Document:

Security Agreement

SECURITY AGREEMENT

This Security Agreement is made and entered into this October 22, 2001, by and between UNITED CALIFORNIA BANK formerly known as SANWA BANK CALIFORNIA (the "Bank") and APPLIED SIGNAL TECHNOLOGY, INC. (the "Debtor").

1.Grant of Security Interest. The Debtor hereby grants to the Bank a security interest in and to all of the following property (hereinafter collectively referred to as the "Collateral"):
(a) Equipment. All goods now owned or hereafter acquired by the Debtor or in which the Debtor now has or may hereafter acquire any interest, including, but not limited to, all machinery, equipment, furniture, furnishings, fixtures, tools, supplies and motor vehicles of every kind and description, and all additions, accessions, improvements, replacements and substitutions thereto and thereof.

(b) Inventory. All inventory now owned or hereafter acquired by the Debtor including, but not limited to, all raw materials, work in process, finished goods, inventory leased to others or held for lease, merchandise, parts and supplies of every kind and description, including inventory temporarily out of the Debtor’s custody or possession, together with all returns on accounts (the "Inventory").

(c) Accounts. All accounts, letter of credit rights, commercial tort claims, contract rights and general intangibles, including software and payment intangibles, now owned or hereafter created or acquired by the Debtor including, but not limited to, all receivables, including as-extracted receivables, credit card receivables, health care receivables, insurance receivables, software receivables and license fees, goodwill, trademarks, trademark applications, trade styles, trade names, patents, patent applications, copyrights and copyright applications, customer lists, business records and computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the Collateral.

(d) Documents. All documents, instruments and chattel paper, whether electronic or tangible, now owned or hereafter acquired by the Debtor, including, but not limited to, warehouse and other receipts, bills of sale, promissory notes and bills of lading.

(e) Monies. All monies, deposit accounts, certificates of deposit, investment property and securities of the Debtor now or hereafter in the Bank’s or its agents’ possession.

(f) Investment Property. Those shares of stock, bonds, indentures, negotiable and nonnegotiable securities, mutual funds, and annuities in the possession of the Bank, together with all proceeds thereof, including but not limited to, warrants, options, stock rights, rights to subscribe, liquidating dividends, cash dividends, payments, dividends paid in stock, new securities or other property derived therefrom or to which the Debtor may become entitled to receive on account thereof.

(g) Government Contracts. Any and all rights to receive monies under any government contracts with any federal, state, county or city, or any of their agencies, departments, or divisions, and such rights shall be perfected by obtaining an acknowledgement from such contracting parties authorized representative if required by Bank.

The Bank’s security interest in the Collateral shall be a continuing lien and shall include all proceeds and products of the Collateral including, but not limited to, the proceeds of any insurance thereon.

Debtor hereby consents to and instructs Bank to file financing statements in all locations deemed appropriate by the Bank from time to time.

The security interest granted to Bank in the Collateral shall not secure or be deemed to secure any Indebtedness of the Debtor to the Bank which is, at the time of its creation, subject to the provisions of any state or federal consumer credit or truth-in-lending disclosure statutes.

2.The Indebtedness. The Collateral secures payment of the indebtedness under that certain credit agreement dated as of September 18, 2000, executed by the Debtor and in the aggregate principal amount of $3,000,000.00 owed to the Bank together with any and all modifications, extensions and renewals of such indebtedness (hereinafter collectively referred to as the "Indebtedness") and performance of all the terms, covenants and agreements contained in this Security Agreement and in any other document, instrument or agreement evidencing or related to the Indebtedness or the Collateral.

The Indebtedness secured hereby shall not include any indebtedness of the Debtor incurred for personal, family or household purposes except to the extent any disclosure required under any consumer protection law (including but not limited to the Truth in Lending Act) or any regulation thereto, as now existing or hereafter amended, is or has been given.

3.Debtor’s Representations and Warranties. The Debtor hereby makes the following representations and warranties to the Bank, which representations and warranties are continuing:
(a) Status. The Debtor’s correct legal name is as stated in this Agreement and the Debtor is a corporation duly organized and validly existing under the laws of the state of California, and with its chief executive office in the state of California and is properly licensed and is qualified to do business and in good standing in, and, where necessary to maintain the Debtor’s rights and privileges, has complied with the fictitious name statute of every jurisdiction in which the Debtor is doing business.

(b) Authority. The execution, delivery and performance by the Debtor of this Agreement and any instrument, document or agreement required hereunder have been duly authorized and do not and will not: (i) violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having application to the Debtor, (ii) result in a breach of or constitute a default under any material indenture or loan or credit agreement or other material agreement, lease or instrument to which the Debtor is a party or by which it or its properties may be bound or affected; or (iii) require any consent or approval of its stockholders or violate any provision of its articles of incorporation or by-laws; or (iv) violate any provision of its partnership agreement; or (v) require any consent or approval of its members or violate any provision of its articles of organization or operating agreement.

(c) Legal Effect. This Security Agreement constitutes, and any document, instrument or agreement required hereunder when delivered will constitute, legal, valid and binding obligations of the Debtor enforceable against the Debtor in accordance with their respective terms.

(d) Fictitious Trade Styles. There are no fictitious trade styles used by the Debtor in connection with its business operations. The Debtor shall notify the Bank not less than 30 days prior to effecting any change in the matters described herein or prior to using any other fictitious trade style at any future date, indicating the trade style and state(s) of its use.

(e) Title to Collateral; Permitted Liens. The Debtor has good and marketable title to the Collateral and the same is not now and shall not become subject to any security interest, encumbrance, lien or claim of any third person other than: (i) liens and security interests to secure the Indebtedness or other indebtedness owed to the Bank; (ii) liens for taxes, assessments or similar charges either not yet due or being duly contested in good faith; (iii) liens of mechanics, materialmen, warehousemen or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (iv) liens and security interests which, as of the date hereof, have been disclosed to and approved by the Bank in writing; (v) purchase money liens or purchase money security interests upon or in any property acquired or held by the Debtor in the ordinary course of business to secure indebtedness outstanding on the date hereof or permitted to be incurred hereunder; and (vi) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of the Debtors assets (collectively "Permitted Liens").

(f) Financial Statements. All financial statements, information and other data now or hereafter submitted to the Bank in connection with the transaction with respect to which this Security Agreement is entered into are true, accurate and correct and have been or will be prepared in accordance with generally accepted accounting principles consistently applied. Since the most recent submission of any such financial statement, information or other data to the Bank, the Debtor represents and warrants that no material adverse change in the financial condition or operations as disclosed therein or thereby has occurred which has not been fully disclosed to the Bank in writing.

