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Exhibit 10.1   AMENDMENT   This Amendment (“Amendment”) is entered into and effective as of February 15, 2006 by and between Robert R. Buck (“Executive”) and Beacon Sales Acquisition, Inc. d/b/a Beacon Sales Company, a Delaware corporation (the “Company”).   R E C I T A L S:   A.            The Company and Executive are parties to that certain Employment Agreement dated as of October 20, 2003, as amended on July 30, 2004 (the “Employment Agreement”).   B.            The parties hereto desire to amend the Employment Agreement, on the terms set forth herein.   A G R E E M E N T S:   The parties hereto agree as follows:   1      EMPLOYMENT TERM.  THE INITIAL TERM OF THE EMPLOYMENT AGREEMENT IS HEREBY EXTENDED UNTIL NOVEMBER 30, 2007.   2      COMPENSATION.  SECTION 3(B) OF THE EMPLOYMENT AGREEMENT IS HEREBY AMENDED TO INSERT THE FOLLOWING AFTER THE FIRST SENTENCE OF SECTION 3(B):   “FOR THE COMPANY’S FISCAL YEAR 2006, THE COMPANY SHALL PAY TO EXECUTIVE A BASE SALARY FOR ALL SERVICES RENDERED BY EXECUTIVE UNDER THIS AGREEMENT OF $500,000 PER YEAR (PRORATED FOR ANY PARTIAL YEAR).”   3      THE PARTIES HEREBY RATIFY AND CONFIRM, IN ALL RESPECTS, THE EMPLOYMENT AGREEMENT, AS AMENDED BY THIS AMENDMENT.   IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.       BEACON SALES ACQUISITION, INC.             By:   /s/ Andrew R. Logie       Andrew R. Logie, Chairman           EXECUTIVE             /s/ Robert R. Buck     Robert R. Buck   --------------------------------------------------------------------------------

  THIRD AMENDED AND RESTATED SECURITY AGREEMENT THIS THIRD AMENDED AND RESTATED SECURITY AGREEMENT (the “Agreement”), is entered into and made effective as of February 10, 2005, by and between BSI2000, INC., a Delaware corporation with its principal place of business located at 12600 West Colfax Avenue, B410, Lakewood, CO 80215 (the “Company”), and the BUYER(S) listed on Schedule I attached to the Securities Purchase Agreement dated the date hereof (the “Secured Party”).   RECITALS:   WHEREAS, the Company issued to the Secured Party, as provided in the Securities Purchase Agreement dated September 30, 2004 (the “2004 SPA”) between the Company and the Secured Party, and the Secured Party purchased One Million Two Hundred Fifty Thousand Dollars ($1,250,000) of secured convertible debentures plus accrued and unpaid interest, and the Company issued to the Secured Party, as provided in the Securities Purchase Agreement dated June 17, 2005 (the “June 2005 SPA”) between the Company and the Secured Party, and the Secured Party purchased One Million Two Hundred Fifty Thousand Dollars ($1,250,000) of secured convertible debentures plus accrued and unpaid interest (the convertible debentures issued pursuant to both the 2004 SPA and the June 2005 SPA shall collectively be referred to as the “Prior Debentures”). The Company hereby expressly reaffirms all of the principal and accrued but unpaid interest under the Prior Debentures.   WHEREAS, this Agreement shall amend and restate the Second Amended and Restated Security Agreement between the parties hereto dated November 3, 2005, the Security Agreement between the parties hereto dated September 30, 2004 and shall amend and restate the Amended and Restated Security Agreement dated June 17, 2005.   WHEREAS, the Company has requested the Secured Party to make additional financing available to the Company.   WHEREAS, the Secured Party is willing to provide such additional financing on the condition that such additional financing is secured hereunder and under the UCC-1 filed on October 15, 2004 (#20042113504) filed in connection with the Securities Purchase Agreement dated September 30, 2004.   WHEREAS, the Company shall issue and sell to the Secured Party, as provided in the Amended and Restated Securities Purchase Agreement of even date herewith between the Company and the Secured Party (the “Securities Purchase Agreement”), and the Secured Party shall purchase up to One Million Dollars ($1,000,000) of secured convertible debentures (the “Convertible Debentures”), which shall be convertible into shares of the Company’s common stock, par value $0.001 (the “Common Stock”) (as converted, the “Conversion Shares”) in the respective amounts set forth opposite each Buyer(s) name on Schedule I attached to the Securities Purchase Agreement.     1 --------------------------------------------------------------------------------     WHEREAS, to induce the Secured Party to enter into the transaction contemplated by the Securities Purchase Agreement, the Convertible Debentures, the Amended and Restated Investor Registration Rights Agreement of even date herewith between the Company and the Secured Party (the “Investor Registration Rights Agreement”), the Warrants of even date herewith, and the Warrant dated November 3, 2005 and the Amended and Restated Irrevocable Transfer Agent Instructions among the Company, the Secured Party, the Transfer Agent, and David Gonzalez, Esq. (the “Transfer Agent Instructions”) (collectively referred to as the “Transaction Documents”), the Company hereby grants to the Secured Party a security interest in and to the pledged property identified on Exhibit A hereto (collectively referred to as the “Pledged Property”) until the satisfaction of the Obligations, as defined herein below.   NOW, THEREFORE, for and in consideration of the promises and the mutual covenants herein contained, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows:   ARTICLE 1. DEFINITIONS AND INTERPRETATIONS   Section 1.1. Recitals.   The above recitals are true and correct and are incorporated herein, in their entirety, by this reference.   Section 1.2. Interpretations.   Nothing herein expressed or implied is intended or shall be construed to confer upon any person other than the Secured Party any right, remedy or claim under or by reason hereof.   Section 1.3. Obligations Secured.   The obligations secured hereby are any and all obligations of the Company now existing or hereinafter incurred to the Secured Party, whether oral or written and whether arising before, on or after the date hereof including, without limitation, those obligations of the Company to the Secured Party under this Agreement, the Transaction Documents, the Prior Debentures and any other amounts now or hereafter owed to the Secured Party by the Company thereunder or hereunder (collectively, the “Obligations”).   ARTICLE 2. PLEDGED COLLATERAL, ADMINISTRATION OF COLLATERAL   AND TERMINATION OF SECURITY INTEREST   Section 2.1. Pledged Property.   (a) Company hereby pledges to the Secured Party, and creates in the Secured Party for its benefit, a security interest for such time until the Obligations are paid in full, in and to all of the property of the Company as set forth in Exhibit “A” attached hereto (collectively, the “Pledged Property”):     2 --------------------------------------------------------------------------------     The Pledged Property, as set forth in Exhibit “A” attached hereto, and the products thereof and the proceeds of all such items are hereinafter collectively referred to as the “Pledged Collateral.”   (b) Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge, file, record and deliver to the Secured Party any documents reasonably requested by the Secured Party to perfect its security interest in the Pledged Property. Simultaneously with the execution and delivery of this Agreement, the Company shall make, execute, acknowledge and deliver to the Secured Party such documents and instruments, including, without limitation, financing statements, certificates, affidavits and forms as may, in the Secured Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or to continue and preserve, the security interest of the Secured Party in the Pledged Property, and the Secured Party shall hold such documents and instruments as secured party, subject to the terms and conditions contained herein.   Section 2.2. Rights; Interests; Etc.   (a) So long as no Event of Default (as hereinafter defined) shall have occurred and be continuing:   (i) the Company shall be entitled to exercise any and all rights pertaining to the Pledged Property or any part thereof for any purpose not inconsistent with the terms hereof; and   (ii) the Company shall be entitled to receive and retain any and all payments paid or made in respect of the Pledged Property.   (b) Upon the occurrence and during the continuance of an Event of Default:   (i) All rights of the Company to exercise the rights which it would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and to receive payments which it would otherwise be authorized to receive and retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights shall thereupon become vested in the Secured Party who shall thereupon have the sole right to exercise such rights and to receive and hold as Pledged Collateral such payments; provided, however, that if the Secured Party shall become entitled and shall elect to exercise its right to realize on the Pledged Collateral pursuant to Article 5 hereof, then all cash sums received by the Secured Party, or held by Company for the benefit of the Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any outstanding Obligations; and   (ii) All interest, dividends, income and other payments and distributions which are received by the Company contrary to the provisions of Section 2.2(b)(i) hereof shall be received in trust for the benefit of the Secured Party, shall be segregated from other property of the Company and shall be forthwith paid over to the Secured Party; or     3 --------------------------------------------------------------------------------     (iii) The Secured Party in its sole discretion shall be authorized to sell any or all of the Pledged Property at public or private sale in order to recoup all of the outstanding principal plus accrued interest owed pursuant to the Convertible Debenture as described herein   (c) An “Event of Default” shall be deemed to have occurred under this Agreement upon an Event of Default under the Convertible Debentures.   ARTICLE 3. ATTORNEY-IN-FACT; PERFORMANCE   Section 3.1. Secured Party Appointed Attorney-In-Fact.   Upon the occurrence of an Event of Default, the Company hereby appoints the Secured Party as its attorney-in-fact, with full authority in the place and stead of the Company and in the name of the Company or otherwise, from time to time in the Secured Party’s discretion to take any action and to execute any instrument which the Secured Party may reasonably deem necessary to accomplish the purposes of this Agreement, including, without limitation, to receive and collect all instruments made payable to the Company representing any payments in respect of the Pledged Collateral or any part thereof and to give full discharge for the same. The Secured Party may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Pledged Property as and when the Secured Party may determine. To facilitate collection, the Secured Party may notify account debtors and obligors on any Pledged Property or Pledged Collateral to make payments directly to the Secured Party.   Section 3.2. Secured Party May Perform.   If the Company fails to perform any agreement contained herein, the Secured Party, at its option, may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be included in the Obligations secured hereby and payable by the Company under Section 8.3.   ARTICLE 4. REPRESENTATIONS AND WARRANTIES   Section 4.1. Authorization; Enforceability.   Each of the parties hereto represents and warrants that it has taken all action necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby; and upon execution and delivery, this Agreement shall constitute a valid and binding obligation of the respective party, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights or by the principles governing the availability of equitable remedies.     4 --------------------------------------------------------------------------------     Section 4.2. Ownership of Pledged Property.   The Company warrants and represents that it is the legal and beneficial owner of the Pledged Property free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement.   ARTICLE 5. DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL   Section 5.1. Default and Remedies.   (a) If an Event of Default described in Section 2.2(c)(i) and (ii) occurs, then in each such case the Secured Party may declare the Obligations to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration, the Obligations shall become immediately due and payable. If an Event of Default described in Sections 2.2(c)(iii) or (iv) occurs and is continuing for the period set forth therein, then the Obligations shall automatically become immediately due and payable without declaration or other act on the part of the Secured Party.   (b) Upon the occurrence of an Event of Default, the Secured Party shall: (i) be entitled to receive all distributions with respect to the Pledged Collateral, (ii) to cause the Pledged Property to be transferred into the name of the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and (iv) to realize upon any and all rights in the Pledged Property then held by the Secured Party.   Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies.   Upon the occurrence of an Event of Default, in addition to any rights and remedies available at law or in equity, the following provisions shall govern the Secured Party’s right to realize upon the Pledged Property:   (a) Any item of the Pledged Property may be sold for cash or other value in any number of lots at brokers board, public auction or private sale and may be sold without demand, advertisement or notice (except that the Secured Party shall give the Company ten (10) days’ prior written notice of the time and place or of the time after which a private sale may be made (the “Sale Notice”)), which notice period is hereby agreed to be commercially reasonable. At any sale or sales of the Pledged Property, the Company may bid for and purchase the whole or any part of the Pledged Property and, upon compliance with the terms of such sale, may hold, exploit and dispose of the same without further accountability to the Secured Party. The Company will execute and deliver, or cause to be executed and delivered, such instruments, documents, assignments, waivers, certificates, and affidavits and supply or cause to be supplied such further information and take such further action as the Secured Party reasonably shall require in connection with any such sale.   (b) Any cash being held by the Secured Party as Pledged Collateral and all cash proceeds received by the Secured Party in respect of, sale of, collection from, or other realization upon all or any part of the Pledged Collateral shall be applied as follows:     5 --------------------------------------------------------------------------------     (i) to the payment of all amounts due the Secured Party for the expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3 hereof;   (ii) to the payment of the Obligations then due and unpaid.   (iii) the balance, if any, to the person or persons entitled thereto, including, without limitation, the Company.   (c) In addition to all of the rights and remedies which the Secured Party may have pursuant to this Agreement, the Secured Party shall have all of the rights and remedies provided by law, including, without limitation, those under the Uniform Commercial Code.   (i) If the Company fails to pay such amounts due upon the occurrence of an Event of Default which is continuing, then the Secured Party may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the monies adjudged or decreed to be payable in the manner provided by law out of the property of Company, wherever situated.   (ii) The Company agrees that it shall be liable for any reasonable fees, expenses and costs incurred by the Secured Party in connection with enforcement, collection and preservation of the Transaction Documents, including, without limitation, reasonable legal fees and expenses, and such amounts shall be deemed included as Obligations secured hereby and payable as set forth in Section 8.3 hereof.   Section 5.3. Proofs of Claim.   In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relating to the Company or the property of the Company or of such other obligor or its creditors, the Secured Party (irrespective of whether the Obligations shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Secured Party shall have made any demand on the Company for the payment of the Obligations), subject to the rights of Previous Security Holders, shall be entitled and empowered, by intervention in such proceeding or otherwise:   (i) to file and prove a claim for the whole amount of the Obligations and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Secured Party (including any claim for the reasonable legal fees and expenses and other expenses paid or incurred by the Secured Party permitted hereunder and of the Secured Party allowed in such judicial proceeding), and   (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by the Secured Party to make such payments to the Secured Party and, in the event that the Secured Party shall consent to the making of such payments directed to the Secured Party, to pay to the Secured Party any amounts for expenses due it hereunder.     6 --------------------------------------------------------------------------------     Section 5.4. Duties Regarding Pledged Collateral.   The Secured Party shall have no duty as to the collection or protection of the Pledged Property or any income thereon or as to the preservation of any rights pertaining thereto, beyond the safe custody and reasonable care of any of the Pledged Property actually in the Secured Party’s possession.   ARTICLE 6. AFFIRMATIVE COVENANTS   The Company covenants and agrees that, from the date hereof and until the Obligations have been fully paid and satisfied, unless the Secured Party shall consent otherwise in writing (as provided in Section 8.4 hereof):   Section 6.1. Existence, Properties, Etc.   (a) The Company shall do, or cause to be done, all things, or proceed with due diligence with any actions or courses of action, that may be reasonably necessary (i) to maintain Company’s due organization, valid existence and good standing under the laws of its state of incorporation, and (ii) to preserve and keep in full force and effect all qualifications, licenses and registrations in those jurisdictions in which the failure to do so could have a Material Adverse Effect (as defined below); and (b) the Company shall not do, or cause to be done, any act impairing the Company’s corporate power or authority (i) to carry on the Company’s business as now conducted, and (ii) to execute or deliver this Agreement or any other document delivered in connection herewith, including, without limitation, any UCC-1 Financing Statements required by the Secured Party to which it is or will be a party, or perform any of its obligations hereunder or thereunder. For purpose of this Agreement, the term “Material Adverse Effect” shall mean any material and adverse affect as determined by Secured Party in its sole discretion, whether individually or in the aggregate, upon (a) the Company’s assets, business, operations, properties or condition, financial or otherwise; (b) the Company’s to make payment as and when due of all or any part of the Obligations; or (c) the Pledged Property.   Section 6.2. Financial Statements and Reports.   The Company shall furnish to the Secured Party within a reasonable time such financial data as the Secured Party may reasonably request, including, without limitation, the following:   (a) The balance sheet of the Company as of the close of each fiscal year, the statement of earnings and retained earnings of the Company as of the close of such fiscal year, and statement of cash flows for the Company for such fiscal year, all in reasonable detail, prepared in accordance with generally accepted accounting principles consistently applied, certified by the chief executive and chief financial officers of the Company as being true and correct and accompanied by a certificate of the chief executive and chief financial officers of the Company, stating that the Company has kept, observed, performed and fulfilled each covenant, term and condition of this Agreement during such fiscal year and that no Event of Default hereunder has occurred and is continuing, or if an Event of Default has occurred and is continuing, specifying the nature of same, the period of existence of same and the action the Company proposes to take in connection therewith;     7 --------------------------------------------------------------------------------     (b) A balance sheet of the Company as of the close of each month, and statement of earnings and retained earnings of the Company as of the close of such month, all in reasonable detail, and prepared substantially in accordance with generally accepted accounting principles consistently applied, certified by the chief executive and chief financial officers of the Company as being true and correct; and   (c) Copies of all accountants' reports and accompanying financial reports submitted to the Company by independent accountants in connection with each annual examination of the Company.   Section 6.3. Accounts and Reports.   The Company shall maintain a standard system of accounting in accordance with generally accepted accounting principles consistently applied and provide, at its sole expense, to the Secured Party the following:   (a) as soon as available, a copy of any notice or other communication alleging any nonpayment or other material breach or default, or any foreclosure or other action respecting any material portion of its assets and properties, received respecting any of the indebtedness of the Company in excess of $15,000 (other than the Obligations), or any demand or other request for payment under any guaranty, assumption, purchase agreement or similar agreement or arrangement respecting the indebtedness or obligations of others in excess of $15,000, including any received from any person acting on behalf of the Secured Party or beneficiary thereof; and   (b) within fifteen (15) days after the making of each submission or filing, a copy of any report, financial statement, notice or other document, whether periodic or otherwise, submitted to the shareholders of the Company, or submitted to or filed by the Company with any governmental authority involving or affecting (i) the Company that could have a Material Adverse Effect; (ii) the Obligations; (iii) any part of the Pledged Collateral; or (iv) any of the transactions contemplated in this Agreement or the Loan Instruments.   Section 6.4. Maintenance of Books and Records; Inspection.   The Company shall maintain its books, accounts and records in accordance with generally accepted accounting principles consistently applied, and permit the Secured Party, its officers and employees and any professionals designated by the Secured Party in writing, at any time to visit and inspect any of its properties (including but not limited to the collateral security described in the Transaction Documents and/or the Loan Instruments), corporate books and financial records, and to discuss its accounts, affairs and finances with any employee, officer or director thereof.     8 --------------------------------------------------------------------------------     Section 6.5. Maintenance and Insurance.   (a) The Company shall maintain or cause to be maintained, at its own expense, all of its assets and properties in good working order and condition, making all necessary repairs thereto and renewals and replacements thereof.   (b) The Company shall maintain or cause to be maintained, at its own expense, insurance in form, substance and amounts (including deductibles), which the Company deems reasonably necessary to the Company’s business, (i) adequate to insure all assets and properties of the Company, which assets and properties are of a character usually insured by persons engaged in the same or similar business against loss or damage resulting from fire or other risks included in an extended coverage policy; (ii) against public liability and other tort claims that may be incurred by the Company; (iii) as may be required by the Transaction Documents and/or applicable law and (iv) as may be reasonably requested by Secured Party, all with adequate, financially sound and reputable insurers.   Section 6.6. Contracts and Other Collateral.   The Company shall perform all of its obligations under or with respect to each instrument, receivable, contract and other intangible included in the Pledged Property to which the Company is now or hereafter will be party on a timely basis and in the manner therein required, including, without limitation, this Agreement.   Section 6.7. Defense of Collateral, Etc.   The Company shall defend and enforce its right, title and interest in and to any part of: (a) the Pledged Property; and (b) if not included within the Pledged Property, those assets and properties whose loss could have a Material Adverse Effect, the Company shall defend the Secured Party’s right, title and interest in and to each and every part of the Pledged Property, each against all manner of claims and demands on a timely basis to the full extent permitted by applicable law.   Section 6.8. Payment of Debts, Taxes, Etc.   The Company shall pay, or cause to be paid, all of its indebtedness and other liabilities and perform, or cause to be performed, all of its obligations in accordance with the respective terms thereof, and pay and discharge, or cause to be paid or discharged, all taxes, assessments and other governmental charges and levies imposed upon it, upon any of its assets and properties on or before the last day on which the same may be paid without penalty, as well as pay all other lawful claims (whether for services, labor, materials, supplies or otherwise) as and when due   Section 6.9. Taxes and Assessments; Tax Indemnity.   The Company shall (a) file all tax returns and appropriate schedules thereto that are required to be filed under applicable law, prior to the date of delinquency, (b) pay and discharge all taxes, assessments and governmental charges or levies imposed upon the Company, upon its income and profits or upon any properties belonging to it, prior to the date on which penalties attach thereto, and (c) pay all taxes, assessments and governmental charges or levies that, if unpaid, might become a lien or charge upon any of its properties; provided, however, that the Company in good faith may contest any such tax, assessment, governmental charge or levy described in the foregoing clauses (b) and (c) so long as appropriate reserves are maintained with respect thereto.     9 --------------------------------------------------------------------------------     Section 6.10. Compliance with Law and Other Agreements.   The Company shall maintain its business operations and property owned or used in connection therewith in compliance with (a) all applicable federal, state and local laws, regulations and ordinances governing such business operations and the use and ownership of such property, and (b) all agreements, licenses, franchises, indentures and mortgages to which the Company is a party or by which the Company or any of its properties is bound. Without limiting the foregoing, the Company shall pay all of its indebtedness promptly in accordance with the terms thereof.   Section 6.11. Notice of Default.   The Company shall give written notice to the Secured Party of the occurrence of any default or Event of Default under this Agreement, the Transaction Documents or any other Loan Instrument or any other agreement of Company for the payment of money, promptly upon the occurrence thereof.   Section 6.12. Notice of Litigation.   The Company shall give notice, in writing, to the Secured Party of (a) any actions, suits or proceedings wherein the amount at issue is in excess of $50,000, instituted by any persons against the Company, or affecting any of the assets of the Company, and (b) any dispute, not resolved within fifteen (15) days of the commencement thereof, between the Company on the one hand and any governmental or regulatory body on the other hand, which might reasonably be expected to have a Material Adverse Effect on the business operations or financial condition of the Company.   ARTICLE 7. NEGATIVE COVENANTS   The Company covenants and agrees that, from the date hereof until the Obligations have been fully paid and satisfied, the Company shall not, unless the Secured Party shall consent otherwise in writing:   Section 7.1. Indebtedness.   The Company shall not directly or indirectly permit, create, incur, assume, permit to exist, increase, renew or extend on or after the date hereof any indebtedness on its part, including commitments, contingencies and credit availabilities, or apply for or offer or agree to do any of the foregoing (excluding any indebtedness of the Company to the Secured Party, trade accounts payable and accrued expenses incurred in the ordinary course of business and the endorsement of negotiable instruments payable to the Company, respectively for deposit or collection in the ordinary course of business).     10 --------------------------------------------------------------------------------     Section 7.2. Liens and Encumbrances.   The Company shall not directly or indirectly make, create, incur, assume or permit to exist any assignment, transfer, pledge, mortgage, security interest or other lien or encumbrance of any nature in, to or against any part of the Pledged Property or of the Company’s capital stock, or offer or agree to do so, or own or acquire or agree to acquire any asset or property of any character subject to any of the foregoing encumbrances (including any conditional sale contract or other title retention agreement), or assign, pledge or in any way transfer or encumber its right to receive any income or other distribution or proceeds from any part of the Pledged Property or the Company’s capital stock; or enter into any sale-leaseback financing respecting any part of the Pledged Property as lessee, or cause or assist the inception or continuation of any of the foregoing.   Section 7.3. Certificate of Incorporation, By-Laws, Mergers, Consolidations, Acquisitions and Sales.   Without the prior express written consent of the Secured Party, the Company shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b) issue or sell its stock, stock options, bonds, notes or other corporate securities or obligations; (c) be a party to any merger, consolidation or corporate reorganization, (d) purchase or otherwise acquire all or substantially all of the assets or stock of, or any partnership or joint venture interest in, any other person, firm or entity, (e) sell, transfer, convey, grant a security interest in or lease all or any substantial part of its assets, nor (f) create any subsidiaries nor convey any of its assets to any subsidiary.   Section 7.4. Management, Ownership.   The Company shall not materially change its ownership, executive staff or management without the prior written consent of the Secured Party. The ownership, executive staff and management of the Company are material factors in the Secured Party's willingness to institute and maintain a lending relationship with the Company.   Section 7.5. Dividends, Etc.   The Company shall not declare or pay any dividend of any kind, in cash or in property, on any class of its capital stock, nor purchase, redeem, retire or otherwise acquire for value any shares of such stock, nor make any distribution of any kind in respect thereof, nor make any return of capital to shareholders, nor make any payments in respect of any pension, profit sharing, retirement, stock option, stock bonus, incentive compensation or similar plan (except as required or permitted hereunder), without the prior written consent of the Secured Party.   Section 7.6. Guaranties; Loans.   The Company shall not guarantee nor be liable in any manner, whether directly or indirectly, or become contingently liable after the date of this Agreement in connection with the obligations or indebtedness of any person or persons, except for (i) the indebtedness currently secured by the liens identified on the Pledged Property identified on Exhibit A hereto and (ii) the endorsement of negotiable instruments payable to the Company for deposit or collection in the ordinary course of business. The Company shall not make any loan, advance or extension of credit to any person other than in the normal course of its business.     11 --------------------------------------------------------------------------------     Section 7.7. Conduct of Business.   The Company will continue to engage, in an efficient and economical manner, in a business of the same general type as conducted by it on the date of this Agreement.   Section 11.8. Places of Business.   The location of the Company’s chief place of business is 12600 West Colfax Avenue, B410, Lakewood, CO 80215. The Company shall not change the location of its chief place of business, chief executive office or any place of business disclosed to the Secured Party or move any of the Pledged Property from its current location without thirty (30) days' prior written notice to the Secured Party in each instance.   ARTICLE 8. MISCELLANEOUS   Section 8.1. Notices.   All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as duly given on: (a) the date of delivery, if delivered in person, by nationally recognized overnight delivery service or (b) five (5) days after mailing if mailed from within the continental United States by certified mail, return receipt requested to the party entitled to receive the same:   If to the Secured Party: Cornell Capital Partners, LP   101 Hudson Street-Suite 3700   Jersey City, New Jersey 07302   Attention: Mark Angelo                       Portfolio Manager   Telephone: (201) 986-8300   Facsimile: (201) 985-8266     With a copy to: David Gonzalez, Esq.   101 Hudson Street, Suite 3700   Jersey City, NJ 07302   Telephone: (201) 985-8300   Facsimile: (201) 985-8266     12 --------------------------------------------------------------------------------     And if to the Company: BSI2000, INC.   12600 West Colfax Avenue, B410   Lakewood, CO 80215   Attention: Jack Harper, CEO   Telephone: (303) 231-9095   Facsimile: (303) 231-9002     With a copy to: Kirkpatrick & Lockhart Nicholson Graham, LLP   201 South Biscayne Boulevard, Suite 2000   Miami, Florida 33131   Attention: Clayton E. Parker, Esq.   Telephone: (305) 539-3306   Facsimile: (305) 328-7095 Any party may change its address by giving notice to the other party stating its new address. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such party’s address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement.   Section 8.2. Severability.   If any provision of this Agreement shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such invalid or unenforceable provision were not contained herein.   Section 8.3. Expenses.   In the event of an Event of Default, the Company will pay to the Secured Party the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, which the Secured Party may incur in connection with: (i) the custody or preservation of, or the sale, collection from, or other realization upon, any of the Pledged Property; (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by the Company to perform or observe any of the provisions hereof.   Section 8.4. Waivers, Amendments, Etc.   The Secured Party’s delay or failure at any time or times hereafter to require strict performance by Company of any undertakings, agreements or covenants shall not waiver, affect, or diminish any right of the Secured Party under this Agreement to demand strict compliance and performance herewith. Any waiver by the Secured Party of any Event of Default shall not waive or affect any other Event of Default, whether such Event of Default is prior or subsequent thereto and whether of the same or a different type. None of the undertakings, agreements and covenants of the Company contained in this Agreement, and no Event of Default, shall be deemed to have been waived by the Secured Party, nor may this Agreement be amended, changed or modified, unless such waiver, amendment, change or modification is evidenced by an instrument in writing specifying such waiver, amendment, change or modification and signed by the Secured Party.     13 --------------------------------------------------------------------------------     Section 8.5. Continuing Security Interest.   This Agreement shall create a continuing security interest in the Pledged Property and shall: (i) remain in full force and effect until payment in full of the Obligations; and (ii) be binding upon the Company and its successors and heirs and (iii) inure to the benefit of the Secured Party and its successors and assigns. Upon the payment or satisfaction in full of the Obligations, the Company shall be entitled to the return, at its expense, of such of the Pledged Property as shall not have been sold in accordance with Section 5.2 hereof or otherwise applied pursuant to the terms hereof.   Section 8.6. Independent Representation.   Each party hereto acknowledges and agrees that it has received or has had the opportunity to receive independent legal counsel of its own choice and that it has been sufficiently apprised of its rights and responsibilities with regard to the substance of this Agreement.   Section 8.7. Applicable Law: Jurisdiction.   This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in Hudson County, New Jersey, and expressly consent to the jurisdiction and venue of the Superior Court of New Jersey, sitting in Hudson County and the United States District Court for the District of New Jersey sitting in Newark, New Jersey for the adjudication of any civil action asserted pursuant to this Paragraph.   Section 8.8. Waiver of Jury Trial.   AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.   Section 8.9. Entire Agreement.   This Agreement constitutes the entire agreement among the parties and supersedes any prior agreement or understanding among them with respect to the subject matter hereof.   [SIGNATURE PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]     14 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as of the date first above written.           COMPANY: BSI2000, INC.               By:       -------------------------------------------------------------------------------- Jack Harper   President & CEO           SECURED PARTY CORNELL CAPITAL PARTNERS, LP         By:  Yorkville Advisors, LLC   Its: General Partner               By:       -------------------------------------------------------------------------------- Mark Angelo   Portfolio Manager   15 --------------------------------------------------------------------------------     EXHIBIT A     DEFINITION OF PLEDGED PROPERTY     For the purpose of securing prompt and complete payment and performance by the Company of all of the Obligations, the Company unconditionally and irrevocably hereby grants to the Secured Party a continuing security interest in and to, and lien upon, the following Pledged Property of the Company:     (a) all goods of the Company, including, without limitation, machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools, parts, supplies and motor vehicles of every kind and description, now or hereafter owned by the Company or in which the Company may have or may hereafter acquire any interest, and all replacements, additions, accessions, substitutions and proceeds thereof, arising from the sale or disposition thereof, and where applicable, the proceeds of insurance and of any tort claims involving any of the foregoing;     (b) all inventory of the Company, including, but not limited to, all goods, wares, merchandise, parts, supplies, finished products, other tangible personal property, including such inventory as is temporarily out of Company’s custody or possession and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing;     (c) all contract rights and general intangibles of the Company, including, without limitation, goodwill, trademarks, trade styles, trade names, leasehold interests, partnership or joint venture interests, patents and patent applications, copyrights, deposit accounts whether now owned or hereafter created;     (d) all documents, warehouse receipts, instruments and chattel paper of the Company whether now owned or hereafter created;     (e) all accounts and other receivables, instruments or other forms of obligations and rights to payment of the Company (herein collectively referred to as “Accounts”), together with the proceeds thereof, all goods represented by such Accounts and all such goods that may be returned by the Company’s customers, and all proceeds of any insurance thereon, and all guarantees, securities and liens which the Company may hold for the payment of any such Accounts including, without limitation, all rights of stoppage in transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of which the Company represents and warrants will be bona fide and existing obligations of its respective customers, arising out of the sale of goods by the Company in the ordinary course of business;     (f) to the extent assignable, all of the Company’s rights under all present and future authorizations, permits, licenses and franchises issued or granted in connection with the operations of any of its facilities;     (g) all products and proceeds (including, without limitation, insurance proceeds) from the above-described Pledged Property.     A-1 --------------------------------------------------------------------------------  

