Document:

Exhibit 10.1

    
      
        

      

    

    Exhibit
      10.2

    

    

    ADDENDUM
      NO. 2

    

    TO
      CONSTRUCTION AND LEASE AGREEMENT

    

    THIS
      AGREEMENT, made and entered into effective the first day of __June
      8________,
      2005, by and between the PORT OF WALLA WALLA, a municipal corporation of the
      State of Washington (hereinafter referred to as "Lessor"), and KEY TECHNOLOGY,
      INC., an Oregon corporation (hereinafter referred to as "Lessee"), 

    

    W
      I T N E S S E T H:

    

      WHEREAS,
      Lessor and Lessee entered into a Construction and Lease Agreement (hereinafter
      the "Agreement") dated October 17, 1989 and recorded with the Walla Walla County
      Auditor under Auditor's File No. 9105334 regarding the construction and leasing
      of certain premises located on Avery Street in Walla Walla, Washington,
      and

    

      WHEREAS,
      Lessor and Lessee entered into Addendum No. 1 to Construction and Lease
      Agreement (hereinafter the "Addendum No. 1") dated January 1, 2002 regarding
      the
      Lessor’s reduction in the Lessee’s monthly rent for the period of January 1,
      2002 through December 31, 2002, and

    

    WHEREAS,
      the parties desire to further amend certain provisions of the
      Agreement,

    

    NOW,
      THEREFORE, in consideration of the Lessor's expansion of the Lessee’s Avery
      Facility located at 150 Avery Street, Walla Walla, Washington, the parties
      agree
      as follows:

    

    1.    Section
      3 of said Agreement, as amended by Addendum No. 1, is amended to read as
      follows: 

    

    “3. Term.

    

    "This
      Lease shall be for a term of THIRTY (30) years, commencing at 12:01 a.m.
      effective on September 20, 1990 and terminating at 11:59 p.m. on September
      19,
      2020." 

    

    2.    Section
      4, Paragraph D of said Agreement, as amended by Addendum No. 1, is amended
      to
      read as follows:

    

    "D.    It
      is agreed by the parties that the rental due for the penultimate five (5) years
      of this Agreement (September 21, 2010 through September 20, 2015) shall be
      the
      sum of FIFTY SIX THOUSAND ONE HUNDRED SEVENTY FIVE DOLLARS AND THIRTEEN CENTS
      ($56,175.13) per month plus applicable leasehold tax. It is further agreed
      by
      the parties that the rental due for the last five (5) years of this Agreement
      (September 21, 2015 through September 20, 2020) shall be the sum of FIFTY SEVEN
      THOUSAND EIGHT HUNDRED SIXTY DOLLARS AND THIRTY EIGHT CENTS ($57,860.38) per
      month plus applicable leasehold tax."

    
      
        
          Addendum
            No. 2 to Construction and Lease Agreement, P. 1 

          Port
            of Walla Walla—Key Technology, Inc. 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    3.    Section
      4 of said Agreement is amended by adding new Paragraphs “E"and “F” thereto to
      read as follows:

    ".
      . . .

    
    

    E.    In
      addition to the rental hereinbefore provided to be paid to Lessor, Lessee agrees
      to pay additional monthly rent to the Lessor for the Lessor's construction
      of a
      20,160 sq. ft. manufacturing bay expansion on the east side of Key’s Avery
      facility, the construction of a 2,400 sq.ft. research and development area
      on
      the north side of said facility, the construction of an additional 62 stall
      parking lot adjacent to said facility, the installation of new carpeting in
      Key's administrative offices, and for certain other construction costs
      associated with the expansion project. The estimated project cost for said
      improvements is TWO MILLION EIGHT HUNDRED FOUR THOUSAND SEVEN HUNDRED FORTY
      NINE
      DOLLARS ($2,804,749).
      The estimated additional monthly rental commencing January 1, 2006 (subject
      to
      the issuance of a Certificate of Occupancy by the City of Walla Walla) shall
      be
      the sum of NINETEEN THOUSAND ONE HUNDRED TWENTY-SEVEN AND 03/100 DOLLARS
      ($19,127.03) per month plus applicable state leasehold tax, pursuant to the
      terms of the Letter of Authorization to Proceed executed by the Lessee and
      dated
      April 27, 2005 (attached hereto and incorporated herein as Exhibit 1). The
      additional monthly rental for said improvements shall be adjusted and finalized
      based on the final actual costs of construction. Any difference, positive or
      negative, between the actual final cost of the project and the current budget
      of
      $2,804,749 will result in an adjustment to the monthly lease cost by applying
      a
      3% rate and a 15 year term in the same manner used in calculating the current
      expected lease rate as set forth in Exhibit 1. The parties shall confirm the
      amount of additional monthly rental in writing.