(g) Litigation. Except as have been disclosed to the Bank in writing, there are no actions, suits or proceedings pending or, to the knowledge of the Debtor, threatened against or affecting the Debtor or the Debtors properties before any court or administrative agency which, if determined adversely to the Debtor, would have a material adverse effect on the Debtors financial condition or operations or on the Collateral.

(h) Taxes. The Debtor has filed all tax returns required to be filed and paid all taxes shown thereon to be due, including interest and penalties, other than taxes which are currently payable without penalty or interest or those which are being duly contested in good faith.

(i) Environmental Compliance. The operations of the Debtor comply, and during the term of this Security Agreement will at all times comply, in all respects with all Environmental Laws; the Debtor has obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") and necessary for its ordinary course operations, all such Environmental Permits are in good standing, and the Debtor is in compliance with all material terms and conditions of such Environmental Permits; neither the Debtor nor any of its present property or operations is subject to any outstanding written order from or agreement with any governmental authority nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material; there are no Hazardous Materials or other conditions or circumstances existing, or arising from operations prior to the date of this Agreement, with respect to any property of the Debtor that would reasonably be expected to give rise to Environmental Claims; provided, however, that with respect to property leased from an unrelated third party, the foregoing representation is made to the best knowledge of the Debtor. In addition, (i) the Debtor does not have any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials off-site, and (ii) the Debtor has notified all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and have met all notification requirements under Title III of CERCLA and all other Environmental Laws.

For the purposes hereof:
(1) "Environmental Claims" shall mean all claims, however asserted, by any governmental authority or other person alleging potential liability or responsibility for violation of any Environmental Law or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from property, whether or not owned by the Debtor, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

(2) "Environmental Laws" shall mean all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authorities, in each case relating to environmental, health, safety and land use matters; including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act, the California Hazardous Waste Control Law, the California Solid Waste Management, Resource, Recovery and Recycling Act, the California Water Code and the California Health and Safety Code.

(3) "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any Environmental Law, including all substances identified under any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste.

(j) ERISA. If the Debtor has a pension, profit sharing or retirement plan subject to Employee Retirement Income Security Act of 1974 ("ERISA"), such plan has been and will continue to be funded in accordance with its terms and otherwise complies with and continues to comply with the requirements of ERISA.

4.Debtor’s Covenants. The Debtor covenants and agrees that, unless the Bank otherwise consents in writing, the Debtor shall at all times:

(a) Maintenance of Insurance. Keep and maintain the Collateral insured for not less than its full replacement value against all risks of loss and damage and maintain such other insurance as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Debtor operates and maintain such other insurance and coverages as may be required by the Bank. All such insurance shall be in form and amount and with companies satisfactory to the Bank. With respect to insurance covering the Collateral, such insurance shall name the Bank as loss payee pursuant to a loss payable endorsement satisfactory to the Bank and shall not be altered or canceled except upon 10 days’ prior written notice to the Bank. Upon the Bank’s request, the Debtor shall furnish the Bank with the original policy or binder of all such insurance.

(b) Maintenance of Collateral and Other Properties. Except for Permitted Liens, keep and maintain the Collateral free and clear of all levies, liens, encumbrances and security interests (including, but not limited to, any lien of attachment, judgment or execution) and defend the Collateral against any such levy, lien, encumbrance or security interest; comply with all laws, statutes and regulations pertaining to the Collateral and its use and operation; execute, file and record such statements, notices and agreements, take such actions and obtain such certificates and other documents as necessary to perfect, evidence and continue the Bank’s security interest in the Collateral and the priority thereof; maintain accurate and complete records of the Collateral which show all sales, claims and allowances; and properly care for, house, store and maintain the Collateral in good condition, free of misuse, abuse and deterioration, other than normal wear and tear. The Debtor shall also maintain and preserve all its properties in good working order and condition in accordance with the general practice of other businesses of similar character and size, ordinary wear and tear excepted.

(c) Location and Maintenance of Equipment.

(1) The Equipment shall at all times be in the Debtor’s physical possession, shall not be held for sale or lease, and shall be kept only at corporate headquarters located at 400 West California Avenue, Sunnyvale, CA 94086; the Virginia office located at 470 Spring Park Place, Suite 700, Herndon, VA 20170; the Oregon office located at 22867 NW Bennett Road, Suite 100, Hillsboro, OR 97124; the Utah office located at 1128 West 2400 South, Suite B, Salt Lake City, UT 84119, and/or the Maryland office located at 133 National Business Parkway, Suite 100, Annapolis Junction, MD 20701.

The Debtor shall not secrete, abandon or remove, or permit the removal of, the Equipment, or any part thereof, from the location(s) shown above or remove or permit to be removed any accessories now or hereafter placed upon the Equipment.

(2) Upon the Bank’s demand, the Debtor shall immediately provide the Bank with a complete and accurate description of the Equipment including, as applicable, the make, model, identification number and serial number of each item of Equipment. In addition, the Debtor shall immediately notify the Bank of the acquisition of any new or additional Equipment or the replacement of any existing Equipment and shall supply the Bank with a complete description of any such additional or replacement Equipment.

(3) The Debtor shall, at the Debtor’s sole cost and expense, keep and maintain the Equipment in a good state of repair and shall not destroy, misuse, abuse, illegally use or be negligent in the care of the Equipment or any part thereof. The Debtor shall not remove, destroy, obliterate, change, cover, paint, deface or after the name plates, serial numbers, labels or other distinguishing numbers or identification marks placed upon the Equipment or any part thereof by or on behalf of the manufacturer, any dealer or rebuilder thereof, or the Bank. The Debtor shall not be released from any liability to the Bank hereunder because of any injury to or loss or destruction of the Equipment. The Debtor shall allow the Bank and its representatives free access to and the right to inspect the Equipment at all times and shall comply with the terms and conditions of any leases covering the real property on which the Equipment is located and any orders, ordinances, laws, regulations or rules of any federal, state or municipal agency or authority having jurisdiction of such real property or the conduct of the business of the persons having control or possession of the Equipment.

(4) The Equipment is not now and shall not at any time hereafter be so affixed to the real property on which it is located as to become a fixture or a part thereof. The Equipment is now and shall at all times hereafter be and remain personal property of the Debtor.

