon not less than fifteen (15) days prior written request, the Lessor and the Lessee agree, each in favor of the other, to execute, acknowledge and deliver a statement in writing certifying that this Lease is unmodified and in full force and effect or, if there have been any modifications that the same is in full force and effect as modified and stating the modifications, and the date to which the basic rent hereunder and other charges have been paid and any other information reasonably requested. Any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser, mortgagee or lending source. 15. SUBORDINATION AND NON-DISTURBANCE. The Lessee covenants and agrees to subordinate the lien of this Lease to any mortgages, and/or security agreements which may be placed against the Leased Premises, provided that any new mortgagees agree in writing to honor this Lease, as long as Lessee is not its default hereunder. 16. BROKERS' COMMISSIONS. Lessor shall be solely responsible for any and all brokerage commissions due The Wellington Property Management Group arising out of representation of the Lessor in the negotiation of this Lease Agreement. The Lessee represents and warrants that it has not dealt with any broker other than The Wellington Property Management Group as the authorized agent of the Lessor and agrees to indemnify and hold the Lessor harmless, as aforesaid, from any claims for brokers' commissions arising by reason of its having dealt with brokers other than the authorized agent of the Lessor. 17. FORCE MAJEURE. Except as herein elsewhere provided to the contrary, all of the obligations of the Lessor and the Lessee hereunder are subject to the following conditions: if performance other than the payment of money is prevented by reason of fire, strike, labor difficulty, inability to obtain supplies or other difficulties beyond the reasonable control of the party required to perform such obligations, the performance shall be excusable during the period of such inability. 18. COVENANT OF QUIET ENJOYMENT. The Lessor covenants that upon the Lessee's paying the Base Rent and Additional Rent herein reserved and performing and observing all the other covenants to be performed and observed on the part of the Lessee, the Lessee may use and occupy the Leased Premises throughout the full Term of this Lease without any disturbance by the Lessor. Notwithstanding the foregoing, if any person not claiming by, through or under the Lessor shall disturb or attempt to disturb the Lessee's use, the Lessor shall not be deemed in breach of this Section 18 if the Lessor shall immediately thereafter at its own expense cause such disturbances to cease. 19. MECHANICS LIENS. Notice is hereby given that the Lessor shall not be liable for any labor or materials furnished, or to be furnished, to the Lessee and that no mechanics liens or other liens for any such labor or materials shall attach to or affect the reversionary or other estate or interest of the Lessor in and to the Leased Premises. The Lessee further agrees to indemnify and hold harmless the Lessor against any and all costs it may suffer on account of the same. 20. WAIVER OF SUBROGATION. The Lessor and Lessee each hereby waives all claims, causes of action and rights of recovery against the other, and their respective agents, officers and employees, for any damages to or destruction of property or business, including but not limited to Lessor's and/or Lessee's improvements, which shall occur on or about the Leased Premises and shall result from any of the perils insured under any and all policies of insurance maintained by Lessor and Lessee, regardless of cause, including the negligence of either party and their respective agents, officers and employees, but only to the extent of recovery, if any, under such policy or policies of insurance. Each party agrees that their fire and extended coverage insurance policies will include such a clause so long as the same is obtainable and is includable without extra cost, or if extra cost is chargeable therefor, each party will advise the other thereof and of the amount thereof. Each party, at its option, may pay the same, but shall not be obligated to do so. 21. LESSOR'S RIGHT TO SELL, MORTGAGE OR ASSIGN. Nothing contained in this Lease shall limit or curtail Lessor's right to sell, mortgage or otherwise deal with its fee interest in the Leased Premises and/or the Land and Building, or affect Lessor's right to assign the Rent payable under this Lease either as further collateral security under a fee mortgage or otherwise. Any such assignment of Rent shall be honored by Lessee. 22. ATTORNMENT. If any mortgagee, by foreclosure sale or deed given in lieu thereof, becomes the owner of the Leased Premises, Lessee agrees to attorn to and recognize any such mortgagee, successor thereto or assignee thereof, becoming such owner, for all purposes, in place of and instead of the Lessor named herein. 23. EMINENT DOMAIN. (a) If the entire building on the Leased Premises shall be taken for public or quasi-public purposes, then this Lease shall terminate as of the date the Lessee shall be required by law to vacate the premises and surrender them to the authority making the taking. (b) If such portion of the building on the Leased Premises shall be taken as to render the Leased Premises unsuitable for the continuance of the Lessee's business in substantially the same manner as the same was being conducted immediately prior to such taking, then the Lessee shall have the right to terminate this Lease at Lessee's sole discretion by giving written notice to the Lessor within thirty (30) days after receipt of Notice of Entry for purposes of effectuating the taking. If the cost of repairing or restoring the Leased Premises after a partial taking is more than twenty (20%) percent of their value as determined by the City of Westborough's tax assessment immediately prior to such taking, the Lessor may at its option terminate this Lease by written notice to the Lessee within thirty (30) days after the date of the taking; provided, that if this Lease shall not be so terminated, the Lessor shall restore, only to the extent of the receipt of the eminent domain proceeds, the building with all reasonable dispatch to a complete architectural unit as close as possible to the condition the building was in immediately prior to said taking. Any provision of the subparagraph (b) to the contrary notwithstanding, the Lessor shall not be required to restore if the Lessor's mortgagees shall refuse to permit application of the Lessor's condemnation proceeds towards the costs of such restoration. (c) If the Leased Premises, or any part thereof, shall be rendered untenantable and this Lease is not terminated, the Rent herein reserved or a just and proportionate part thereof, shall be suspended or abated according to the nature and extent of the taking from the date of such taking until the Leased Premises shall be restored, and if after such restoration the Leased Premises are smaller than they were prior to the taking or the utility thereof to the Lessee is otherwise diminished, the annual rent shall be equitably reduced. (d) Upon any such taking, the proceeds thereof shall be payable to the Lessor, and the Lessee shall have absolutely no right or interest in any award. The Lessee hereby irrevocably appoints the Lessor as its attorney in fact for purposes of collecting any such condemnation award and dealing with all governmental authorities with respect thereto. This power of attorney is coupled with an interest and is irrevocable. (e) If the Lessor shall be obligated to repair or restore as aforesaid, and if the Leased Premises are not repaired or restored within four (4) months after the date of such taking, then the Lessee may, in addition to all other rights and remedies it may have, terminate this Lease. 