    

    F.    In
      consideration that Lessee's rental payments to Lessor are based in part on
      Lessor’s total cost to construct the addition to the premises, the Lessee will
      receive the economic benefit of the Lessor not paying sales and use taxes.
      Accordingly, Lessor will obtain the required exemption certificate pursuant
      to
      Ch. 82.60 RCW. Lessee warrants that it plans to create sufficient "qualified
      employment positions" at the premises for Lessor to satisfy the requirements
      of
      WAC 458-20-24001(h) and that it will, at the request of Lessor, provide
      information to support Lessor's participation in the sales and use tax deferral
      program established pursuant to RCW 82.60. In the event Lessor fails to qualify
      for the sales and use tax deferral program as a result of Lessee's breach of
      the
      foregoing warranties, Lessee will pay any additional assessments imposed on
      Lessor that would not have been imposed were it not for such breaches. The
      warranties provided herein shall remain in place for a period of eight (8)
      years
      and shall survive any sale of the property by Lessor to Lessee pursuant to
      Section 37 of this Agreement. The Lessee further agrees to complete and submit
      in a timely manner the annual employee's survey to the Department of Revenue
      as
      required by RCW 82.60.070."

    

    4.
       All
      other terms and conditions of said Agreement and Addendum No. 1 not specifically
      amended herein shall remain in full force and effect. 

    

    
      
        
          Addendum
            No. 2 to Construction and Lease Agreement, P. 2 

          Port
            of Walla Walla—Key Technology, Inc. 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Addendum No. 2 to Construction
      and Lease Agreement this 8th
      day
      of June
      ,
      2005. 

     

    

    LESSOR

    PORT
      OF WALLA WALLA, a municipal corporation 

    

    

    By: _/s/
      James M. Kuntz_____________________________

    James
      M. Kuntz

    Executive
      Director

    

    

    

    LESSEE

    KEY
      TECHNOLGY, INC.

    

    

    

    By: _/s/
      Kirk Morton _______________________________

    Kirk
      Morton

    President
      and CEO 

    

    

    

    STATE
      OF WASHINGTON  

                                                
      ) ss.

    County
      of Walla Walla  )

    

    Know
      all men by these presents that JAMES M. KUNTZ appeared before me this
      _8th______day
      of _June__________________,
      2005, and stated and acknowledged that he is the Executive Director of the
      Port
      of Walla Walla, and that he is duly authorized to and did execute the foregoing
      Addendum No. 2 to Construction and Lease Agreement for and on behalf of the
      municipal corporation as its free and voluntary act and deed and within the
      scope of its municipal corporate powers.

    

    GIVEN
      under my hand and official seal this __8th_____
      day of _June_____________,
      2005.

    

    

    /s/
      Becky Kay Hulse     

    Notary
      Public for State of Washington,

    Residing
      at Walla Walla

    

    

    
      
        
          Addendum
            No. 2 to Construction and Lease Agreement, P. 3

          Port
            of Walla Walla—Key Technology, Inc. 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    STATE
      OF WASHINGTON  

                                                
      ) ss.

    County
      of Walla Walla  )

    

    Know
      all men by these presents that KIRK MORTON appeared before me this _8th______day
      of __June________________,
      2005, and stated and acknowledged that he is the President and COO of Key
      Technology, Inc., and that he is duly authorized to and did execute the
      foregoing Addendum No. 2 to Construction and Lease Agreement for and on behalf
      of the corporation as its free and voluntary act and deed and within the scope
      of its corporate powers.

    

    GIVEN
      under my hand and official seal this __8th________
      day of __June___________,
      2005.