(d) Location of Inventory. The Inventory is now and shall at all times hereafter be of good and merchantable quality and free from defects; is not now and shall not at any time hereafter be stored with a bailee, warehouseman or similar party without the Bank’s prior written consent; shall at all times be in the Debtors physical possession; shall not be held by any other party on consignment, sale on approval, or sale or return; and shall be kept only at corporate headquarters located at 400 West California Avenue, Sunnyvale, CA 94086; the Virginia office located at 470 Spring Park Place, Suite 700, Herndon, VA 20170; the Oregon office located at 22867 NW Bennett Road, Suite 100, Hillsboro, OR 97124; the Utah office located at 1128 West 2400 South, Suite B, Salt Lake City, UT 84119, and/or the Maryland office located at 133 National Business Parkway, Suite 100, Annapolis Junction, MD 20701.

(e) Inspection Rights and Accounting Records. The Debtor will maintain adequate books and records in accordance with generally accepted accounting principals consistently applied and in a manner otherwise acceptable to Bank, and, at any reasonable time and from time to time, permit the Bank or any representative thereof to examine and make copies of the records and visit the properties of the Debtor and discuss the business and operations of the Debtor with any employee or representative thereof. If the Debtor shall maintain any records (including, but not limited to, computer generated records or computer programs for the generation of such records) in the possession of a third party, the Debtor hereby agrees to notify such third party to permit the Bank free access to such records at all reasonable times and to provide the Bank with copies of any records which it may request, all at the Debtor’s expense, the amount of which shall be payable immediately upon demand. In addition, the Bank may, at any reasonable time and from time to time, conduct inspections and audits of the Collateral and the Debtor’s accounts payable, the cost and expenses of which shall be paid by the Debtor to the Bank upon demand.

(f) Reporting Requirements. Promptly upon the Bank’s request, deliver or cause to be delivered to the Bank such information pertaining to the Debtor, the Collateral or such other matters as the Bank may reasonably request.

(g) Transfer of Collateral. Not sell, contract for sale, convey, transfer, assign, lease or sublet any of the Collateral except in the ordinary course of business as presently conducted by the Debtor and then, only for full, fair and reasonable consideration.

(h) Payment of Obligations. Pay all of its liabilities and obligations when due.

(i) Compensation of Employees. Compensate its employees for services rendered at an hourly rate at least equal to the minimum hourly rate prescribed by any applicable federal or state law or regulation.

(j) Maintenance of Jurisdiction. Debtor shall maintain the jurisdiction of its organization and chief executive office, or if applicable, principal residence, as set forth herein and not change such jurisdiction name or form of organization without 30 days prior written notice to Bank.

(k) Notice. Give the Bank prompt written notice of any and all (i) Events of Default; (ii) litigation, arbitration or administrative proceedings to which any Debtor is a party and in which the claim or liability exceeds $500,000.00 or which affects the Collateral; (iii) other matters which have resulted in, or might result in a material adverse change in the Collateral or the financial condition or business operations of any Debtor, and (iv) any enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against any Debtor or any of its properties.

5.Bank’s Rights Without Default. At its option and without any obligation to do so, the Bank may, either in the name of the Bank, the Bank’s nominee or the Debtor:
(a) Collect, endorse and receive all sums, including, but not limited to, dividends and interest, now or hereafter payable upon or on account of the Collateral.

(b) Enter into any agreement relating to or affecting the Collateral and, in connection therewith, the Bank may surrender control of any such Collateral, accept other property in exchange for such Collateral, and do and perform such acts as it deems proper. Any money or property received in exchange for any such Collateral shall be subject to and held by the Bank pursuant to the terms of this Security Agreement.

(c) Make any compromise or settlement with respect to the Collateral that the Bank, in its sole and absolute discretion, deems proper.

(d) Insure and do such other acts as the Bank deems necessary, in its sole discretion, to preserve or protect the Collateral.

(e) Cause the Collateral to be transferred to the Bank’s name or the name of the Bank’s nominee.

(f) With respect to the Collateral, exercise all rights, powers and remedies of an owner but excluding any voting rights.

6.Events of Default. Any one or more of the following described events shall constitute an event of default ("Event of Default") hereunder:
(a) Non-Payment: The Debtor shall fail to pay the aggregate principal amount of any Indebtedness when due or interest on the Indebtedness within 5 days of when due.

(b) Performance Under This Agreement: The Debtor shall fail in any material respect to perform or observe any term, covenant or agreement contained in this Security Agreement or in any document, instrument or agreement relating to this Agreement and any such failure shall continue unremedied for more than 30 days after the occurrence thereof.

(c) Representations and Warranties; Financial Statements: Any representation or warranty made by the Debtor under or in connection with this Security Agreement or any financial statement given by the Debtor or any guarantor shall prove to have been incorrect in any material respect when made or given or when deemed to have been made or given.

(d) Other Agreements: If there is a default under any agreement to which Debtor is a party with the Bank or with a third party or parties resulting in a right by the Bank or such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness.

(e) Insolvency: The Debtor or any guarantor shall: (i) become insolvent or be unable to pay its debts as they mature; (ii) make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its properties and assets; (iii) file a voluntary petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors; (iv) file an answer admitting the material allegations of an involuntary petition relating to bankruptcy or reorganization or join in any such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or consent to the appointment of, or consent that an order be made, appointing any receiver, custodian or trustee, for itself or any of its properties, assets or businesses; or (vii) any receiver, custodian or trustee shall have been appointed for all or substantial part of its properties, assets or businesses and shall not be discharged within 30 days after the date of such appointment.

(f) Execution: Any writ of execution or attachment or any judgment lien shall be issued against any property of the Debtor and shall not be discharged or bonded against or released within 30 days after the issuance or attachment of such writ or lien.

(g) Revocation or Limitation of Guaranty: Any guaranty shall be revoked or limited or its enforceability or validity shall be contested by any guarantor, by operation of law, legal proceeding or otherwise or any guarantor who is a natural person shall die.

(h) Revocation or Limitation of Subordination Agreement: Any subordination agreement shall be revoked or limited or its enforceability or validity shall be contested by any creditor signatory thereto, by operation of law, legal proceeding or otherwise.

(i) Suspension: The Debtor shall voluntarily suspend the transaction of business or allow to be suspended, terminated, revoked or expired any permit, license or approval of any governmental body necessary to conduct the Debtors business as now conducted.

(j) Material Adverse Change: If there occurs a material adverse change in the Debtor’s business or financial condition, or if there is a material impairment of the prospect of repayment of any portion of the Indebtedness or there is a material impairment of the value or priority of the Bank’s security interest in the Collateral.

(k) Change in Ownership: There shall occur a sale, transfer, disposition or encumbrance (whether voluntary or involuntary), or an agreement shall be entered into to do so, with respect to more than 10% of the issued and outstanding capital stock of the Debtor.

(l) Impairment of Collateral. There shall occur any injury or damage to all or any part of the Collateral or all or any part of the Collateral shall be lost, stolen or destroyed.