EXHIBIT 10.3 BUSINESS OPERATIONS AND SUPPORT SERVICES AGREEMENT           This Business Operations and Support Services Agreement (this “Agreement”) is made and entered into this 19th day of August, 2000, effective as of the Closing Date, by and between American Consolidated Technologies, a Michigan Partnership (“ACT”) (“Practice Manager”), and RADS, P.C. Oncology Professionals, a Michigan professional services corporation (“RADS”) (“Medical Practice”) located at 28595 Orchard Lake Road, Suite 110, Farmington Hills, Michigan 48334. RECITALS:           WHEREAS, Medical Practice is a duly formed and validly existing professional services corporation; and           WHEREAS, Medical Practice is formed for and engaged in the conduct of a medical practice and the provision of medical services to the general public in the State of Michigan through individual physicians who are licensed to practice medicine in the State of Michigan and who are shareholders of Medical Practice or are employed or otherwise retained by Medical Practice; and           WHEREAS, Practice Manager is a duly formed and validly existing Michigan Partnership, which is in the business of providing both medical administrative and related services to professional associations, physicians, and other professional health care entities and individuals.  Practice Manager is experienced in the design, development, financing, equipping, staffing, accounts receivable management, and marketing of medical practices; and           WHEREAS, Medical Practice desires to focus its energies, expertise, and time on the actual practice of medicine and on the delivery of medical services to patients, and to accomplish that goal it desires to delegate the increasingly more complex business aspects of its practice to business persons; and           WHEREAS, Medical Practice wishes to expand its business, pursue market opportunities, achieve efficiencies, provide utilization review and quality assurance, acquire additional equipment, space and personnel; and           WHEREAS, Medical Practice wishes to engage Practice Manager to assume the initial costs and risks of operating the practice, to provide the management, marketing, administrative, and business services that are necessary and appropriate for the day-to-day administration of the non-medical aspects of its medical practice, and Practice Manager desires to provide such services, all upon the terms and conditions hereinafter set forth; and           WHEREAS, Medical Practice and Practice Manager have determined a fair market value for the services to be rendered by Medical Practice; and           WHEREAS, based on this fair market value, Medical Practice and Practice Manager have developed a formula to compensate the Medical Practice and employees that will allow the parties to establish a relationship permitting each parry to devote its skills and expertise to the appropriate responsibilities and functions; --------------------------------------------------------------------------------           NOW, THEREFORE, in consideration of the mutual terms, covenants and conditions set forth herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: I.       Recitals.           The foregoing recitals are true and correct and are made an integral part of this Agreement as though fully set forth and incorporated herein. II.      Definitions.           For the purposes of this Agreement, the following terms have the following meanings, unless otherwise clearly required by the context in which the term is used.           2.1          Agreement.  The term “Agreement” means this Business Operations and Support Services Agreement between Medical Practice and Practice Manager and any amendments that may be adopted from time to time as hereinafter provided.           2.2          Budget.  The term “Budget” means an operating budget for each fiscal year as prepared by Practice Manager.           2.3          Confidential Information.  The term “Confidential Information” means all of the materials, information and ideas of Practice Manager, including, without limitation:  operation methods and information, accounting and financial information, marketing and pricing information and materials, internal publications and memoranda, and other matters considered confidential by Practice Manager.           2.4          Management Fee.  The term “Management Fee” means Practice Manager’s monthly compensation established pursuant to this Agreement, against receivables draw.           2.5          Practice Manager.  The term “Practice Manager” means American Consolidated Technologies, a Michigan Partnership, and any successors or assigns.           2.6          Practice Manager Expense.  The term “Practice Manager Expense” means an expense or cost incurred by Practice Manager and for which Practice Manager is financially liable.           2.7          Managing Physician.  The term “Managing Physician” means that physician designated by Practice Manager to direct the delivery of clinical services to patients by Practice Manager.           2.8          Medical Practice.  The term “Medical Practice” means RADS, P.C. Oncology Professionals, a Michigan professional corporation, and any successors, assigns, subsidiaries or affiliates.           2.9          Medical Practice Account.  The term “Medical Practice Account” means the bank account of Medical Practice established pursuant to this Agreement. -2- --------------------------------------------------------------------------------           2.10        Medical Practice Expense.  The term “Medical Practice Expense” means an expense or cost that is incurred by Practice Manager or Medical Practice and for which Medical Practice is financially liable.           2.11        Medical Services.  The term “Medical Services” means medical care and services, including but not limited to the practice of medicine, and all related health care services provided by Medical Practice through Medical Practice’s Managing Physician and Physician(s) that are retained by or professionally affiliated with Medical Practice.           2.12        Office.  The term “Office” means any office space that Practice Manager or Medical Practice owns, leases or otherwise procures as an agent for Medical Practice for Medical Practice for the purpose of providing Medical Services.           2.13        Physician.  The term “Physician” means the individually licensed professionals who are shareholders of Medical Practice, or are employed or otherwise retained by or associated with Medical Practice by contract.           2.14        Professional Personnel.  The term “Professional Personnel” means any licensed personnel, other than Physician(s), whose clinical services are provided under the direction of Physician and are retained by or professionally affiliated with Medical Practice.           2.15        State.  The term “State” means the State of Michigan.           2.16        Term.  The term “Term” means the initial and any renewal periods of duration of this Agreement as described in Section 8.1 hereof.           2.17        Closing Date.  The Closing Date shall be ___________________ unless mutually agreed upon by both parties. III.    Business of Medical Practice and Practice Manager.           The parties stipulate that the business of the Medical Practice and Practice Manager are those Medical Services, and Practice Manager services in support of Medical Service (i) where both the “facility” and “professional” components of the Medical Services have historically been provided in the Medical Practice’s private practice offices and reimbursed on a “global basis,” and (ii) where the “professional” component of the service has historically been provided in a hospital inpatient or outpatient facility, nursing home, ambulatory surgery facility or some other licensed or certified “facility” eligible for separate reimbursement for the “facility” component of such service and where the “professional” and “facility” components of the service are billed separately by different legal entities. IV.    Appointment and Authority of Practice Manager.           4.1          Appointment.  Medical Practice appoints Practice Manager as its sole and exclusive agent for the management, marketing, and administration of the business affairs and funding of Medical Practice, except as otherwise specifically agreed in writing by Medical Practice and Practice Manager, and Practice Manager accepts the appointment, subject at all times to the provisions of this Agreement. -3- --------------------------------------------------------------------------------           4.2          Authority.  Consistent with the provisions of this Agreement, Practice Manager shall have the responsibility and commensurate authority to provide business, public relations, administrative, and full management services for Medical Practice, including, without limitation, the provision of   (a) equipment,   (b) supplies,   (c) support services,   (d) non-physician personnel,   (e) public relations;   (f) office space, including purchase and lease, and rental fee collection,   (g) management,   (h) administration,   (i) financial record keeping,   (j) financial reporting,   (k) other business services,   (l) supervision of all medical physics and radiation safety services,   (m) business expansion,   (n) patient billing and revenue collection. Practice Manager is expressly authorized to provide such services in any reasonable manner Practice Manager deems appropriate to meet the day-to-day requirements of the business functions of Medical Practice, as well as the long range plan for the Practice.  Unless an expense is expressly designated as a Practice Manager Expense in this Agreement, all expenses incurred by Practice Manager in providing management services pursuant to this agreement shall be Medical Practice Expenses.  The parties acknowledge and agree that Medical Practice, through its Physicians, shall be responsible for and shall have complete authority, responsibility, supervision, and control over the provision of all Medical Services and other professional health care services performed for patients by Professional Personnel, and that all diagnoses, treatment, procedures, and other professional health care services shall be provided and performed exclusively by or under the supervision of the Physicians as they, in their sole discretion, deem appropriate.  Practice Manager shall have and exercise absolutely no control or supervision over the clinical aspects of the provision of Medical Services.  Practice Manager may however, in conjunction with its obligations to pursue business expansion opportunities, determine whether to offer new or expanded medical services or eliminate certain medical services currently provided to patients by the Medical Practice.           4.3          Patient Referrals.  Practice Manager and Medical Practice agree that the benefits to Medical Practice hereunder do not require, are not payment for, and are not in any way contingent upon the referral, admission, or any other arrangement for the provision of any item or service offered by Practice Manager to any patient of Medical Practice in any facility, laboratory, or hospital controlled, managed, or operated by Practice Manager or its affiliates. V.      Covenants and Responsibilities of Practice Manager.           During the Term of this Agreement, Practice Manager shall provide all the management, public relations, administrative and business services that are necessary and appropriate for the day-to-day administration of the non-medical aspects of Medical Practice’s operations, including without limitation those set forth in this Article IV, in accordance with the law and all rules, regulations, and guidelines of applicable governmental agencies. -4- --------------------------------------------------------------------------------           5.1          Office and Equipment.  As agreed upon by the parties hereto and included in the Medical Practice’s approved capital and operating budgets, Practice Manager shall provide for an Office, or more than one office where relevant (“Office”) deemed reasonably necessary by Practice Manager, for the purpose of providing Medical Services.  Furthermore, as agreed upon by the parties hereto and included in the Medical Practice’s capital and operating budgets, Practice Manager shall provide certain equipment, fixtures, furniture and furnishings (collectively, the “Equipment”) deemed reasonably necessary by Practice Manager for the operation of the Office and reasonably necessary for the provision of Medical Services therein.  Practice Manager shall consult with and seek the advice of Medical Practice in connection with equipping the Office, and with the purchase of additional or replacement equipment, to ensure the necessity and appropriateness of equipment placed in service at the Office.  Practice Manager shall be responsible for the repair and maintenance of the Office, consistent with the respective responsibilities of Practice Manager and Medical Practice and for the repair, maintenance, and replacement of all Equipment, other than such repairs, maintenance and replacement necessitated by the negligence or willful misconduct of Medical Practice, the Physicians, or other personnel employed by Medical Practice.           5.2          Supplies.  Practice Manager shall obtain and provide all reasonable medical, office, and other supplies, and shall ensure that the Office is at all times adequately stocked with the supplies that are reasonably necessary and appropriate for the operation of the Office(s) and the provision of Medical Services therein; except, however, that Medical Practice shall order, purchase, stock, and monitor the inventory of pharmaceutical and other medical supplies, substances, or items whose purchase, maintenance, or security require licensure as a health care provider or require a permit, registration, certification, or identification number that requires licensure or certification as a health care provider.           5.3          Support Services.  Practice Manager shall provide or arrange for all printing, stationery, forms, postage, duplication or photocopying services, and other support services that are reasonably necessary and appropriate for the operation of the Office and the provision of Medical Services in the Office.           5.4          Quality Assurance, Risk Management and Utilization Review.  Practice Manager shall assist Medical Practice in the establishment and implementation of procedures to ensure the consistency, quality, appropriateness, and medical necessity of Medical Services provided by Medical Practice, and shall provide administrative support for Medical Practice’s overall quality assurance, risk management, and utilization review programs.           5.5          Licenses and Permits.  Practice Manager shall, on behalf and in the name of Medical Practice, coordinate all development and planning processes, and apply for and use Practice Manager’s best efforts to obtain and maintain all federal, State, and local licenses and regulatory permits required for or in connection with the operation of Medical Practice and the equipment (existing and future) located therein, other than those relating to the practice of medicine or the administration of drugs by Physicians or Professional Personnel retained by, associated with, or under contract with Medical Practice.  The Medical Practice, its Physicians and/or Professional Personnel shall use their best efforts to support Practice Manager’s activities on behalf of the Medical Practice in a timely manner. -5- --------------------------------------------------------------------------------           5.6          Use of Name.  Except as noted below, Practice Manager will permit the Medical Practice to do business under the name “RADS, P.C. Oncology Professionals” and may require it to prominently reflect an affiliation with any of Practice Manager’s assumed names during the term of this Agreement.  Practice Manager may, however, at any time change the names, marks and logos under which the Medical Practice or Practice Manager does business and/or which it makes available to the Medical Practice.  The Medical Practice recognizes the value of the names, marks and logos of Practice Manager.  The Medical Practice acknowledges and agrees that all rights to such names, marks and logos and the goodwill pertaining thereto belong exclusively to Practice Manager, and that the Medical Practice will not during the term of this Agreement or thereafter, challenge the title or rights of Practice Manager to such names, marks and logos.  The Medical Practice further acknowledges and agrees that Practice Manager possesses valid trade name, trademark and service mark rights to such names, marks and logos, and that the Medical Practice will not, during the term of this Agreement or thereafter, challenge the validity of any such rights or their exclusive ownership by Practice Manager.  Practice Manager shall have the right to obtain assumed names (d/b/a) for the Medical Practice and may require the Medical Practice to use the d/b/a if Practice Manager deemed it advantageous for marketing purposes.           5.7          Public Relations.  Public relations services shall be provided in accordance with the standards of medical ethics of the American Medical Association and the American Osteopathic Association, and all applicable laws prior to the publication or distribution of marketing or public relations materials or information.  Practice Manager shall submit such materials to Medical Practice for its review and comments, and shall make all reasonable written changes thereto as Medical Practice may request and which are in accordance with Practice Manager’s marketing plans for the Medical Practice.  Practice Manager shall be the sole owner and holder of all right, title, and interest in and to any materials or documents prepared, purchased, or furnished by Practice Manager pursuant to this Agreement.           5.8          Personnel.                          A.          Non-Physician Personnel.  Except as specifically provided in this Agreement, Practice Manager shall employ or otherwise retain and shall be responsible for selecting, training, supervising, and terminating all management, administrative, clerical, secretarial, bookkeeping, technical, medical physics, nursing, accounting, payroll, billing and collection, and other non-physician personnel as Practice Manager deems reasonably necessary and appropriate for Practice Manager’s performance of its duties and obligations under this Agreement and for the operation of the Office.  Practice Manager shall have the duty to hire duly qualified clinical personnel in accordance with standards promulgated by the American College of Radiology (ACR), Joint Commission for Accreditation of Health Organization (JCAHO) and/or Nuclear Regulatory Commission (NRC), provided, however, Practice Manager shall seek the input of the full-time physicians and employees of Practice concerning the selection, transfer and termination of all non-physician personnel. -6- --------------------------------------------------------------------------------                          B.          Physician Personnel.  Practice Manager shall have sole responsibility for determining the salaries and providing fringe benefits, and for withholding, as required by law, any sums for income tax, unemployment insurance, social security, or any other withholding required by applicable law or governmental requirement for all employees, including physician-employees and consultants.  If any physician-employee/consultant does not meet ACR, JCAHO or Hospital medical staff requirements, or is not Board Certified in his/her field of speciality, then Practice Manager may remove or refuse to hire that physician.  Likewise, Practice Manager may take action to remove a physician for the following reasons:   i. commission of a felony,         ii. not supervising patients’ treatments adequately,         iii. being removed from any Hospital’s medical staff,         iv. mental or physical disability interfering with Practice,         v. losing his/her medical license,         vi. not being timely certified by ABR or equivalent,         vii. ethical conducts unbefitting a professional,         viii. inability to manage patient care,         ix. not completing patient charts and other required medical documents on a timely basis as requested by Practice Manager.           Practice Manager shall also have the right to act on behalf of Medical Practice and terminate physician-employee or physician consulting agreements pursuant to their terms and conditions and to take whatever other action is deemed necessary to protect the Medical Practice.                          C.          Nonexclusivity.  In recognition of the fact that Practice Manager and the management and administrative personnel and non-physician personnel provided to Medical Practice by Practice Manager may from time to time perform services for others, this Agreement shall not prevent Practice Manager or such personnel from performing services for others or restrict Practice Manager from so using Practice Manager’s personnel.  Practice Manager shall use reasonable efforts, consistent with sound business practices, to honor the specific requests of Medical Practice with regard to the assignment of Practice Manager’s non-physician and nonprofessional personnel.                          D.          Equal Employment Opportunity.  Practice Manager expressly agrees not to intentionally violate any and all applicable federal and/or State equal employment opportunity statutes, rules and regulations, all as may from time to time be modified or amended.                          E.          Labor Reports.  Practice Manager shall appropriately prepare, maintain, and file all requisite reports and statements regarding income tax withholdings, unemployment insurance, social security, workers’ compensation, equal employment opportunity, or other reports and statements required with respect to personnel provided by Practice Manager pursuant to this Agreement. -7- --------------------------------------------------------------------------------           5.9          Contract Negotiations.           For all existing and/or new physician employees, consultants or third parties, Practice Manager shall advise Medical Practice with respect to and shall negotiate, either directly or on Medical Practice’s behalf, all contractual arrangements that are reasonably necessary and appropriate for Medical Practice’s provision of Medical Services, including, without limitation, physician’s employment contracts, physicians’ consulting agreements, negotiated price agreements with third-party payors, alternative delivery systems, or other purchasers of group health care services.  All contracts or arrangements regarding the provision of Medical Services shall be entered into with Medical Practice’s consent, which consent shall not be unreasonably withheld. A lack of written objection by Medical Practice 5 working days after notice by Practice Manager shall be construed as automatic approval by Medical Practice.           5.10        Billing and Collection.           On behalf of and for the account of Medical Practice, Practice Manager shall establish and maintain credit and billing and collection policies and procedures, and shall use Practice Manager’s best efforts to bill and collect timely all professional and other fees for all billable Medical Services provided by Medical Practice or the Physicians.  Provided, however, that nothing in this Agreement shall be construed as a guarantee by Practice Manager that amounts billed will be collected.  Practice Manager shall advise and consult with Medical Practice regarding the fees for Medical Services provided by Medical Practice; it being understood, however, that Medical Practice shall establish the reasonable and customary fees to be charged for Medical Services and that Practice Manager shall have no authority whatsoever with respect to the establishment of such fees.  In connection with the billing and collection services to be provided hereunder and throughout the Term (and thereafter as provided in Section 8.3), Medical Practice grants Practice Manager a special power of attorney and appoints Practice Manager as Medical Practice’s true and lawful agent and attorney-in-fact, and Practice Manager accepts such special power of attorney and appointment, for the following purposes:                          A.          To bill Medical Practice’s patients on behalf of and in the name of Medical Practice, for all billable Medical Services provided-by Medical Practice to such patients;                          B.          To bill on behalf of and in the name of Medical Practice all claims for reimbursement or indemnification from Blue Cross/Blue Shield, insurance companies, Medicare, Medicaid, and all other third-party payors or fiscal intermediaries for all covered billable Medical Services provide by Medical Practice to patients; provided, however, that Physician shall comply with all third party payor requirements applicable to true and accurate coding and submission of claims for reimbursement or indemnification and patient care management in accordance with all applicable laws, rules, regulations and third parry payor requirements;                          C.          To collect and receive on behalf of and in the name of Medical Practice, all accounts receivable generated by such billings and claims for reimbursement; to administer such accounts including, but not limited to:  extending the time of payment of any such accounts; assigning or selling at a discount such accounts to collection agencies; or taking other measures to require the payment of any such accounts; provided, however, that extraordinary collection measures, such as discharging or releasing obligers or assigning or selling accounts at a discount to collection agencies, shall not be undertaken except in emergency cases without the approval of Managing Physician, which approval shall not be unreasonably withheld.  Lack of a written objection from Managing Physician after 5 working days shall be an automatic approval by the Managing Physician. -8- --------------------------------------------------------------------------------                          D.          To deposit all amounts collected into the Medical Practice Account, which shall be and at all times remain in Medical Practice’s name.  Medical Practice covenants to transfer and deliver to Practice Manager all funds received by Medical Practice from any and all services including patients or third-parry payors for Medical Services.  Upon receipt by Practice Manager of any funds from patients or third-party payors or from Medical Practice for Medical Services of Medical Practice or from other sources including grants, leases, donations, and interests received by Medical Practice, Practice Manager shall immediately deposit the funds into the Medical Practice Account.  Practice Manager shall disburse the deposited funds to creditors and other persons on behalf of Medical Practice, maintaining records of the receipt and disbursement of funds according to generally accepted accounting principles; and                          E.          To take possession of, endorse in the name of Medical Practice, subject to required reassignment by Physicians, and deposit into the Medical Practice Account any notes, checks, money orders, insurance payments, and any other instruments received in payment of accounts receivable for Medical Services.  Medical Practice shall require all physician employees and consultants to assign to Medical Practice in writing any and all fees received by them for services rendered on behalf of Practice Manager or Medical Practice.           Upon the request of Practice Manager, Medical Practice shall execute and deliver to the financial institution wherein the Medical Practice Account is maintained, any additional documents or instruments that may be necessary to evidence or effect the special power of attorney granted to Practice Manager by Medical Practice pursuant to this Section or pursuant to Section 5.10 of this Agreement.  The special power of attorney granted in this Agreement shall be coupled with an interest and shall be irrevocable except with Practice Manager’s written consent.           5.11        Medical Practice Account.  Practice Manager shall have sole access to the Medical Practice Account.  Practice Manager shall have access to the Medical Practice Account solely for the purposes stated in this Agreement.  In connection with this Agreement and throughout the Term, Medical Practice grants Practice Manager a special power of attorney and appoints Practice Manager as Medical Practice’s true and lawful agent and attorney-in-fact, and Practice Manager accepts such special power of attorney and appointment, to deposit into the Medical Practice Account all funds, fees, and revenues generated including those from the provision of Medical Services by Medical Practice and collected by Practice Manager, and to make withdrawals from the Medical Practice Account for payments set forth in this Agreement, for regular expenses of Medical Practice and any other Medical Practice Expense attributable to the operations of the Office or to the provision of Medical Services, and/or any other reasonable obligations of Medical Practice.  From the amounts collected by Practice Manager on behalf of Medical Practice, Practice Manager shall pay all reasonable expenses of operating the practice in accordance with the budget developed by Practice Manager, as well as reasonable administrative expenses of Practice Manager associated with the performance of its duties set forth herein, including, but not limited to, use of an automobile, car phone, pager, reimbursement for gasoline and automobile repair expenses, professional dues, journals, CME conferences, office expenses, related travel and entertainment expenses, etc., and expenses associated with the retention of personnel for radiation safety, quality assurance and utilization review, all of which shall be documented.  Practice Manager at its option shall maintain an office at each of the offices of the Medical Practice and shall have reasonable secretarial services provided by the Medical Practice for each of Practice Manager’s offices. -9- --------------------------------------------------------------------------------           5.12        Fiscal Matters.                          A.          Annual Budget.  Annually, and at least thirty (30) days prior to the commencement of each fiscal year of Medical Practice, Practice Manager, in consultation with the Managing Physician, shall prepare a Budget setting forth an estimate of Medical Practice’s revenues and expenses (including, without limitation, all costs associated with the services provided by Practice Manager under this Agreement).  Practice Manager shall endeavor to manage and administer the operations of Medical Practice as herein provided so that the actual revenues, costs, and expenses of the operation and maintenance of Medical Practice during any applicable period of the Medical Practice’s fiscal year shall be consistent with the Budget.  In the event of a material change in the Medical Practice, including but not limited to personnel, regulatory, reimbursement and other changes, the Budget may be amended by Practice Manager in an equitable manner to take into account the impact of the material change.                          