    

    

    /s/
      Michele R. Walters    

    Notary
      Public for State of Washington,

    Residing
      at Walla Walla

    

    

    
      
        
          Addendum
            No. 2 to Construction and Lease Agreement, P. 4

          Port
            of Walla Walla—Key Technology, Inc. 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    “EXHIBIT
      1” - 3 PAGES

    

    

    April
      26, 2005

    

    

    Mr.
      Jim Kuntz

    Port
      of Walla Walla

    310
      A Street

    Walla
      Walla, WA 99362

    

    RE: Authorization
      to Proceed on Key Technology Avery Expansion Project

    

    Dear
      Jim:

    

    Key
      Technology hereby authorizes the Port of Walla Walla to proceed with the
      expansion of Key’s Avery Manufacturing Facility located at 150 Avery Street,
      Walla Walla, Washington. The proposed project is to construct a 20,160 sq.ft.
      manufacturing bay expansion on the east side of Key’s Avery facility,
      construction of a 2,400 sq.ft. research and development area on the north side
      of Key’s Avery facility, and the construction of an additional 62 stall parking
      lot located on-site. 

    

    The
      project construction will be concrete tilt-up to match existing building, the
      installation of special concrete footings to support Key Technology's
      manufacturing equipment, and installation of an electrical and HVAC system.
      The
      project cost is estimated at $2,804,749. (See Attachment A) The estimated
      monthly cost for said improvements based on the project pro-forma is $19,127.03
      per month plus State Leasehold Tax of 12.84% (See Attachment B). 

    

    Key
      Technology agrees to extend the lease term on the existing Avery facility for
      five years to 2020. The lease term extension will commence upon the completion
      of said improvements. In reference to the existing lease agreement on the Avery
      facility, Key Technology authorizes the Port to prepare amendments to the
      existing Avery lease to include the following:

    

    
      	 	
              1.

            	
              Amend
                the lease term to 2020.

            

    

    
      	 	
              2.

            	
              Amend
                the monthly lease payment to include the new
                improvements.

            

    

    
      	 	
              3.

            	
              Amend
                the option to purchase section to incorporate the new improvement
                costs on
                the site. 

            

    

    

    

    Authorization
      to Proceed

    

    

    

    _/s/
      Ronald W. Burgess_________________    ____4/27/05__________________

    Ronald
      W. Burgess       Date 

    Senior
      VP & CFO

    Key
      Technology, Inc.

    

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              Key
                Technology 2005 Expansion

            
	 	
              Port
                of Walla Walla Budget

            
	 	 	 
	
              A

            	
              Production
                Bay Expansion

            	
              $
                1,775,000 

            
	 	
              20,160
                sq.ft .

            	 
	 	 	 
	
              B

            	
              R&D
                Building

            	
              $
                265,000 

            
	 	
              2,400
                sq.ft.

            	 
	 	 	 
	
              C

            	
              Steel
                Package

            	
              $
                99,125 

            
	 	
               

            	 
	
              D

            	
              Expanded
                Parking Lot

            	
              $
                93,500 

            
	 	
              62
                Stalls

            	 
	 	 	 
	
              E

            	
              Utility
                Extension & Misc.

            	
              $
                - 

            
	 	 	 
	 	
              Sub
                Total 1

            	
              $
                2,232,625 

            
	 	 	 
	 	
              Project
                Contingency 9% (Sum of items A-E times 9%)

            	
              $
                200,936 

            
	 	
               

            	 
	 	
              Sub
                Total 2

            	
              $
                2,433,561 

            
	 	 	 
	 	
              A
                & E Cost 

            	
              $
                185,880 

            
	 	
              ($1.9
                million x 9.52% = $180,880 plus $5,000
                contingency)

            
	 	
              *
                State Fee Schedule for A & E is 10.58%

            	 
	 	
              Sub
                Total 3

            	
              $
                2,619,441 

            
	 	 	 
	 	
              Sales
                Tax

            	
              $
                185,308 

            
	 	
               

            	 
	 	
              Project
                Total

            	
              $
                2,804,749 

            
	 	 	 
	 	 	 
	
              *

            	
              Budget
                does not include:

            	 
	 	
              (1)
                New carpet - Administrative offices $150,000

            	 

    

     

    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              Draft
                Rental Schedule

            
	
              Key
                Technology Expansion - Proposed Financing 

            
	
              Project
                Pro-Forma 

            
	 	 	 	 	 
	
              Project
                Cost

            	
              $
                2,804,749 

            	 	 	 
	
               

            	 	 	 	 
	
              Project
                Financing Sources

            	
              Amount
                Financed 

            	
              Term

            	
              Rate

            	
              Monthly
                PMT

            
	
              .08
                Sales Tax Fund Grant

            	
              $
                200,000 

            	
               

            	
               

            	
               

            
	