7.Bank’s Rights and Remedies on Default. Upon the occurrence of any Event of Default, the Bank may, at its sole and absolute election, without demand and only upon such notice as may be required by law:

(a) Acceleration. Declare the Indebtedness and any or all other indebtedness owing to the Bank by the Debtor or any obligor on the Indebtedness (however such indebtedness may be evidenced or secured) immediately due and payable, whether or not otherwise due and payable.

(b) Cease Extending Credit. Cease extending credit to or for the account of the Debtor or any obligor on the Indebtedness under any agreement now existing or hereafter entered into with the bank.

(c) Termination. Terminate any agreement as to any future obligation of the Bank without affecting the Debtor’s obligations to the Bank or the Banks rights and remedies under this Security Agreement or under any other document, instrument or agreement.

(d) Segregate Collections. Require the Debtor to segregate all collections and proceeds of the Collateral so that they are capable of identification and to deliver such collections and proceeds to the Bank, in kind, without commingling, at such times and in such manner as required by the Bank.

(e) Records of Collateral. Require the Debtor to periodically deliver to the Bank records and schedules showing the status, condition and location of the Collateral and such contracts or other matters which affect the Collateral. In connection herewith, the Bank may conduct such audits or other examination of such records, including, but not limited to, verification of balances owing by any account debtor of the Debtor, as the Bank, in its sole and absolute discretion, deems necessary.

(f) Notification of Account Debtors.

(1) Notify any account debtor, any buyers or transferee of the Collateral or any other persons of the Bank’s interest in the Collateral and the proceeds thereof.

(2) Sign the Debtors name (which authority the Debtor hereby irrevocably and unconditionally grants to the Bank) on any invoice or bill of lading relating to accounts or other drafts against the account debtors, buyers or transferees, notify post office authorities to change the address for delivery of mail addressed to the Debtor to such address as the Bank may designate and take possession of and open mail addressed to the Debtor and remove therefrom, proceeds of and payments on the Collateral, and demand, receive and endorse payment and give receipts, releases and satisfactions for and sue for all money payable to the Debtor.

(3) Require the Debtor to indicate on the face of all invoices (or such other documentation as may be specified by the Bank relating to the sale, delivery or shipment of goods giving rise to the account) that the account has been assigned to the Bank and that all payments are to be made directly to the Bank at such address as the Bank may designate.

(4) Require the Debtor to direct all account debtors, buyers or transferees to forward all remittances, payments and proceeds of the Collateral directly to the Bank at such address as the Bank may designate. In connection therewith, the Debtor hereby irrevocably constitutes and appoints the Bank as its attorney-in-fact to endorse the Debtors name on any notes, acceptances, checks, drafts, money orders or other evidence of payment that may come into the Bank’s possession.

(5) Require the Debtor to deliver to the Bank, at such times designated by the Bank, records and schedules which show the status and condition of the Collateral, where it is located and such contracts or other matters which affect the Collateral.

(6) Send verification requests to any account debtor, buyer or transferee.

(7) Make inquiries of the Debtor’s trade vendors.

(g) Compromise. Grant extensions, compromise claims and settle any account for less than the amount owing thereunder, all without notice to the Debtor or any obligor on or any guarantor of the Indebtedness.

(h) Protection of Security Interest in Collateral. Make such payments and do such acts as the Bank, in its sole judgment, considers necessary and reasonable to protect its security interest in the Collateral. The Debtor hereby irrevocably authorizes the Bank to pay, purchase, contest or compromise any encumbrance, lien or claim which the Bank, in its sole judgment, deems to be prior or superior to its security interest. Further, the Debtor hereby agrees to pay to the Bank, upon demand therefor, all expenses and expenditures (including attorneys’ fees) incurred in connection with the foregoing.

(i) Foreclosure. Enforce any security interest or lien given or provided for under this Security Agreement or under any other document relating to the Collateral, in such manner and such order, as to all or any part of the Collateral, as the Bank, in its sole judgment, deems to be necessary or appropriate and the Debtor hereby waives any and all rights, obligations or defenses now or hereafter established by law relating to the foregoing. In the enforcement of its security interest in the Collateral, the Bank is authorized to enter upon the premises where any Collateral is located and take possession of the Collateral or any part thereof, together with the Debtor’s records pertaining thereto, or the Bank may require the Debtor to assemble the Collateral and records pertaining thereto and make such Collateral and records available to the Bank at a place designated by the Bank. The Bank may sell the Collateral or any portions thereof, together with all additions, accessions and accessories thereto, giving only such notices and following only such procedures as are required by law, at either a public or private sale, or both, with or without having the Collateral present at the time of sale, which sale shall be on such terms and conditions and conducted in such manner as the Bank determines in its sole judgment to be commercially reasonable. The Collateral may be disposed of in its then condition without any preparation or processing. In connection with any disposition of the Collateral, the Bank may disclaim any warranty relating to title, possession or quiet enjoyment. Any deficiency which exists after the disposition or liquidation of the Collateral shall be a continuing liability of any obligor on or any guarantor of the Indebtedness and shall be immediately paid to the Bank.

(j) Non-Exclusivity of Remedies. Exercise one or more of the Bank’s rights set forth herein or seek such other rights or pursue such other remedies as may be provided by law, in equity or in any other agreement now existing or hereafter entered into between the Bank and the Debtor or any obligor on or guarantor of the Indebtedness, or otherwise.

(k) Application of Proceeds. All amounts received by the Bank as proceeds from the disposition or liquidation of the Collateral shall be applied as follows: first, to the costs and expenses of collection, including court costs and reasonable attorneys’ fees, whether or not suit is commenced by the Bank; next, to those costs and expenses incurred by the Bank in protecting, preserving, enforcing, collecting, selling or disposing of the Collateral; next, to the payment of accrued and unpaid interest on all of the Indebtedness; next, to the payment of the outstanding principal balance of the Indebtedness; and last, to the payment of any other indebtedness owed by the Debtor to the Bank. Any excess Collateral or excess proceeds existing after the disposition or liquidation of the Collateral will be returned or paid by the Bank to the Debtor.

If any non-cash proceeds are received in connection with any sale of Collateral, the Bank shall not apply such non-cash proceeds to the Obligations unless and until such proceeds are converted to such; provided, however, that if such non-cash proceeds are not expected on the date of receipt thereof to be converted to cash within one year after such date, the Bank shall use commercially reasonable efforts to convert such non-cash proceeds to cash within such one year period.