B.          Accounting and Financing Records.  Practice Manager shall establish and administer accounting procedures, controls, and systems for the development, preparation, and safekeeping of administrative or financial records and books of account relating to the business and financial affairs of Medical Practice and the provision of Medical Services, all of which shall be prepared and maintained in accordance with generally accepted accounting principles consistently applied.  Practice Manager shall-prepare within ninety (90) days of the end of each calendar year a balance sheet and a profit-and-loss statement reflecting the financial status of Medical Practice in respect of the provision of Medical Services as of the end of the prior calendar year.                          C.          Review of Accounting and Financial Records.  The Managing Physician shall have the right to review all expenditures related to the operation of the Medical Practice, but shall not have the power to prohibit or invalidate any expenditure deemed reasonable by Practice Manager.                          D.          Financial Information in Support of Tax Returns.  Practice Manager shall prepare necessary financial information required for appropriate tax returns and reports required of Medical Practice by an accountant selected by Practice Manager. -10- --------------------------------------------------------------------------------           5.13        Reports and Records.                          A.          Medical Records.  Practice Manager shall establish, monitor, and maintain procedures and policies for the timely creation, preparation, filing, release, and retrieval of all medical records generated by Medical Practice in connection with Medical Practice’s provision of Medical Services; and, subject to applicable law, shall ensure that medical records are promptly available to the Physicians and any other appropriate persons.  All medical records shall be retained and maintained in accordance with all applicable State and Federal laws relating to the confidentiality and retention thereof.  Copies of medical records shall be available to the Medical Practice as needed.  Custody shall remain with Practice Manager.                          B.          Other Reports and Records.  Practice Manager shall timely create, prepare, and file such additional reports and records as are reasonably necessary and appropriate for Medical Practice’s provision of Medical Services, and shall be prepared to analyze and interpret such reports and records.           5.14        Recruitment of Physicians.  Practice Manager shall coordinate recruiting of physicians including advertising for recruitment of Physicians to become shareholders, employees or independent contractors of the Medical Practice.  It shall be a joint responsibility of Medical Practice and Practice Manager to interview, select, contract with, supervise, control, and terminate all Physicians performing Medical Services.  It shall be and shall remain the sole and complete responsibility of Practice Manager to select, contract with, administratively supervise, control and terminate all Personnel performing Medical Services.  Costs of recruiting not identified in the yearly budget on a continual basis shall be borne as an additional expense to the Medical Practice.           5.15        Insurance.  Throughout the Term, Practice Manager shall, as a Practice Manager Expense, obtain and maintain with commercial carriers, through self-insurance, or by some combination thereof, appropriate workers’ compensation coverage for Practice Manager’s employed personnel being provided pursuant to this Agreement, and professional, casualty, and comprehensive general liability insurance covering Practice Manager, Practice Manager’s personnel, and all of Practice Manager’s equipment in such amounts, on such basis, and upon such terms and conditions as Practice Manager deems appropriate.           5.16        Indemnification by Practice Manager.  Practice Manager shall indemnify and hold Medical Practice harmless from and against any and all liability, losses, damages, claims, causes of action, and expenses, including reasonable attorney’s fees, associated with or directly or indirectly resulting from any intentional act or omission of Practice Manager or the personnel under its supervision.  To be entitled to such indemnification, Medical Practice shall give Practice Manager prompt written notice of the assertion by a third party of any claim with respect to which Medical Practice might bring a claim for indemnification hereunder, and in all events must provide such written notice to Practice Manager within the applicable period for defense of such claim by Practice Manager.  Practice Manager shall, as a Practice Manager Expense, have the right to defend and litigate any such third-parry claim. VI.     Covenants and Responsibilities of Medical Practice.           6.1          Organization and Operation.  As a continuing condition of Practice Manager’s obligations under this Agreement, Medical Practice shall at all times during the Term be and remain legally organized and operated to provide Medical Services in a manner consistent with all state and federal laws. -11- --------------------------------------------------------------------------------           6.2          Medical Practice Personnel.                          A.          Physicians.  Medical Practice shall retain, as a Medical Practice Expense, the number of radiation oncologists and other Physicians sufficient in the discretion of Practice Manager that are necessary and appropriate for the provision of Medical Services, each of whom shall be bound by and subject to applicable provisions of this Agreement.  Each Physician shall hold and maintain a valid and unrestricted license to practice medicine in the State of Michigan and shall be competent in the practice of medicine and shall be Board Certified or Board eligible in his/her specialty.  Medical Practice shall enter into and maintain with each radiation oncologist who is not at least a 10% shareholder of Medical Practice, a written employment or independent contractor agreement.  Medical Practice shall be responsible for paying the compensation for all Physicians and any other physician personnel or other contracted or affiliated physicians, and for withholding, as required by law, any sums for income tax, unemployment insurance, social security, or any other withholding required by applicable law.  Practice Manager shall, on behalf of Medical Practice, establish and administer the compensation with respect to such individuals and enter on behalf of Medical Practice into a written agreement between Medical Practice and each Physician.  Practice Manager shall neither control nor direct any Physician in the performance of Medical Services for patients.                          B.          Professional and Technical Personnel.  All Professional and Technical Personnel who provide Medical Services shall be employed by or retained by Medical Practice and shall be under Medical Practice’s direction in the performance of Medical Services for patients.  Practice Manager shall, on behalf of Medical Practice, manage and supervise the employees and establish and administer the compensation of these individuals.           6.3          Professional Standards.  As a continuing condition of Practice Manager’s obligations under this Agreement, each Physician must (i) have and maintain a valid and unrestricted license to practice medicine in the State, (ii) comply with, be controlled and governed by, and otherwise provide, Medical Services in accordance with applicable federal, state, and municipal laws, rules, regulations, ordinances, and orders, all applicable Medicare, Medicaid and other third party payor requirements and the ethics and standard of care of the medical community wherein the principal office of the Medical Practice is located, (iii) obtain and retain appropriate medical staff membership with appropriate clinical privileges at any hospital or health care facility at which Medical Services are to be provided and Practice Manager deems appropriate, (iv) obtain Board Certification by ABR or its equivalent within 3 years of hiring; and (v) follow the guidelines of NRC, JCAHO and ACR and other applicable agencies.  Procurement of temporary staff privileges pending the completion of the medical staff approval process shall satisfy the medical staff appointment condition of this provision, provided the Physician actively pursues full appointment and actually obtains full appointment.  Professional Personnel shall be duly licensed, accredited or certified, as relevant.           6.4          Medical Services.  Medical Practice shall ensure that Physicians are available as necessary to provide Medical Services to patients.  Medical Practice and Practice Manager shall be responsible for scheduling Physician coverage and work together to establish Technical, Professional and other Personnel coverage of all medical procedures.  Medical Practice shall cause all Physicians to exert their best effort to develop and promote Medical Practice in a manner consistent with Practice Manager’s business objectives and designed to ensure that Medical Practice is able to serve the diverse needs of the community. -12- --------------------------------------------------------------------------------           6.5          Peer Review/Quality Assurance.  Medical Practice shall adopt a peer-review/quality assurance program to monitor and evaluate the quality and cost effectiveness of Medical Services provided by physician personnel of Medical Practice.  Practice Manager shall provide administrative direction and act as the agent of Medical Practice in ensuring the performance of Medical Practice’s peer-review/quality-assurance activities.           6.6          Medical Practice’s Insurance.  Medical Practice shall, as a Medical Practice Expense, obtain and maintain with commercial carriers acceptable to Practice Manager appropriate workers’ compensation coverage for Medical Practice’s Physicians and Professional, Personnel and professional and comprehensive general liability insurance covering Medical Practice, each Physician, and Professional Personnel.           6.7          Indemnification by Medical Practice.  Medical Practice shall defend, indemnify and hold Practice Manager harmless from and against any and all liability, losses, damages, claims, causes of action, and expenses, including without limitation, reasonable attorney’s fees and costs associated with or directly or indirectly resulting from any act or omission of Medical Practice, its employees, agents, or independent contractors during the Term.  To be entitled to such indemnification, Practice Manager shall give Medical Practice prompt written notice of the assertion by a third party of any claim with respect to which Practice Manager might bring a claim for indemnification hereunder, and in all events must provide written notice to Medical Practice within the applicable period for defense of such claim by Medical Practice.  Medical Practice shall, as a Medical Practice Expense, have the right to defend and litigate any such third-party claim.           6.8          Confidential and Proprietary Information.  Medical Practice and Practice Manager acknowledge the confidentiality of its relationship with Practice Manager and Medical Practice and of any Confidential Information which it may learn or obtain during the Term of this Agreement.  For purposes of this Agreement, “Confidential Information” includes, but is not limited to all books, manuals, documents, materials, business or technical information, trade secrets, systems, and strategy concerning Practice Manager’s business plans or policies related to the Management Services described hereunder, and not otherwise available to the public domain.  Medical Practice shall not, either during the Term of this Agreement or at any time after the expiration or sooner termination thereof, directly or indirectly, disclose to any person or entity other than employees, agents or independent contractors engaged by Medical Practice, any Confidential Information obtained or learned by Medical Practice.  Further, Medical Practice agrees to place any person, including all Physicians, Technical, Administrative and Professional Personnel to whom Confidential Information is disclosed for the purpose of performance, under legal obligation to treat Confidential Information as strictly confidential.           6.9          Provision of Medical Services.  Medical Practice recognizes and acknowledges that Practice Manager will incur substantial costs in providing office, equipment, support services, personnel, marketing, management, administration, and other items and services that are the subject matter of this Agreement.  The parties also recognize that the services to be provided by Practice Manager will be feasible only if Medical Practice operates an active practice to which the Physicians associated with Medical Practice devote their full time and attention.  Medical Practice shall use its best efforts to obtain and enforce formal agreements from its shareholders and physician employees pursuant to which the Physicians agree to devote their full time and attention to the practice of medicine as described herein. -13- --------------------------------------------------------------------------------           6.10        Non-Competition.  Medical Practice agrees that during the term of this Agreement and for a period of five (5) years thereafter Medical Practice and its employees will not:             (i)          render medical services of type or nature provided by Medical Practice in the preceding 12 month period, or other related treatment, personally or participate in any capacity (for example, shareholder, partner or investor) with someone who offers such services, except pursuant to this Agreement, within a thirty (30) mile radius of any of the offices, or within a thirty (30) mile radius of any practice or Hospital location to which Practice Manager renders business operations and support services or other comparable services, at the time of termination, (a list of which will be provided upon termination of the Agreement) without the prior written consent of Practice Manager, as applicable, which in its sole discretion may withhold consent; or                 (ii)         market the Medical Practice’s services or assist others in marketing medical services including medical and/or radiation oncology services in any area to which Practice Manager markets such services at the time of termination.  The Medical Practice also agrees that it will not solicit or otherwise contact, or assist any other person in contacting, patients treated at RADS. VII.   Financial Arrangement.           7.1          Amount of Management Fee.  Medical Practice and Practice Manager mutually recognize and acknowledge that Practice Manager will incur substantial costs and risks in providing the management administration, and other items and services that are the subject matter of this Agreement.  It is the intent of the parties that the fees paid to Practice Manager approximate its costs and expenses plus a rate of return reflective of the magnitude of the investment and high risk taken by Practice Manager and the value of the services provided by Practice Manager.  In consideration of the services to be famished by Physician Shareholders, Medical Practice shall retain 1% of the Gross Patient Revenues collected from radiation oncology services and pay a Management Fee equal to the balance of Gross Collections (as defined in Subsection 7.2 herein) collected based on services and goods provided during the Term or any Renewal Term including Gross Collections collected following the Term or any Renewal Term hereof that are based on such services and goods, after the payment of all reasonable Practice and Practice Manager expenses.           7.2          Gross Collection.  “Gross Collections” shall include collections of any and all fees, charges and accounts of medical practice which are due and payable on or after the commencement date of this Agreement, notwithstanding the location where such services were rendered, and shall include, without limitation, the following: -14- --------------------------------------------------------------------------------                          A.          All capitation payments payable to Medical Practice under managed care agreements, and any other payments to Medical Practice under such agreements, including but not limited to, all funds from shared risk pools under any risk-sharing arrangements wherein Medical Practice is a provider of professional medical services;                          B.          Any and all coordination of benefits and third-party liability recoveries;                          C.          Any and all revenues derived by Medical Practice, its stockholder-physicians, employee-physicians or independent contractor-physicians from any professional, community or education programs or projects;                          D.          Any and all proceeds from a policy or policies of business interruption insurance or stop-loss insurance relating to Medical Practice, if any; and                          E.          Any and all revenues from other sources of income including, but not limited to, interests, rental income, real estate sales or lease, grants, and donations.           7.3          Payment of the Management Fee.  To facilitate the payment of the Management Fee, Medical Practice expressly authorizes Practice Manager to draw its Management Fee from the Medical Practice Account on the fifth business day of each calendar month (or on the date of expiration or termination of this Agreement if not on the first business day of a calendar month) following the payment of all Practice and Practice Manager’s expenses.  The payment of the Management Fee shall commence during the second calendar month of the Term and continue monthly thereafter, and shall be based upon the Gross Collections during the immediately preceding calendar month.           Practice Manager shall have the right to obtain loans for any business purpose the Practice Manager deems reasonable either on behalf of Medical Practice or for Practice Manager and to use any or all tangible and intangible assets of the Medical Practice as collateral for these loans from financial institutions whether or not such loans are obtained in the name of Practice Manager or Medical Practice. VIII.  Term and Termination.           8.1          Initial and Renewal Terms.  The Term of this Agreement shall commence on the Closing Date which shall be on or before October 15, 2000, and shall terminate 30 years thereafter.  Notwithstanding the foregoing, this Agreement shall be reviewed annually and the 30 year termination date automatically extended for additional one year periods, unless written notification is given by ACT not less than 60 days prior to October 14, 2001, and each October 14th thereafter.  All terms and conditions contained in this Agreement shall remain in full force and effect during the Renewal Term.           8.2          Termination.                          A.          Termination by Practice Manager.  This Agreement may be terminated by Practice Manager upon the occurrence of any of the events set forth below. -15- --------------------------------------------------------------------------------                1.          The revocation, suspension, cancellation, surrender, or restriction of the Managing Physician’s license to practice medicine in the State;                    2.          The revocation, suspension, cancellation, surrender, or restriction of any Physician’s license or DEA number to practice medicine in the State, and the failure by Medical Practice to cause such Physician to cease the rendering of Medical Services on behalf of Medical Practice;                    3.          Medical Practice’s loss or suspension of its Medicare or Medicaid provider number and/or Medical Practice’s restriction from treating beneficiaries of the Medicare or Medicaid programs, or other major existing contracted managed care entities;                    4.          The dissolution of Medical Practice or the filing of a voluntary petition in bankruptcy, an assignment for the benefit of creditors, or any other action taken voluntarily or involuntarily under any state or federal statute for the protection of debtors;                    5.          The transfer of any percentage of the voting ownership interests or control of Medical Practice to any person or entity (other than one in which Medical Practice owns or controls a one hundred percent (100%) voting interest) without Practice Manager’s written consent; and                    6.          The death or permanent disability of the Managing Physician.                    7.          In the event of a material change in the Medical Practice, including but not limited to personnel, regulatory, reimbursement and other changes.                          B.          Termination by Agreement.  If Medical Practice and Practice Manager shall mutually agree in writing, this Agreement may be terminated on the date specified in the written agreement.                          C.          Legislative. Regulatory or Administrative Change.  If there shall be a change in the Medicare or Medicaid laws, regulations or general instructions, the adoption of new legislation, or a change in any third-party reimbursement system, any of which materially affects the manner in which either party may perform or be compensated for its services under this Agreement, the parties shall immediately propose a new service arrangement or basis for compensation for the services furnished pursuant to this Agreement.  If such notice of new service arrangement or basis for compensation is given in writing to Practice Manager, and if Practice Manager on behalf of Medical Practice is unable, within ninety (90) days thereafter, to arrive at a new service arrangement or basis for compensation, either party may terminate this Agreement by providing the other party with written notice at least thirty (30) days prior to the specified termination date.  Medical Practice shall continue its liability to Practice Manager for all expenses incurred by Practice Manager on behalf of Medical Practice including all Medical Practice’s liabilities to Practice Manager who will continue to hold the Power of Attorney to direct the sale and transfer of stock so as to pay all Practice Manager’s debts and obligations. -16- --------------------------------------------------------------------------------                          D.          Termination on Notice of Default.  If either party shall give notice to the other that the other party has substantially defaulted in the performance of any obligation under this Agreement, and the default shall not have been cured within sixty (60) days following the giving of the notice, the parties will obtain three (3) mutually agreeable arbitrators who will either resolve the issues of disagreement or will arbitrate and decide as to whether the Agreement must be terminated.  Except as provided in Section 9.8, the expense of such Arbitration shall be paid 50% by the Practice Manager and 50% to be allocated proportionately among the Shareholders of Medical Practice.  Until the final decision of the Arbitration, Practice Manager shall continue as the Practice Manager under this Agreement.           8.3          Effects of Termination.  Upon termination of this Agreement, as hereinabove provided in 8.2(4)(B) or (C), neither party shall have any further obligations under this Agreement except for (i) obligations accruing prior to the date of termination, including, without limitation, payment of the Management Fee relating to services provided prior to the termination of this Agreement, and (ii) obligations, promises, or covenants set forth in this Agreement that are expressly made to extend beyond the Term, including, without limitation, indemnity and confidentiality provisions, which provisions shall survive the expiration or termination of this Agreement.  Upon termination or default by Medical Practice, Practice Manager in addition to the remedies set forth above shall be entitled to recover the acquisition costs of the Medical Practice and equipment, and any funds advanced to permit the redemption of stock.  In effectuating the provisions of this Section, Medical Practice specifically acknowledges and agrees that Practice Manager shall continue to collect and receive on behalf of Medical Practice for a period of one hundred eighty (180) days following the date of such termination, all cash collections from accounts receivable in existence at the time this Agreement is terminated, it being understood that such cash collections will represent, in part, Practice Manager’s Management Fee for management services already rendered.           Practice Manager and Medical Practice agree that Practice Manager’s contract with Medical Practice is of significant value.  As such, in the event Medical Practice terminates this Agreement with or without cause, before its term, the Practice Manager is entitled to obtain from Medical Practice, a sum equal to the total fair market value of the Medical Practice as of the day before the termination.           In any event, if Medical Practice exercises its option to terminate Practice Manager’s Agreement, the following will become immediately due and payable by Medical Practice:   A. All loans obtained by Practice Manager on behalf of Medical Practice, or owed by Medical Practice to Practice Manager or to third parry.         B. All loans obtained by Practice Manager for the benefit of Medical Practice whether in Practice Manager’s or Medical Practice’s name.         C. All loans, balance of leases and contracts, taken for the benefit of Medical Practice obtained by Practice Manager and/or Medical Practice.         D. Any and all loans that Practice Manager and/or President of Practice Manager has guaranteed.         E. The expected balance of future value of Practice Manager’s contract with Medical Practice.         F. A lump sum for the balance of the compensation of all Practice Manager’s employees for the remainder of all such employment/independent contractors’ contracts.         G. All fringe benefits for the remainder of the term under the employment contracts. -17- -------------------------------------------------------------------------------- IX.     Miscellaneous.           9.1          Dispute Resolution.           Any dispute which may arise under or pursuant to this Agreement shall be exclusively submitted to and governed by the determination reached as a result of arbitration in the County of Oakland consistent with the Commercial Arbitration Rules of the American Arbitration Association in effect at the time of any such dispute (although it need not be conducted under the auspices of the American Arbitration Association).  The arbitration shall be conducted by a panel of three arbitrators, each of whom must be an attorney or certified public accountant licensed to practice in the State of Michigan, except where the matter in dispute is clinical in nature, in which case, the third mutually agreed to arbitrator shall be a physician, licensed to practice allopathic or osteopathic medicine in the State of Michigan, who is not an interested person.  One arbitrator shall be selected by each of the parties subject to the arbitration, and those two arbitrators shall select the third arbitrator.  Each arbitrator shall execute an agreement with the parties which shall provide as follows:                          (a)          Each arbitrator shall accept the appointment and agree to complete the arbitration with reasonable diligence, and pursuant to a majority vote and otherwise in accordance with the then pertaining Commercial Arbitration Rules of the American Arbitration Association (which shall administer the arbitration if it agrees to do so);                          (b)          Each arbitrator shall agree to keep all information made available to him with respect to Practice Manager and Medical Practice in strict confidence; and                          (c)          The parties to the arbitration shall agree to be jointly responsible for the costs of the arbitration (including the hourly charges of the arbitrators at their customary levels), which in turn may be awarded to any or all parties to the arbitration as the arbitrators shall determine.           A demand for arbitration shall be made within six (6) months after the claim shall have accrued, plus the time of any written extensions given to the party demanding arbitration from the other parry.  The foregoing requirement for arbitration shall not foreclose the institution of litigation by any party hereto in the Oakland County Circuit Court (in which exclusive jurisdiction and venue is acknowledged) seeking immediately injunctive relief for a breach of the provisions of this Agreement pending the outcome of arbitration or to compel the arbitration process.  Any arbitration award shall be entitled to enforcement by decree of any court of competent jurisdiction and shall be final and binding upon all parties hereto or claiming an interest herein.  Arbitration may proceed in the absence of any party who fails or refuses to attend after notice deemed by the arbitration panel to be appropriate. -18- --------------------------------------------------------------------------------           9.2          Administrative Services Only.  Except as Agent of Medical Practice, nothing in this Agreement is intended or shall be construed to allow Practice Manager to exercise control or direction over the manner or method by which Medical Practice and its Physicians perform Medical Services.  The rendition of all Medical Services, including but not limited to, the prescription or administration of medicine and drugs, shall be the sole responsibility of Medical Practice and its Physicians and Practice Manager shall not interfere in any manner or to any extent therewith.  Nothing in this Agreement shall be construed to permit Practice Manager to engage in the practice of medicine, it being the intention of the parties that the services to be rendered to Medical Practice by Practice Manager are solely for the purpose of providing management and administrative services so that Medical Practice can devote its full time and energies rendering patient treatment services and to the provision of Medical Services to its patients.           9.3          Status of Contractor.  It is expressly acknowledged that the parties are independent contractors, and nothing in this Agreement is intended and nothing shall be construed to create an employer-employee, partnership, joint venture, or other type of relationship, or to allow either party to exercise control or direction over the manner or method by which the other performs the services that are the subject matter of this Agreement; provided, however, that the services to be provided under this Agreement shall always be furnished in a manner consistent with the standards governing those services and the provisions of this Agreement.  Each party understands and agrees that (i) the other will not be treated as an employee for federal income tax purposes, (ii) except in cases by leased employees, neither will withhold on behalf of the other any sums for income tax, unemployment insurance, social security, or any other withholding pursuant to any law or requirement of any governmental body or make available any of the benefits afforded to its employees, (iii) all of such payments, withholdings, and benefits, if any, are the sole responsibility of the party incurring the liability, and (iv) each will indemnify and hold the other harmless from any and all loss or liability arising with respect to such payments, withholdings, and benefits, if any.           9.4          Notices.  Any notice, demand, or communication required, permitted, or desired to be given under this Agreement shall be in writing and shall be deemed given if delivered in person or deposited in United States Mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the parties as set forth opposite their respective names below: Medical Practice: RADS, P.C. Oncology Professionals   Attention: Practice Manager   28595 Orchard Lake Road, Suite 110   Farmington Hills, MI 48334     Practice Manager: American Consolidated Technologies   Attention: Farideh R. Bagne, Ph.D, J.D.   28595 Orchard Lake Road, Suite 110   Farmington Hills, MI 48334 -19- -------------------------------------------------------------------------------- or to another address, or to the attention of another person or officer, that either party may designate by written notice.  Notice shall be deemed given if personally served on the date it is personally delivered, or if mailed, the date it is deposited in the mail in accordance with the foregoing.           9.5          Governing Law.  This Agreement shall be governed by the laws of the State of Michigan and is performable and shall be enforceable in Oakland County, Michigan.           9.6          Assignment.  Except as may be specifically provided in this Agreement to the contrary, this Agreement shall inure to the benefit of and be binding upon the parties and their respective legal representatives, successors, and assigns; provided, however, that Medical Practice, may not assign this Agreement without the prior written consent of Practice Manager, which consent Practice Manager may withhold in its sole discretion.           9.7          Waiver of Breach.  The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as or be construed to constitute a waiver of any subsequent breach of the same or another provision.           9.8          Enforcement.  Each party waives its right to any legal action, except by means of arbitration, to enforce or interpret any provision of this Agreement.  The prevailing party shall be entitled to recover the costs and expenses of arbitration, including without limitation, reasonable attorney’s fees.           9.9          Gender and Number.  Whenever the context of this Agreement requires, the gender of all words shall include the masculine, feminine, and neuter, and the number of all words shall include the singular and plural.           9.10        Additional Assurances.  Except as may be specifically provided in this Agreement to the contrary, the provisions of this Agreement shall be self-operative and shall not require further agreement by the parties; except by mutual agreement of the parties.           9.11        Consents, Approvals, and Exercise of Discretion.  Whenever this Agreement requires any consent or approval to be given by either party or either party must or may exercise discretion, the parties agree that the consent or approval shall not be unreasonably withheld or delayed and that the discretion shall be reasonably exercised.           9.12        Force Majeure.  Neither party shall be liable or deemed to be in default for any delay or failure in performance under this Agreement or other interruption of services deemed to result, directly or indirectly, from acts of God, civil or military authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, failure of transportation, third party actions against Medical Practice and/or Practice Manager, strikes or other work interruptions by either party’s employees, or any other similar cause beyond the reasonable control of either party unless the delay or failure in performance is expressly addressed elsewhere in this Agreement.           9.13        Severability.  The parties have negotiated and prepared the terms of this Agreement in good faith and with the intent that every term, covenant, and condition be binding upon and inure to the benefit of the respective parties.  Accordingly, if any one or more of the terms, provisions, promises, covenants, or conditions of this Agreement or the application thereof to any person or circumstance shall be adjudged to any extent invalid, unenforceable, void, or voidable for any reason whatsoever by a court of competent jurisdiction, that provision shall be as narrowly construed as possible, and all the remaining terms, provisions, promises, covenants, and conditions of this Agreement or their application to other persons or circumstances shall not be affected thereby, and shall be valid and enforceable to the fullest extent permitted by law.  To the extent this Agreement is in violation of applicable law, the parties agree to negotiate in good faith to amend the Agreement to the extent possible to remain consistent with its purposes and to conform to applicable law. -20- --------------------------------------------------------------------------------           9.14        Survivability.  Notwithstanding the termination of this Agreement, the provisions of Sections 5.10, 5.11, 6.7, 6.8, 7.1 and 8.3 shall survive.           9.15        Divisions and Headings.  The division of this Agreement into articles, sections, and subsections and the use of captions and headings in connection therewith is solely for convenience and shall not affect in any way the meaning or interpretation of this Agreement.           9.16        Amendments and Agreement Execution.  This Agreement and its amendments, if any, shall be in writing and executed in multiple copies on behalf of Medical Practice by its duly authorized officer and on behalf of Practice Manager by its duly authorized officer.  Each multiple copy shall be deemed an original, but all multiple copies together shall constitute one and the same instrument.           9.17        Entire Agreement.  With respect to the subject matter of this Agreement, this Agreement supersedes all previous contracts except the Binding Letter of Intent, and together with the Durable Power of Attorney Agreement, constitutes the entire Management Agreement between the parties.  No prior oral statements or contemporaneous negotiations or understandings or prior written material not specifically incorporated into this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized unless incorporated by amendment as provided in this Agreement, such amendment(s) to become effective on the date stipulated in the amendment(s).  The parties specifically acknowledge that in entering into and executing this Agreement, the parties rely solely upon the representations and agreements in this Agreement and upon no other.           9.18        Contingency.  The effectiveness of this Agreement is contingent upon the acquisition by Bagne of any and all interests of Donald G. Bronn, M.D. in Medical Practice, and a Limited Durable Power of Attorney between any new shareholders and Bagne granting Bagne certain authority over shares in Medical Practice held by all other shareholders. -21- --------------------------------------------------------------------------------           IN WITNESS WHEREOF, Medical Practice and Practice Manager have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. MEDICAL PRACTICE:   PRACTICE MANAGER:       RADS, P.C. ONCOLOGY PROFESSIONALS, a Michigan professional corporation   AMERICAN CONSOLIDATED TECHNOLOGIES, a Michigan Partnership       By: /s/ Mark J. Fireman, M.D.   By: /s/ Farideh R. Bagne   --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   Mark J. Fireman, M.D.     Farideh R. Bagne, Ph.D., J.D. Its: President   Its: Partner -22- -------------------------------------------------------------------------------- STATE OF MICHIGAN     ) STATE OF OAKLAND      )ss.           Before me this 20th day of August, 2000 did personally appear Mark J. Fireman, M.D. President of RADS, P.C. Oncology Professionals and being first duly sworn did execute the foregoing instrument on behalf of RADS, P.C. Oncology Professionals.   /s/ Nancy J. Beck   --------------------------------------------------------------------------------   Notary Public         STATE OF MICHIGAN     )   STATE OF OAKLAND      )ss.             Before me this 20th day of August, 2000 did personally appear Farideh R. Bagne, Ph.D., J.D., Partner of American Consolidated Technologies and being first duly sworn did execute the foregoing instrument on behalf of American Consolidated Technologies.   /s/ Nancy J. Beck   --------------------------------------------------------------------------------   Notary Public -23- --------------------------------------------------------------------------------