              .08
                Sales Tax Fund Loan

            	
              $
                200,000 

            	
              10

            	
              3.0%

            	
              $1,931.21
                

            
	
              CERB
                Grant

            	
              $
                250,000 

            	
               

            	
               

            	
               

            
	
              CERB
                Loan

            	
              $
                750,000 

            	
              15

            	
              1.62%

            	
              $4,696.20
                

            
	
              Port
                - GO Bond/Revenue Loan

            	
              $
                666,949 

            	
              10

            	
              6.0%

            	
              $7,404.50
                

            
	
              Port
                - 2005 Capital Fund

            	
              $
                737,800 

            	
              15

            	
              3.0%

            	
              $5,095.11
                

            
	 	 	
              Base
                Lease

            	
              $19,127.03
                

            
	
               

            	
               

            	
              State
                Leasehold Tax 12.84%

            	
              $2,455.91
                

            
	 	 	
              Total
                Monthly Lease

            	
              $21,582.94
                

            
	
               

            	
               

            	
              Total
                Annual Lease

            	
              $258,995.24
                

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
              Projected
                Rental Savings

            
	 	 	 	 	 
	 	 	
              Projected
                Avery

            	 	 
	 	
              Annual
                Melrose 

            	
              Expansion

            	
              Annual

            	 
	
              Year

            	
              Facility
                Rental Rent

            	
              Rental
                Rate

            	
              Savings

            	 
	
              2006

            	
              $
                382,660 

            	
              $258,995
                

            	
              $123,664.89
                

            	 
	
              2007

            	
              $
                385,627 

            	
              $258,995
                

            	
              $126,631.58
                

            	 
	
              2008

            	
              $
                415,779 

            	
              $258,995
                

            	
              $156,783.70
                

            	 
	
              2009

            	
              $
                418,957 

            	
              $258,995
                

            	
              $159,961.69
                

            	 
	
              2010

            	
              $
                449,328 

            	
              $258,995
                

            	
              $190,332.51
                

            	 
	 	 	
              Total

            	
              $757,374.37
                

            	 
	 	 	 	 	 
	 	 	 	 	 
	
              Revised
                4-22-05EXHIBIT 10.2

 August 22, 2003
                            LETTER LOAN AGREEMENT
                            ---------------------

 Mr. Brad Jacoby
 Best Circuit Boards, Inc. dba Lone Star Circuits
 901 Hensley Drive
 Wylie, TX 75098

 Dear Mr. Jacoby:

 Compass Bank, a bank chartered under the laws of the State of Alabama
 ("Bank") is pleased to advise you that it has approved a new credit facility
 for Best Circuit Boards, Inc. dba Lone Star Circuits ("Borrower") subject to
 the terms and conditions described in this agreement as follows;

 1.   Amount of Credit: up to $2,000,000.00 revolving loan
      Borrower subject to terms of this agreement pursuant to promissory
      notes ("Note") of even date herewith executed by Borrower payable to
      the order of Bank secured by the Collateral as described in Section 5
      (and as described and defined in the Security Agreement).

 2.   "Borrowing Base" - Formula and Definition:
      Revolving credit advances shall be up to the sum of 80% of Eligible
      Accounts Receivable and 50% of Eligible Inventory.

      Eligible Accounts Receivable shall be defined so as to exclude accounts
      receivable which are not acceptable to Compass, in its sole discretion,
      for one of more of a variety of reasons including, without limitation,
      by reason that such accounts receivable are: (i) Reserve for Cross
      Aging, Contra, Cash, & Employees (ii) 90 days or greater from invoice
      date, (iii) Credit Balances in past due columns (iv) are due from an
      account debtor in which more than 10% of the total amount owed from
      such account debtor remains unpaid after 90 days from invoice date,
      (v) are foreign receivables not supported by letters of credit or
      receivable insurance acceptable to Compass, (vi) owed by affiliates,
      subsidiaries or other related entities, (vii) subject to offset, (viii)
      it is not an account owed by an account debtor whose aggregate account
      balance exceeds twenty-five (25%) of the total value of borrower's
      total accounts. The balance in excess of the aforementioned 25% will be
      deemed an ineligible receivable or (ix) otherwise unacceptable to
      Compass for one or more reasons to be detailed in the Loan Documents.
      Compass will review exceptions to the 25% threshold for inclusion in
      the borrowing base.