24. DISPUTES. The parties hereto agree that if at any time a dispute should arise as to the propriety or necessity of the Lessee making any payment or performing any obligations required hereunder, the Lessee may pay or perform the same under protest and such payment or performance under protest shall not be considered to be voluntary on the part of the Lessee. 25. ATTORNEY'S FEES. In the event that either party to this Lease brings an action against the other to enforce any covenant of this Lease, including actions for Base Rent and/or Additional Rent or other payments due and actions in summary process, the prevailing party, as determined by the entry of a judgment by a court of competent jurisdiction, shall be indemnified by the other party against all legal costs and charges, including reasonable attorney's fees. 26. ASSENTS. No assent, expressed or implied, by one party to any breach of any covenant or condition herein contained on the part of the other to be performed or observed, and no waiver, expressed or implied, of or failure by one party to insist on the other's prompt performance or observance of any such covenant or condition shall be deemed to be a waiver of or assent to any succeeding breach of the same, or any other covenant or condition, and, except as provided herein, any party may assert its rights and remedies hereunder without any prior or additional notice to the other that it proposes to do so. The payment by the Lessee and acceptance by the Lessor of Base Rent and/or Additional Rent or silence by either party as to any breach shall not be construed as waiving any of such party's rights hereunder unless such waiver is in writing. No payment by the Lessee or acceptance by the Lessor of a lesser amount than shall be due the Lessor from the Lessee shall be deemed to be anything but payment on account, and the acceptance by the Lessor of a check for a lesser amount with an endorsement or statement thereon or upon a letter accompanying said check shall not be deemed an accord and satisfaction and the Lessor may accept said check without prejudice to recover the balance due or pursue any other remedy which any be available to it. 27. CUMULATIVE RIGHTS. Any and all rights and remedies which either party may have hereunder shall be cumulative and the exercise of any one of such rights shall not bar the exercise of any other right or remedy which said party may have. 28. LEASE RENEWAL OR TERMINATION. Lessee shall notify the Lessor of its intent to vacate the Leased Premises or exercise of the Option Term or negotiate a new Lease Agreement not less than four (4) months' written notice prior to the end of the current lease Term to be sent by registered mail, return receipt requested, to the Lessor. Provided the Lessee has affirmed its intention of remaining at the Leased Premises, a Lease agreement shall be mutually agreed to by both parties no later than three (3) months prior to the end of the current lease Term. The Lessee, at the expiration of the Term hereof, or at any prior termination as herein provided, shall peaceably yield up the Leased Premises and all additions, improvements and alterations made thereupon in the same condition and repair as the same were in at the commencement of the Term hereof, or may have been put thereafter, reasonable wear and use, damage by fire or other casualty, acts of God, acts of war and the enemy and acts of paramount authority only excepted. The Lessee and those claiming by, through or under the Lessee, may, at any time prior to the expiration of the Term hereof, or prior termination thereof, remove its personal property, trade fixtures and any equipment installed by it from the Leased Premises, provided that if such removal causes any damage to the Leased Premises, the Lessee shall promptly repair the same. 29. HOLDING OVER. If the Lessee or anyone claiming by, through or under the Lessee shall remain on the Leased Premises after the expiration of the Term hereof, the Lessee or such other person or entity so holding over shall be a tenant at sufferance and shall be liable for use and occupancy charges based on the monthly Base Rent during the last year of the lease Term at the rate of one and one half (1.5) times the rent payable during any hold over period after the Term or Option Term of this Lease has terminated, subject to all of the other terms and conditions of this Lease insofar as the same are applicable to a month-to-month tenancy and the Lessee as a holdover tenant shall be considered solely as a tenant at sufferance. Lessor reserves all rights to accept or reject the hold over rent thereafter and reserves all rights and remedies with respect to the termination of this Lease Agreement. 30. LESSOR'S ACCESS. The Lessee agrees that the Lessor upon reasonable advance notice to the Lessee, or without notice in the case of emergency, may enter upon the Leased Premises at reasonable hours so as not to unduly interfere with the normal conduct of the Lessee's business, or at any time in the case of emergency, for the purpose of inspecting the same and making repairs thereto as it may be required or permitted to do under the terms of this Lease Agreement. The Lessor shall have the right during the Term hereof, to place signs on the exterior of the Building indicating that the Building is for rent or sale and to have access to the Leased Premises, with reasonable notice, for the purpose of showing it to prospective tenants, mortgage lenders or purchasers. 31. ASSIGNMENT AND SUBLETTING. The Lessee shall not transfer, sublet, or assign this Lease or the Lessee's interest in and to all or any part of the Leased Premises, without the Lessor's prior written consent which shall not be unreasonably withheld by Lessor. Any attempted transfer, subletting, assignment, license to use, hypothecation or other alienation of the Lease by the Lessee shall be void and shall confer no rights on third parties and shall constitute a breach of this Lease. 32. NOTICES. Whenever in this Lease it shall be required or permitted that notice, demand or other communication be given or served by either party to this Lease to or upon the other, such notice shall be deemed to have been duly delivered, given or served if in writing and mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the party to whom it is to be given or served in the case of the Lessor at the most recent place to which rental checks were mailed and in the case of the Lessee at the Leased Premises. Each party may change its above address for purpose of notices by notice to the other party in the manner hereinabove provided. 