Exhibit 10.36 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS. COMMUNICATION INTELLIGENCE CORPORATION Non-Negotiable Promissory Note due          , 200x Dated: August      , 2006   $XXX   For value received, Communication Intelligence Corporation, a Delaware corporation (the “Maker”), hereby promises to pay to the order of                            (together with its successors, representatives, and permitted assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of up to                            Dollars ($                ), together with interest thereon.  This Note is being issued pursuant to a Note and Warrant Purchase Agreement of even date herewith. 1.             Payments.  All payments under or pursuant to this Note shall be made in United States Dollars in immediately available funds to the Holder at such address as the Holder may designate from time to time in writing to the Maker (which shall initially be the address set forth for Maker in Section 11) or by wire transfer of funds to the Holder’s account, instructions for which are attached hereto as Exhibit A.  The outstanding principal balance of this Note, plus all accrued but unpaid interest, shall be due and payable on           , 200X (the “Maturity Date”) or at such earlier time as provided herein. 2.             Note and Warrant Purchase Agreement.  This Note has been executed and delivered pursuant to the Note and Warrant Purchase Agreement dated as of August     , 2006 (the “Purchase Agreement”) by and between the Maker and the Holder.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement. 3.             INTEREST; PAYMENT OF INTEREST.  BEGINNING ON THE ISSUANCE DATE OF THIS NOTE (THE “ISSUANCE DATE”), THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE SHALL BEAR INTEREST, IN ARREARS, AT A RATE PER ANNUM EQUAL TO FIFTEEN PERCENT (15%).  INTEREST SHALL BE COMPUTED ON THE BASIS OF A 360-DAY YEAR OF TWELVE (12) 30-DAY MONTHS AND SHALL ACCRUE COMMENCING ON THE ISSUANCE DATE. ACCRUED INTEREST SHALL BE PAYABLE QUARTERLY IN ARREARS. 4.             TRANSFER.  THIS NOTE MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE GRANTED AS SECURITY BY THE HOLDER. -------------------------------------------------------------------------------- 5.             REPLACEMENT.  UPON RECEIPT OF A DULY EXECUTED, NOTARIZED AND UNSECURED WRITTEN STATEMENT FROM THE HOLDER WITH RESPECT TO THE LOSS, THEFT OR DESTRUCTION OF THIS NOTE (OR ANY REPLACEMENT HEREOF), AND WITHOUT REQUIRING AN INDEMNITY BOND OR OTHER SECURITY, OR, IN THE CASE OF A MUTILATION OF THIS NOTE, UPON SURRENDER AND CANCELLATION OF SUCH NOTE, THE MAKER SHALL ISSUE A NEW NOTE, OF LIKE TENOR AND AMOUNT, IN LIEU OF SUCH LOST, STOLEN, DESTROYED OR MUTILATED NOTE. 6.             EVENTS OF DEFAULT; REMEDIES.  THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS SHALL BE AN “EVENT OF DEFAULT” UNDER THIS NOTE: 6.1.                  THE MAKER SHALL FAIL TO MAKE THE PAYMENT OF ANY AMOUNT OF PRINCIPAL OUTSTANDING ON THE MATURITY DATE HEREUNDER; OR 6.2.                  THE MAKER SHALL FAIL TO MAKE ANY PAYMENT OF ACCRUED INTEREST WHEN DUE HEREUNDER; OR 6.3.                  DEFAULT SHALL BE MADE IN THE PERFORMANCE OR OBSERVANCE OF ANY MATERIAL COVENANT, CONDITION OR AGREEMENT CONTAINED IN THIS NOTE OR THE PURCHASE AGREEMENT AND SUCH DEFAULT IS NOT FULLY CURED WITHIN TEN (10) DAYS AFTER THE OCCURRENCE THEREOF; OR 6.4.                  ANY MATERIAL REPRESENTATION OR WARRANTY MADE BY THE MAKER HEREIN OR IN THE PURCHASE AGREEMENT SHALL PROVE TO HAVE BEEN FALSE OR INCORRECT OR BREACHED IN A MATERIAL RESPECT ON THE DATE AS OF WHICH MADE; OR 6.5.                  THE MAKER SHALL (I) APPLY FOR OR CONSENT TO THE APPOINTMENT OF, OR THE TAKING OF POSSESSION BY, A RECEIVER, CUSTODIAN, TRUSTEE OR LIQUIDATOR OF ITSELF OR OF ALL OR A SUBSTANTIAL PART OF ITS PROPERTY OR ASSETS, (II) MAKE A GENERAL ASSIGNMENT FOR THE BENEFIT OF ITS CREDITORS, (III) COMMENCE A VOLUNTARY CASE UNDER THE UNITED STATES BANKRUPTCY CODE (AS NOW OR HEREAFTER IN EFFECT) OR UNDER THE COMPARABLE LAWS OF ANY JURISDICTION (FOREIGN OR DOMESTIC), (IV) FILE A PETITION SEEKING TO TAKE ADVANTAGE OF ANY BANKRUPTCY, INSOLVENCY, MORATORIUM, REORGANIZATION OR OTHER SIMILAR LAW AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, (V) ACQUIESCE IN WRITING TO ANY PETITION FILED AGAINST IT IN AN INVOLUNTARY CASE UNDER UNITED STATES BANKRUPTCY CODE (AS NOW OR HEREAFTER IN EFFECT) OR UNDER THE COMPARABLE LAWS OF ANY JURISDICTION (FOREIGN OR DOMESTIC), (VI) ISSUE A NOTICE OF BANKRUPTCY OR WINDING DOWN OF ITS OPERATIONS OR ISSUE A PRESS RELEASE REGARDING SAME, OR (VII) TAKE ANY ACTION UNDER THE LAWS OF ANY JURISDICTION (FOREIGN OR DOMESTIC) ANALOGOUS TO ANY OF THE FOREGOING; OR 6.6.                  A PROCEEDING OR CASE SHALL BE COMMENCED IN RESPECT OF THE MAKER, WITHOUT ITS APPLICATION OR CONSENT, IN ANY COURT OF COMPETENT JURISDICTION, SEEKING (I) THE LIQUIDATION, REORGANIZATION, MORATORIUM, DISSOLUTION, WINDING UP, OR COMPOSITION OR READJUSTMENT OF ITS DEBTS, (II) THE APPOINTMENT OF A TRUSTEE, RECEIVER, CUSTODIAN, LIQUIDATOR OR THE LIKE OF IT OR OF ALL OR ANY SUBSTANTIAL PART OF ITS ASSETS IN CONNECTION WITH THE LIQUIDATION OR DISSOLUTION OF THE MAKER OR (III) SIMILAR RELIEF IN RESPECT OF IT UNDER ANY LAW PROVIDING FOR THE RELIEF OF DEBTORS, AND SUCH PROCEEDING OR CASE DESCRIBED IN CLAUSE (I), (II) OR (III) SHALL CONTINUE UNDISMISSED, OR UNSTAYED AND IN EFFECT, FOR A PERIOD OF SIXTY (60) DAYS OR ANY ORDER FOR RELIEF SHALL BE ENTERED IN AN INVOLUNTARY CASE UNDER UNITED STATES BANKRUPTCY CODE (AS NOW OR HEREAFTER IN EFFECT) OR UNDER THE COMPARABLE LAWS OF ANY JURISDICTION (FOREIGN OR DOMESTIC) AGAINST THE MAKER OR ACTION UNDER THE LAWS OF ANY JURISDICTION (FOREIGN OR DOMESTIC) ANALOGOUS TO ANY OF THE FOREGOING SHALL BE TAKEN 2 -------------------------------------------------------------------------------- WITH RESPECT TO THE MAKER AND SHALL CONTINUE UNDISMISSED, OR UNSTAYED AND IN EFFECT FOR A PERIOD OF SIXTY (60) DAYS. 7.             REMEDIES UPON AN EVENT OF DEFAULT.  IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND SHALL BE CONTINUING, THE HOLDER OF THIS NOTE MAY AT ANY TIME AT ITS OPTION DECLARE THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS NOTE, TOGETHER WITH ALL INTEREST ACCRUED THEREON, DUE AND PAYABLE, AND THEREUPON, THE SAME SHALL BE ACCELERATED AND SO DUE AND PAYABLE, WITHOUT PRESENTMENT, DEMAND, PROTEST, OR NOTICE, ALL OF WHICH ARE HEREBY WAIVED BY THE MAKER.  NO COURSE OF DELAY ON THE PART OF THE HOLDER SHALL OPERATE AS A WAIVER THEREOF OR OTHERWISE PREJUDICE THE RIGHT OF THE HOLDER.  NO REMEDY CONFERRED HEREBY SHALL BE EXCLUSIVE OF ANY OTHER REMEDY REFERRED TO HEREIN OR NOW OR HEREAFTER AVAILABLE AT LAW, IN EQUITY, BY STATUTE OR OTHERWISE. 8.             PREPAYMENT.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE MAKER SHALL HAVE THE RIGHT, AT SUCH MAKER’S OPTION, TO PREPAY ANY AMOUNTS DUE HEREUNDER, INCLUDING THE ENTIRE UNPAID PRINCIPAL OR ANY PARTIAL AMOUNT THEREOF AND ANY ACCRUED BUT UNPAID INTEREST, AT ANY TIME PRIOR TO THE MATURITY DATE, WITH NO PREPAYMENT PENALTIES. 9.             No Rights as Shareholder.  Nothing contained in this Note shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Maker or of any other matter, or any other rights as a shareholder of the Maker. 10.           Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (ii) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows: If to the Maker:   Communication Intelligence Corporation     275 Shoreline Drive, Suite 500     Redwood Shores, California 94065     Attention: Frank Dane     Tel. No.: (650) 802-7888     Fax No.: (650) 802-7777 with copies (which copies     shall not constitute notice     to Maker) to:   Davis Wright Tremaine LLP     1300 S.W. Fifth Ave., 23rd Floor     Portland, Oregon 97201     Attention: Michael C. Phillips, Esq.     Tel. No. (503) 241-2300     Fax No.: (503) 778-5299   3 -------------------------------------------------------------------------------- If to the Holder:                    [Insert name, address, phone and fax number. With a copy to:                    [Insert name, address, phone and fax number] 11.           GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY OF THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.  THIS NOTE SHALL NOT BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS NOTE TO BE DRAFTED. 12.           HEADINGS.  ARTICLE AND SECTION HEADINGS IN THIS NOTE ARE INCLUDED HEREIN FOR PURPOSES OF CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS NOTE FOR ANY OTHER PURPOSE. 13.           REMEDIES.  THE REMEDIES PROVIDED IN THIS NOTE SHALL BE CUMULATIVE AND IN ADDITION TO ALL OTHER REMEDIES AVAILABLE UNDER THIS NOTE, AT LAW OR IN EQUITY, AND NO REMEDY CONTAINED HEREIN SHALL BE DEEMED A WAIVER OF COMPLIANCE WITH THE PROVISIONS GIVING RISE TO SUCH REMEDY. 14.           ASSIGNMENT.  HOLDER MAY NOT ASSIGN ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS NOTE WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF MAKER. 15.           AMENDMENTS.  THIS NOTE MAY NOT BE MODIFIED OR AMENDED IN ANY MANNER EXCEPT IN WRITING EXECUTED BY THE MAKER AND THE HOLDER. 16.           COMPLIANCE WITH SECURITIES LAWS.  THE HOLDER OF THIS NOTE ACKNOWLEDGES THAT THIS NOTE IS BEING ACQUIRED SOLELY FOR THE HOLDER’S OWN ACCOUNT AND NOT AS A NOMINEE FOR ANY OTHER PARTY, AND FOR INVESTMENT, AND THAT THE HOLDER SHALL NOT OFFER, SELL OR OTHERWISE DISPOSE OF THIS NOTE.  THIS NOTE AND ANY NOTE ISSUED IN SUBSTITUTION OR REPLACEMENT THEREFOR SHALL BE STAMPED OR IMPRINTED WITH A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM: “THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.” 17.           ATTORNEYS’ FEES AND EXPENSES.  EACH OF THE MAKER AND THE HOLDER HEREBY AGREE THAT THE PREVAILING PARTY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE SHALL BE ENTITLED TO REIMBURSEMENT FOR REASONABLE LEGAL FEES (INCLUDING REASONABLY INCURRED ATTORNEYS’ FEES) AND COSTS FROM THE NON-PREVAILING PARTY. 4 -------------------------------------------------------------------------------- 18.           PARTIES IN INTEREST.  THIS NOTE SHALL BE BINDING UPON, INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY THE MAKER, THE HOLDER AND THEIR RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS. 19.           FAILURE OR INDULGENCE NOT WAIVER.  NO FAILURE OR DELAY ON THE PART OF THE HOLDER IN THE EXERCISE OF ANY POWER, RIGHT OR PRIVILEGE HEREUNDER SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY SUCH POWER, RIGHT OR PRIVILEGE PRECLUDE OTHER OR FURTHER EXERCISE THEREOF OR OF ANY OTHER RIGHT, POWER OR PRIVILEGE. This Note has been delivered as of the date set forth at the top of the first page hereof.   MAKER:   COMMUNICATION INTELLIGENCE CORPORATION       By:       Name: Frank Dane   Its: Chief Financial and Legal Officer   5 -------------------------------------------------------------------------------- EXHIBIT A WIRE INSTRUCTIONS Payee:           Bank:           Address:                       Bank No.:           Account No.:           Account Name:       6 --------------------------------------------------------------------------------

Exhibit 10.1 AGREEMENT made as of the 3rd  day of MAY in the year of 2006 (In words, indicate day, month and year) BETWEEN the Owner: (Name and address) DOVER DOWNS, INC. 1131 NORTH DUPONT HIGHWAY DOVER, DELAWARE 19901 and the Construction Manager: (Name and address) T. N. WARD COMPANY 129 COULTER AVENUE, P.O. BOX 191 ARDMORE, PA 19003 The Project is: (Name, address and brief description) DOVER DOWNS HOTEL ADDITION 1131 NORTH DUPONT HIGHWAY DOVER, DELAWARE 19901 268 ROOM HOTEL ADDITION The Architect is: (Name and address) THE FRIEDMUTTER GROUP 8025 BLACK HORSE PIKE WEST ATLANTIC CITY, NJ 08232 The Owner and Construction Manager agree as set forth below: 1 -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE 1   GENERAL PROVISIONS § 1.1 Relationship of the Parties § 1.2 General Conditions ARTICLE 2   CONSTRUCTION MANAGER’S RESPONSIBILITIES § 2.1 Preconstruction Phase § 2.2 Guaranteed Maximum Price Proposal and Contract Time § 2.3 Construction Phase § 2.4 Professional Services § 2.5 Hazardous Materials ARTICLE 3   OWNER’S RESPONSIBILITIES § 3.1 Information and Services § 3.2 Owner’s Designated Representative § 3.3 Architect § 3.4 Legal Requirements ARTICLE 4   COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES § 4.1 Compensation § 4.2 Payments ARTICLE 5   COMPENSATION FOR CONSTRUCTION PHASE SERVICES § 5.1 Compensation § 5.2 Guaranteed Maximum Price § 5.3 Changes in the Work ARTICLE 6   COST OF THE WORK FOR CONSTRUCTION PHASE § 6.1 Costs to Be Reimbursed § 6.2 Costs Not to Be Reimbursed § 6.3 Discounts, Rebates and Refunds § 6.4 Accounting Records ARTICLE 7   CONSTRUCTION PHASE § 7.1 Progress Payments § 7.2  Final Payment ARTICLE 8   INSURANCE AND BONDS § 8.1 Insurance Required of the Construction Manager § 8.2 Insurance Required of the Owner § 8.3 Performance Bond and Payment Bond ARTICLE 9   MISCELLANEOUS PROVISIONS § 9.1 Dispute Resolution § 9.2 Other Provisions ARTICLE 10   TERMINATION OR SUSPENSION § 10.1 Termination Prior to Establishing Guaranteed Maximum Price § 10.2 Termination Subsequent to Establishing Guaranteed Maximum Price § 10.3 Suspension ARTICLE 11   OTHER CONDITIONS AND SERVICES 2 -------------------------------------------------------------------------------- ARTICLE 1   GENERAL PROVISIONS § 1.1 RELATIONSHIP OF PARTIES The Construction Manager accepts the relationship of trust and confidence established with the Owner by this Agreement, and covenants with the Owner to furnish the Construction Manager’s reasonable skill and judgment and to cooperate with the Architect in furthering the interests of the Owner. The Construction Manager shall furnish construction administration and management services and use the Construction Manager’s best efforts to perform the Project in an expeditious and economical manner consistent with the interests of the Owner. The Owner shall endeavor to promote harmony and cooperation among the Owner, Architect, Construction Manager and other persons or entities employed by the Owner for the Project. § 1.2 GENERAL CONDITIONS For the Construction Phase, the General Conditions of the contract shall be the AIA® Document A201™—1997, General Conditions of the Contract for Construction, amended and attached. For the Preconstruction Phase, or in the event that the Preconstruction and Construction Phases proceed concurrently, A201™—1997 shall apply to the Preconstruction Phase only as specifically provided in this Agreement. The term “Contractor” as used in A201™—1997 shall mean the Construction Manager. ARTICLE 2   CONSTRUCTION MANAGER’S RESPONSIBILITIES The Construction Manager shall perform the services described in this Article. The services to be provided under Sections 2.1 and 2.2 constitute the Preconstruction Phase services. If the Owner and Construction Manager agree, after consultation with the Architect, the Construction Phase may commence before the Preconstruction Phase is completed, in which case both phases will proceed concurrently. § 2.1 PRECONSTRUCTION PHASE (INTENTIONALLY DELETED) § 2.2 GUARANTEED MAXIMUM PRICE PROPOSAL AND CONTRACT TIME § 2.2.1 When the Drawings and Specifications are sufficiently complete, the Construction Manager shall propose a Guaranteed Maximum Price, which shall be the sum of the estimated Cost of the Work and the Construction Manager’s Fee. § 2.2.2 As the Drawings and Specifications may not be finished at the time the Guaranteed Maximum Price proposal is prepared, the Construction Manager shall provide in the Guaranteed Maximum Price for further development of the Drawings and Specifications by the Architect that is consistent with the Contract Documents and reasonably inferable therefrom as necessary to produce the results intended by the Contract Documents.. Such further development does not include such things as changes in scope, systems, kinds and quality of materials, finishes or equipment, all of which, if required, shall be incorporated by Change Order. The Construction Manager recognizes that the Guaranteed Maximum Price has been based on design drawings and specifications which have not been released for construction and accepts the responsibility to perform the entire work described in the released for construction drawings and specifications for the Guaranteed Maximum Price without regard to the fact that said work may have been modified or expanded consistent with the original design intent. § 2.2.3 The estimated Cost of the Work shall include the Construction Manager’s contingency, a sum established by the Construction Manager for the Construction Manager’s exclusive use to cover costs arising under Section 2.2.2 and other costs which are properly reimbursable as Cost of the Work but not the basis for a Change Order. § 2.2.4 BASIS OF GUARANTEED MAXIMUM PRICE The Construction Manager shall include with the Guaranteed Maximum Price proposal a written statement of its basis, which shall include: .1                     A list of the Drawings and Specifications, including all addenda thereto and the Conditions of the Contract, which were used in preparation of the Guaranteed Maximum Price proposal. .2                     A list of allowances and a statement of their basis. .3                     A list of the clarifications and assumptions made by the Construction Manager in the preparation of the Guaranteed Maximum Price proposal to supplement the information contained in the Drawings and Specifications. 3 -------------------------------------------------------------------------------- .4                     The proposed Guaranteed Maximum Price, including a statement of the estimated cost organized by trade categories, allowances, contingency, and other items and the Fee that comprise the Guaranteed Maximum Price. .5                     The Date of Substantial Completion upon which the proposed Guaranteed Maximum Price is based, and a schedule of the Construction Documents issuance dates upon which the date of Substantial Completion is based. § 2.2.5 The Construction Manager shall meet with the Owner and Architect to review the Guaranteed Maximum Price proposal and the written statement of its basis. In the event that the Owner or Architect discover any inconsistencies or inaccuracies in the information presented, they shall promptly notify the Construction Manager, who shall make appropriate adjustments to the Guaranteed Maximum Price proposal, its basis, or both. § 2.2.6 Unless the Owner accepts the Guaranteed Maximum Price proposal in writing on or before the date specified in the proposal for such acceptance and so notifies the Construction Manager, the Guaranteed Maximum Price proposal shall not be effective without written acceptance by the Construction Manager. § 2.2.7 Prior to the Owner’s acceptance of the Construction Manager’s Guaranteed Maximum Price proposal and issuance of a Notice to Proceed, the Construction Manager shall not incur any cost to be reimbursed as part of the Cost of the Work, except as the Owner may specifically authorize in writing. § 2.2.8 Upon acceptance by the Owner of the Guaranteed Maximum Price proposal, the Guaranteed Maximum Price and its basis shall be set forth in Amendment No. 1. The Guaranteed Maximum Price shall be subject to additions and deductions by a change in the Work as provided in the Contract Documents, and the Date of Substantial Completion shall be subject to adjustment as provided in the Contract Documents. § 2.2.9 The Owner shall authorize and cause the Architect to revise the Drawings and Specifications to the extent necessary to reflect the agreed-upon assumptions and clarifications contained in Amendment No. 1. Such revised Drawings and Specifications shall be furnished to the Construction Manager in accordance with schedules agreed to by the Owner, Architect and Construction Manager. The Construction Manager shall promptly notify the Architect and Owner if such revised Drawings and Specifications are inconsistent with the agreed-upon assumptions and clarifications. § 2.2.10 The Guaranteed Maximum Price shall include in the Cost of the Work only those taxes which are enacted at the time the Guaranteed Maximum Price is established. § 2.3 CONSTRUCTION PHASE § 2.3.1 GENERAL § 2.3.1.1 The Construction Phase shall commence on the earlier of: (1)                 the Owner’s acceptance of the Construction Manager’s Guaranteed Maximum Price proposal and issuance of a Notice to Proceed, or issuance of a building permit which ever is later. (2)                 the Owner’s first authorization to the Construction Manager to: (a) award a subcontract, or (b) undertake construction Work with the Construction Manager’s own forces, or (c) issue a purchase order for materials or equipment required for the Work. § 2.3.2 ADMINISTRATION § 2.3.2.1 Those portions of the Work that the Construction Manager does not customarily perform with the Construction Manager’s own personnel shall be performed under subcontracts or by other appropriate agreements with the Construction Manager. The Construction Manager shall obtain bids from Subcontractors and from suppliers of materials or equipment fabricated to a special design for the Work from the list previously reviewed and, after analyzing such bids, shall deliver such bids to the Owner and Architect. The Owner will then determine, with the advice of the Construction Manager and subject to the reasonable objection of the Architect, which bids will be accepted. The Owner may designate specific persons or entities from whom the Construction Manager shall obtain bids; however, if the Guaranteed Maximum Price has been established, the Owner may not prohibit the Construction Manager from 4 -------------------------------------------------------------------------------- obtaining bids from other qualified bidders. The Construction Manager shall not be required to contract with anyone to whom the Construction Manager has reasonable objection. § 2.3.2.2 If the Guaranteed Maximum Price has been established and a specific bidder among those whose bids are delivered by the Construction Manager to the Owner and Architect (1) is recommended to the Owner by the Construction Manager; (2) is qualified to perform that portion of the Work; and (3) has submitted a bid which conforms to the requirements of the Contract Documents without reservations or exceptions, but the Owner requires that another bid be accepted, then the Construction Manager may require that a change in the Work be issued to adjust the Contract Time and the Guaranteed Maximum Price by the difference between the bid of the person or entity recommended to the Owner by the Construction Manager and the amount of the subcontract or other agreement actually signed with the person or entity designated by the Owner. § 2.3.2.3 Subcontracts and agreements with suppliers furnishing materials or equipment fabricated to a special design shall conform to the payment provisions of Sections 7.1.8 and 7.1.9 and shall not be awarded on the basis of cost plus a fee without the prior consent of the Owner. § 2.3.2.4 The Construction Manager shall schedule and conduct meetings at which the Owner, Architect, Construction Manager and appropriate Subcontractors can discuss the status of the Work. The Construction Manager shall prepare and promptly distribute meeting minutes. § 2.3.2.5 Promptly after the Owner’s acceptance of the Guaranteed Maximum Price proposal, the Construction Manager shall prepare a schedule in accordance with Section 3.10 of A201™—1997, including the Owner’s occupancy requirements. § 2.3.2.6 The Construction Manager shall provide monthly written reports to the Owner and Architect on the progress of the entire Work. The Construction Manager shall maintain a daily log containing a record of weather, Subcontractors working on the site, number of workers, Work accomplished, problems encountered and other similar relevant data as the Owner may reasonably require. The log shall be available to the Owner and Architect. § 2.3.2.7 The Construction Manager shall develop a system of cost control for the Work, including regular monitoring of actual costs for activities in progress and estimates for uncompleted tasks and proposed changes. The Construction Manager shall identify variances between actual and estimated costs and report the variances to the Owner and Architect at regular intervals. § 2.4 PROFESSIONAL SERVICES Section 3.12.10 of A201™—1997 shall apply to both the Preconstruction and Construction Phases. § 2.5 HAZARDOUS MATERIALS Section 10.3 of A201™—1997 shall apply to both the Preconstruction and Construction Phases. ARTICLE 3   OWNER’S RESPONSIBILITIES § 3.1 INFORMATION AND SERVICES § 3.1.1 The Owner shall provide full information in a timely manner regarding the requirements of the Project, including a program which sets forth the Owner’s objectives, constraints and criteria, including space requirements and relationships, flexibility and expandability requirements, special equipment and systems, and site requirements. § 3.1.2 The Owner shall, at the written request of the Construction Manager prior to commencement of the Construction Phase and thereafter, furnish to the Construction Manager reasonable evidence that financial arrangements have been made to fulfill the Owner’s obligations under the Contract. Furnishing of such evidence shall be a condition precedent to commencement or continuation of the Work. After such evidence has been furnished, the Owner shall not materially vary such financial arrangements without prior notice to the Construction Manager. 5 -------------------------------------------------------------------------------- § 3.1.3 The Owner shall establish and update an overall budget for the Project, based on consultation with the Construction Manager and Architect, which shall include contingencies for changes in the Work and other costs which are the responsibility of the Owner. § 3.1.4 STRUCTURAL AND ENVIRONMENTAL TESTS, SURVEYS AND REPORTS In the Preconstruction Phase, the Owner shall furnish the following with reasonable promptness and at the Owner’s expense. Except to the extent that the Construction Manager knows of any inaccuracy, the Construction Manager shall be entitled to rely upon the accuracy of any such information, reports, surveys, drawings and tests described in Sections 3.1.4.1 through 3.1.4.4 but shall exercise customary precautions relating to the performance of the Work. § 3.1.4.1 Reports, surveys, drawings and tests concerning the conditions of the site which are required by law. § 3.1.4.2 Surveys describing physical characteristics, legal limitations and utility locations for the site of the Project, and a written legal description of the site. The surveys and legal information shall include, as applicable, grades and lines of streets, alleys, pavements and adjoining property and structures; adjacent drainage; rights-of-way, restrictions, easements, encroachments, zoning, deed restrictions, boundaries and contours of the site; locations, dimensions and necessary data pertaining to existing buildings, other improvements and trees; and information concerning available utility services and lines, both public and private, above and below grade, including inverts and depths. All information on the survey shall be referenced to a project benchmark. § 3.1.4.3 The services of a geotechnical engineer when such services are requested by the Construction Manager. Such services may include but are not limited to test borings, test pits, determinations of soil bearing values, percolation tests, evaluations of hazardous materials, ground corrosion and resistivity tests, including necessary operations for anticipating subsoil conditions, with reports and appropriate professional recommendations. § 3.1.4.4 Structural, mechanical, chemical, air and water pollution tests, tests for hazardous materials, and other laboratory and environmental tests, inspections and reports which are required by law. § 3.1.4.5 The services of other consultants when such services are reasonably required by the scope of the Project and are requested by the Construction Manager. § 3.2 OWNER’S DESIGNATED REPRESENTATIVE The Owner shall designate in writing a representative who shall have express authority to bind the Owner with respect to all matters requiring the Owner’s approval or authorization. This representative shall have the authority to make decisions on behalf of the Owner concerning estimates and schedules, construction budgets, and changes in the Work, and shall render such decisions promptly and furnish information expeditiously, so as to avoid unreasonable delay in the services or Work of the Construction Manager. Except as otherwise provided in Section 4.2.1 of A201™—1997, the Architect does not have such authority. § 3.3 ARCHITECT The Owner shall retain an Architect to provide Basic Services, including normal structural, mechanical and electrical engineering services, other than cost estimating services, described in the edition of AIA® Document B151™—1997, Abbreviated Standard Form of Agreement Between Owner and Architect current as of the date of this Agreement. The Owner shall authorize and cause the Architect to provide those Additional Services described in B151™—1997, requested by the Construction Manager which must necessarily be provided by the Architect for the Preconstruction and Construction Phases of the Work. Such services shall be provided in accordance with time schedules agreed to by the Owner, Architect and Construction Manager. Upon request of the Construction Manager, the Owner shall furnish to the Construction Manager a copy of the Owner’s Agreement with the Architect, from which compensation provisions may be deleted. 6 -------------------------------------------------------------------------------- § 3.4 LEGAL REQUIREMENTS The Owner shall determine and advise the Architect and Construction Manager of any special legal requirements relating specifically to the Project which differ from those generally applicable to construction in the jurisdiction of the Project. The Owner shall furnish such legal services as are necessary to provide the information and services required under Section 3.1. ARTICLE 4   COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES The Owner shall compensate and make payments to the Construction Manager for Preconstruction Phase services as follows: § 4.1 COMPENSATION (INTENTIONALLY DELETED) ARTICLE 5   COMPENSATION FOR CONSTRUCTION PHASE SERVICES § 5.1 COMPENSATION § 5.1.1 For the Construction Manager’s performance of the Work as described in Section 2.3, the Owner shall pay the Construction Manager in current funds the Contract Sum consisting of the Cost of the Work as defined in Article 7 and the Construction Manager’s Fee determined as follows: The Owner shall compensate the Construction Manager for Construction Phase services as follows: Base Fee — 3.25% of the GMP Change Order — 10% overhead, plus 3.25% fee. (the 3.25% fee to apply only to the extent that the Cost of the Work exceeds 110% of GMP.) No reduction in fee for deductive changes. (State a lump sum, percentage of actual Cost of the Work or other provision for determining the Construction Manager’s Fee, and explain how the Construction Manager’s Fee is to be adjusted for changes in the Work.) § 5.2 GUARANTEED MAXIMUM PRICE § 5.2.1 The sum of the Cost of the Work and the Construction Manager’s Fee are guaranteed by the Construction Manager not to exceed the amount provided in Amendment No. 1, subject to additions and deductions by changes in the Work as provided in the Contract Documents. Such maximum sum as adjusted by approved changes in the Work is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Construction Manager without reimbursement by the Owner. 