8. Miscellaneous.

(a) Amounts Payable Under this Security Agreement. If the Debtor fails to pay on demand the amount of any obligations referred to in this Security Agreement, the Bank may pay such amount at its option and without any obligation to do so and without waiving any default occasioned by the Debtor’s failure to pay such amount. All amounts so paid by the Bank, together with reasonable attorneys’ fees and all other costs, charges and expenses relating to the Indebtedness, shall be a part of the Indebtedness and shall bear interest at the highest rate chargeable on any Indebtedness until paid in full.

(b) Other Terms. Terms not otherwise defined in this Security Agreement shall have the meanings attributed to such terms in the California Uniform Commercial Code as in effect on July 1, 2001 and from time to time thereafter.

(c) Reliance. Each warranty, representation, covenant and agreement contained in this Security Agreement shall be conclusively presumed to have been relied upon by the Bank regardless of any investigation made or information possessed by the Bank and shall be cumulative and in addition to any other warranties, representations, covenants or agreements which the Debtor shall now or hereafter give, or cause to be given, to the Bank.

(d) Attorneys’ Fees. Debtor shall pay to the Bank all costs and expenses, including but not limited to reasonable attorneys fees, incurred by Bank in connection with the administration, enforcement, including any bankruptcy, appeal or the enforcement of any judgment or any refinancing or restructuring of this Security Agreement or any document, instrument or agreement executed with respect to, evidencing or securing the Indebtedness hereunder.

(e) Notices. All notices, payments, requests, information and demands which either party hereto may desire, or be required to give or make to the other party, shall be given or made to such party by hand delivery or through deposit in the United States mail, postage prepaid, or by Western Union telegram, addressed to the address set forth below such party’s signature to this Security Agreement or to such other address as may be specified from time to time in writing by either party to the other.

(f) Waiver. Neither the failure nor delay by the Bank in exercising any right hereunder or under any document, instrument or agreement mentioned herein shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder or under any other document, instrument or agreement mentioned herein preclude other or further exercise thereof or the exercise of any other right; nor shall any waiver of any right or default hereunder or under any other document, instrument or agreement mentioned herein constitute a waiver of any other right or default or constitute a waiver of any other default of the same or any other term or provision.

(g) Assignment. This Security Agreement shall be binding upon and inure to the benefit of the Debtor and the Bank and their respective successors and assigns, except that the Debtor shall not have the right to assign its rights hereunder or any interest herein without the Bank’s prior written consent. The Bank may sell or assign all or any portion of its rights and benefits hereunder and, in connection therewith, may deliver to such prospective buyer or assignee financial statements and other relevant information pertaining to the Debtor or any obligor on the Indebtedness.

(h) Jurisdiction. This Security Agreement and the rights of the parties hereunder to and concerning the Collateral, and any documents, instruments or agreements mentioned or referred to herein, shall be governed by and construed according to the laws of the State of California, without regard to conflict of law principles, to the jurisdiction of whose courts the parties hereby submit.

(i) Waiver of Jury Trial: THE DEBTOR AND THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE DEBTOR AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be executed as of the date first herein above written.Amendments to Lease Agreements

Agreement to Terminate Lease

This Agreement to Terminate Lease (the "Agreement") is made as of July 30, 2001, by and between Sunnyvale Business Park, A California Limited Partnership ("Landlord"), and Applied Signal Technology, Inc., a California corporation ("Tenant"), with reference to the following facts.

Recitals

WHEREAS, Tenant and Landlord have entered into that certain Lease Agreement dated September 15, 1999 (the "Lease"), whereby Landlord leased to Tenant and Tenant leased from Landlord approximately 58,000 rentable square feet in those certain premises located at 840 W. California Avenue, Sunnyvale, California (the "Premises");

WHEREAS, pursuant to the Lease, the Lease Term for the Premises is presently scheduled to end on March 13, 2012 (the "Original Expiration Date");

WHEREAS, Landlord and Tenant now wish to terminate the Lease on the Termination Date (hereafter defined), a date prior to the Original Expiration Date, on the terms and conditions set forth below.

NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.Recitals. Landlord and Tenant hereby agree that the recitals set forth hereinabove are true and correct and incorporated into this Agreement.

2.Lease Termination. Landlord and Tenant hereby agree to terminate the Lease as of August 1, 2001 (the "Termination Date"). On or before the Termination Date, Tenant shall vacate and surrender possession of the Premises to Landlord in accordance with the provisions of the Lease. Landlord and Tenant hereby acknowledge and agree that the Letter of Credit required to be delivered by Tenant to Landlord pursuant to the provisions of Section 5 of the Lease was never delivered by Tenant. Landlord agrees that upon termination of the Lease in accordance with the terms of this Agreement and provided Landlord does not reinstate the Lease as provided herein, such Letter of Credit requirement shall be terminated and become null and void.

Upon termination of the Lease, the vacation and surrender of the Premises by Tenant, and completion of the Termination Conditions (defined in Paragraph 3 below) of this Agreement, Landlord and Tenant shall have no further rights, obligations or claims with respect to each other arising from this Agreement or the Lease, except for those obligations of Tenant under the Lease which are expressly required to survive and continue after the termination or expiration of the Lease. Tenant and Landlord hereby acknowledge and agree that certain obligations of Tenant survive the termination or expiration of the Lease, pursuant to the terms and provisions of the Lease, and the parties further agree that it is the intention of Tenant and Landlord that this Agreement not affect such ongoing obligations of Tenant.

3.Termination Conditions. The following conditions shall be conditions to the termination of the Lease (collectively, the "Termination Conditions"):
A.Performance by Tenant. Performance by Tenant through the Termination Date of all obligations required to be performed by Tenant under the Lease, as and when such obligations are required to be performed under the Lease, including, without limitation, the payment of Rent and any other sums required to be paid by Tenant to Landlord.

The Termination Conditions are conditions for the sole benefit of Landlord and may, at the sole discretion of Landlord, be waived by Landlord. If any or all of the Termination Conditions are not satisfied as required, then Landlord may terminate this Agreement and reinstate the Lease (in which event the Lease shall remain in full force and effect) or Landlord may consider the Lease terminated as of the Termination Date.

4.Abandoned Property. In addition to any rights Landlord may have under the Lease or this Agreement, Landlord, at its sole option, may deem any furniture, fixtures, shelving, cabinets, tables, equipment, lighting, and other fixtures or personal property in, on or attached to the Premises and remaining in or on the Premises after the Termination Date (the "Abandoned Property"), whether or not belonging to Tenant, to be abandoned, and Landlord may dispose of the Abandoned Property as it in its sole discretion deems appropriate. Tenant shall not be entitled to any proceeds received by Landlord as a result of the disposition of the Abandoned Property. Tenant waives, to the greatest extent permitted by law, all of its rights under California Civil Code Sections 1980, et. seq, as the same may be amended from time to time, and any related and successor statutes thereto.