      Eligible Inventory shall be defined so as to exclude inventory that is
      not acceptable to Bank, in its sole discretion, for one or more reasons
      including, without limitation, by reason that such inventory is:
      (i) work-in-process, (ii) in transit, (iii) on consignment, (iv)
      packaging/supplies, (v) obsolete, (vi) slow-moving (defined as and
      item, type or class of inventory which turns less than once each 365
      days), (vii) defective, (viii) otherwise unacceptable to Bank for one
      or more reasons as detailed in the loan documents.

 3.   "Maturity Date":
      October 15, 2004

 4.   Payment Terms:
      Interest due and payable monthly as it accrues. Principal is due on or
      before the Maturity Date.

 5.   "Collateral",
      A first and prior security interest in all of Borrower's accounts and
      contract rights, including all accounts receivable (including insurance
      proceeds and tax refunds) and products thereof, whether now owned
      or hereafter acquired and all cash, notes, drafts, acceptances,
      instruments, chattel paper and other proceeds arising therefrom, and
      all returned and repossessed goods arising from or relating to any
      such accounts, and all products and proceeds thereof.

      A first and prior security interest in all of Borrower's inventory,
      held for resale or furnished or to be furnished under contracts for
      service or used or consumed in Borrower's trade or business and all
      additions and accessions thereto and all documents of title evidencing
      or representing any part thereof, and all products and proceeds
      thereof.

      A security interest in the Collateral shall be granted pursuant to one
      or more Security Agreements ("Security Agreement" whether one or more)
      of even date herewith between Borrower and Bank. The Security Agreement
      shall define and describe the Collateral.

 6.   Advances:
      Each advance requested shall be accompanied by signed request from a
      properly designated representative of borrower along with the various
      supporting documentation deemed necessary by Bank in its sole
      discretion.  No advances shall be made subsequent to the occurrence of
      an Event of Default unless such Event of Default is waived in writing
      by Bank.

 7.   "Loan Documents":

      (i)    The Letter Loan Agreement ("Agreement")
      (ii)   Note.
      (iii)  Financing statements on Form UCC-1 perfecting the security
             interest in the Collateral.
      (iv)   Security Agreement(s).
      (v)    Corporate Resolution of Borrower's Board of Directors and
             Incumbency Certificate setting forth, in a form and substance
             acceptable to bank, in its sole discretion, the resolutions
             authorizing the borrowing transaction described herein and
             designating the individuals and officers that may execute
             documents in the name of Borrower.
      (vi)   Corporate Resolution of Jacco Investment's, Inc. Board of
             Directors and Incumbency Certificate setting forth, in a form
             and substance acceptable to Bank, in its sole discretion, the
             resolutions authorizing Jacco Investments, Inc.'s transaction
             described herein and designating the individuals and officers
             that may execute documents in the name of Jacco Investments,
             Inc.
      (vii)  The guaranty of Jacco Investments, Inc. and Brad Jacoby
             evidencing that all of Borrower's indebtedness to Bank is
             unconditionally guarantee.
      (viii) Notice of Final Agreement form.
      (ix)   Such other documents as Bank may require to evidence, document
             and secure the transactions described herein.

 8.   Additional Covenants:

      Borrower agrees to a "clean up period" on the Note during which the
      Note has a zero balance for a period of 30 consecutive days at least
      once during each twelve month period after the date hereof.

      Borrower shall maintain a "debt to tangible net worth ratio" no greater
      than 1.50:1, tested quarterly.

      "Debt to tangible net worth ratio" is defined as total liabilities of
      Borrower less any shareholder loans if subordinated to the Bank divided
      by Borrower's tangible net worth.

      Borrower shall maintain a minimum "tangible net worth, of $3 million
      dollars.

      Borrower's "Tangible Net Worth" is defined as net worth plus
      shareholder loans if subordinated to the Bank less all intangible
      assets including receivables due from officers, affiliates,
      subsidiaries and related entities.

      Borrower shall maintain a "fixed charge coverage ratio" of at least
      1.20:1 tested quarterly calculated from four rolling quarter's
      financials.

      "Fixed Charge Coverage" is defined as operating earnings before
      interest, taxes, depreciation amortization and lease and rental
      payments (EBITDAR) plus professional fees paid to Jacco Investments,
      Inc. divided by debt service (principal and interest payments made)
      plus contractual lease payments plus professional fees paid to Jacco
      Investments, Inc.

      All financial and accounting terms and definitions used herein shall
      mean as calculated and defined in accordance with generally accepted
      accounting principles consistently applied.