25% of the savings will be paid to Construction Manager at the time of Final Payment, excluding savings attributable to Construction Change Directives or savings due to paying less for insurance premiums than as set forth in the GMP Proposal. The following changes discussed to date constitute Construction  Change Directives:             1) delete room millwork, 2) delete floor drains in rooms, 3) delete window at end of hall, 4) change specified bath tile. (Insert specific provisions if the Construction Manager is to participate in any savings.) The Work shall be substantially completed by October 22, 2007 (the “Target Completion Date”). If the Construction Manager achieves Substantial Completion of the Work under the Contract after the Target Completion Date, the Owner shall be entitled to retain or recover from the Construction Manager, as liquidated damages and not as a penalty, the sum of Five Thousand Dollars ($5,000) per day commencing on the day following the Target Completion Date and continuing until the actual date of Substantial Completion. In the event of partial turnover and actual occupancy, the Liquidated Damages shall be reduced by the percentage of rooms turned over. 7 -------------------------------------------------------------------------------- § 5.3 CHANGES IN THE WORK § 5.3.1 Adjustments to the Guaranteed Maximum Price on account of changes in the Work subsequent to the execution of Amendment No. 1 may be determined by any of the methods listed in Section 7.3.3 of A201™—1997. § 5.3.2 In calculating adjustments to subcontracts (except those awarded with the Owner’s prior consent on the basis of cost plus a fee), the terms “cost” and “fee” as used in Section 7.3.3.3 of A201™—1997 and the terms “costs” and “a reasonable allowance for overhead and profit” as used in Section 7.3.6 of A201™—1997 shall have the meanings assigned to them in that document and shall not be modified by this Article 5. Adjustments to subcontracts awarded with the Owner’s prior consent on the basis of cost plus a fee shall be calculated in accordance with the terms of those subcontracts.  Unless specified in the GMP Proposal, no subcontracts shall be on a cost plus a fee basis. § 5.3.3 In calculating adjustments to the Contract, the terms “cost” and “costs” as used in the above-referenced provisions of A201™—1997 shall mean the Cost of the Work as defined in Article 6 of this Agreement, and the term “and a reasonable allowance for profit” shall mean the Construction Manager’s Fee as defined in Section 5.1.1 of this Agreement. § 5.3.4 If no specific provision is made in Section 5.1.1 for adjustment of the Construction Manager’s Fee in the case of changes in the Work, or if the extent of such changes is such, in the aggregate, that application of the adjustment provisions of Section 5.1.1 will cause substantial inequity to the Owner or Construction Manager, the Construction Manager’s Fee shall be equitably adjusted on the basis of the Fee established for the original Work. ARTICLE 6   COST OF THE WORK FOR CONSTRUCTION PHASE § 6.1 COSTS TO BE REIMBURSED § 6.1.1 The term “Cost of the Work” shall mean costs necessarily incurred by the Construction Manager in the proper performance of the Work. Such costs shall be at rates not higher than those customarily paid at the place of the Project except with prior consent of the Owner. The Cost of the Work shall include only the items set forth in this Article 6. § 6.1.2 LABOR COSTS .1                     Wages of construction workers directly employed by the Construction Manager to perform the construction of the Work at the site or, with the Owner’s agreement, at off-site workshops. .2                     Wages or salaries of the Construction Manager’s supervisory and administrative personnel when stationed at the site with the Owner’s agreement, and all Project Management and Purchasing Personnel regardless of location. Classification   Name         (If it is intended that the wages or salaries of certain personnel stationed at the Construction Manager’s principal office or offices other than the site office shall be included in the Cost of the Work, such personnel shall be identified below.) .3                     Wages and salaries of the Construction Manager’s supervisory or administrative personnel engaged, at factories, workshops or on the road, in expediting the production or transportation of materials or equipment required for the Work, but only for that portion of their time required for the Work. .4                     Costs paid or incurred by the Construction Manager for taxes, insurance, contributions, assessments and benefits required by law or collective bargaining agreements, and, for personnel not covered by such agreements, customary benefits such as sick leave, medical and health benefits, holidays, vacations and pensions, provided that such costs are based on wages and salaries included in the Cost of the Work under Sections 6.1.2.1 through 6.1.2.3. 8 -------------------------------------------------------------------------------- § 6.1.3 SUBCONTRACT COSTS Payments made by the Construction Manager to Subcontractors in accordance with the requirements of the subcontracts. § 6.1.4 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED CONSTRUCTION .1                     Costs, including transportation, of materials and equipment incorporated or to be incorporated in the completed construction. .2                     Costs of materials described in the preceding Section 6.1.4.1 in excess of those actually installed but required to provide reasonable allowance for waste and for spoilage. Unused excess materials, if any, shall be handed over to the Owner at the completion of the Work or, at the Owner’s option, shall be sold by the Construction Manager; amounts realized, if any, from such sales shall be credited to the Owner as a deduction from the Cost of the Work. § 6.1.5 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED ITEMS .1                     Costs, including transportation, installation, maintenance, dismantling and removal of materials, supplies, temporary facilities, machinery, equipment, and hand tools not customarily owned by the construction workers, which are provided by the Construction Manager at the site and fully consumed in the performance of the Work; and cost less salvage value on such items if not fully consumed, whether sold to others or retained by the Construction Manager. Cost for items previously used by the Construction Manager shall mean fair market value. .2                     Rental charges for temporary facilities, machinery, equipment and hand tools not customarily owned by the construction workers, which are provided by the Construction Manager at the site, whether rented from the Construction Manager or others, and costs of transportation, installation, minor repairs and replacements, dismantling and removal thereof. Rates and quantities of equipment rented shall be subject to the Owner’s prior approval. .3                     Costs of removal of debris from the site. .4                     Reproduction costs, costs of telegrams, facsimile transmissions and long-distance telephone calls, postage and express delivery charges, telephone at the site and reasonable petty cash expenses of the site office. .5                     That portion of the reasonable travel and subsistence expenses of the Construction Manager’s personnel incurred while traveling in discharge of duties connected with the Work. § 6.1.6 MISCELLANEOUS COSTS .1                     That portion directly attributable to this Contract of premiums for insurance and bonds. (If charges for self-insurance are to be included, specify the basis of reimbursement.)           .007 x GMP = Premium for General & Excess Liability. .2                     Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Construction Manager is liable. .3                     Fees and assessments for the building permit and for other permits, licenses and inspections for which the Construction Manager is required by the Contract Documents to pay. .4                     Fees of testing laboratories for tests required by the Contract Documents, except those related to nonconforming Work other than that for which payment is permitted by Section 6.1.8.2. .5                     Royalties and license fees paid for the use of a particular design, process or product required by the Contract Documents; the cost of defending suits or claims for infringement of patent or other intellectual property rights arising from such requirement by the Contract Documents; payments made in accordance with legal judgments against the Construction Manager resulting from such suits or claims and payments of settlements made with the Owner’s consent; provided, however, that such costs of legal defenses, judgment and settlements shall not be included in the calculation of the Construction Manager’s Fee or the Guaranteed Maximum Price and provided that such royalties, fees and costs are not excluded by the last sentence of Section 3.17.1 of A201™—1997 or other provisions of the Contract Documents. 9 -------------------------------------------------------------------------------- .6                     Data processing costs related to the Work. .7                     Deposits lost for causes other than the Construction Manager’s negligence or failure to fulfill a specific responsibility to the Owner set forth in this Agreement. .8                     Legal, mediation and arbitration costs, other than those arising from disputes between the Owner and Construction Manager, reasonably incurred by the Construction Manager in the performance of the Work and with the Owner’s written permission, which permission shall not be unreasonably withheld. .9                     Expenses incurred in accordance with Construction Manager’s standard personnel policy for relocation and temporary living allowances of personnel required for the Work, in case it is necessary to relocate such personnel from distant locations. .10    For all trade work performed by CM cost plus 15% overhead. § 6.1.7 OTHER COSTS .1                     Other costs incurred in the performance of the Work if and to the extent approved in advance in writing by the Owner. § 6.1.8 EMERGENCIES AND REPAIRS TO DAMAGED OR NONCONFORMING WORK The Cost of the Work shall also include costs described in Section 6.1.1which are incurred by the Construction Manager: .1                     In taking action to prevent threatened damage, injury or loss in case of an emergency affecting the safety of persons and property, as provided in Section 10.6 of A201™—1997. .2                     In repairing or correcting damaged or nonconforming Work executed by the Construction Manager or the Construction Manager’s Subcontractors or suppliers, provided that such damaged or nonconforming Work was not caused by the negligence or failure to fulfill a specific responsibility to the Owner set forth in this agreement of the Construction Manager or the Construction Manager’s foremen, engineers or superintendents, or other supervisory, administrative or managerial personnel of the Construction Manager, or the failure of the Construction Manager’s personnel to supervise adequately the Work of the Subcontractors or suppliers, and only to the extent that the cost of repair or correction is not recoverable by the Construction Manager from insurance, Subcontractors or suppliers. § 6.1.9 The costs described in Sections 6.1.1 through 6.1.8 shall be included in the Cost of the Work notwithstanding any provision of AIA or A201™—1997 other Conditions of the Contract which may require the Construction Manager to pay such costs, unless such costs are excluded by the provisions of Section 6.2. § 6.2 COSTS NOT TO BE REIMBURSED § 6.2.1 The Cost of the Work shall not include: .1                     Salaries and other compensation of the Construction Manager’s personnel stationed at the Construction Manager’s principal office or offices other than the site office, except as specifically provided in Sections 6.1.2.2 and 6.1.2.3. Unless otherwise agreed to between Owner and Construction Manager, the only personnel to be charged that are not on-site shall be:  John Lesky and personnel handling estimating, purchasing and scheduling. .2                     Expenses of the Construction Manager’s principal office and offices other than the site office, except as specifically provided in Section 6.1. .3                     Overhead and general expenses, except as may be expressly included in Section 6.1. .4                     The Construction Manager’s capital expenses, including interest on the Construction Manager’s capital employed for the Work. .5                     Rental costs of machinery and equipment, except as specifically provided in Section 6.1.5.2. .6                     Except as provided in Section 6.1.8.2, costs due to the negligence of the Construction Manager or to the failure of the Construction Manger to fulfill a specific responsibility to the Owner set forth in this Agreement. .7                     Costs incurred in the performance of Preconstruction Phase Services. .8                     Except as provided in Section 6.1.7.1, any cost not specifically and expressly               described in Section 6.1. .9                     Costs which would cause the Guaranteed Maximum Price to be exceeded. 10 -------------------------------------------------------------------------------- § 6.3 DISCOUNTS, REBATES AND REFUNDS § 6.3.1 Cash discounts obtained on payments made by the Construction Manager shall accrue to the Owner if (1) before making the payment, the Construction Manager included them in an Application for Payment and received payment therefor from the Owner, or (2) the Owner has deposited funds with the Construction Manager with which to make payments; otherwise, cash discounts shall accrue to the Construction Manager. Trade discounts, rebates, refunds and amounts received from sales of surplus materials and equipment shall accrue to the Owner, and the Construction Manager shall make provisions so that they can be secured. § 6.3.2 Amounts which accrue to the Owner in accordance with the provisions of Section 6.3.1 shall be credited to the Owner as a deduction from the Cost of the Work. § 6.4 ACCOUNTING RECORDS § 6.4.1 The Construction Manager shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Contract; the accounting and control systems shall be satisfactory to the Owner. The Owner and the Owner’s accountants shall be afforded access to the Construction Manager’s records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project, and the Construction Manager shall preserve these for a period of three years after final payment, or for such longer period as may be required by law. ARTICLE 7   CONSTRUCTION PHASE § 7.1 PROGRESS PAYMENTS § 7.1.1 Based upon Applications for Payment submitted to the Architect by the Construction Manager and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Construction Manager as provided below and elsewhere in the Contract Documents. § 7.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows: § 7.1.3 Provided an Application for Payment is received by the Architect not later than the 1st day of a month, the Owner shall make payment to the Construction Manager not later than the  25th  day of the  same  month. If an Application for Payment is received by the Architect after the application date fixed above, payment shall be made by the Owner not later than twenty-five ( 25 ) days after the Architect receives the Application for Payment. §7.1.4  With each Application for Payment, the Construction Manager shall submit computer generated progress reports and any other evidence required by the Owner or Architect to demonstrate that cash disbursements already made by the Construction Manager on account of the Cost of the Work equal or exceed (1) progress payments already  received by the Construction Manager; less (2) that portion of those payments attributable to the Construction Manager’s Fee; plus (3) payrolls for the period covered by the present Application for Payment. In addition to other required items, each Application for Payment shall be accompanied by the following, all in form and substance satisfactory to the Owner and in compliance with applicable Delaware statutes: 1.               A current Sworn Statement from the Construction Manager setting forth all subcontractors and materialmen with whom the Construction Manager has subcontracted, the amount of such subcontract, the amount requested for any subcontractor or materialman in the application for payment and the amount to be paid to the Construction Manager from such progress payment, together with a current, duly executed waiver of mechanics’ and materialmen’s liens from the Construction Manager establishing receipt of payment or satisfaction of the payment requested by the Construction Manager in the current Application for Payment; 11 -------------------------------------------------------------------------------- 2.               Commencing with the second (2nd) Application for Payment submitted by the Construction Manager, duly executed so-called “after the fact” waivers of mechanics’ and materialmen’s and materialmen’s liens form all subcontractors, materialmen and, when appropriate, from lower tier subcontractors, establishing receipt of payment or satisfaction of payment of all amounts requested on behalf of such entities and disbursed prior to submittal by the Construction Manager of the current Application for Payment, plus sworn statements from all subcontractors, materialmen and, where appropriate, from lower tier subcontractors, covering all amounts described above. 3.               Such other information, documentation and materials as the Owner or the Architect may require. § 7.1.5 Each Application for Payment shall be based upon the most recent schedule of values submitted by the Construction Manager in accordance with the Contract Documents. The schedule of values shall allocate the entire Guaranteed Maximum Price among the various portions of the Work, except that the Construction Manager’s Fee shall be shown as a single separate item. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Architect may require. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Construction Manager’s Applications for Payment. § 7.1.6 Applications for Payment shall show the percentage completion of each portion of the Work as of the end of the period covered by the Application for Payment. The percentage completion shall be the lesser of (1) the percentage of that portion of the Work which has actually been completed or (2) the percentage obtained by dividing (a) the expense which has actually been incurred by the Construction Manager on account of that portion of the Work for which the Construction Manager has made or intends to make actual payment prior to the next Application for Payment by (b) the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. § 7.1.7 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows: .1                     Take that portion of the Guaranteed Maximum Price properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Guaranteed Maximum Price allocated to that portion of the Work in the schedule of values. Pending final determination of cost to the Owner of changes in the Work, amounts not in dispute may be included as provided in Section 7.3.8 of A201™—1997, even though the Guaranteed Maximum Price has not yet been adjusted by Change Order. .2                     Add that portion of the Guaranteed Maximum Price properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the Work or, if approved in advance by the Owner, suitably stored off the site at a location agreed upon in writing. .3                     Add the Construction Manager’s Fee, less retainage of ten (  10%  ). The Construction Manager’s Fee shall be computed upon the Cost of the Work described in the two preceding Sections at the rate stated in Section 5.1.1 or, if the Construction Manager’s Fee is stated as a fixed sum in that Section, shall be an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the two preceding Sections bears to a reasonable estimate of the probable Cost of the Work upon its completion. .4                     Subtract the aggregate of previous payments made by the Owner. .5                     Subtract the shortfall, if any, indicated by the Construction Manager in the documentation required by Section 7.1.4 to substantiate prior Applications for Payment, or resulting from errors subsequently discovered by the Owner’s accountants in such documentation. .6                     Subtract amounts, if any, for which the Architect has withheld or nullified a Certificate for Payment as provided in Section 9.5 of A201™—1997. § 7.1.8 Except with the Owner’s prior approval, payments to Subcontractors shall be subject to retention of not less than ten ( 10% ). The Owner and the Construction Manager shall agree upon a mutually acceptable procedure for review and approval of payments and retention for subcontracts. 12 -------------------------------------------------------------------------------- Once the project is 50% complete, provided the project is on schedule, no additional retention will be withheld. § 7.1.9 Except with the Owner’s prior approval, the Construction Manager shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site. § 7.1.10 In taking action on the Construction Manager’s Applications for Payment, the Architect shall be entitled to rely on the accuracy and completeness of the information furnished by the Construction Manager and shall not be deemed to represent that the Architect has made a detailed examination, audit or arithmetic verification of the documentation submitted in accordance with Section 7.1.4 or other supporting data, that the Architect has made exhaustive or continuous on-site inspections or that the Architect has made examinations to ascertain how or for what purposes the Construction Manager has used amounts previously paid on account of the Contract. Such examinations, audits and verifications, if required by the Owner, will be performed by the Owner’s accountants acting in the sole interest of the Owner. §7.1.11   Owner agrees that 100% payment shall be made for: 1)              Soil stabilization. 2)              Structural Concrete. 3)              Precast plank Once this work is 100% complete and accepted. §7.1.12   No retention shall be held on insurance, permits or Subguard. § 7.2 FINAL PAYMENT § 7.2.1 Final payment shall be made by the Owner to the Construction Manager when (1) the Contract has been fully performed by the Construction Manager except for the Construction Manager’s responsibility to correct nonconforming Work, as provided in Section 12.2.2 of A201™—1997, and to satisfy other requirements, if any, which necessarily survive final payment; (2) a final Application for Payment and a final accounting for the Cost of the Work have been submitted by the Construction Manager and reviewed by the Owner’s accountants; and (3) a final Certificate for Payment has then been issued by the Architect; such final payment shall be made by the Owner not more than 30 days after the issuance of the Architect’s final Certificate for Payment, or as follows: Once substantial completion is achieved, Owner agrees to consider payments out of retention to subcontractors that have fully performed. § 7.2.2 The amount of the final payment shall be calculated as follows: .1                     Take the sum of the Cost of the Work substantiated by the Construction Manager’s final accounting and the Construction Manager’s Fee, but not more than the Guaranteed Maximum Price. .2                     Subtract amounts, if any, for which the Architect withholds, in whole or in part, a final Certificate for Payment as provided in Section 9.5.1 of A201™—1997 or other provisions of the Contract Documents. .3                     Subtract the aggregate of previous payments made by the Owner. If the aggregate of previous payments made by the Owner exceeds the amount due the Construction Manager, the Construction Manager shall reimburse the difference to the Owner. § 7.2.3 The Owner’s accountants will review and report in writing on the Construction Manager’s final accounting within 30 days after delivery of the final accounting to the Architect by the Construction Manager. Based upon such Cost of the Work as the Owner’s accountants report to be substantiated by the Construction Manager’s final accounting, and provided the other conditions of Section 7.2.1 have been met, the Architect will, within seven days after receipt of the written report of the Owner’s accountants, either issue to the Owner a final Certificate for Payment with a copy to the Construction Manager or notify the Construction Manager and Owner in writing of the Architect’s reasons for withholding a certificate as provided in Section 9.5.1 of A201™—1997 . The time periods stated in this Section 7.2 supersede those stated in Section 9.4.1 of A201™—1997. 13 -------------------------------------------------------------------------------- § 7.2.4 If the Owner’s accountants report the Cost of the Work as substantiated by the Construction Manager’s final accounting to be less than claimed by the Construction Manager, the Construction Manager shall be entitled to proceed in accordance with Article 9 without a further decision of the Architect. Unless agreed to otherwise, a demand for mediation or arbitration of the disputed amount shall be made by the Construction Manager within 60 days after the Construction Manager’s receipt of a copy of the Architect’s final Certificate for Payment. Failure to make such demand within this 60-day period shall result in the substantiated amount reported by the Owner’s accountants becoming binding on the Construction Manager. Pending a final resolution of the disputed amount, the Owner shall pay the Construction Manager the amount certified in the Architect’s final Certificate for Payment. § 7.2.5 If, subsequent to final payment and at the Owner’s request, the Construction Manager incurs costs described in Section 6.1 and not excluded by Section 6.2 (1) to correct nonconforming Work or (2) arising from the resolution of disputes, the Owner shall reimburse the Construction Manager such costs and the Construction Manager’s Fee, if any, related thereto on the same basis as if such costs had been incurred prior to final payment, but not in excess of the Guaranteed Maximum Price. If the Construction Manager has participated in savings, the amount of such savings shall be recalculated and appropriate credit given to the Owner in determining the net amount to be paid by the Owner to the Construction Manager. ARTICLE 8   INSURANCE AND BONDS § 8.1 INSURANCE REQUIRED OF THE CONSTRUCTION MANAGER During both phases of the Project, the Construction Manager shall purchase and maintain insurance as set forth in Section 11.1 of A201™—1997. Such insurance shall be written for not less than the following limits, or greater if required by law § 8.1.1 Workers’ Compensation and Employers’ Liability meeting statutory limits mandated by state and federal laws. If (1) limits in excess of those required by statute are to be provided, or (2) the employer is not statutorily bound to obtain such insurance coverage or (3) additional coverages are required, additional coverages and limits for such insurance shall be as follows: § 8.1.2 Commercial General Liability including coverage for Premises-Operations, Independent Contractors’ Protective, Products-Completed Operations, Contractual Liability, Personal Injury and Broad Form Property Damage (including coverage for Explosion, Collapse and Underground hazards): 1,000,000/2,000,000  Each Occurrence 2,000,000  General Aggregate 1,000,000  Personal and Advertising Injury 2,000,000  Products-Completed Operations Aggregate  1.    The policy shall be endorsed to have the General Aggregate apply to this Project only.  2.                  Products and Completed Operations insurance shall be maintained for a minimum period of at least ( 2 ) year(s) after either 90 days following Substantial Completion or final payment, whichever is earlier.  3.                  The Contractual Liability insurance shall include coverage sufficient to meet the obligations in Section 3.18 of A201TM—1997. § 8.1.3 Automobile Liability (owned, non-owned and hired vehicles) for bodily injury and property damage:  1,000,000  Each Accident § 8.1.4 Other coverage:  Umbrella Excess Liability - $25,000,000 14 -------------------------------------------------------------------------------- (If Umbrella Excess Liability coverage is required over the primary insurance or retention, insert the coverage limits. Commercial General Liability and Automobile Liability limits may be attained by individual policies or by a combination of primary policies and Umbrella and/or Excess Liability policies. If Project Management Protective Liability Insurance is to be provided, state the limits here.) § 8.2 INSURANCE REQUIRED OF THE OWNER During both phases of the Project, the Owner shall purchase and maintain liability and property insurance, including waivers of subrogation, with contractor and all subcontractors named additionally insured. as set forth in Sections 11.2 and 11.4 of A201™—1997. Such insurance shall be written for not less than the following limits, or greater if required by law: § 8.2.1 Property Insurance: $320 Million $100,000  Deductible Per Occurrence N/A  Aggregate Deductible                Builder’s Risk Insurance for new work: in accordance with Exhibit 1 and in an amount equal to at least full GMP Value. § 8.2.2 Boiler and Machinery insurance with a limit of:  $5,000,000/occurrence. (If not a blanket policy, list the objects to be insured.) §8.2.3   Builder’s Risk. Construction Manager shall procure builder’s risk coverage for new work in accordance with Exhibit 1 and in amount equal to at least full GMP value. §8.2.4  Construction Manager shall be responsible for any deductibles relative to damage to property under either the property or the builder’s risk policies to the extent the covered loss is due to the acts or omissions of Construction Manager or its subcontractors. Owner shall be responsible for any deductibles relative to business interruption coverage under either the property or the builder’s risk policies. § 8.3 PERFORMANCE BOND AND PAYMENT BOND § 8.3.1 The Construction Manager shall furnish bonds covering faithful performance of the Contract and payment of obligations arising thereunder.  Bonds may be obtained through the Construction Managers unusal source, and the cost thereof shall be included in the Cost of the Work. The amount of each bond shall be equal to the Guaranteed Maximum Price, less cost of the bonds. § 8.3.2  The Construction Manager shall deliver the required bonds, using AIA Document A312 to the Owner at least three days before the commencement of any work at the Project site. § 8.3.3  Construction Manager shall purchase Subguard coverage in an amount equal to the amount of subcontracted work and shall have the policy endorsed to cover Owner’s financial interests. In addition, if there is a refund of any of the premium paid for this coverage upon completion of the Work, the refund shall be paid to Owner. ARTICLE 9   MISCELLANEOUS PROVISIONS § 9.1 DISPUTE RESOLUTION § 9.1.1   The parties shall not be obligated to engage in either mediation or arbitration but may choose to do so on a case by case basis. Any references herein to such forms of dispute resolution shall be deemed to apply to the parties rights relative to litigation. § 9.2 OTHER PROVISIONS § 9.2.1 Unless otherwise noted, the terms used in this Agreement shall have the same meaning as those in A201™—1997, General Conditions of the Contract for Construction. § 9.2.2 EXTENT OF CONTRACT This Contract, which includes this Agreement and the other documents incorporated herein by reference, represents the entire and integrated agreement between the Owner and the Construction Manager and 15 -------------------------------------------------------------------------------- supersedes all prior negotiations, representations or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both the Owner and Construction Manager. If anything in any document incorporated into this Agreement is inconsistent with this Agreement, this Agreement shall govern. § 9.2.3 OWNERSHIP AND USE OF DOCUMENTS Article 1.6 of A201™—1997 shall apply to both the Preconstruction and Construction Phases. § 9.2.4 GOVERNING LAW The Contract shall be governed by the law of the place where the Project is located. § 9.2.5 ASSIGNMENT The Owner and Construction Manager respectively bind themselves, their partners, successors, assigns and legal representatives to the other party hereto and to partners, successors, assigns and legal representatives of such other party in respect to covenants, agreements and obligations contained in the Contract Documents. Except as provided in Section 13.2.2 of A201™—1997, neither party to the Contract shall assign the Contract as a whole without written consent of the other. If either party attempts to make such an assignment without such consent, that party shall nevertheless remain legally responsible for all obligations under the Contract. ARTICLE 10 TERMINATION OR SUSPENSION § 10.1 TERMINATION PRIOR TO ESTABLISHING GUARANTEED MAXIMUM PRICE § 10.1.1 Prior to execution by both parties of Amendment No. 1 establishing the Guaranteed Maximum Price, the Owner may terminate this Contract at any time without cause, and the Construction Manager may terminate this Contract for any of the reasons described in Section 14.1.1 of A201™—1997. § 10.1.2 If the Owner or Construction Manager terminates this Contract pursuant to this Section 10.1 prior to commencement of the Construction Phase, the Construction Manager shall be equitably compensated for Preconstruction Phase Services performed prior to receipt of notice of termination. § 10.1.3 If the Owner or Construction Manager terminates this Contract pursuant to this Section 10.1 after commencement of the Construction Phase, the Construction Manager shall, in addition    to the compensation provided in Section 10.1.2, be paid an amount calculated as follows: .1                     Take the Cost of the Work incurred by the Construction Manager. .2                     Add the Construction Manager’s Fee computed upon the Cost of the Work to the date of termination at the rate stated in Section 5.1, but not less than $325,000. If the Construction Manager’s Fee is stated as a fixed sum in that Section, an amount which bears the same ratio to that fixed-sum Fee as the Cost of the Work at the time of termination bears to a reasonable estimate of the probable Cost of the Work upon its completion. .3                     Subtract the aggregate of previous payments made by the Owner on account of the Construction Phase. The Owner shall also pay the Construction Manager fair compensation, either by purchase or rental at the election of the Owner, for any equipment owned by the Construction Manager which the Owner elects to retain and which is not otherwise included in the Cost of the Work under Section 10.1.3.1. To the extent that the Owner elects to take legal assignment of subcontracts and purchase orders (including rental agreements), the Construction Manager shall, as a condition of receiving the payments referred to in this Article 10, execute and deliver all such papers and take all such steps, including the legal assignment of such subcontracts and other contractual rights of the Construction Manager, as the Owner may require for the purpose of fully vesting in the Owner the rights and benefits of the Construction Manager under such subcontracts or purchase orders. Subcontracts, purchase orders and rental agreements entered into by the Construction Manager with the Owner’s written approval prior to the execution of Amendment No. 1 shall contain provisions permitting assignment to the Owner as described above. If the Owner accepts such assignment, the Owner shall reimburse or indemnify the Construction Manager with respect to all costs arising under the subcontract, 16 -------------------------------------------------------------------------------- purchase order or rental agreement except those which would not have been reimbursable as Cost of the Work if the contract had not been terminated. If the Owner elects not to accept the assignment of any subcontract, purchase order or rental agreement which would have constituted a Cost of the Work had this agreement not been terminated, the Construction Manager shall terminate such subcontract, purchase order or rental agreement and the Owner shall pay the Construction Manager the costs necessarily incurred by the Construction Manager by reason of such termination. § 10.2 TERMINATION SUBSEQUENT TO ESTABLISHING GUARANTEED MAXIMUM PRICE Subsequent to execution by both parties of Amendment No. 1, the Contract may be terminated as provided in Article 14 of A201™—1997. § 10.2.1 In the event of such termination by the Owner, the amount payable to the Construction Manager pursuant to Section 14.1.3 of A201™—1997 shall not exceed the amount the Construction Manager would have been entitled to receive pursuant to Sections 10.1.2 and 10.1.3 of this Agreement. § 10.2.2 In the event of such termination by the Construction Manager, the amount to be paid to the Construction Manager under Section 14.1.3 of A201™—1997 shall not exceed the amount the Construction Manager would have been entitled to receive under Sections 10.1.2 and 10.1.3 above, except that the Construction Manager’s Fee shall be calculated as if the Work had been fully completed by the Construction Manager, including a reasonable estimate of the Cost of the Work for Work not actually completed. § 10.3 SUSPENSION The Work may be suspended by the Owner as provided in Article 14 of A201™—1997; in such case, the Guaranteed Maximum Price, if established, shall be increased as provided in Section 14.3.2 of A201™—1997 except that the term “cost of performance of the Contract” in that Section shall be understood to mean the Cost of the Work and the term “profit” shall be understood to mean the Construction Manager’s Fee as described in Sections 5.1.1 and 5.3.4 of this Agreement. ARTICLE 11 OTHER CONDITIONS AND SERVICES §11.1  Construction Manager shall use its best efforts ( and shall cause its subcontractors) not to interfere in any way with Owner’s and its affiliates existing operations at its casino, hotel, Conference center, Dining facilities, harness track, sumulcasting facilities, speedway and related facilities (the “Existing Facilities”) and not to inconvenience or offend patrons of the Existing Facilities or employees working there. Parking for Construction Manager and its subcontractors and storage of equipment and materials shall be limited to those areas designated by Owner. Fencing requirements shall be as required to keep the entire site secure and as may be reasonably required by Owner from time to time. Construction Manager is aware that Owner and its affiliates conduct a major speedway event at the Existing Facilities two (2) times per year, in June and September. Construction Manager further agrees to curtail and secure all construction activities for the week prior to the speedway event in accordance with the Owner’s requirements. It shall be the Construction Manager’s responsibility to obtain the exact dates of all the events that occur during the construction period, inform all subcontractors and schedule all activities accordingly. Weekday Work hours shall be between the hours of 7:00 am and 4:00 pm. Any alteration of this work schedule must have the approval of the Owner. All weekend work must be approved by and coordinated with the Owner. Construction Manager understands that construction activities are immediately adjacent to existing hotel rooms and will make every effort possible to limit construction noise decibel levels to an absolute minimum. Excessive complaints will require an alteration of construction schedule & activities. 17 -------------------------------------------------------------------------------- This Agreement entered into as of the day and year first written above.   OWNER   CONSTRUCTION MANAGER /s/ Edward Sutor   /s/ Tom Falvey (Signature)   (Signature) Edward J. Sutor, Executive Vice President   Thomas A. Falvey, President (Printed name and title)   (Printed name and title)       Date 5-03-06   Date 5-03-06       ATTEST   ATTEST   18 --------------------------------------------------------------------------------