5.Tenant's Representations and Warranties. Tenant hereby represents and warrants to Landlord the following, each of which shall survive the termination of the Lease, the vacation and surrender of the Premises, the surrender of the Lease and Tenant's leasehold estate, and the termination of this Agreement:
A.Tenant has not made any assignment, sublease, transfer, conveyance or other disposition of the Lease, Tenant's leasehold estate, the Premises, any other rights, title, interest under or arising by virtue of the Lease, or of any claim, demand, obligation, liability, action or cause of action arising from or pursuant to the Lease or arising from any rights of possession arising under or by virtue of the Lease, Tenant's leasehold estate, or the Premises.

B.The person or entity executing this Agreement on behalf of Tenant has the full right and authority to execute this Agreement on behalf of said party and to bind said party without the consent or approval of any other person or entity.

C.Tenant has the full power, capacity, authority and legal right to execute and deliver this Agreement.

D.This Agreement is legal, valid and binding upon Tenant and Landlord, and this Agreement is enforceable in accordance with its terms.

E.Tenant has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially, all of its assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of its assets, (v) admitted in writing to its inability to pay its debts as they become due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

6.General Provisions.
A.Time is of the essence in the performance of the parties' respective obligations set forth in this Agreement.

B.Notices shall be deemed given when received or when receipt is refused. Notices shall be sent by U.S. mail, registered or certified, return receipt requested, postage prepaid or by overnight delivery service showing receipt of delivery. If to Tenant, notices shall be sent to: Applied Signal Technology, 400 W. California Avenue, Sunnyvale, CA 94086, and if to Landlord: to Legacy Partners Commercial, Inc., 101 Lincoln Centre Drive, 4th Floor, Foster City, California 94404; Attention: Regional Vice President. If at any time either party should change its address, such party shall deliver written notice thereof to the other party together with the designation of the new address.

C.This Agreement constitutes the entire understanding of the parties and all prior agreements, representations, and understandings between the parties, whether oral or written, are deemed null, all of the foregoing having been merged into this Agreement. The parties acknowledge that each party and/or its counsel have reviewed and revised this Agreement and that no rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation of this Agreement or any amendments or exhibits to this Agreement or any document executed and delivered by either party in connection with this Agreement.

D.Tenant may not assign its rights, obligations and interest in this Agreement to any other person or entity, without Landlord's written consent thereto. Any attempted assignment shall be null and void. This Agreement shall inure to the benefit of and be binding upon the parties to this Agreement and their respective successors and assigns.

E.If for any reason, any provision of this Agreement shall be held to be unenforceable, it shall not affect the validity or enforceability of any other provision of this Agreement.

F.This Agreement shall be governed by and construed under the laws of the State of California.

G.Any and all addenda attached hereto and either signed or initialed by the parties shall be deemed a part hereof. This Agreement, including addenda, if any, expresses the entire agreement of the parties and supersedes any and all previous agreements between the parties with regard to the Premises and the Lease. There are no other understandings, oral or written, which in any way alter or enlarge its terms, and there are no warranties or representations of any nature whatsoever, either expressed or implied, except as may be set forth herein. Any and all future modifications of this Agreement will be effective only if they are in writing and signed by the parties hereto. The terms and conditions of any and all addenda attached hereto and any and all future modifications of this Agreement shall supersede and replace any inconsistent provisions in this Agreement.

H.This Agreement may be executed in counterparts. All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original.

I.In the event any dispute between the parties results in litigation or other proceeding, the prevailing party shall be reimbursed by the nonprevailing party for all reasonable costs and expenses, including, without limitation, reasonable attorneys' and experts' fees and costs incurred by the prevailing party in connection with such litigation or other proceeding and any appeal thereof. Such costs, expenses and fees shall be included in and made a part of the judgment recovered by the prevailing party, if any.

J.All capitalized terms used herein and not otherwise defined herein shall have the same meaning ascribed to such terms as set forth in the Lease.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above in this Agreement.

 

This Agreement to Terminate Lease (the "Agreement") is made as of July 30, 2001, by and between Sunnyvale Business Park, A California Limited Partnership ("Landlord"), and Applied Signal Technology, Inc., a California corporation ("Tenant"), with reference to the following facts.

Recitals

WHEREAS, Tenant and Landlord have entered into that certain Lease Agreement dated November 23, 1994, as amended by that certain First Amendment to Lease Agreement, dated as of January 1, 1998 (collectively, the "Lease"), whereby Landlord leased to Tenant and Tenant leased from Landlord approximately 58,000 rentable square feet in those certain premises located at 640 W. California Avenue, Sunnyvale, California (the "Premises");

WHEREAS, pursuant to the Lease, the Lease Term for the Premises is presently scheduled to end on March 13, 2012 (the "Original Expiration Date");

WHEREAS, Landlord and Tenant now wish to terminate the Lease on the Termination Date (hereafter defined), a date prior to the Original Expiration Date, on the terms and conditions set forth below.

NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Recitals. Landlord and Tenant hereby agree that the recitals set forth hereinabove are true and correct and incorporated into this Agreement.

2.Lease Termination. Landlord and Tenant hereby agree to terminate the Lease as of August 1, 2001 (the "Termination Date"). On or before the Termination Date, Tenant shall vacate and surrender possession of the Premises to Landlord in accordance with the provisions of the Lease. Landlord and Tenant hereby acknowledge and agree that upon termination of the Lease in accordance with the terms of this Agreement, the First Security Deposit and the Transferred Security Deposit, as such terms are defined in the Premises 1 Lease (as defined in the Lease), shall continue to be held by Landlord as security for the Collateral Lease Agreements (as defined in the Lease), provided however, the Transferred Security shall be reduced pursuant to the Second Amendment to Lease Agreement dated July 30, 2001.

Upon termination of the Lease, the vacation and surrender of the Premises by Tenant, and completion of the Termination Conditions (defined in Paragraph 3 below) of this Agreement, Landlord and Tenant shall have no further rights, obligations or claims with respect to each other arising from this Agreement or the Lease, except for those obligations of Tenant under the Lease which are expressly required to survive and continue after the termination or expiration of the Lease. Tenant and Landlord hereby acknowledge and agree that certain obligations of Tenant survive the termination or expiration of the Lease, pursuant to the terms and provisions of the Lease, and the parties further agree that it is the intention of Tenant and Landlord that this Agreement not affect such ongoing obligations of Tenant.

