Commitments

Letters of Credit

Outstanding letters of credit totaled $675 thousand and $1.4 million at December 31, 2012 and 2011, respectively. The letters of credit secure performance obligations and purchase commitments, and allow holders to draw funds up to the face amount of the letter of credit if the Company does not perform as contractually required. The outstanding letters of credit at December 31, 2012 were secured by the Revolving Credit Facility and Ex-Im Facility. The outstanding letters of credit at December 31, 2011 were secured by $21 thousand of restricted cash and the remainder was secured by the Revolving Credit Facility and Ex-Im Facility.

Purchase Obligations

Included in purchase obligations are raw materials, equipment and services needed to fulfill customer orders. During the normal course of business, in order to manage manufacturing lead times and help assure an adequate supply, the Company enters into agreements with suppliers that either allow the Company to procure goods and services when it chooses or that establish purchase requirements. In certain instances, the agreements with purchase requirements allow the Company the option to cancel, reschedule, or adjust its requirements based on the Company's business needs prior to firm orders being placed. Consequently, only a portion of the Company's purchase obligations are firm, non-cancelable and unconditional. At December 31, 2012, the Company's obligations under firm, non-cancelable, and unconditional agreements were $367 thousand, of which, $363 thousand of the Company's purchase obligations are due in 2013.

Property Under Capital Leases and Lease Commitments

At December 31, 2012 and 2011, the Company had operating and capital leases for office space and office equipment. At December 31, 2012, future minimum lease payments for the period ended are as follows:



(in thousands)	Unrelated Party Operating Leases		Related Party Operating Leases		Unrelated Party Capital Leases
2013	$	136	$	2,313	$	15
2014	48		2,386		8
2015	—		2,458		—
2016	—		2,530		—
2017	—		2,380		—
Total minimum lease payments	$	184	$	12,067	23
Less: amounts represented by interest					(2		)
Present value of monthly lease payments					21
Less: current portion of unrelated party capital lease obligation					(13		)
Long-term portion of unrelated party capital lease obligation					$	8

Unrelated Party Capital Lease

In August 2009 the Company entered into a lease for information technology storage equipment whereby the Company agreed to pay $73 thousand over a five year term expiring in July 2014. The lease agreement did not provide for a transfer of ownership at any point. Interest costs were assumed at 11%. Interest expense was approximately $3 thousand and $4 thousand for the year ended December 31, 2012 and 2011, respectively. This lease was classified as a unrelated party capital lease.

In September 2009 the Company entered into a lease for information technology storage equipment whereby the Company agreed to pay $120 thousand over a three year term expiring in August 2012. The lease agreement did not provide for a transfer of ownership at any point. Interest costs were assumed at 13%. Interest expense was approximately $1 thousand and $6 thousand for the year ended December 31, 2012 and 2011, respectively. This lease was classified as a unrelated party capital lease.

The asset value of the equipment under capital lease is zero and $58 thousand and is recorded in property and equipment in the Company’s consolidated balance sheet for the years ended December 31, 2012 and 2011, respectively.

Unrelated Party Operating Leases

Unrelated party operating leases expire at various times thru 2014 and primarily consist of leases for automobiles, servers, copiers and the telephone system.

Related Party Operating Lease

On November 30, 2007, the Company entered into a new Lease Agreement (the “Bedford Lease”) with SPI-Trust, a Trust of which Roger G. Little, Chairman of the Board, Chief Executive Officer and President of the Company, is the sole trustee and principal beneficiary, with respect to 144 thousand square feet of space comprising the entire building in which the Company has occupied space since December 1, 1985. The term of the Bedford Lease commenced on December 1, 2007 and was originally set to expire on November 30, 2012. The annual rental rate for the first year of the Bedford Lease was $12.50 per square foot on a triple net basis, whereby the tenant is responsible for operating expenses, taxes and maintenance of the building. The annual rental rate increased on each anniversary by $0.75 per square foot.

On September 17, 2010, the Company entered into the First Amendment to Lease Agreement with SPI-Trust to amend the Bedford Lease. The term of the Bedford Lease was extended for an additional 5 years to expire on November 30, 2017. The annual rental rate for the first year of the extended term (December 1, 2012 through November 30, 2013) is $16.00 per square foot on a triple net basis, whereby the tenant is responsible for operating expenses, taxes and maintenance of the building. After the first year of the extended term of the Bedford Lease, the annual rental rate increases on each anniversary by $0.50 per square foot. The Company has the right to further extend the term of the Bedford Lease for an additional 5 years. If the Company exercises this right to further extend the term of the Bedford Lease, the annual rental rate for the first year of the further extended term will be the greater of: (a) the rental rate in effect immediately preceding the commencement of the extended term; or (b) the market rate at such time, and on each anniversary of the commencement of the extended term the rental rate will increase by $0.50 per square foot. Additionally, SPI-Trust agreed to reimburse the Company up to $50 thousand for all costs incurred by the Company in connection with any alterations or improvements to the premises or repairs or replacements to the heating and air conditioning systems. The Company believes that the terms of the Bedford Lease, as amended, are commercially reasonable. Rent expense from continuing operations under the Bedford Lease was $2.3 million and $2.3 million for the years ended December 31, 2012 and 2011, respectively.

On August 29, 2008, the Company entered into a new Lease Agreement (the “Hudson Lease”) with SPI-Trust, with respect to 90 thousand square feet of space comprising the entire building in which Spire Semiconductor has occupied space since June 1, 2003. The term of the Hudson Lease commenced on September 1, 2008, and was to continue for 7 years until August 31, 2015. The annual rental rate for the first year of the Hudson Lease was $12.50 per square foot on a triple-net basis, whereby the tenant was responsible for operating expenses, taxes and maintenance of the building. The annual rental rate increases on each anniversary by $0.75 per square foot. In addition, the Company was required to deposit with SPI-Trust $300 thousand as security for performance by the Company for its covenants and obligations under the Hudson Lease. SPI-Trust is responsible, at its sole expense, to make certain defined tenant improvements to the building. The Company believes that the terms of the Hudson Lease were commercially reasonable and reflective of market rates. The Hudson Lease was classified as a related party operating lease. Rent expense from continuing operations under the Hudson Lease was $119 thousand and $626 thousand for the years ended December 31, 2012 and 2011, respectively. Rent expense from discontinued operations under the Hudson Lease was $134 thousand and $702 thousand for the years ended December 31, 2012 and 2011, respectively. In connection with sale of the Semiconductor Business Unit, the lease was terminated on March 9, 2012 and the Company was released from all future obligations under the lease as of such date. The security deposit of $300 thousand was used to off-set rent payments in the first quarter of 2012. See Note 17 to the consolidated financial statements.