  Exhibit 10.2 FORRESTER RESEARCH, INC. 2006 STOCK OPTION PLAN FOR DIRECTORS 1. DEFINED TERMS       Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms. 2. PURPOSE       The Plan has been established to advance the interests of the Company by providing for the grant of Stock Options to Eligible Directors. 3. ADMINISTRATION       The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Stock Options; determine, modify or waive the terms and conditions of any Stock Option; prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the Plan. Determinations of the Administrator made under the Plan will be conclusive and will bind all parties. 4. LIMITS ON AWARDS UNDER THE PLAN       (a) Number of Shares. A maximum of four hundred fifty thousand (450,000) shares of Stock may be delivered under the Plan. Shares of Stock, if any, withheld by the Company in payment of the exercise price of a Stock Option shall not be treated as delivered for purposes of the preceding sentence.       (b) Type of Shares. Stock delivered by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be delivered under the Plan. 5. ELIGIBILITY AND PARTICIPATION       Only Eligible Directors shall be eligible to be awarded Stock Options under, and thereby to participate in, the Plan. 6. RULES APPLICABLE TO STOCK OPTIONS       (a) Automatic Awards         (1) Number of Stock Options; Time of Grant; Term. On the date of each annual meeting of stockholders of the Company (beginning with the annual meeting of stockholders at which the Plan is approved), each individual who is then an Eligible Director, including any Eligible Director elected to the Board on such date but not including any individual who ceases to be a member of the Board on such date, shall automatically be granted an Annual Award. In addition, each individual who first becomes an Eligible Director between annual meetings shall be granted an Interim Award on the date he or she first becomes an Eligible Director. Subject to Section 7 and the terms of the award, (i) each Annual Award shall entitle the Eligible Director to acquire 12,500 shares of Stock, and (ii) each Interim Award shall entitle the Eligible Director to acquire 6,000 shares of Stock. Unless earlier exercised or terminated in accordance with the Plan, each Automatic Award shall have a term of ten (10) years from the date of grant.           (2) Exercise Price. The per-share exercise price of each Automatic Award shall be the per-share fair market value of the Stock on the date of grant, as determined by the Administrator. B-1 --------------------------------------------------------------------------------           (3) Vesting. Unless earlier terminated and subject to Section 7 below, each Automatic Award shall vest (become exercisable) as to one quarter (25%) of the shares subject thereto on (a) in the case of an Interim Award, on the date of grant and on each of the next three anniversaries of that date, and (b) in the case of an Annual Award, the first, second, third and fourth anniversaries of the date of grant       (b) Discretionary Awards         (1) Grant. In addition to such Automatic Awards as may be granted pursuant to Section 6(a) above, the Administrator may grant Discretionary Awards to any Eligible Director at any time, for such number of shares as the Administrator may determine in its discretion.           (2) Exercise Price; Other Terms. Each Discretionary Award shall be exercisable at a price per share determined by the Administrator in connection with the grant that is not less than the per-share fair market value of the Stock on the date of grant, as determined by the Administrator. Each Discretionary Award shall be subject to such vesting and other terms, not inconsistent with the express provisions of the Plan, as the Administrator may determine in its discretion.       (c) All Awards         (1) Transferability. A Stock Option may not be transferred other than by will or by the laws of descent and distribution and during the Eligible Director’s lifetime may be exercised only by the Eligible Director. Notwithstanding the foregoing, the Administrator in its discretion may permit any Eligible Director to transfer any or all of his or her Stock Options in a gratuitous transfer to a family member or a family trust, family partnership or similar entity.           (2) Time and Manner of Exercise; Payment of Exercise Price. A Stock Option will not be deemed to have been exercised until the Administrator receives a notice of exercise (in form acceptable to the Administrator) signed by the appropriate person and accompanied by the exercise price. If the Stock Option is exercised by any person other than the Participant, the Administrator may require satisfactory evidence that the person exercising the Stock Option has the right to do so. The exercise price must be paid (i) by cash or check acceptable to the Administrator, or (ii) through the delivery of shares of Stock that have been outstanding for at least six months (unless the Administrator approves a shorter period) and that have a fair market value equal to the exercise price, or (iii) through a broker-assisted exercise program acceptable to the Administrator, or (iv) by other means acceptable to the Administrator, or (v) by any combination of the foregoing permissible forms of payment. The delivery of shares in payment of the exercise price under clause (ii) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.           (3) Termination of Service. If an Eligible Director ceases for any reason other than death to be a member of the Board, all Automatic Awards and, unless otherwise provided in the terms of the Award, all Discretionary Awards then held by the Eligible Director that are not then vested shall immediately terminate and all other Automatic Awards and Discretionary Awards then held by the Eligible Director shall remain exercisable for a period of three (3) months or until the last day of the applicable ten-year term, if earlier, and then (except to the extent previously exercised) shall immediately terminate. In the event of an Eligible Director’s death, except as the Administrator shall otherwise provide, all Automatic Awards and Discretionary Awards held by the Eligible Director not then exercisable shall terminate. All Automatic Awards and Discretionary Awards held by an Eligible Director or his or her permitted transferees, if any, immediately prior to the Eligible Director’s death, to the extent exercisable, (i) will remain exercisable for the lesser of the one-year period ending with the first anniversary of the Eligible Director’s death or (ii) the period ending on the latest date on which such Automatic Award or Discretionary Award could have been exercised without regard to this Section 6(c)(3), and will thereupon terminate.           (4) Dividend Equivalents, Etc. The Administrator may provide for the payment of amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to a Stock Option, subject in each case to compliance with the requirements of Section 409A to the extent applicable. B-2 --------------------------------------------------------------------------------           (5) Rights Limited. Nothing in the Plan will be construed as giving any Eligible Director the right to continued service with the Company or any rights as a stockholder except as to shares of Stock actually issued under the Plan. 7. EFFECT OF CERTAIN TRANSACTIONS       (a) Mergers, etc. Except as otherwise provided in a Stock Option, the following provisions shall apply in the event of a Covered Transaction:         (1) Assumption or Substitution. If the Covered Transaction is one in which there is an acquiring or surviving entity, the Administrator may provide for the assumption of some or all outstanding Stock Options or for the grant of new awards in substitution therefor by the acquiror or survivor or an affiliate of the acquiror or survivor to any Eligible Director who will continue to provide services to the acquiring or surviving entity.           (2) Cash-Out of Awards. If the Covered Transaction is one in which holders of Stock will receive upon consummation a payment (whether cash, non-cash or a combination of the foregoing), the Administrator may provide for payment (a “cash-out”), with respect to some or all Awards, equal in the case of each affected Stock Option to the excess, if any, of (A) the fair market value of one share of Stock (as determined by the Administrator in its reasonable discretion) times the number of shares of Stock subject to the Stock Option, over (B) the aggregate exercise or purchase price, if any, under the Stock Option, in each case on such payment terms (which need not be the same as the terms of payment to holders of Stock) and other terms, and subject to such conditions, as the Administrator determines.           (3) Acceleration of Certain Awards. If the Covered Transaction (whether or not there is an acquiring or surviving entity) is one in which there is no assumption, substitution or cash-out under Section 7(a)(1) above), each Stock Option requiring exercise will become fully exercisable, prior to the Covered Transaction, on a basis that gives the holder of the Stock Option a reasonable opportunity, as determined by the Administrator, following exercise of the Stock Option to participate as a stockholder in the Covered Transaction.           (4) Termination of Awards Upon Consummation of Covered Transaction. Each Stock Option (unless assumed pursuant to Section 7(a)(1) above), will terminate upon consummation of the Covered Transaction.           (5) Additional Limitations. Any share of Stock delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above with respect to a Stock Option may, in the discretion of the Administrator, contain such restrictions, if any, as the Administrator deems appropriate to reflect any performance or other vesting conditions to which the Stock Option was subject.       (b) Change in and Distributions With Respect to Stock         (1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Company’s capital structure, the Administrator will make appropriate adjustments to the maximum number of shares specified in Section 4(a) that may be delivered under the Plan and to the share amounts described in Section 6(a)(1), and will also make appropriate adjustments to the number and kind of shares of stock or securities subject to Stock Options then outstanding or subsequently granted, any exercise prices relating to Stock Options and any other provision of Stock Options affected by such change.           (2) Continuing Application of Plan Terms. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7. 8. LEGAL CONDITIONS ON DELIVERY OF STOCK       The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously delivered under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance and delivery of such shares have been addressed and resolved; B-3 --------------------------------------------------------------------------------   (ii) if the outstanding Stock is at the time of delivery listed on any stock exchange or national market system, the shares to be delivered have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all conditions of the Award have been satisfied or waived. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act. The Company may require that certificates evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the applicable restrictions. 9. AMENDMENT AND TERMINATION       The Administrator may at any time or times amend the Plan or any outstanding Stock Option for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Stock Options; provided, that except as otherwise expressly provided in the Plan the Administrator may not, without the Eligible Director’s consent, alter the terms of a Stock Option so as to affect adversely the Eligible Director’s rights under the Stock Option, unless the Administrator expressly reserved the right to do so at the time of the Stock Option grant. Any amendments to the Plan shall be conditioned upon stockholder approval only to the extent, if any, such approval is required by law (including the Code and applicable stock exchange or Nasdaq requirements), as determined by the Administrator. 10. OTHER COMPENSATION ARRANGEMENTS       The existence of the Plan or the grant of any Stock Option will not in any way affect the Company’s right to grant an Eligible Director other compensation outside of the Plan. B-4 --------------------------------------------------------------------------------   EXHIBIT A Definition of Terms       The following terms, when used in the Plan, will have the meanings and be subject to the provisions set forth below:       “Administrator”: The Compensation Committee, except that the Compensation Committee may delegate to such persons as it determines such ministerial tasks as it deems appropriate. In the event of any delegation described in the preceding sentence, the term “Administrator” shall include the person or persons so delegated to the extent of such delegation.       “Annual Award”: An Automatic Award described in Section 6(a)(1)(i).       “Automatic Award”: A Stock Option described in Section 6(a)(1).       “Board”: The Board of Directors of the Company.       “Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or any successor statute as from time to time in effect.       “Compensation Committee”: The Compensation and Nominating Committee of the Board.       “Company”: Forrester Research, Inc.       “Covered Transaction”: Any of (i) a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert, (ii) a sale or transfer of all or substantially all the Company’s assets, or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction shall be deemed to have occurred upon consummation of the tender offer.       “Discretionary Award”: A Stock Option described in Section 6(b)(1).       “Eligible Director”: A member of the Board who is not a present or former employee of the Company or of any subsidiary of the Company.       “Interim Award”: An Automatic Award described in Section 6(a)(1)(ii).       “Plan”: The Forrester Research, Inc. Stock Option Plan for Directors as from time to time amended and in effect.       “Stock”: Common Stock of the Company, par value $.01 per share.       “Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the exercise price. B-5

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.48 SEVERANCE AGREEMENT         THIS SEVERANCE AGREEMENT ("Agreement") is made this 30th day of April, 2003 to be effective as of the 1st day of August, 2005, by and between RELIANT RESOURCES, INC., a Delaware corporation having its principal place of business in Houston, Harris County, Texas, and Mark M. Jacobs, an individual currently residing in Harris County, Texas ("Executive").         WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and         WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change of Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and         WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control;         NOW, THEREFORE, the Company and Executive have entered into this Agreement, on the terms and conditions hereinafter stated.         1.    DEFINITIONS:    The following terms shall have the meanings set forth below.         "Affiliate" means any company controlled by, controlling or under common control with the Company within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the "Code").         "Board" means the board of directors of the Company.         "Cause" means Executive's (a) gross negligence in the performance of Executive's duties, (b) intentional and continued failure to perform Executive's duties, (c) intentional engagement in conduct which is materially injurious to the Company or its Affiliates (monetarily or otherwise) or (d) conviction of a felony, which, in the case of clauses (a), (b) or (c) has not been cured within 30 days after a written demand for substantial performance is delivered to Executive by the Board, which demand specifically identifies the conduct which the Board asserts to constitute Cause. For purposes of the definition of Cause, an act or failure to act on the part of Executive will be deemed "intentional" only if done or omitted to be done by Executive not in good faith and without reasonable belief that his/her action or omission was in the best interest of the Company, and no act or failure to act on the part of Executive will be deemed "intentional" if it was due primarily to an error in judgment or negligence.         A "Change of Control" shall be deemed to have occurred upon the occurrence of any of the following events:         (a)   30% Ownership Change:    Any Person, other than an ERISA-regulated pension plan established by the Company or an Affiliate, makes an acquisition of Outstanding Voting Stock and is, immediately thereafter, the beneficial owner of 30% or more of the then Outstanding Voting Stock, unless such acquisition is made directly from the Company in a transaction approved by a majority of the Incumbent Directors; or any group is formed that is the beneficial owner of 30% or more of the Outstanding Voting Stock; or 1 --------------------------------------------------------------------------------         (b)   Board Majority Change:    Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or         (c)   Major Mergers and Acquisitions:    Consummation of a Business Combination unless, immediately following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination in substantially the same relative proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Voting Stock, (ii) if the Business Combination involves the issuance or payment by the Company of consideration to another entity or its shareholders, the total fair market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired (in each case, determined as of the date of consummation of such Business Combination by a majority of the Incumbent Directors) does not exceed 50% of the sum of the fair market value of the Outstanding Voting Stock plus the principal amount of the Company's consolidated long-term debt (in each case, determined immediately prior to such consummation by a majority of the Incumbent Directors), (iii) no Person (other than any corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of voting stock of the parent corporation resulting from such Business Combination and (iv) a majority of the members of the board of directors of the parent corporation resulting from such Business Combination were Incumbent Directors of the Company immediately prior to consummation of such Business Combination; or         (d)   Major Asset Dispositions:    Consummation of a Major Asset Disposition unless, immediately following such Major Asset Disposition, (i) individuals and entities that were beneficial owners of the Outstanding Voting Stock immediately prior to such Major Asset Disposition beneficially own, directly or indirectly, more than 70% of the then outstanding shares of voting stock of the Company (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) and (ii) a majority of the members of the board of directors of the Company (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) were Incumbent Directors of the Company immediately prior to consummation of such Major Asset Disposition.         For purposes of the foregoing definition,         (1)   the term "Person" means an individual, entity or group;         (2)   the term "group" is used as it is defined for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act");         (3)   the term "beneficial owner" is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;         (4)   the term "Outstanding Voting Stock" means outstanding voting securities of the Company entitled to vote generally in the election of directors; and any specified percentage or portion of the Outstanding Voting Stock (or of other voting stock) shall be determined based on the combined voting power of such securities;         (5)   the term "Incumbent Director" means a director of the Company (x) who was a director of the Company on January 1, 2003 or (y) who becomes a director subsequent to such date and whose election, or nomination for election by the Company's shareholders, was approved by a vote of a majority of the Incumbent Directors at the time of such election or nomination, except that 2 -------------------------------------------------------------------------------- any such director shall not be deemed an Incumbent Director if his or her initial assumption of office occurs as a result of an actual or threatened election contest or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board;         (6)   the term "election contest" is used as it is defined for purposes of Rule 14a-11 under the Exchange Act;         (7)   the term "Business Combination" means (x) a merger or consolidation involving the Company or its stock or (y) an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its stock or assets;         (8)   the term "parent corporation resulting from a Business Combination" means the Company if its stock is not acquired or converted in the Business Combination and otherwise means the entity which as a result of such Business Combination owns the Company or all or substantially all the Company's assets either directly or through one or more subsidiaries; and         (9)   the term "Major Asset Disposition" means the sale or other disposition in one transaction or a series of related transactions of 70% or more of the assets of the Company and its subsidiaries on a consolidated basis; and any specified percentage or portion of the assets of the Company shall be based on fair market value, as determined by a majority of the Incumbent Directors.         "Company" means Reliant Resources, Inc., and, except for purposes of determining whether a Change of Control has occurred, any successor thereto.         "Covered Termination" means any termination of Executive's employment with the Company or any Affiliate thereof during the term of this Agreement that does not result from any of the following:         (i)    death;         (ii)   disability entitling Executive to benefits under the Company's long-term disability plan;         (iii)  termination for Cause; or         (iv)  termination by Executive. Notwithstanding the foregoing, a Covered Termination shall also include a termination by Executive for Good Reason that occurs following a Change of Control.         "Good Reason" shall mean any one or more of the following which occurs following a Change of Control:         (a)   a significant reduction in the duties or responsibilities of Executive from those applicable to him/her immediately prior to the date on which a Change of Control occurs;         (b)   a reduction by the Company in Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time;         (c)   the failure by the Company to continue in effect any compensation plan in which Executive participates immediately prior to the Change of Control which is material to Executive's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of Executive's participation relative to other participants, as existed immediately prior to the Change of Control; 3 --------------------------------------------------------------------------------         (d)   the failure by the Company to continue to provide Executive with benefits substantially similar to those enjoyed by Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which Executive was participating immediately prior to the Change of Control, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive Executive of any material fringe benefit enjoyed by Executive at the time of the Change of Control or the failure by the Company to provide Executive with paid vacation on the same basis as was applicable to Executive immediately prior to the Change of Control; or         (e)   a change in the location of Executive's principal place of employment with the Company by more than 50 miles from the location where Executive was principally employed immediately prior to the date on which a Change of Control occurs or the Company requiring Executive to be based in a location other than that of the Company's principal executive offices.         "Performance Shares" means an award issued to the Executive under the Company's Long-Term Incentive Plan or any successor plan, in the form of shares of common stock of the Company or any successor, or units denominated in shares of Common Stock of the Company or any successor the vesting of which is subject to the attainment of one or more performance objectives.         "Restricted Shares" means an award issued to the Executive under the Company's Long-Term Incentive Plan, the 1994 Houston Industries Incorporated Long-Term Incentive Compensation Plan, as amended, the Reliant Energy, Incorporated Long-Term Incentive Plan, the Reliant Resources, Inc. Transition Stock Plan or any successor plan in the form of shares of common stock of the Company or of CenterPoint Energy, Incorporated or any successor or units denominated in shares of Common Stock of the Company or of CenterPoint Energy, Incorporated or any successor that is subject to a time-based vesting schedule.         "Salary" means Executive's base salary as in effect immediately prior to the termination of his employment or, if higher, the base salary in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.         "Stock Option" means a right to purchase a specified number of shares of common stock of the Company or of Reliant Energy, Incorporated at a specified price issued to Executive under the 1994 Houston Industries Incorporated Long-Term Incentive Compensation Plan, as amended, the Company's 2001 and 2002 Long-Term Incentive Plans, the Company's 2002 Stock Plan, the Reliant Energy, Incorporated Long-Term Incentive Plan, or any successor plan.         "Target Bonus Percentage" means Executive's target incentive award opportunity under the Reliant Resources, Inc. Annual Incentive Compensation Plan (or any successor plan) in effect immediately prior to the termination of his employment or, if higher, immediately prior to the first event or circumstance constituting Good Reason.         "Waiver and Release" means a legal document, in the form attached hereto as Exhibit A or such other form as may be prescribed by the Company, but which form may not be altered, amended or modified after execution of a binding agreement to effect a Change of Control without the consent of the Executive.         "Welfare Benefit Coverage" shall mean each of life insurance, medical, dental and vision benefits.         2.    SEVERANCE BENEFITS:    If Executive (a) experiences a Covered Termination, (b) executes and returns to the Company a Waiver and Release within the time period prescribed in the Waiver and Release following the date of Executive's Covered Termination, and (c) does not revoke such Waiver and Release within the time period prescribed in the Waiver and Release, then Executive shall be entitled to receive, as additional compensation for services rendered to the Company (including its Affiliates), the following severance benefits: 4 --------------------------------------------------------------------------------         (a)   Cash Severance Payments:    Executive will receive an amount equal to the product of (1) three and (2) the sum of (a) the Salary and (b) the product of the Salary multiplied by the Target Bonus Percentage, in one lump sum payment, within 15 days after the expiration of the Waiver and Release revocation period.         (b)   Pro Rated Bonus:    Executive will receive an amount equal to the product of (1) the Salary and (2) the Target Bonus Percentage, with the product of (1) and (2) prorated based on the number of days Executive was employed during the bonus year in which his employment terminated. Such bonus shall be paid within 15 days after the expiration of the Waiver and Release revocation period.         (c)   Welfare Benefit Coverage:    Continued Welfare Benefit Coverage for Executive and his/her eligible dependents at the active employee rate for a period of (1) 3 years following the date of Executive's Covered Termination which occurs following a Change of Control or (2) 18 months following any other Covered Termination. Such entitlement shall apply only to those Welfare Benefit Coverages that the Company has in effect from time to time for active employees. If Executive's employment is terminated following a Change of Control and Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the termination or of his employment (or, if more favorable to Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason), had the Executive's employment terminated at any time during the period of three years following the date upon which Executive's employment was terminated, the Company shall provide such post-retirement health care or life insurance benefits to Executive and Executive's dependents commencing on the later of (i) the date on which such coverage would have first become available and (ii) the date on which benefits described in the first sentence of this paragraph 2(c) terminate. Benefits otherwise receivable by Executive pursuant to this Section 2(c) shall be reduced to the extent Executive becomes eligible to receive benefits pursuant to a government-sponsored health insurance or health care program.         (d)   Outplacement:    Reimbursement for fees incurred for outplacement services within twenty four months of the date of Executive's Covered Termination in connection with Executive's efforts to obtain new employment, up to a maximum of $100,000.         (e)   Financial Planning:    Continued access, for the remainder of the calendar year in which the Covered Termination occurs or for 60 days (if greater), to the financial planning services available to executive employees at the time of Covered Termination.         3.    CHANGE OF CONTROL EQUITY-BASED BENEFITS:    Immediately upon any Change of Control or, if earlier, immediately upon a Covered Termination, Executive shall be entitled to receive, as additional compensation for services rendered to the Company (including its Affiliates), benefits with respect to any equity based compensation in accordance with the applicable plans and agreements.         4.    CERTAIN ADDITIONAL PAYMENTS:    Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 4 (a "Payment")) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment (whether through withholding at the source or otherwise) by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with 5 -------------------------------------------------------------------------------- respect thereto), employment taxes and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.         Subject to the provisions of this Section 4, all determinations required to be made under this Section 4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by the Company to Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return would not result in the imposition of negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to the following provisions of this Section 4 and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.         Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:         (a)   give the Company any information reasonably requested by the Company relating to such claim;         (b)   take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company;         (c)   cooperate with the Company in good faith in order to effectively contest such claim; and         (d)   permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax, employment tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 4, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or 6 -------------------------------------------------------------------------------- forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax, employment tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.         If, after the receipt by Executive of an amount advanced by the Company pursuant to the foregoing provisions of this Section 4, Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company complying with the requirements of this Section 4) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to the foregoing provisions of this Section 4, a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.         If the Company is obligated to provide the Executive with one or more Welfare Benefit Coverages pursuant to Section 2(c), and the amount of such benefits or the value of such benefit coverage (including without limitation any insurance premiums paid by the Company to provide such benefits) is subject to any income, employment or similar tax imposed by federal, state or local law, or any interest or penalties with respect to such tax (such tax or taxes, together with any such interest and penalties, being hereafter collectively referred to as the "Income Tax") because such benefits cannot be provided under a nondiscriminatory health plan described in Section 105 of the Code or for any other reason, the Company will pay to the Executive an additional payment or payments (collectively, an "Income Tax Payment"). The Income Tax Payment will be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), the Executive retains an amount of the Income Tax Payment equal to the Income Tax imposed with respect to such welfare benefits or such welfare benefit coverage.         5.    