3.Termination Conditions. The following conditions shall be conditions to the termination of the Lease (collectively, the "Termination Conditions"):

A. Performance by Tenant. Performance by Tenant through the Termination Date of all obligations required to be performed by Tenant under the Lease, as and when such obligations are required to be performed under the Lease, including, without limitation, the payment of Rent, Additional Rent and any other sums required to be paid by Tenant to Landlord.

B. Surrender of the Premises. Tenants vacating the Premises and Tenant’s surrender of the Premises to Landlord in accordance with the provisions of the Lease by the Termination Date, including, without limitation, the removal by Tenant of all of its personal property and to the extent required by Landlord, the removal of any fixtures or improvements to the Premises, and the repair and restoration of the Premises to the satisfaction of Landlord.

The Termination Conditions are conditions for the sole benefit of Landlord and may, at the sole discretion of Landlord, be waived by Landlord. If any or all of the Termination Conditions are not satisfied as required, then Landlord may terminate this Agreement and reinstate the Lease (in which event the Lease shall remain in full force and effect) or Landlord may consider the Lease terminated as of the Termination Date.

4.Abandoned Property. In addition to any rights Landlord may have under the Lease or this Agreement, Landlord, at its sole option, may deem any furniture, fixtures, shelving, cabinets, tables, equipment, lighting, and other fixtures or personal property in, on or attached to the Premises and remaining in or on the Premises after the Termination Date (the "Abandoned Property"), whether or not belonging to Tenant, to be abandoned, and Landlord may dispose of the Abandoned Property as it in its sole discretion deems appropriate. Tenant shall not be entitled to any proceeds received by Landlord as a result of the disposition of the Abandoned Property. Tenant waives, to the greatest extent permitted by law, all of its rights under California Civil Code Sections 1980, et. seq, as the same may be amended from time to time, and any related and successor statutes thereto.

5.Tenant's Representations and Warranties. Tenant hereby represents and warrants to Landlord the following, each of which shall survive the termination of the Lease, the vacation and surrender of the Premises, the surrender of the Lease and Tenants leasehold estate, and the termination of this Agreement:

A.Tenant has not made any assignment, sublease, transfer, conveyance or other disposition of the Lease, Tenants leasehold estate, the Premises, any other rights, title, interest under or arising by virtue of the Lease, or of any claim, demand, obligation, liability, action or cause of action arising from or pursuant to the Lease or arising from any rights of possession arising under or by virtue of the Lease, Tenant’s leasehold estate, or the Premises.

B. The person or entity executing this Agreement on behalf of Tenant has the full right and authority to execute this Agreement on behalf of said party and to bind said party without the consent or approval of any other person or entity.

C.Tenant has the full power, capacity, authority and legal right to execute and deliver this Agreement.

D.This Agreement is legal, valid and binding upon Tenant and Landlord, and this Agreement is enforceable in accordance with its terms.

E.Tenant has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially, all of its assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of its assets, (v) admitted in writing to its inability to pay its debts as they become due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

6.General Provisions.

A.Time is of the essence in the performance of the parties' respective obligations set forth in this Agreement.

B.Notices shall be deemed given when received or when receipt is refused. Notices shall be sent by U.S. mail, registered or certified, return receipt requested, postage prepaid or by overnight delivery service showing receipt of delivery. If to Tenant, notices shall be sent to: Applied Signal Technology, 400 W. California Avenue, Sunnyvale, CA 94086, and if to Landlord: to Legacy Partners Commercial, Inc., 101 Lincoln Centre Drive, 4th Floor, Foster City, California 94404; Attention: Regional Vice President. If at any time either party should change its address, such party shall deliver written notice thereof to the other party together with the designation of the new address.

C.This Agreement constitutes the entire understanding of the parties and all prior agreements, representations, and understandings between the parties, whether oral or written, are deemed null, all of the foregoing having been merged into this Agreement. The parties acknowledge that each party and/or its counsel have reviewed and revised this Agreement and that no rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation of this Agreement or any amendments or exhibits to this Agreement or any document executed and delivered by either party in connection with this Agreement.

D.Tenant may not assign its rights, obligations and interest in this Agreement to any other person or entity, without Landlord's written consent thereto. Any attempted assignment shall be null and void. This Agreement shall inure to the benefit of and be binding upon the parties to this Agreement and their respective successors and assigns.

E.If for any reason, any provision of this Agreement shall be held to be unenforceable, it shall not affect the validity or enforceability of any other provision of this Agreement.

F.This Agreement shall be governed by and construed under the laws of the State of California.

G.Any and all addenda attached hereto and either signed or initialed by the parties shall be deemed a part hereof. This Agreement, including addenda, if any, expresses the entire agreement of the parties and supersedes any and all previous agreements between the parties with regard to the Premises and the Lease. There are no other understandings, oral or written, which in any way alter or enlarge its terms, and there are no warranties or representations of any nature whatsoever, either expressed or implied, except as may be set forth herein. Any and all future modifications of this Agreement will be effective only if they are in writing and signed by the parties hereto. The terms and conditions of any and all addenda attached hereto and any and all future modifications of this Agreement shall supersede and replace any inconsistent provisions in this Agreement.

H.This Agreement may be executed in counterparts. All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original.

I.In the event any dispute between the parties results in litigation or other proceeding, the prevailing party shall be reimbursed by the nonprevailing party for all reasonable costs and expenses, including, without limitation, reasonable attorneys' and experts' fees and costs incurred by the prevailing party in connection with such litigation or other proceeding and any appeal thereof. Such costs, expenses and fees shall be included in and made a part of the judgment recovered by the prevailing party, if any.

J.All capitalized terms used herein and not otherwise defined herein shall have the same meaning ascribed to such terms as set forth in the Lease.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first written above in this Agreement.

 

Fourth Amendment to Lease Agreement

This Fourth Amendment to Lease Agreement (the "Amendment") is made and entered into as of July 30, 2001, by and between SUNNYVALE BUSINESS PARK, a California limited partnership ("Landlord"), and APPLIED SIGNAL TECHNOLOGY, INC., a California corporation ("Tenant"), with reference to the following facts.

Recitals

A.Landlord and Tenant have entered into that certain Lease Agreement, dated as of November 23, 1994, as amended by that certain First Amendment to Lease Agreement, dated as of February 1, 1995, that certain Second Amendment to Lease Agreement, dated as of November 20, 1995 and that certain Third Amendment to Lease Agreement, dated as of January 1, 1996 (collectively, the "Lease"), for the leasing of certain premises consisting of approximately 215,456 rentable square feet located at 400, 430, 490 and 600 W. California Avenue, Sunnyvale, California (collectively, the "Original Premises"), as such Premises are more fully described in the Lease.