      Borrower will maintain, with financially sound, reputable insurance
      companies, insurance of the kinds, (including liability insurance)
      covering the risks and in the relative proportionate amounts, usually
      carried by companies engaged in businesses similar to that of Borrower,
      naming Bank as loss payee, and shall deliver to Bank evidence of the
      maintenance of such insurance.

      Borrower will promptly pay all lawful claims, whether for labor,
      materials or otherwise, which might or could, if unpaid, become a
      lien or charge on any property or assets of Borrower, unless and to
      the extent only that the same are being contested in good faith by
      appropriate proceedings and reserves deemed adequate by Bank have been
      established therefor.

      Borrower will comply with all rules, regulations and laws of and by all
      government authorities including (without restrictions) all applicable
      environmental and worker safety laws.

 9.   "Events of Default":
      (a)    Failure to pay any of the principal or interest on the Note
             when due.
      (b)    Failure to observe or perform any of the covenants or agreements
             contained herein, in the Note, in any Security Agreement or in
             any of the other Loan Documents.
      (c)    Death of Guarantor.
      (d)    Default under any other Loan or Credit Agreement.
      (e)    A filing of bankruptcy, either voluntary or involuntary.
      (f)    The occurrence of any event of default (however denominated)
             under any Security Agreement or any other Loan Document.
      (g)    The determination by Bank, in the exercise of its reasonable
             judgment, that a material adverse change has occurred in the
             Borrower's financial condition.

 10.  Occurrence of Event of Default:
      Upon the occurrence of any Event of Default, Bank may, at its option,
      declare the unpaid principal of and accrued interest on the Note to be
      immediately due and payable without notice of any kind (including,
      without limitation, notice of intent to accelerate and notice of
      acceleration) whereupon the same shall forthwith become due and
      payable. Bank may thereupon enforce payment of the Note and pursue any
      rights and remedies provided in the Security Agreement or other Loan
      Documents or otherwise available at law.

11.   Conditions Precedent:

      Prior to the initial advance under the Note, Borrower is to provide
      Bank with the following, each to be in form and substance acceptable
      to Bank in its sole discretion:
      1.     Current evidence of corporate existence and good standing of
             Borrower and corporate Guarantor from the appropriate state
             official.
      2.     Evidence of a first and prior security interest in the
             Collateral in favor of Bank.
      3.     Execution and delivery of the Loan Documents.
      4.     Evidence of assignment or release from Inwood Bank as to their
             prior UCC filing.

 12.  So long as any indebtedness is outstanding under the Note, Borrower
      and Guarantor agree to:

      1.     Borrowers to furnish to Bank monthly, on or before 20 days after
             the end of the month, a balance sheet, a statement of profit
             and loss and back-log report for such month accompanied by a
             completed "Financial Covenant Compliance Report" in the form
             attached hereto as Exhibit A.

      2.     Borrower to furnish to Bank annually, on or before 90 days after
             the close of each fiscal year the annual financial statements
             (balance sheet and profit and loss statements) including all
             notes thereto for such fiscal year, accompanied by a completed
             "Financial Covenant Compliance Report" in the form attached
             hereto as Exhibit A.  These statements shall fairly present the
             financial condition of the Borrower and shall be prepared by an
             independent certified public accountant acceptable to Bank in
             its sole discretion.

      3.     Borrower and Guarantor to furnish to Bank copies of their annual
             tax returns within 15 days of filing.

      4.     Guarantor to furnish to Bank annually, on or before 15 days
             after the end of each fiscal year end (or the date of the last
             preceding financial statement submitted) a complete personal
             financial statement in a form acceptable to Bank.

      5.     From time to time, upon the request of Bank, execute and deliver
             to Bank any instrument, document, assignment or other writing
             which may be necessary or advisable in Bank's reasonable opinion
             to carry out the terms of this agreement or the other Loan
             Documents and to perfect Bank's security interest in the
             Collateral.

      6.     Furnish to the Bank monthly, a Borrowing Base Certificate in the
             form of Exhibit "A" attached hereto. With a schedule of accounts
             receivable listing and aging, and a raw material inventory form
             acceptable to Bank in its sole discretion.