LEGAL FEES AND EXPENSES:    It is the intent of the Company that Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would detract from the benefits intended to be extended to Executive hereunder. Accordingly, if it should appear to Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to Executive hereunder, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of the Company as hereafter provided, to advise and represent Executive in connection with any such interpretation, 7 -------------------------------------------------------------------------------- enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection the Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the foregoing except to the extent that a final judgment no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive as a result of such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by the Company or by a trust created to secure such payment shall be repaid.         In the event a Change of Control occurs, the performance of the Company's obligations under this Section 5 will be funded by amounts deposited or which may be deposited in trust pursuant to certain trust agreements to which the Company may be a party providing that the fees and expenses of counsel selected from time to time by Executive pursuant to this Section 5 will be paid, or reimbursed to Executive if paid by Executive, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by Executive to the Company or to the trustee of a statement or statements prepared by such counsel in accordance with its customary practices. In order to be eligible for payment of expenses directly from the Company, Executive must first exhaust all rights to payment under the trust agreements, if any, contemplated immediately above. The pendency of a claim by the Company that a claim or defense of Executive is frivolous or otherwise lacking merit shall not excuse the Company (or the trustee of a Trust contemplated by this Section 5) from making periodic payments of legal fees and expenses until a final judgment is rendered as hereinabove provided. Any failure by the Company to satisfy any of its obligations under this Section 5 will not limit the rights of Executive hereunder. Subject to the foregoing, Executive will have the status of a general unsecured creditor of the Company and will have no right to, or security interest in, any assets of the Company or any Affiliate.         6.    CONFIDENTIALITY:    Executive acknowledges that pursuant to this Agreement, the Company agrees to provide to him Confidential Information regarding the Company and the Company's business and has previously provided him other such Confidential Information. In return for this and other consideration provided under this Agreement, Executive agrees that he will not, while employed by the Company and thereafter, disclose or make available to any other person or entity, or use for his own personal gain, any Confidential Information, except for such disclosures as required in the performance of his duties hereunder as may otherwise be required by law or legal process (in which case Executive and shall notify the Company of such legal or judicial proceeding as soon as practicable following his receipt of notice of such a proceeding, and permit the Company to seek to protect its interests and information). For purposes of this Agreement, "Confidential Information" shall mean any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company or any of its affiliates or ventures or in which property rights have been assigned or otherwise conveyed to the Company or any of its affiliates or ventures, which information, data or knowledge has commercial value in the business in which the Company is engaged, except such information, data or knowledge as is or becomes known to the public without violation of the terms of this Agreement. By way of illustration, but not limitation, Confidential Information includes business trade secrets, secrets concerning the Company's plans and strategies, nonpublic information concerning material market opportunities, technical trade secrets, processes, formulas, know-how, improvements, discoveries, developments, designs, inventions, techniques, marketing plans, manuals, records of research, reports, memoranda, computer software, strategies, forecasts, new products, unpublished 8 -------------------------------------------------------------------------------- financial information, projections, licenses, prices, costs, and employee, customer and supplier lists or parts thereof.         7.    RETURN OF PROPERTY:    Executive agrees that at the time of leaving the Company's employ, he will deliver to the Company (and will not keep in his possession, recreate or deliver to anyone else) all Confidential Information as well as all other devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, customer or client lists or information, or any other documents or property (including all reproductions of the aforementioned items) belonging to the Company or any of its affiliates or ventures, regardless of whether such items were prepared by Executive.         8.    NON-SOLICITATION AND NON-COMPETITION:             (a)   For consideration provided under this Agreement, including but not limited to the Company's agreement to provide Executive with Confidential Information regarding the Company and the Company's business, Executive agrees that while employed by the Company and for one year following a Covered Termination that does not occur following a Change of Control, he shall not, without the prior written consent of the Company, directly or indirectly, (i) hire or induce, entice or solicit (or attempt to induce entice or solicit) any employee of the Company or any of its affiliates or ventures to leave the employment of the Company or any of its affiliates or ventures or (ii) solicit or attempt to solicit the business of any customer or acquisition prospect of the Company or any of its affiliates or ventures with whom Executive had any actual contact while employed at the Company.         (b)   Additionally, for consideration provided under this Agreement, including but not limited to the Company's agreement to provide Executive with Confidential Information regarding the Company and the Company's business, Executive agrees that while employed by the Company and for one year following a Covered Termination that does not occur following a Change of Control, he will not, without the prior written consent of the Company, acting alone or in conjunction with others, either directly or indirectly, engage in any business that is in competition with the Company or accept employment with or render services to such a business as an officer, agent, employee, independent contractor or consultant, or otherwise engage in activities that are in competition with the Company.         (c)   The restrictions contained in this Paragraph 8 are limited to a 50-mile radius around any geographical area in which the Company engages (or has definite plans to engage) in operations or the marketing of its products or services at the time of a Covered Termination.         (d)   Executive acknowledges that these restrictive covenants under this Agreement, for which Executive received valuable consideration from the Company as provided in this Agreement, including but not limited to the Company's agreement to provide Executive with Confidential Information regarding the Company and the Company's business are ancillary to otherwise enforceable provisions of this Agreement that the consideration provided by the Company gives rise to the Company's interest in restraining Executive from competing and that the restrictive covenants are designed to enforce Executive's consideration or return promises under this Agreement. Additionally, Executive acknowledges that these restrictive covenants contain limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of the Company, including but not limited to the Company's need to protect its Confidential Information.         9.    NOTICES:    For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or 9 -------------------------------------------------------------------------------- when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company:   Reliant Resources, Inc. 1111 Louisiana Houston, Texas 77002 ATTENTION: Chairman of the Board If to Executive:   Mark M. Jacobs 1500 North Boulevard Houston, Texas 77006 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt.         10.    APPLICABLE LAW:    The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Texas, including the Texas statute of limitations, but without giving effect to the principles of conflict of laws of such State.         11.    SEVERABILITY:    If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.         12.    WITHHOLDING OF TAXES:    The Company may withhold from any payments payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling.         13.    NO ASSIGNMENT; SUCCESSORS:    Executive's right to receive payments or benefits hereunder shall not be assignable or transferable, whether by pledge, creation or a security interest or otherwise, whether voluntary, involuntary, by operation of law or otherwise, other than a transfer by will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Section 13 the Company shall have no liability to pay any amount so attempted to be assigned or transferred. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.         This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate).         14.    PAYMENT OBLIGATIONS ABSOLUTE:    Except for the requirement of the Executive to execute and return to the Company the Waiver and Release in accordance with Section 2, the Company's obligation to pay (or cause one of its Affiliates to pay) Executive the amounts and to make the arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counter-claim, recoupment, defense or other right which the Company (including its Affiliates) may have against him/her or anyone else. All amounts payable by the Company (including its Affiliates hereunder) shall be paid without notice or demand. Executive shall not be obligated to sign an agreement not to compete with the Company or to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any other employment shall in no event effect any reduction of the Company's obligations to make (or cause to be made) the payments and arrangements required to be made under this Agreement. 10 --------------------------------------------------------------------------------         15.    NUMBER AND GENDER:    Wherever appropriate herein, words used in the singular shall include the plural and the plural shall include the singular. The masculine gender where appearing herein shall be deemed to include the feminine gender.         16.    CONFLICTS:    This Agreement constitutes the entire understanding of the parties with respect to its subject matter and supercedes any other agreement or other understanding, whether oral or written, express or implied, between them concerning, related to or otherwise in connection with, the subject matter hereof.         17.    TERM:    The effective date of the Agreement is August 1, 2005. The term of this Agreement shall be for a period of three years after such effective date; provided, however, upon each anniversary of the effective date, the term shall be extended automatically for an additional one-year period unless the Company shall have delivered to Executive written notice of non-renewal prior to the applicable anniversary. Upon the occurrence of a Change of Control, the term shall be automatically extended to a date which is three years from the date upon which the Change of Control occurs. If Executive's employment is terminated prior to the occurrence of a Change of Control this Agreement shall immediately terminate, except that terms of this Agreement, which must survive the termination this Agreement in order to be effectuated (including the provisions of Sections 2, 5, 6, 7 and 8) shall survive.         IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered this 30th day of April, 2003, but effective as of the first day of August, 2005.     RELIANT RESOURCES, INC.     By /s/  JOEL V. STAFF       -------------------------------------------------------------------------------- Joel V. Staff Chairman and Chief Executive Officer     EXECUTIVE     /s/  MARK M. JACOBS       -------------------------------------------------------------------------------- Mark M. Jacobs 11 -------------------------------------------------------------------------------- Exhibit A Waiver And Release         In exchange for the payment to me of the severance benefits described in Section 2 of the Severance Agreement between Reliant Resources, Inc. (the "Company") and me effective as of            , 200    (the "Agreement") and of other remuneration and consideration provided for in the Agreement (the "Benefits"), which is in addition to any remuneration or benefits to which I am already entitled, I agree not to sue and to release and forever discharge the Company and all of its parents, subsidiaries, affiliates and unincorporated divisions, and its or their respective officers, directors, agents, servants, employees, successors, assigns, insurers, employee benefit plans and fiduciaries, and agents of any of the foregoing (collectively, the "Corporate Group") from any and all damages, losses, causes of action, expenses, demands, liabilities, and claims on behalf of myself, my heirs, executors, administrators, and assigns with respect to all matters relating to or arising out of my employment with or separation from the Company, under any employee benefit plan or claims for indemnity arising as a result of my being an officer or fiduciary of the Corporate Group. The release does not apply to claims or causes of action accruing after the date hereof.         I acknowledge that signing this Waiver and Release is an important legal act and that I have been advised in writing to consult an attorney prior to execution. I also understand that, in order to be eligible for the Benefits, I must sign and return this Waiver and Release to the Company's General Counsel. I acknowledge that I have been given at least 21 days to consider whether to execute this Waiver and Release.         In exchange for the payment to me of the Benefits, which is in addition to any remuneration or benefits to which I am already entitled, (1) I agree not to sue in any local, state or federal court regarding or relating in any way to my employment with or separation from the Company or any member of the Corporate Group, and (2) I knowingly and voluntarily waive all claims and release the Corporate Group from any and all claims, demands, actions, liabilities, and damages, whether known or unknown, arising out of or relating in any way to my employment with or separation from the Company or any member of the Corporate Group, except to the extent that my rights are vested under the terms of employee benefit plans sponsored by the Corporate Group, rights described in the Agreement, claims for indemnity from the Corporate Group arising as a result of being an officer or fiduciary of the Corporate Group, and except with respect to such rights or claims as may arise after the date this Waiver and Release is executed. Except for the matters identified above that are not the subject of this Waiver and Release, this Waiver and Release includes, but is not limited to, claims and causes of action under: Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended, including the Older Workers Benefit Protection Act of 1990; the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990; the Energy Reorganization Act, as amended, 42 U.S.C. § 5851; the Workers Adjustment and Retraining Notification Act of 1988; the Pregnancy Discrimination Act of 1978; the Employee Retirement Income Security Act of 1974, as amended; the Family and Medical Leave Act of 1993; the Fair Labor Standards Act; the Occupational Safety and Health Act; the Texas Labor Code §21.001 et. seq.; the Texas Labor Code; the Sarbanes-Oxley Act of 2002; claims in connection with workers' compensation or "whistle blower" statutes; and claims for breach of contract (whether written or oral, expressed or implied), tort, personal injury, defamation, negligence or wrongful termination; and any other claims under the statutory, regulatory, administrative, constitutional or common law of any nation, state, locality or any other jurisdiction.         Further, I expressly represent that no promise or agreement which is not expressed in this Waiver and Release has been made to me in executing this Waiver and Release, and that I am relying on my own judgment in executing this Waiver and Release, and that I am not relying on any statement or representation of any member of the Corporate Group or any of their agents. I agree that this Waiver 12 -------------------------------------------------------------------------------- and Release is valid, fair, adequate and reasonable, is with my full knowledge and consent, was not procured through fraud, duress or mistake and has not had the effect of misleading, misinforming or failing to inform me. I acknowledge and agree that the Company will withhold any taxes required by federal or state law from the Benefits otherwise payable to me.         I understand that for a period of seven calendar days following the Company's receipt of this Waiver and Release executed by me, I may revoke my acceptance of the offer of the Benefits by delivering a written statement to the Company's General Counsel, by hand or by registered-mail, in which case the Waiver and Release will not become effective. In the event I revoke my acceptance of this offer, the Company shall have no obligation to provide me the Benefits. I understand that failure to revoke my acceptance of the offer within seven days after the date I sign this Waiver and Release will result in this Waiver and Release being permanent and irrevocable.         I agree that the terms of this Waiver and Release are CONFIDENTIAL and that any disclosure to anyone for any purpose whatsoever except as required by law by me or my agents, representatives, heirs, spouse, employees or spokespersons shall be a breach of this Waiver and Release         I agree that this Waiver and Release is valid. I agree that this Waiver and Release is fair, adequate and reasonable. I agree that my consent to this Waiver and Release was with my full knowledge and was not procured through fraud, duress or mistake.         I acknowledge that payment of the Benefits is not an admission by any member of the Corporate Group that they engaged in any wrongful or unlawful act or that any member of the Corporate Group violated any law or regulation. I understand that nothing in this Waiver and Release is intended to prohibit, restrict or otherwise discourage me from engaging in any activity related to matters of public or employee health or safety, specifically to include activity protected under 42 U.S.C. § 5851 and 10 C.F.R. § 50.7, including, but not limited to, providing information to the Nuclear Regulatory Commission ("NRC") regarding nuclear safety or quality concerns, potential violations or other matters within the NRC's jurisdiction. Similarly, nothing herein is intended to prohibit, restrict or otherwise discourage me or any other individual from making reports of unsafe, wrongful or illegal conduct to any agency or branch of the local, state or federal government, including law enforcement authorities, public utility commissions, energy regulatory commissions or any other lawful authority.         I understand and agree that in the event of any breach of the provisions of Sections 6 or 8 of the Agreement, or threatened breach, by me, the Company, in its discretion, may initiate appropriate action as provided in those Sections and may recover all lawful damages which it may prove by a preponderance of the evidence in accordance with the law specified in those Sections.         I acknowledge that this Waiver and Release set forth the entire understanding and agreement between me and the Company concerning the subject matter of this Waiver and Release and supersede any prior or contemporaneous oral and/or written agreements or representations, if any, between me and Company or any other member of the Corporate Group. The invalidity or enforceability of any provisions hereof shall in no way affect the validity or enforceability of any other provision.          -------------------------------------------------------------------------------- Name     -------------------------------------------------------------------------------- Social Security Number     -------------------------------------------------------------------------------- Signature Date     13 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.48 SEVERANCE AGREEMENT (JACOBS)

  Exhibit 10.60 August 16, 2006       Board of Directors   Mr. O. Edwin French MedCath Corporation   President and Chief Executive Officer 10720 Sikes Place, Suite 300   MedCath Corporation Charlotte, North Carolina 28277   10720 Sikes Place, Suite 300     Charlotte, North Carolina 28277 Re: Resignation from Employment Gentlemen: Please accept this letter as my voluntary resignation from employment with MedCath Corporation effective as of August 21, 2006. I understand that I currently hold fully vested and exercisable options that were granted to me during my employment with the Company to acquire 720,000 shares of the Company’s common stock. However, if I exercised all of such options, 432,000 of the shares acquired in connection with the exercise would be subject to a resale restriction that would prohibit me from selling the shares for three years. In view of such resale restriction, I agree to the cancellation of 432,000 of my options concurrently with my resignation. I understand that the remaining options to purchase 288,000 shares will remain fully exercisable for the 90 calendar day period following the effective date of my resignation and that any shares acquired from the exercise of such remaining options will not be subject to the three-year resale restriction. My resignation does not affect my status, and I will continue to serve as Chairman of the Board of Directors of the Company. My resignation also does not affect any stock options granted to me as a non-employee director of the Company. I understand that the Board of Directors has agreed that I will receive the standard non-employee director fees and stock option grants for my Board service plus an additional $25,000 per year for my service as Chairman of the Board. I would appreciate your having the enclosed copy of this letter signed on behalf of the Company and returning it to me to evidence the Company’s acceptance of my resignation and its agreement to the arrangements and other matters described in this letter.         Very truly yours,       /s/ John T. Casey   John T. Casey       Accepted and Agreed To:       MedCath Corporation       By:   /s/ O. Edwin French           O. Edwin French President and Chief Executive Officer

AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT (this "Amendment"), entered into as of the 21st day of June, 2006, amends that certain Executive Employment Agreement (the "Employment Agreement") dated December 7, 2004 by and between NATCO Group Inc., a corporation organized and existing under the laws of the State of Delaware ("NATCO"), and John U. Clarke (the "Executive"). Capitalized terms used but not defined in this Amendment shall have the meaning set forth in the Employment Agreement WHEREAS, NATCO's Board of Directors (the "Board") has determined that it is in the best interests of NATCO and its stockholders to ensure that NATCO and its affiliates will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a termination of the Executive's employment in certain circumstances, including following a Change in Control as defined herein. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened termination of the Executive's employment in such circumstances and to provide the Executive with compensation and benefits arrangements upon such a termination which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations; and WHEREAS, NATCO desires to continue the Executive in the employment capacity hereinafter set forth and the Executive agrees to accept such employment on the terms and conditions hereinafter set forth; and WHEREAS, NATCO and the Executive mutually desire to amend the terms of the Employment Agreement as set forth below. NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is hereby agreed by and between NATCO and the Executive as follows: 1. Sections 3.6(c) and (d) of the Employment Agreement are hereby amended in their entirety to read as follows: (c) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(b), 3.2(a) or 3.5 within 24 months following a Change of Control, Employee shall be entitled, after execution of a Waiver and Release Agreement in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), (i) to the sum of two times one year's annual base salary payable as follows: half of the base salary shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (ii) a lump sum cash amount equal to the product of two times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date, payable as follows: half of target bonus amount shall be paid within 30 days of the termination date; the remaining half shall be paid at the end of the 6-month period following the termination date; (iii) the continuation of the provision of health insurance, dental insurance and life insurance benefits for a period of 24 months following the date of termination to Employee and Employee's family at least equivalent to and to the same extent as those which would have been provided to them in accordance with this Employment Agreement and the plans, programs, practices and policies of Company as in effect and applicable generally to other peer executives and their families at the date of termination, at the election of Employee, or the cash-equivalent thereof; provided, however, that if the Employee becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein will be secondary to those provided under such other plan during such applicable period of eligibility; and (iv) any bonus compensation that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. In addition, notwithstanding the terms of the any related incentive plan or agreement, or any award agreement evidencing awards of stock options or restricted stock to purchase stock of Company, in the event of a Change of Control while Employee is employed by Company, all outstanding stock options held by Employee shall fully vest as of the Change of Control Date and become immediately exercisable in accordance with their terms, all restrictions on any restricted stock of Company held by Employee shall lapse as of the Change of Control Date, and all vesting and/or performance requirements on any other forms of awards that have been granted to the Executive under any incentive plan shall be automatically accelerated and/or deemed to have been met at target levels, unless such treatment shall cause an award to become subject to the excise tax under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), in which case such treatment shall not apply. In addition, any such stock options shall be exercisable for 12 months after the date of termination, unless the term of the stock options expires before the end of such longer period, in which case the stock option shall be exercisable until the expiration of its term. (d) Upon an Involuntary Termination of the employment relationship by either Company or Employee prior to expiration of the Term pursuant to Section 3.1(b), 3.2(a) or 3.5 within 6 months prior to a Change of Control, Employee shall be entitled, after execution of a Waiver and Release Agreement in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), (i) to the sum of two times one year's annual base salary payable as follows: the full amount of such payment shall be paid at the end of the 6-month period following the termination date, with the amount of such payment to be offset by any payment Employee has previously received under Section 3.6(a)(i); (ii) a lump sum cash amount equal to the product of two times the target bonus compensation at the greater of (A) the target bonus compensation in effect at the time notice of termination is given or (B) the target bonus compensation in effect immediately preceding the Change of Control Date, payable as follows: the full amount of such payment shall be paid at the end of the 6-month period following the termination date, with the amount of such payment to be offset by any payment Employee has previously received under Section 3.6(a)(ii); (iii) the continuation of the provision of health insurance, dental insurance and life insurance benefits for a period of 24 months following the date of termination to Employee and Employee's family at least equivalent to and to the same extent as those which would have been provided to them in accordance with this Employment Agreement and the plans, programs, practices and policies of Company as in effect and applicable generally to other peer executives and their families at the date of termination, at the election of Employee, or the cash-equivalent thereof; provided, however, that if the Employee becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein will be secondary to those provided under such other plan during such applicable period of eligibility; and (iv) any bonus compensation that has been earned under the bonus plan, the payment of which has been deferred under the terms of the bonus plan, will be paid to Employee in accordance with the terms of the bonus plan. In addition, Employee shall receive a cash payment, (x) with respect to any stock option that is forfeited as of the date of his termination of employment, equal to the difference between the closing price of the Company stock as of the Change of Control Date and such option's exercise price (or, if the term of such option would have expired before the Change of Control Date, the difference between the closing price of the Company stock as of the date of such option's expiration date and such option's exercise price), (y) with respect to any restricted stock that is forfeited as of the date of his termination of employment, equal to the closing price of such stock as of the Change of Control Date, and (z) with respect to any other form of incentive compensation award under the Company's long-term incentive compensation plans that is forfeited as of the date of his termination of employment, equal to the amount of such award as of the Change in Control Date with such payments to be made within 30 days of the Change of Control Date. 2. A new Section 8.9 is hereby added to the Agreement: 8.9 Notwithstanding anything to the contrary herein, if the Executive is a "specified employee" (as defined under Section 409A(a)(2)(B)(i) of the Code) at the time of his "separation from service" (as defined under Section 409A(a)(2)(A)(i) of the Code), no payment pursuant to this Agreement or otherwise of any amount or provision of any benefit on account of such separation from service that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code shall be made or commence, as applicable, until the date that is six months after the date of such separation from service (such required period of delay, the "Delay Period"). In the event of any benefit continuations that would otherwise be made available pursuant to this Agreement immediately upon separation from service but for the application of the preceding sentence, the Executive may continue such benefits in accordance with the terms of the applicable plans during the Delay Period and then receive reimbursement from the Company for the cost of such benefit continuations on the date that is six months following his separation from service. Further, in the event that any provision of this Agreement would cause any compensation or benefits to the Executive to become subject to the excise tax under Section 409A of the Code, as determined in the reasonable judgment of [the General Counsel of the Company][the Board], the Executive and the Company shall amend this Agreement in a mutually agreeable manner intended to avoid the application of such tax, to the extent possible and without additional economic effect to the Company. 3. The Executive hereby represents and warrants that the execution and performance of this Amendment will not result in or constitute a default, breach or violation, or an event which, with notice or lapse of time or both, would be a default, breach or violation, of any understanding, agreement or commitment, written or oral, express or implied, to which the Executive is a party or by which the Executive or his property is bound. 4. If any provision of this Amendment or the application hereof is held invalid, the invalidity shall not affect other provisions or application of this Amendment that can be given effect without the invalid provisions or application, and to this end the provisions of this Amendment are declared to be severable. 5. Each party has cooperated in the drafting and preparation of this Amendment. Hence, in any construction to be made of this Amendment, the same shall not be construed against any party on the basis of that party being the "drafter." 6. The Employment Agreement as amended by this Amendment supersedes all prior agreements between the parties concerning the subject matter hereof, other than any and all stock option and restricted stock agreements entered into by and between the Executive and NATCO, and this Amendment and Employment Agreement together constitute the entire Employment Agreement between the parties with respect thereto. The Employment Agreement, as amended hereby, may be modified only with a written instrument duly executed by each of the parties. No person has any authority to make any representations or promises on behalf of any of the parties not set forth herein and the Employment Agreement as amended hereby has not been executed in reliance upon any representation or promise except those contained herein. 7. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. 8. In entering into this Amendment, the parties represent that they have relied upon the advice of their attorneys, who are attorneys of their own choice, and that the terms of this Amendment and the Employment Agreement have been completely read and explained to them by their attorneys, and that those terms are fully understood and voluntarily accepted by them. 9. Except as modified hereby, the terms and provisions of the Employment Agreement shall remain in full force and effect on the date hereof. This Amendment may be executed in separate counterparts, each of which when so executed and delivered will be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, Company and Employee have duly executed this Amendment in multiple originals as of the 21st day of June, 2006. NATCO GROUP INC.     By: /s/ Thomas C. Knudson Thomas C. Knudson Chairman of the Governance, Nominating & Compensation Committee of the Board of Directors JOHN U. CLARKE     /s/ John U. Clarke