B.Landlord and Tenant hereby agree to terminate a portion of the Premises (as defined in the Lease) effective October 1, 2001 (the "Termination Date"). The portion of the Premises to be terminated shall consist of approximately 76,379 square feet located at 600 W. California Avenue, Sunnyvale, California.

C.Landlord and Tenant now wish to amend the Lease to, among other things, proportionately reduce the required amount of the Transferred Security Deposit (as defined in the Lease) upon and subject to each of the terms, conditions, and provisions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree as follows:
1.Recitals. Landlord and Tenant agree that the above recitals are true and correct and are hereby incorporated herein as though set forth in full.

2.Premises.

2.1The parties agree that the size of the Original Premises shall be reduced in accordance with the following schedule:

(a) On or prior to October 1, 2001, Tenant shall vacate and surrender to Landlord possession of a portion of the Original Premises consisting of approximately 76,379 rentable square feet within the Premises (the "Terminated Premises") (as shown on Exhibit A-1 attached hereto and made a part hereof); and

(b) Tenant's surrender to Landlord of such portion of the Original Premises shall include the vacation and surrender by Tenant of the Terminated Premises. Such vacation and surrender by Tenant shall be in accordance with the provisions of the Lease and in the condition reasonably required by Landlord.

2.2The parties agree that from and after October 1, 2001, Tenant will then occupy approximately 139,077 rentable square feet in Buildings E, F and G, in the location presently being occupied by Tenant and as already depicted in the Lease.

2.3For purposes of the Lease, from and after October 1, 2001, the term "Premises" as used herein and in the Lease shall mean and refer to the portion of the Original Premises remaining after the vacation and surrender by Tenant of the Terminated Premises consisting of approximately 76,379 rentable square feet. Landlord and Tenant hereby agree that for purposes of the Lease, the rentable square footage area of the Premises shall be conclusively deemed to be the number of rentable square feet from time to time as specified herein.

3.Base Rent. Section 3 of the Lease is hereby modified to provide that during the Term of the monthly Base Rent payable by Tenant to Landlord, in accordance with the provisions of Section 3 of the Lease, shall be as follows:

	

Period
	
Leased and Occupied Rentable Square Feet
	
Base

Rent/RSF/Month
	

Monthly Base Rent

	
10/01/01 — 11/01/03
	
139,077
	
$.83/RSF/Month
	
$115,433.91

	
11/02/03 — 11/01/06
	
139,077
	
$.88/RSF/Month
	
$122,387.76

	
11/02/06 — 05/01/09
	
139,077
	
$.90/RSF/Month
	
$125,169.30

	
05/02/09 — 03/13/12
	
139,077
	
$.93/RSF/Month
	
$129,341.61

 

4.Security Deposit. Section 5 of the Lease is modified to provide that effective as of October 1, 2001, the Transferred Security Deposit (as defined in the Lease) shall be proportionately reduced by Fifty Thousand Three Hundred Fifteen and 50/100 Dollars ($50,315.50) to take into consideration reduction in the Original Premises by the Terminated Premises.

5.Tenant's Percentage of Buildings Operating Expenses. Section 7 of the Lease shall be modified to provide that from and after the dates specified below Tenant's Percentage of Additional Rent, as defined in Section 7 of the Lease, effective October 1, 2001, Tenant's Percentage of Buildings Operating Expenses shall be 26.93%. Said reduction in Tenant's Percentage is based upon the reduction of the size of the Premises as contemplated herein.

6.Tenant's Percentage of Tax Expenses. Section 7.2 of the Lease shall be modified to provide that from and after the dates specified below Tenant's Percentage of Tax Expenses shall be as follows: (a) effective October 1, 2001, Tenant's Percentage of Tax Expenses shall be 26.93% of the Park and 100% of each individual Building. Said reduction in Tenant's Percentage is based upon the reduction of the size of the Premises as contemplated herein.

7.Abandoned Property. In addition to any rights Landlord may have under the Lease or this Amendment, Landlord, at its sole option, may deem any furniture, fixtures, shelving, cabinets, tables, equipment, lighting, and other fixtures or personal property in, on or attached to the Premises and remaining in or on the Premises after September 30, 2001, as applicable (the "Abandoned Property"), whether or not belonging to Tenant, to be abandoned, and Landlord may dispose of the Abandoned Property as it, in its sole discretion, deems necessary or appropriate. Tenant shall not be entitled to any proceeds received by Landlord as a result of the disposition of the Abandoned Property. Tenant waives, to the greatest extent permitted by Law, all of its rights under California Civil Code Sections 1980, et. seq., as the same may be amended from time to time, and any related and successor statutes thereto.

8.Tenant's Representations and Warranties. Tenant hereby represents and warrants to Landlord the following, each of which shall survive any termination of this Amendment or the Lease, the vacation and surrender of the Terminated Premises, and the surrender of the portions of Tenant's leasehold estate, all as contemplated herein:

8.1Tenant has not made any assignment, sublease, transfer, conveyance or other disposition of the Lease, Tenant's leasehold estate, the Original Premises, any other rights, title, interest under or arising by virtue of the Lease, or of any claim, demand, obligation, liability, action or cause of action arising from or pursuant to the Lease or arising from any rights of possession arising under or by virtue of the Lease, Tenant's leasehold estate, or the Original Premises.

8.2The person or entity executing this Amendment on behalf of Tenant has the full right and authority to execute this Amendment on behalf of said party and to bind said party without the consent or approval of any other person or entity.

8.3Tenant has the full power, capacity, authority and legal right to execute and deliver this Amendment.

8.4This Amendment is legal, valid and binding upon Tenant and Landlord, and this Amendment is enforceable in accordance with its terms.

8.5Tenant has not (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially, all of its assets, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of its assets, (v) admitted in writing to its inability to pay its debts as they become due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

9. Effect of Amendment. Except as modified herein, the terms and conditions of the Lease shall remain unmodified and continue in full force and effect. In the event of any conflict between the terms and conditions of the Lease and this Amendment, the terms and conditions of this Amendment shall prevail.

10. Definitions. Unless otherwise defined in this Amendment, all capitalized terms used herein but not otherwise defined in this Amendment shall have the meanings assigned to such terms in the Lease.

11.Authority. Subject to the assignment and subletting provisions of the Lease, this Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, legal representatives, successors and assign. Each party hereto and the persons signing below warrant that the person signing below on such party's behalf is authorized to do so and to bind such party to the terms of this Amendment

12. Incorporation. The terms and provisions of the Lease are hereby incorporated in this Amendment.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and year first above written.

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