33. SHORT FORM. The Lessee agrees that upon request of Lessor, the Lessee will execute whatever instruments may be necessary of the recording of a short form of notice of this Lease. 34. NOTICE OF LEASE. The Lessor agrees that upon request of Lessee, the Lessor will execute whatever instruments may be necessary of the recording of a short form of notice of this Lease. The form of notice as prescribed in Massachusetts general laws. In the event the Lessee records the entire Lease, and only at the Lessor's option, the entire Lease Agreement becomes null and void. 35. ENTIRE AGREEMENT. This Lease contains the entire and exclusive agreement between the parties and supersedes and terminates all prior or contemporaneous arrangements, understandings and agreements, whether oral or written. This Lease may not be amended or modified, except in writing and executed by the Lessor and the Lessee. 36. CONSTRUCTION. In construing this Lease, feminine or masculine pronouns shall be substituted for those of neuter form and vice versa, and the plural for singular and singular for plural in any place where the context may require. 37. GOVERNING LAW AND SEVERABILITY. This Lease shall be governed by and interpreted in accordance with the laws of Massachusetts. If any provision of this Lease shall be determined to be invalid or unenforceable under applicable law, such provision shall, insofar as possible, be construed or applied in such manner as will permit enforcement; otherwise, this Lease shall be construed as if such provision had never been made a part hereof. 38. HEADINGS. The headings used herein are used only for convenience of reference and are not to be considered a part of this Lease or to be used in determining the intent of the parties hereto. 39. BINDING EFFECT. This Lease shall be binding upon and inure to the benefit of all successors and permitted assigns, including all permitted sub-tenants, of the parties hereto. Each sub-tenant or assignee shall as a precondition to the Lessor's approval of the Lessee's subletting the Leased Premises or assigning this Lease execute such written instruments as the Lessor shall reasonably require evidencing its agreement to be bound by each and every Term of this Lease, provided that such an agreement shall not operate to release the Lessee from its obligations hereunder unless the Lessor shall in writing agree. In Witness whereof, the parties hereto have affixed or caused to be affixed their respective signatures this 30th day of June, 1995. Witness: LESSOR: EAST POINT REALTY TRUST /s/ Richard H. Laughlin BY: /s/ Richard Modowitz ------------------------ ------------------------------- Its: Trustee Witness: LESSEE: CERPROBE, INC. /s/ Laura M. Back BY: /s/ C. Zane Close ------------------------ -------------------------------- Its: President and C.E.O. EX-3 4 AMENDMENT TO LOAN AGREEMENT Amendment to Loan Agreement dated April 30, 1995 Amendment Date: June 12, 1995 Page 1 of the existing loan agreement (dated April 30, 1995) between CerProbe Corporation ("Borrower") and First Interstate Bank of Arizona, N.A. ("Lender") defines the borrowing base as the lesser of (a) $750,000.00; or (b) 75.00% of the aggregate amount of Eligible Accounts. This amendment will change the definition of "Eligible Accounts" to include all accounts receivable, as defined by GAAP. All other terms, conditions and requirements in the April 30, 1995 "loan agreement" will remain in place subject to that agreement. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AMENDMENT TO THE APRIL 30, 1995 LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AMENDED AGREEMENT IS DATED AS OF JUNE 12, 1995. Borrower: CERPROBE CORPORATION, a Delaware corporation By: /s/ Zane Close ----------------------------------------------------------- Zane Close, President & CEO Lender: First Interstate Bank of Arizona, N.A. By: /s/ Frederick Mitten ------------------------------------------------------ Frederick Mitten, Commercial Loan Officer First Interstate Bank LOAN AGREEMENT ================================================================================ Borrower: Cerprobe Corporation Lender: First Interstate Bank of 600 South Rockford Drive Arizona, N. A. Tempe, AZ 8528l Commercial Banking Division 100 W. Washington P. O. Box 53456, Dept. #813 Phoenix, AZ 85072-3456 ================================================================================ THIS LOAN AGREEMENT between Cerprobe Corporation ("Borrower") and First Interstate Bank of Arizona, N. A. ("Lender") is made and executed on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans and other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. All such loans and financial accommodations, together with all future loans and financial accommodations from Lender to Borrower, are referred to in this Agreement individually as the "Loan" and collectively as the "Loans." Borrower understands and agrees that: (a) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements, as set forth in this Agreement; (b) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (c) all such Loans shall be and shall remain subject to the following terms and conditions of this Agreement. TERM. This Agreement shall be effective as of April 30, l995, and shall continue thereafter until all indebtedness of Borrower to Lender has been performed in full or until April 27, 1996, whichever is later. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. Agreement. The word "Agreement" means this Loan Agreement, as this Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Loan Agreement from time to time. Account. The word "Account" means a trade account, account receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender). Account Debtor. The words "Account Debtor" mean the person or entity obligated upon an Account. Advance. The word "Advance" means a disbursement of Loan funds under this Agreement. Borrower. The word "Borrower" means Cerprobe Corporation. The word "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." Borrowing Base. The words "Borrowing Base" mean, as determined by Lender from time to time, the lesser of (a) $750,000.00; or (b) 75.000% of the aggregate amount of Eligible Accounts. Business Day. The words "Business Day" mean a day on which commercial banks are open for business in the State of Arizona. CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive of extraordinary gains and income, plus depreciation and amortization. Collateral. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The word "Collateral" includes without limitation all collateral described below in the section titled "COLLATERAL." Debt. The word "Debt" means all of Borrower's liabilities excluding Subordinated Debt. Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of Borrower's Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include: (a) Accounts with respect to which the Account Debtor is an officer, an employee or agent of Borrower. (b) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with or related to Borrower or its shareholders, officers, or directors. (c) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional. (d) Accounts with respect to which the Account Debtor is not a resident of the United States, except to the extent such Accounts are supported by insurance, bonds or other assurances satisfactory to Lender. (e) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower. (f) Accounts which are subject to dispute, counterclaim, or setoff. (g) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor. (h) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory. (i) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due. (j) Accounts with respect to which the Account Debtor is the United States government or any department or agency of the United States. (k) Accounts which have not been paid in full within 90 days from the invoice date. (l) That portion of the Accounts of any single Account Debtor which exceeds 10.000% of all of Borrower's Accounts. (m) The entire balance of any Account of any single Account Debtor will be ineligible whenever the portion of the Account over 90 days from the invoice date is in excess of 25.000% of the total amount outstanding on the Account. ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. Event of Default. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." Expiration Date. The words "Expiration Date" mean the earlier of April 27, 1996 or the date of termination of Lender's commitment to lend under this Agreement. Grantor. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the Indebtedness, including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any indebtedness. Indebtedness. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them, whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. Lender. The word "Lender" means First Interstate Bank of Arizona, N. A., its successors and assigns. Line of Credit. The words "Line of Credit" mean the credit facility described in the Section titled "LINE OF CREDIT" below. Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus Borrower's receivables. Loan. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. Permitted Liens. The words "Permitted Liens" mean: (a) liens and security interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. Related Documents. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by taw, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. Subordinated Debt. The words "Subordinated Debt" mean indebtedness and liabilities of Borrower which have been subordinated by written agreement to indebtedness owed by Borrower to Lender in form and substance acceptable to Lender. Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements) less total Debt. Working Capital. The words "Working Capital" mean Borrower's current assets, excluding prepaid expenses, less Borrower's current liabilities. LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows. Conditions Precedent to Each Advance. Lender's obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender: (a) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender. (b) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request. (c) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect. (d) All guaranties required by Lender for the Line of Credit shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect. (e) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower's Accounts, books, records, and operations, and Lender shall be satisfied as to their condition. (f) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable. (g) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled "Compliance Certificate." Making Loan Advances. Advances under the Line of Credit may be requested either orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (a) when credited to any deposit account of Borrower maintained with Lender or (b) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances wilt be treated as having been requested on the next succeeding Business Day. Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid. Facility Charge. Borrower recognizes that Lender has incurred and will continue to incur certain costs and expenses in connection with establishing, maintaining, servicing, and administering the credit facility. To ensure that Lender is able to recover such costs and expenses, Borrower agrees that, notwithstanding any other provision of this Agreement, the promissory note for the Line of Credit, or the Related Documents, Lender shall be entitled to collect the following facility charge, which Borrower hereby promises and agrees to pay: So long as Lender shall have any obligation to extend or continue credit to Borrower in any form, Borrower shall pay to Lender on the last day of each and every calendar quarter a non-refundable commitment fee in the amount of 3/8 of 1% (percent) of the unused balance of the Loan during the preceding calendar quarter. Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower's account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower's receipt of any such statement which Borrower deems to be incorrect. COLLATERAL. To secure payment of the Line of Credit and performance of all other Loans, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require (the "Collateral", including without limitation Borrower's present and future Accounts and general intangibles. Lender's Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender: Perfection of Security Interests. Borrower agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's Security Interests in the Collateral. Upon request of Lender, Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Contemporaneous with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender's security interest in the Collateral. Borrower promptly will notify Lender of any change in Borrower's name including any change to the assumed business names of Borrower. Borrower also promptly will notify Lender of any change in Borrower's Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location of Borrower's principal governance office or should Borrower merge or consolidate with any other entity. Collateral Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Lender's representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. Collateral Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender a schedule of Accounts and Eligible Accounts, in form and substance satisfactory to the Lender. Thereafter and at such frequency as Lender shall require, Borrower shall execute and deliver to Lender such supplemental schedules of Eligible Accounts and such other matters and information relating to Borrower's Accounts as Lender may request. Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (a) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (b) At Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (c) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect, examine, and audit Borrower's records and to confirm with Account Debtors the accuracy of such Accounts. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the state of Borrower's incorporation, is qualified to do business in the State of Arizona as a foreign corporation, and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. Authorization. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower. Financial Information. Each financial statement of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except for Permitted Liens, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. Hazardous Substances. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and approved by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, or about any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, or about any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the properties for hazardous waste. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Borrower's ownership or interest in the properties, whether or not the same was or should have been known to Borrower. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be effected by Lender's acquisition of any interest in any of the properties, whether by foreclosure or otherwise. Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and approved by Lender in writing. Taxes. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except these presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. Commercial Purposes. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, and (iii) no steps have been taken to terminate any such plan. Location of Borrower's Offices and Records. Borrower's place of business, or Borrower's Chief executive office, if Borrower has more than one place of business, is located at 600 South Rockford Drive, Tempe, AZ 85281. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. Information. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. Survival of Representations and Warranties. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: Litigation. Promptly inform Lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Financial Statements. Furnish Lender with, as soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender, and, as soon as available, but in no event later than forty five (45) days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared and certified as correct to the best knowledge and belief by Borrower's chief financial officer or other officer or person acceptable to Lender. All financial reports required to be provided under this Agreement shall be prepared in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. Financial Covenants and Ratios. Comply with the following covenants and ratios: Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net Worth of less than 1.00 to 1.00. Current Ratio. Maintain a ratio of Current Assets to Current Liabilities in excess of 2.00 to 1.00. Cash Flow Requirements. Maintain Cash Flow at not less than the following level: The ratio of Cash Flow, plus the net increase or less the net decrease in the liability for deferred taxes and plus interest expense, to Borrower's Debt Service Requirement is not to be less than 2.00 to 1.00. "Debt Service Requirement" is defined as the sum of the following that are due within the relevant period: (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property, other than trade accounts payable arising in, and on terms customary in, the ordinary course of Borrower's business, (iii) obligations under conditional sales agreements, (iv) obligations under leases of personal property that would be capitalized on the balance sheet of Borrower, and (v) the unpaid principal amount of loans and other obligations guaranteed by Borrower, all as determined for the relevant period in accordant with generally accepted accounting principles and on a basis consistent with prior periods. The following provisions shall apply for purposes of determining compliance with the foregoing financial covenants and ratios: Covenants to be measured and certified quarterly. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. Performance. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefit plans. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. Environmental Compliance and Reports. Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except U.S. federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (a) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (b) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (c) reduce the rate of return on Lender's capital as a consequence of Lender's obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender's written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender, or the occurrence of any event or condition which after notice or the passage of time would constitute an Event of Default; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other Loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. AGING AND LISTING OF ACCOUNTS RECEIVABLE AND PAYABLE. Borrower covenants and agrees with Lender that, while this agreement is in effect, Borrower shall deliver to Lender within forty five (45) days after the end of each quarter, a detailed aging of Borrower's accounts and contracts receivable and accounts payable as of the last day of that quarter, together with an explanation of any adjustments made at the end of that month, all in a form acceptable to Lender. BORROWING BASE CERTIFICATE. Unless waived in writing by Lender, Borrower agrees to provide Lender with a Borrower's Certificate within 45 days after the end of each quarter and with each Advance. Each "Borrower's Certificate" shall be in form acceptable to Lender, duly executed by Borrower and detailing the status of the Line of Credit as of the date of thereon. COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender on a quarterly basis, within 45 days after quarter end, a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying to financial covenants and that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default, or event or condition which after the lapsed time or notice could result in an Event of Default, exists under this Agreement. CERTIFICATION OF BALANCE SHEET VALUES. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will certify on a quarterly basis, within 45 days after quarter end, the value of their balance sheet, specifically, collateral values - inventory and equipment. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA, Keogh, and trust accounts. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided on this paragraph. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Default on Indebtedness. Failure of Borrower to make any payment when due on the Loans. Other Defaults. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrower's deposit accounts with Lender. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. Insecurity. Lender, in good faith, deems itself insecure. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Loans immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not effect Lender's right to declare a default and to exercise its rights and remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Applicable Law. This Agreement has been delivered to Lender and accepted by Lender in the State of Arizona. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Maricopa County, the State of Arizona. Subject to the provisions on arbitration, this Agreement shall be governed by and construed in accordance with the laws of the State of Arizona. Arbitration. Binding Arbitration. Upon the demand of any party ("Party/Parties"), to a Document (as defined below), whether made before the institution of any judicial proceeding or not more than 60 days after service of a complaint, third party complaint, cross-claim or counterclaim or any answer thereto or any amendment to any of the above, any Dispute (as defined below) shall be resolved by binding arbitration in accordance with the terms of this Arbitration Program. A "Dispute" shall include any action, dispute, claim or controversy of any kind, whether founded in contract, tort, statutory or common law, equity, or otherwise, new existing or hereafter arising between any of the Parties arising out of, pertaining to or in connection with any agreement, document or instrument to which this Arbitration Program is attached or in which it appears or is referenced or any related agreements, documents, or instruments ("Documents"). Any Party who fails to submit to binding arbitration following a lawful demand by another Party shall bear all costs and expenses, including reasonable attorneys' fees, (including those incurred in any trial, bankruptcy proceeding or on appeal) incurred by the other Party in obtaining a stay of any pending judicial proceeding and compelling arbitration of any Dispute. The parties agree that any agreement, document or instrument which includes, attaches to or incorporates this Arbitration Program represents a transaction involving commerce as that term is used in the Federal Arbitration Act, ("FAA") Title 9 United States Code. THE PARTIES UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN COURT, AND ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT. Governing Rules. Arbitrations conducted pursuant to this Arbitration Program shall be administered by the American Arbitration Association ("AAA"), or other mutually agreeable administrator ("Administrator") in accordance with the terms of this Arbitration Program and the Commercial Arbitration Rules of the AAA. Proceedings hereunder shall be governed by the provisions of the Federal Arbitration Act (Title 9 of the United States Code). The arbitrator(s) shall resolve all Disputes in accordance with the applicable substantive law designated in the Documents. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction; provided, however that nothing herein shall be construed to be a waiver by any party that is a bank of the protections afforded pursuant to 12 U.S.C. 91 or any similar applicable state law. Preservation of Remedies. No provision of, nor the exercise of any rights under, this arbitration clause shall limit the right of any Party to: (a) foreclose against any real or personal property collateral or other security, or obtain a personal or deficiency award; (b) exercise self-help remedies (including repossession and setoff rights); or (c) obtain provisional or ancillary remedies such as injunctive relief, sequestration, attachment, replevin, garnishment, or the appointment of a receiver from a court having jurisdiction. Such rights can be exercised at any time except to the extent such action is contrary to a final award or decision in any arbitration proceeding. The institution and maintenance of an action as described above shall not constitute a waiver of the right of any Party to submit the Dispute to arbitration, nor render inapplicable the compulsory arbitration provisions hereof. Any claim or Dispute related to exercise of any self-help, auxiliary or other rights under this paragraph shall be a Dispute hereunder. Arbitrator Powers and Qualifications; Awards. The Parties agree to select a neutral "qualified" arbitrator or a panel of three "qualified" arbitrators to resolve any Dispute hereunder. "Qualified" means a practicing attorney, with not less than 10 years practice in commercial law, licensed to practice in the state of the applicable substantive law designated in the Documents. A Dispute in which the claims or amounts in controversy do not exceed $1,000,00O.00, shall be decided by a single arbitrator. A single arbitrator shall have authority to render an award up to but not to exceed $1,000,000.00 including all damages of any kind whatsoever, costs, fees, attorneys' fees and expenses. Submission to a single arbitrator shall be a waiver of all Parties' claims to recover more than $1,000,000.00. A Dispute involving claims or amounts in controversy exceeding $1,000,000.00 shall be decided by a majority vote of a panel of three qualified arbitrators. An arbitration panel shall be composed of one arbitrator who would be qualified to sit as a single arbitrator hereunder, one who has at least ten years experience in commercial lending and one who has at least ten years experience in the Borrower's industry. The arbitrator(s) shall be empowered to, at the written request of any Party in any Dispute, (a) to consolidate in a single proceeding any multiple party claims that are substantially identical or based upon the same underlying transaction; (b) to consolidate any claims and Disputes between other Parties which arise out of or relate to the subject matter hereof, including all claims by or against borrowers, guarantors, sureties and or owners of collateral; and (c) to administer multiple arbitration claims as class actions in accordance with Rule 23 of the Federal Rules of Civil Procedure. In any consolidated proceeding the first arbitrator(s) selected in any proceeding shall conduct the consolidated proceeding unless disqualified due to conflict of interest. The arbitrator(s) shall be empowered to resolve any dispute regarding the terms of this arbitration clause, including questions about the arbitrability of any Dispute, but shall have no power to change or alter the terms of this Arbitration Program. The prevailing Party in any Dispute shall be entitled to recover its reasonable attorneys' fees in any arbitration, and the arbitrator(s) shall have the power to award such fees. The award of the arbitrator(s) shall be in writing and shall set forth the factual and legal basis for the award. Miscellaneous. All statutes of limitation applicable to any Dispute shall apply to any proceeding in accordance with this arbitration clause. The Parties agree, to the maximum extent practicable, to take any action necessary to conclude an arbitration hereunder within 180 days of the filing of a Dispute with the Administrator. The arbitrator(s) shall be empowered to impose sanctions for any Party's failure to proceed within the times established herein. Arbitrations shall be conducted in the state of the applicable substantive law designated in the Documents. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration hereof or of the Documents unless the Parties otherwise expressly agree in writing. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or as required by applicable law or regulation. If any provision of this Arbitration Program is declared invalid by any court, the remaining provisions shall not be affected thereby and shall remain fully enforceable. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the Provisions of this Agreement. Multiple Parties; Corporate Authority. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each of the Borrowers signing below is responsible for all obligations in this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether new or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. Costs and Expenses. Borrower agrees to pay upon demand all of Lender's allocated costs of in-house counsel and expenses, including without limitation attorneys' fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated pest-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. Notices. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address(es). Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. Successors and Assigns. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival. All warranties, representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waiver. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL 30, 1995. BORROWER: Cerprobe Corporation By: /s/ Zane Close --------------------------- Zane Close, President & CEO LENDER: First Interstate Bank of Arizona, N. A. By: /s/ Frederick Mitten ----------------------------- Authorized Officer First [LOGO] Interstate Bank PROMISSORY NOTE ================================================================================ Borrower: Cerprobe Corporation Lender: First Interstate Bank of 600 South Rockford Drive Arizona, N. A. Tempe, AZ 8528l Commercial Banking Division 100 W. Washington P. O. Box 53456, Dept. #813 Phoenix, AZ 85072-3456 ================================================================================ Principal Amount: $750,000.00 Initial Rate: 9.250% Date of Note: April 30, 1995 PROMISE TO PAY. Cerprobe Corporation ("Borrower") promises to pay to First Interstate Bank of Arizona, N. A. ("Lender"), or order, in lawful money of the United States of America, the principal amount of Seven Hundred Fifty Thousand & 00/100 Dollars ($750,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 27, 1996. In addition, Borrower will pay regular monthly payments of accrued unpaid interest beginning May 30, 1995, and all subsequent interest payments are due on the same day of each month after that. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate ever a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied in any order at Lender's sole discretion. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the First Interstate Bank of Arizona, N. A. Prime Rate, which is an index rate that Lender announces from time to time for pricing certain loans (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The Index currently is 9.000% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 0.250 percentage points over the Index, resulting in an initial rate of 9.250% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the Related Documents. (d) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either new or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (g) Any of the events described in this default section occurs with respect to any guarantor of this Note. (h) A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. (i) Lender in good faith deems itself insecure. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon default, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 4.250 percentage points over the Index. The interest rate will not exceed the maximum rate permitted by applicable law. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. It not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. This Note has been delivered to Lender and accepted by Lender in the State of Arizona. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Maricopa County, the State of Arizona. Subject to the provisions on arbitration, this Note shall be governed by and construed in accordance with the laws of the State of Arizona. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA, Keogh, and trust accounts. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided on this paragraph. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: Zane Close, President & CEO; Roseann Tavarozzi, Vice President of Finance; and Pauline Hostetler, Controller. Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (d) Borrower has applied finds provided pursuant to this Note for purposes other than those authorized by Lender; or (e) Lender in good faith deems itself insecure under this Note or any other agreement between Lender and Borrower. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessry by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the rate specified in this Note plus any additional rate resulting from any other charges in the nature of interest paid or to be paid in connection with this Note. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: Cerprobe Corporation By: /s/ Zane Close ------------------------------------------ Zane Close, President & CEO AGREEMENT TO PROVIDE INSURANCE ================================================================================ Borrower: Cerprobe Corporation Lender: First Interstate Bank of 600 South Rockford Drive Arizona, N. A. Tempe, AZ 8528l Commercial Banking Division 100 W. Washington P. O. Box 53456, Dept. #813 Phoenix, AZ 85072-3456 ================================================================================ INSURANCE REQUIREMENTS. Cerprobe Corporation ("Grantor") understands that insurance coverage is required in connection with the extending of a loan or the providing of other financial accommodations to Grantor by Lender. These requirements are set forth in the security documents. The following minimum insurance coverages must be provided on the following described collateral (the "Collateral"): Collateral: All Inventory and Equipment. Type. All risks, including fire, theft and liability. Amount. Full insurable value. Basis. Replacement value. Endorsements. Lender's loss payable clause with stipulation that coverage will not be cancelled or diminished without a minimum of ten (10) days' prior written notice to Lender. INSURANCE COMPANY. Grantor may obtain insurance from any insurance company Grantor may choose that is reasonably acceptable to Lender. Grantor understands that credit may not be denied solely because insurance was not purchased through Lender. INSURANCE MAILING ADDRESS. All documents and other materials relating to insurance for this loan should be mailed, delivered or directed to the following address: First Interstate Bank PO Box 3330, MS BV-l20 Portland, OR 97208-3330 FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, thirty (30) days from the date of this Agreement, evidence of the required insurance as provided above, with an effective date of April 30, 1995, or earlier. Grantor acknowledges and agrees that if Grantor fails to provide any required insurance or fails to continue such insurance in force, Lender may do so at Grantor's expense as provided in the applicable security document. The cost of any such insurance, at the option of Lender, shall be payable on demand or shall be added to the indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS. AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes Lender to provIde to any person (including any insurance agent or company) all information Lender deems appropriate, whether regarding the Collateral, the loan or other financial accommodations, or both. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 30,1995. GRANTOR: Cerprobe Corporation By: /s/ Zane Close ---------------------------- Zane Close, President & CEO ------------------------------------------------------------------------------- FOR LENDER USE ONLY INSURANCE VERIFICATION DATE: PHONE: ---------------------- --------------------- AGENT'S NAME: ----------------------------------------------------- INSURANCE COMPANY: ------------------------------------------------ POLICY NUMBER: ------------------------------------------------ EFFECTIVE DATES: ------------------------------------------------ COMMENTS: ------------------------------------------------------ ------------------------------------------------------------------------- EX-4 5 ADDENDUM ADDENDUM TO MASTER LEASE AGREEMENT THIS ADDENDUM TO MASTER LEASE AGREEMENT (this "Addendum") is made this 12th day of May, 1995, and supplements that certain Master Lease Agreement dated June 6, 1994 (the "Master Lease"), by and between First Interstate Bank of Arizona, N.A. ("Lessor"), and Cerprobe Corporation, an Arizona corporation ("Lessee"). Supplementing the terms of the Master Lease, Lessor and Lessee agree as follows: l. Unless otherwise defined in this Addendum, capitalized terms shall have the same meanings set forth in the Master Lease. 2. To the extent that the provisions of this Addendum can be interpreted as consistent with the terms of the Master Lease and any Equipment Schedules executed in connection therewith, the terms of this Addendum, the Master Lease, and such Equipment Schedules shall be read together as a consistent agreement. To the extent of any inconsistency among the Master Lease, the Equipment Schedules, and this Addendum, the terms and provisions of this Addendum shall control. 3. All equipment lease pursuant to the Master Lease shall be evidenced by an Equipment Schedule, which Equipment Schedule shall set forth specific terms and conditions with regard to the Equipment described therein. This Addendum, the Master Lease, and the Equipment Schedules together shall establish the terms and conditions governing the lease of Equipment under the Master Lease. The Master Lease, this Addendum, and the Equipment Schedules shall be referred to in this Addendum as the "Agreement". 4. Subject to satisfaction of all conditions set forth in the Agreement, Lessee may enter into Equipment Schedules for Equipment having an aggregate Net Cost of up to One Million Dollars ($1,000,000.00) (the "Lease Line"). The Lease Line shall be non-revolving. "Net Cost" means one hundred percent (100%) of Lessor's cost to purchase all Equipment plus the cost of installation of the Equipment at Lessee's place of business as such installation cost may be approved by Lessor in Lessor's sole discretion. 5. Lessee may enter into Equipment Schedules under the Lease Line for terms ranging between thirty-six (36) and sixty (60) months. The maximum term of each Equipment Schedule shall be equal to the useful economic life of the applicable Equipment as Lessor may determine in Lessor's sole discretion. Notwithstanding the useful economic life of the applicable Equipment, the minimum term of an Equipment Schedule shall be thirty-six (36) months. 6. Lessee's right to enter into Equipment Schedules under the Lease Line shall expire on April 27, 1996. Lessee must accept delivery of all Equipment, and the Equipment Schedule Acceptance Deadline shall be, no later than April 27, 1996. 7. All Equipment Schedules will be funded at a fixed rate equivalent to like tenor Treasury notes plus 2.0% at the time of funding. Treasury rates shall be defined as those issued weekly in the Federal Reserve Boards weekly H.15 report. 8. Lessee Agrees that unless Lessor agrees otherwise in writing, Lessee shall comply with all terms and covenants (financial or otherwise) of that certain Loan Agreement dated April 30, 1995 between Lessee and Lessor, as subsequently amended, whether or not any amounts remain outstanding under such Loan Agreement or such loan agreement has been terminated. 9. Lessee recognizes that Lessor has incurred and will continue to incur certain costs and expenses in connection with establishment maintaining, servicing, and administering the credit facility. To ensure that Lessor is able to recover such costs and expenses, Lessee agrees that, Lessor shall be entitled to collect the following facility charge, which Lessee hereby promises and agrees to pay: So long as Lessor shall have any obligation to extend or continue credit to Lessee in any form, Lessee shall pay to lessor on the last day of each and every calendar quarter a non-refundable commitment fee in the amount of 1/4 of 1% (percent) of unused balance of the Lease Line during the preceding calendar quarter. Cerprobe Corporation First Interstate Bank of Arizona, N.A. By: /s/ Zane Close By: /s/ Michael J. Hutchenson --------------------------- -------------------------------- n:\Mike Addendum.Doc:2 EX-5 6 LETTER OF INTENT LETTER OF INTENT ZEN VOCE TECHNOLOGY PTE LTD [LETTERHEAD] -------------------------------------------------------------------------------- TO : TECHNOLOGY PARKS PTE LTD DATE: 23RD JUNE 1995 ATTN: PHUA MIN TZE FAX : 7784761 LETTER OF INTENT ---------------- We are pleased to inform you that Cerprobe (S) Pte Ltd has confirmed to lease the unit at 5004 Ang Mo Kio Ave 5 Techplace II #02-07 Singapore 2056. The taking over date will be on the 3rd day of July 1995. As this company is currently doing their registration of company, Zon Voce Technology Pte Ltd will act on their behalf under such time Cerprobe (S) Pte Ltd is officially registered. Yours Sincerely, Yours Sincerely, /s/ Johnny Lim /s/ Roseann L. Tavarozzi ----------------------- ------------------------------ Johnny Lim Roseann L. Tavarozzi Managing Director Vice President Finance Cerprobe Corporation c.c. Zane Close Roseann J. Tavarozzi Michael Bonham Henry Wong EX-27 7 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the Balance Sheet at June 30, 1995 and the Statements of Operations and Retained Earnings (deficit) and is qualified in its entirety by reference to such financial statements. 1 U.S. DOLLARS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 1,100,819 0 0 0 2,246,758 6,642,025 6,288,855 2,922,734 12,160,220 2,229,204 1,024,315 200,476 0 0 8,631,190 12,160,220 11,134,194 11,134,194 5,839,115 5,839,115 0 0 0 2,084,384 905,000 2,084,384 0 0 0 1,179,384 0.31 0.26