 13.  Borrower agrees to the following additional covenants:

      (a)    Maintain compensating DDA balances of 15%.
      (b)    This agreement is subject to a satisfactory pre-funding audit
             performed by Compass Bank Structured Lending Group, and
             potential adjustments of the Borrowing Base as deemed
             necessary in Bank's discretion.  Advances against the line
             up to an amount of $500,000.00 will be allowed prior to
             completion and review of the pre-funding audit.

 Borrower agrees to pay and reimburse Bank for all reasonable costs and
 expenses, including reasonable attorney's fees, incurred by or on behalf
 of Bank in connection with the Loan Documents or the transaction described
 herein.

 This agreement shall be binding upon and inure to the benefit of the
 parties hereto and their respective successors and assigns, including each
 transferee, assignee, endorser or holder of the Note, but Borrower may not
 assign this agreement or any of the other Loan Documents without the express
 prior written consent of Bank.

 This agreement shall remain in force for all renewals, extensions and
 modifications of the Note, if any, unless the agreement is modified or
 replaced in writing.

 This agreement and the other loan documents shall be governed by and
 construed in accordance with the applicable laws of the State of Texas and
 the United States of America from time to time in effect. This agreement
 and the other Loan Documents are performable in Dallas County, Texas, which
 shall be a proper place of venue for suit on or in respect of this agreement
 or the other Loan Documents. Texas Revised Civil Statutes Annotated, Article
 5069-1.04, as amended, Chapter 15, which regulates certain revolving credit
 loan accounts and revolving tri-party accounts, shall not apply to this
 agreement, the Note or the other Loan Documents.

 Notwithstanding any provision to the contrary contained in this agreement,
 the Note or any of the other Loan Documents, it is expressly provided that
 in no case or event shall the aggregate of any amounts accrued or paid
 pursuant to this agreement, the Note or any of the other Loan Documents
 which under applicable laws are or may be deemed to constitute interest ever
 exceed the maximum nonusurious interest rate permitted by applicable Texas
 or federal laws, whichever permits the higher rate.  In this connection,
 Borrower and Bank stipulate and agree that it is their common and overriding
 intent to contract in strict compliance with applicable usury laws.  In
 furtherance thereof, none of the terms of this agreement, the Note or any of
 the other Loan Documents shall ever be construed to create a contract to
 pay, as consideration for the use, forbearance or detention of money,
 interest at a rate in excess of the maximum nonusurious interest rate
 permitted by applicable laws.  Borrower shall never be liable for interest
 in excess of the maximum nonusurious interest rate permitted by applicable
 laws.  If, for any reason whatever, such interest paid or received during
 the full term of this agreement, the Note or any of the other Loan Documents
 produces a rate that exceeds the maximum nonusurious interest rate permitted
 by applicable laws, Bank shall credit against the principal of such
 indebtedness (or, if such indebtedness shall have been paid in full, shall
 refund to the payor of such interest) such portion of said interest as shall
 be necessary to cause the interest paid to produce a rate equal to the
 maximum nonusurious interest rate permitted by applicable laws.

 All sums paid or agreed to be paid to Bank for the use, forbearance or
 detention of money shall, to the extent permitted by applicable law, be
 amortized, prorated, allocated and spread in equal parts throughout the full
 term of the applicable indebtedness, so that the interest rate is uniform
 throughout the full term of such indebtedness. The provisions of this
 paragraph shall control all agreements, whether now or hereafter existing
 and whether written or oral, between Borrower and Bank.

 The terms and conditions of this agreement (in its entirety) shall survive
 the closing of the Loan Documents and shall evidence the Agreement between
 Borrower and Bank.  In the event of conflict between the Agreement and any
 of the Note, Guaranty; or Security Agreement the Note, Guaranty or Security
 Agreement shall control.

 If the foregoing correctly sets forth our agreement, please so indicate by
 executing the enclosed copy of this letter and return it to the undersigned.

 Compass Bank

 /s/ David S. Phillips
 David S. Phillips
 Vice President

 (Signature page to follow)

<PAGE>

 Agreed to and accepted this 28 day of Aug, 2003.

 Best Circuits Boards, Inc. dba Lone Star Circuits

 By: /s/ Brad Jacoby
 Name : Brad Jacoby
 Title: President

 Guarantor:

 Jacco Investments, Inc.

 By: /s/ Brad Jacoby
 Name : Brad Jacoby
 Title: President

 Guarantor:

 Brad Jacoby

 /s/ Brad Jacoby
 Brad Jacoby

 Attachment:
 Exhibit A: Financial covenant Compliance/Borrowing Base Certificate Form

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]