EXHIBIT 10.19 WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH DELETIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT COMMERCIAL PLEDGE AGREEMENT THIS COMMERCIAL PLEDGE AGREEMENT is entered into among Nevada Gold & Casinos, Inc., (referred to below as "Borrower"); Nevada Gold BVR, LLC, (referred to below as "Debtor"); and * (referred to below as "Lender"). GRANT OF SECURITY INTEREST. For valuable consideration, Debtor grants to Lender a security interest in the Collateral to secure the Indebtedness. TERMS AND CONDITIONS. This Commercial Pledge Agreement is executed contemporaneously with a Security Agreement entitled, “January 2006 Security Agreement” also known as “1/06 SA,” between Nevada Gold & Casinos, Inc. and *. The terms and conditions of that agreement shall govern the rights and liabilities of the parties hereunder as though: 1.   The text of the “January 2006 Security Agreement” also known as “1/06 SA,” were set forth at length herein. 2.   The obligations of the Debtor herein respecting the collateral shall be the same as the obligations of the Maker under the terms of the “January 2006 Security Agreement” also known as “1/06 SA.” COLLATERAL. The word "Collateral" means all ownership interest of Debtor in a certain promissory note and security agreement executed in favor of Debtor by the Buena Vista Development Company, LLC, in the principal amount of $14,810,200 as attached hereto as exhibit "A".   Together with all Income and Proceeds from the Collateral as defined below.   GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with the Indebtedness. INCOME AND PROCEEDS. The words "Income and Proceeds" mean all present and future income, proceeds. earnings, increases, and substitutions from or for the Collateral of every kind and nature, including without limitation all payments, interest, profits, distributions, benefits, rights, options, warrants, dividends, stock dividends, stock splits. stock rights. regulatory dividends. distributions, subscriptions, monies, claims for money due and to become due, proceeds of any insurance on the Collateral, shares of stock of different par value or no par value issued in substitution or exchange for shares included in the Collateral, and all other property Debtor is entitled to receive on account of such Collateral, including accounts, documents, instruments, chattel paper, and general intangibles.       --------------------------------------------------------------------------------     INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the Note, including all principal and interest, Debtor’s obligations under its Guaranty executed contemporaneously herewith, together with all other obligations, indebtedness, costs and expenses for which Borrower or Debtor is responsible under this Agreement or under any of the Related Documents.   LENDER. The word "Lender" means *, her successors and assigns. NOTE. The word "Note" means that certain Promissory Note executed January 19, 2006 by Borrower payable to Lender in the original principal amount of Fifty Five Million Dollars ($55,000,000.00). RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. The term includes, without limiting the generality of the foregoing, that certain document entitled, “Amended and Restated Credit Facility,” “January 2006 Security Agreement” also known as “1/06 SA,” and “Schedule of Collateral, Notes, Security Interests, and Ownership Interests,” as each of those documents now exists and as modified, increased or extended at any time in the future. Executed this 19th day of January, 2006. Borrower:   Debtor: Nevada Gold & Casinos, Inc.   Nevada Gold BVR, LLC       By its Sole Member, Nevada Gold & Casinos, Inc.           By: /s/ H. Thomas Winn   By: /s/ H. Thomas Winn   Its Chief Executive Officer     Its Chief Executive Officer         --------------------------------------------------------------------------------  

Exhibit 10.1   Summary of 2006 Success Sharing Bonus Plan   Overview and Purpose   The 2006 Success Sharing Bonus Plan (the “SSB Plan”) provides opportunities for all employees of Fargo Electronics, Inc. (the “Company”) to share in the Company’s success by offering incentive compensation for the Company’s achievement of specified performance measures.   Eligibility   All Company employees, both full time and part time, are eligible to participate in the 2006 SSB Plan.  Employees must be employed by the Company on the SSB payout date to receive the bonus payout.   Administration   The specified performance measures are defined each year by the CEO and approved by the Board of Directors.  At the end of each plan year, the CEO, the Compensation and Human Resources Committee and the Board of Directors review the performance measures against the Company’s actual performance to determine the Success Sharing Payout Percentage (defined below) for such plan year.   Success Sharing Payout Percentage   The “Success Sharing Payout Percentage” is determined by the CEO and the Compensation and Human Resources Committee at the end of each fiscal year.  The Success Sharing Payout Percentage is based on the Company’s level of achievement in two categories of performance measures.  While there is no set formula to establish the final Payout Percentage level, Company leadership follows suggested guidelines to determine success or failure under each measure.  The Compensation and Human Resources Committee has the discretion to use, not use or modify the Payout Percentage determined under the suggested guidelines.   The Success Sharing Payout Percentage may range from 0% to 250%, which is then applied to each eligible employee’s Bonus Potential (defined below) to determine the actual bonus payout for each employee.   Performance Measures   Two categories of performance measures have been established for 2006.  Company leadership assigns a percentage “score”, ranging from 0% to 250%, for each category.  The scores are then averaged on a weighted basis according to the guidelines to calculate the overall Success Sharing Payout Percentage.  The two categories of performance measures are:   Return on Net Assets before Interest and Taxes and Sales Growth, Return on Net Assets before Interest and Taxes (calculated by dividing operating profit by the net assets employed in the business), reflecting the Company’s return on its investment in the business, referenced with Sales Growth, comparing current year’s sales to last year’s sales; and   2006 Board Approved Plan, including business and financial objectives established by the Board of Directors.   1 --------------------------------------------------------------------------------   Calculation of Individual Bonus Payouts   Each employee’s individual bonus potential (the “Bonus Potential”) is equal to his or her 2006 pay times an eligibility level percentage based on such employee’s job position, which for officers is 35% and for the CEO is 50%.  The amount of 2006 pay to be included in the calculation of Bonus Potential for officers and the CEO is equal to the employee’s base salary for 2006.  The Company communicates eligibility rates to employees at the time they are hired, and communicates changes in these rates in writing after they have approved by the Company’s Director of Human Resources and the Chief Financial Officer.  As noted above, the Bonus Potential is multiplied by the Success Sharing Payout Percentage to determine the actual bonus payout for each employee.  SSB payouts are subject to deductions for applicable federal and state taxes, Employee Stock Purchase Plan elections and 401(k) contributions.   2 --------------------------------------------------------------------------------

  EXHIBIT 10.3 (LEAP LOGO) [a24360a2436000.gif] LETTER AMENDMENT October 16, 2006 To   Bank of America, N.A., as Collateral Agent under the Security Agreement referred to below Ladies and Gentlemen:           We refer to the Amended and Restated Security Agreement dated as of June 16, 2006 (as amended in accordance with its terms, the “Security Agreement”) among Cricket Communications, Inc., as Borrower (the “Borrower”), Leap Wireless International, Inc. (“Holdings”), as a guarantor, the other Grantors referred to therein and you. Capitalized terms not otherwise defined in this Letter Amendment have the same meanings as specified in the Credit Agreement.           It has come to the attention of the Grantors that pursuant to Section 1(f)(i) of the Security Agreement, we have granted a security interest in the “Other Deposit Accounts” and not in our deposit accounts which are not included in the definition of Other Deposit Accounts. Pursuant to Section 5 of the Security Agreement, Other Deposit Accounts are those accounts which are intended to be exceptions to the requirements that we perfect your security interest in deposit accounts. The intention of the parties was that all deposit accounts constitute Account Collateral, but that Other Deposit Accounts be excluded from the requirements of Section 5 of the Security Agreement as they relate to perfection of security interests. Therefore it is hereby agreed that Section 1(f)(i) is amended by (a) substituting for the phrase “the Other Deposit Accounts” where it appears in the first and second lines thereof the phrase “all deposit accounts” and (b) substituting for the phrase “the Other Deposit Account” where it appears in the last line thereof the phrase “all other deposit accounts”.           This Letter Amendment shall become effective as of the date first above written when, and only when, the Collateral Agent shall have executed this Letter Amendment and shall have received counterparts of this Letter Amendment executed by each Grantor.           The Security Agreement, the Credit Agreement, the Notes and each of the other Loan Documents, as amended hereby, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, except to the extent of the amendment set forth herein, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.           If you agree to the terms and provisions of this Letter Amendment, please evidence such agreement by executing and returning at least two counterparts of this Letter Amendment to Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022, Attention: Monica Holland, telecopier number: 646-848-5338.           This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Letter Amendment. [Remainder of page intentionally left blank.] 1 --------------------------------------------------------------------------------             This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.             Very truly yours, CRICKET COMMUNICATIONS, INC.     By  /s/ Robert J. Irving, Jr.          Name:         Title:                  LEAP WIRELESS INTERNATIONAL, INC.       By  /s/ Robert J. Irving, Jr.          Name:         Title:      BACKWIRE.COM, INC. TELEPHONE ENTERTAINMENT NETWORK, INC. CHASETEL LICENSEE CORP. CRICKET LICENSEE (ALBANY), INC. CRICKET LICENSEE (COLUMBUS), INC. CRICKET LICENSEE (DENVER) INC. CRICKET LICENSEE (LAKELAND) INC. CRICKET LICENSEE (MACON),INC. CRICKET LICENSEE (NORTH CAROLINA) INC. CRICKET LICENSEE (PITTSBURGH) INC. CRICKET LICENSEE (REAUCTION), INC. CRICKET LICENSEE I, INC. CRICKET LICENSEE II, INC. CRICKET LICENSEE III, INC. CRICKET LICENSEE IV, INC. CRICKET LICENSEE V, INC. CRICKET LICENSEE VI, INC. CRICKET LICENSEE VII, INC. CRICKET LICENSEE VIII, INC. CRICKET LICENSEE IX, INC. CRICKET LICENSEE X, INC. CRICKET LICENSEE XII, INC. CRICKET LICENSEE XIII, INC. CRICKET LICENSEE XIV, INC. 2 --------------------------------------------------------------------------------   CRICKET LICENSEE XV, INC. CRICKET LICENSEE XVI, INC. CRICKET LICENSEE XVII, INC. CRICKET LICENSEE XVIII, INC. CRICKET LICENSEE XIX, INC. CRICKET LICENSEE XX, INC. CRICKET HOLDINGS DAYTON, INC. MCG PCS LICENSEE CORPORATION, INC. CHASETEL REAL ESTATE HOLDING COMPANY, INC. CRICKET ALABAMA PROPERTY COMPANY CRICKET ARIZONA PROPERTY COMPANY CRICKET ARKANSAS PROPERTY COMPANY CRICKET CALIFORNIA PROPERTY COMPANY CRICKET COLORADO PROPERTY COMPANY CRICKET FLORIDA PROPERTY COMPANY CRICKET GEORGIA PROPERTY COMPANY, INC. CRICKET IDAHO PROPERTY COMPANY CRICKET ILLINOIS PROPERTY COMPANY CRICKET INDIANA PROPERTY COMPANY CRICKET KANSAS PROPERTY COMPANY CRICKET KENTUCKY PROPERTY COMPANY CRICKET MICHIGAN PROPERTY COMPANY CRICKET MINNESOTA PROPERTY COMPANY CRICKET MISSISSIPPI PROPERTY COMPANY CRICKET NEBRASKA PROPERTY COMPANY CRICKET NEVADA PROPERTY COMPANY CRICKET NEW MEXICO PROPERTY COMPANY CRICKET NEW YORK PROPERTY COMPANY, INC. CRICKET NORTH CAROLINA PROPERTY COMPANY CRICKET OHIO PROPERTY COMPANY CRICKET OKLAHOMA PROPERTY COMPANY CRICKET OREGON PROPERTY COMPANY CRICKET PENNSYLVANIA PROPERTY COMPANY CRICKET TEXAS PROPERTY COMPANY CRICKET UTAH PROPERTY COMPANY CRICKET WASHINGTON PROPERTY COMPANY CRICKET WISCONSIN PROPERTY COMPANY 3 --------------------------------------------------------------------------------               LEAP PCS MEXICO, INC.       By  /s/ Robert J. Irving, Jr.          Name:         Title:                  Agreed as of the date first above written: BANK OF AMERICA, N.A., as Collateral Agent       By  /s/ Scott Conner          Name: Scott Conner         Title:   Vice President      4

  Exhibit 10.96 BEARINGPOINT, INC. RESTRICTED STOCK UNIT AGREEMENT      THIS RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”), dated September 19, 2006 (the “Grant Date”), evidences an award of restricted stock units made by BearingPoint, Inc., a Delaware corporation (the “Company”), to Judy Ethell (the “Executive”), each of which represents the right to receive on settlement cash or one (1) share of common stock, $0.01 par value of the Company (the “Common Stock”).      WHEREAS, the Executive will be the Executive Vice President — Finance and Chief Accounting Officer of the Company, and her services will be of vital importance to the business success of the Company; and      WHEREAS, the Company has determined that it is in the best interests of the Company and its stockholders to grant the Executive the restricted stock units, as provided in this Agreement, as a material inducement for the Executive to join the Company and to contribute to its business success.      NOW, THEREFORE, the Company makes an award of restricted stock units to the Executive, subject to the following terms and conditions:      1. Grant of Restricted Stock Units.                a. On September 19, 2006 (the “Grant Date”), the Executive shall acquire, subject to the provisions of this Agreement, 292,000 restricted stock units (the “Restricted Stock Units”), subject to adjustment as provided in Section 8. Each Restricted Stock Unit consists of a bookkeeping entry representing the right to receive on a date determined in accordance with this Agreement either (i) one share of Common Stock or (ii) cash equal to the Fair Market Value of one share of Common Stock.                b. The Executive is not required to make any monetary payment (other than applicable tax withholding, if any, and payment of the par value of the Common Stock, if required by law) as a condition to receiving cash or shares of Common Stock issued upon settlement of the Restricted Stock Units. The consideration for the Restricted Stock Units shall be future services to be rendered to the Company or for its benefit.      2. Vesting of Restricted Stock Units.                a. Except as provided in Sections 2(b), 4 and 7(a), the Restricted Stock Units shall become 100% vested and nonforfeitable (i) on each date (the “Vesting Date”) set forth below, provided the Executive remains continuously employed through the Vesting Date: - 1 - --------------------------------------------------------------------------------             Vesting Date   Number of Restricted Stock Units Grant Date     204,400   July 1, 2007     29,200   July 1, 2008     29,200   July 1, 2009     29,200   or (ii) notwithstanding clause (i), on the death or Disability of the Executive. “Disability” shall mean the inability of the Executive to perform substantially her duties and responsibilities for a continuous period of at least six months, as determined solely by the Compensation Committee of the Board of Directors of the Company (the “Committee”).                b. Notwithstanding the provisions of Section 2(a), vesting of the Restricted Stock Units that is scheduled to occur on July 1 in each of the years 2007 — 2009 shall be subject to the achievement of the following goals: i. all of the Company’s SEC filings (beginning with the Company’s 2005 Form 10-K) being filed on a timely basis as of such Vesting Date or the Executive having exerted her reasonable best efforts to have the Company’s SEC filings materially complete as of such date, and ii. the Executive having exerted her reasonable best efforts to move the Company forward on a path to becoming a “world class financial organization.” For these purposes, a “world class financial organization” shall mean an organization that satisfies the criteria mutually established by the Executive and the Chief Executive Officer of the Company.      3. Termination of Employment. In the event that the Executive’s employment terminates for any reason or no reason, with or without “Cause”, the Executive shall forfeit and the Company shall automatically reacquire all Restricted Stock Units which are not, as of time of such termination, vested, and the Executive shall not be entitled to any payment or other consideration therefore, provided, however, that on the termination of the Executive’s employment by the Company without Cause or by the Executive for Good Reason, the portion of the Restricted Stock Units that is scheduled to vest on the next anniversary of the Grant Date shall vest on the date of the Executive’s termination. “Good Reason” shall have the meaning set forth in the employment letter entered into by the Executive and the Company as of June 22, 2005 (the “Employment Letter”).      4. Termination of Restricted Stock Units and Forfeiture of Restricted Stock Units Gain.                a. If the Executive:                     i. breaches any covenant concerning confidentiality or intellectual property or concerning noncompetition or nonsolicitation of clients, prospective clients or personnel of the Company and its Affiliates to which the Executive is or may become a party in the future; - 2 - --------------------------------------------------------------------------------                       ii. fails (A) to complete on a timely basis all current and future training relating to the Company’s policies and procedures, including financial reporting and timekeeping training, (B) to consistently follow all Company policies and procedures and to confirm that the employees the Executive supervises are following such Company policies and procedures, (C) to meet such cash collection goals, if any, as are established for the Executive by the Company from time to time or (D) to participate in the Company’s variable compensation program; or                     iii. is terminated for “Cause;” then, in addition to and without in any way limiting any remedies under any of the covenants described above in this Section 4(a) or otherwise:                          (A) any unvested Restricted Stock Units and any vested Restricted Stock Units that have not settled as provided in Section 5(a) shall be forfeited automatically on the date the Executive commits such breach as is specified in clause (i), fails to act as specified in clause (ii) or is terminated for “Cause;” and                          (B) in the event of a breach described in Section 4(a)(i), the Executive shall pay the Company, within five business days of receipt by the Executive of a written demand therefor, an amount in cash equal to the aggregate of (i) cash received in settlement of Restricted Stock Units and (ii) the amount determined by multiplying the number of shares of Common Stock issued in settlement of Restricted Stock Units prior to the date the Executive breaches such covenant (without reduction for any shares of Common Stock delivered by the Executive or withheld by the Company pursuant to Section 6(c)) by the Fair Market Value of a share of Common Stock on the date the shares of Common Stock were issued to the Executive; and                          (C) in the event of a breach described in Section 4(a)(ii) or if the Executive is terminated for Cause other than for a breach referenced in Section 4(a)(i), the Executive shall pay the Company, within five business days of receipt by the Executive of a written demand therefor, an amount in cash equal to 50% of the aggregate of (i) cash received in settlement of Restricted Stock Units and (ii) the amount determined by multiplying the number of shares of Common Stock issued in settlement of Restricted Stock Units prior to the date of the breach described in Section 4(a)(ii) or the date the Executive is terminated for Cause other than for a breach referenced in Section 4(a)(i) (without reduction for any shares of Common Stock delivered by the Executive or withheld by the Company pursuant to Section 6(c)) by the Fair Market Value of a share of Common Stock on the date the shares of Common Stock were issued to the Executive; and                          (D) the Executive shall pay any damages in excess of the amounts paid to the Company under clauses (B) or (C) above.                b. The Executive agrees that by executing this Agreement, the Executive authorizes the Company and its Affiliates to deduct any amount or amounts owed by the Executive pursuant to Section 4(a) from any amounts payable by the Company or any Affiliate to the Executive, including, without limitation, any amount payable to the Executive as salary, - 3 - --------------------------------------------------------------------------------   wages, vacation pay or bonus. This right of setoff shall not be an exclusive remedy, and the Company’s or an Affiliate’s election not to exercise this right of setoff with respect to any amount payable to the Executive shall not constitute a waiver of this right of setoff with respect to any other amount payable to the Executive or any other remedy.           c. “Cause” shall mean the occurrence, failure to cause the occurrence or failure to cure after the occurrence (when a cure is permitted), as the case may be, of any of the following circumstances after the Executive’s receipt of written notification from the General Counsel which includes a detailed description of the claimed circumstance: (i) the Executive’s embezzlement, misappropriation of corporate funds, or the Executive’s material acts of dishonesty; (ii) the Executive’s commission or conviction of any felony or of any misdemeanor involving moral turpitude, or entry of a plea of guilty or nolo contendre to any felony or misdemeanor involving moral turpitude; (iii) the Executive’s engagement, without a reasonable belief that her action was in the best interests of the Company, in any activity that could harm the business or reputation of the Company in a material manner; (iv) the Executive’s willful failure to adhere to the Company’s material corporate codes, policies or procedures that have been communicated to her; (v) the Executive’s material breach of any provision of the managing director agreement entered into by the Executive and the Company effective July 1, 2005 (the “Managing Director Agreement”) or the Employment Letter; or (vi) the Executive’s violation of any statutory or common law duty or obligation to the Company, including, without limitation, the duty of loyalty, provided, however, that in the case of subsections (iii), (iv), (v) and (vi), the Company shall provide the Executive with the opportunity to cure any Cause event during the 15-day period after her receipt of written notice describing the Cause event, provided, however, that a Cause event shall be considered to be cured only if all adverse consequences of the Cause event have been fully remedied.      5. Settlement of the Restricted Stock Units.           a. Issuance of Shares of Common Stock or Cash. Subject to the provisions of Sections 5(c) - (e), the Company shall issue to the Executive (i) cash, (ii) the number of shares of Common Stock that is equal to the number of vested Restricted Stock Units after any adjustments under Section 8 or (iii) a combination of cash or shares of Common Stock, provided, however, that it shall be in the Company’s sole discretion whether the issuance shall be in the form specified in clause (i), (ii) or (iii) and provided further that any Restricted Stock Units that vest as a result of the death or Disability of the Executive shall be settled in full on the next Vesting Date that occurs after the death or Disability of the Executive. Notwithstanding the foregoing, the Executive may defer payment of any vested Restricted Stock Units, provided any such election to defer and deferral agreement comply in all respects with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and, at the request of the Executive, the Company shall amend this Agreement to the extent necessary for the deferral to comply with Code Section 409 A. If the Company elects to pay the Executive in cash, the payment shall equal the Fair Market Value of the number of shares of Common Stock on the Settlement Date, as defined below, that is equal to the number of vested Restricted Stock Units after any adjustments under Section 8. For purposes of this Agreement, “Fair Market Value” shall mean the last sale price of a share of Common Stock as reported on the New York Common Stock Exchange on the date as of which such value is being determined or, if there shall be no reported transactions on - 4 - --------------------------------------------------------------------------------   such date, on the next preceding date for which a transaction was reported; provided, however. that if the Common Stock is not traded on the New York Common Stock Exchange, Fair Market Value may be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate.           b. Settlement Schedule. Except for any deferred amounts, and subject to any restriction on transfer pursuant to Sections 5(c)-(e), the Restricted Stock Units shall be settled as provided in Section 5(a), and any Common Stock that is issued at settlement may be sold, in accordance with the following schedule (the “Settlement Schedule).           Settlement of RSUs     and Permissible     Sale Dates   Number of RSUs Grant Date     131,400   July 1, 2007     43,800   July 1, 2008     29,200   July 1, 2009     29,200   July 1, 2010     29,200   July 1, 2011     29,200             c. Restrictions on Grant of the Restricted Stock Units and Issuance of Shares. The grant of the Restricted Stock Units and issuance of shares of Common Stock upon settlement of the Restricted Stock Units shall be subject to and in compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No shares of Common Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance of any shares subject to the Restricted Stock Units shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Restricted Stock Units, the Company may require the Executive to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.           d. Restrictions upon Certain Terminations of Employment. If the Executive terminates her employment, other than for Good Reason or on account of death or Disability, then (i) the Company shall not issue to the Executive any additional shares of Common Stock underlying outstanding vested Restricted Stock Units pursuant to Section 5(a) of this Agreement until July 1, 2015, at which time any outstanding vested Restricted Stock Units shall be settled as provided in Section 5 (a), and (ii) the Executive shall not sell, assign, alienate, pledge, attach or otherwise transfer or encumber any shares of Common Stock previously issued to the Executive pursuant to Section 5(a) until July 1, 2015. - 5 - --------------------------------------------------------------------------------             e. Restrictions on Sale of Shares. Until July 1, 2015, the Executive shall not transfer any shares of Common Stock received upon the settlement of Restricted Stock Units pursuant to Section 5(a) except (i) in sales, redemptions or other transactions, underwritten public offerings or share repurchases, in each case as approved in writing by the Company either specifically or by general policy, or (ii) to estate and/or tax planning vehicles, family members and charitable organizations that become bound hereby by express agreement, in each case as approved in writing by the Company (which approval may be subject to such other conditions, including the requirement that any transferee become bound by any other agreement, as the Company may, in its sole discretion, require). The Company shall use its reasonable efforts to facilitate the sales, redemptions or other transactions, underwritten public offerings or share repurchases referred to in clause (i) of the preceding sentence, at the Company’s expense, promptly after each settlement of the Restricted Stock Units. The Executive agrees that, in the Company’s sole discretion, and until July 1, 2015, all of his or her shares of Common Stock shall either (i) bear legends that reflect the restrictions imposed by this Section 5 or (ii) be held in custody by a custodian designated by the Company.           f. Registration of Shares. Shares issued in settlement of the Restricted Stock Units shall be registered in the name of the Executive, or, if applicable, in the names of the heirs of the Executive. Such shares may be issued either in certificated or book entry form. In either event, the certificate or book entry account shall bear such restrictive legends or restrictions as the Company, in its sole discretion, shall require.           g. Fractional Shares. The Company shall not be required to issue fractional shares upon the settlement of the Restricted Stock Units.           h. Dividend Equivalents. As of each dividend payment date for each cash dividend on the Common Stock, the Company shall award the Executive additional restricted stock units, which shall be subject to the same terms and conditions as the Restricted Stock Units granted pursuant to this Agreement. The number of additional restricted stock units to be granted shall equal: (i) the product of (x) the per-share cash dividend payable with respect to each share of Common Stock on that date, multiplied by (y) the total number of Restricted Stock Units which have not been paid or forfeited as of the record date for such dividend, divided by (ii) the Fair Market Value of one share of Common Stock on the payment date of such dividend. The number of additional Restricted Stock Units to be granted if the dividend is paid in the form of Common Stock shall be determined in accordance with Section 8 of this Agreement. - 6 - --------------------------------------------------------------------------------        6. Withholding Taxes.           a. In General. Unless Section 6(b) or 6(c) applies, the Executive shall pay to the Company, or make provision satisfactory to the Company for payment of, any federal, state, local or foreign taxes required by law to be withheld with respect to the issuance of shares of Common Stock in settlement thereof, no later than the date on which such withholding is required under applicable law. The Company shall have no obligation to deliver shares of Common Stock until the tax withholding obligations of the Company have been satisfied by the Executive.           b. Payment in Cash. The Company shall withhold from any payment under Section 5 the amount of any federal, state, local or foreign taxes required by law to be withheld with respect to the settlement of the Restricted Stock Units in cash.           c. Payment in Shares. The Executive may satisfy all or any portion of the Company’s tax withholding obligations by requesting the Company to withhold a number of whole shares of Common Stock otherwise deliverable to the Executive in settlement of the Restricted Stock Units having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates. Any adverse consequences to the Executive resulting from the procedure permitted under this Section 6(c), including, without limitation, tax consequences, shall be the sole responsibility of the Executive.      7. Change in Control.           a. In addition to the provisions of the Special Termination Agreement entered into by the Executive and the Company effective July 1, 2005, in the event of a Change in Control, as defined in Section 7(b), of the Company, the Restricted Stock Units shall become 100% vested and nonforfeitable effective as of the date of the Change in Control. The Restricted Stock Units shall be settled in accordance with Section 4 on the date of the Change in Control to the extent that the Restricted Stock Units are neither assumed nor continued in connection with the Change in Control.           b. For purposes of this Agreement, “Change in Control” means:           (A) a sale or transfer of all or substantially all of the assets of the Company on a consolidated basis in any transaction or series of related transactions;           (B) any merger, consolidation or reorganization to which the Company is a party, except for a merger, consolidation or reorganization in which the Company is the surviving corporation and, after giving effect to such merger, consolidation or reorganization, the holders of the Company’s outstanding equity (on a fully diluted basis) immediately prior to the merger, consolidation or reorganization will own in the aggregate immediately following the merger, consolidation or reorganization the Company’s - 7 - --------------------------------------------------------------------------------   outstanding equity (on a fully diluted basis) either (i) having the ordinary voting power to elect a majority of the members of the Company’s board of directors to be elected by the holders of Common Stock and any other class which votes together with the Common Stock as a single class or (ii) representing at least 50% of the equity value of the Company as reasonably determined by the Committee;           (C) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the holders of the Company’s equity, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened solicitation by any individual, entity or group (a “Person”) other than the Board, including any “person” within the meaning of Section 13(d) of the Exchange Act, for the purpose of opposing a solicitation by any other Person with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board; or           (D) any Person acquires beneficial ownership of 30% or more of the outstanding equity of the Company generally entitled to vote on the election of directors.      8. Adjustments for Changes in Capital Structure. In the event of any Common Stock split, reverse Common Stock split, Common Stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number and class of securities subject to the Restricted Stock Units shall be appropriately adjusted by the Committee. If any adjustment would result in a fractional share being subject to the Restricted Stock Units, the Company shall pay the Executive, in connection with the first vesting of the Restricted Stock Units occurring after such adjustment, an amount in cash determined by multiplying (i) the fraction of such share (rounded to the nearest hundredth) by (ii) the Fair Market Value on the vesting date. The decision of the Committee regarding any such adjustment shall be final, binding and conclusive.      9. Rights as a Shareholder. The Executive shall have no rights as a stockholder with respect to any shares which may be issued in settlement of the Restricted Stock Units until the date of the issuance of a certificate for such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Sections 5(h) and 8.      10. No Employment Rights. The Executive understands and acknowledges that, except as otherwise provided in the Employment Letter or the Managing Director Agreement, as the case may be, the Executive’s employment is “at will” and is for no specified term. Nothing in this Agreement shall confer upon the Executive any right to continue in the employment of the - 8 - --------------------------------------------------------------------------------   Company or interfere in any way with any right of the Company to terminate the Executive’s employment at any time.      11. Legends. The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of Common Stock issued pursuant to this Agreement. The Executive shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Agreement in the possession of the Executive in order to carry out the provisions of this Section.      12. Nontransferability of Restricted Stock Units. Prior to the issuance of shares of Common Stock on the Settlement Date, neither this Agreement nor any of the Restricted Stock Units subject to this Agreement shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Executive or the Executive’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Agreement shall be exercisable during the Executive’s lifetime only by the Executive or the Executive’s guardian or legal representative.      13. Amendment. The Committee may amend this Agreement at any time; provided, however, that no such amendment may adversely affect the Participant’s rights under this Agreement without the consent of the Participant, except to the extent such amendment is reasonably determined by the Committee in its sole discretion to be necessary to comply with applicable law. No amendment or addition to this Agreement shall be effective unless in writing.      14. Administration of this Agreement. All questions of interpretation concerning this Agreement shall be determined by the Committee. All determinations by the Committee shall be final and binding upon all persons having an interest in this Agreement.      15. Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Executive and the Executive’s heirs, executors, administrators, successors and assigns.      16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, other than the conflict of laws principles thereof.      17. Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. - 9 - --------------------------------------------------------------------------------        18. Employment Letter. In the event of a conflict between the provisions of this Agreement and the provisions of the Employment Letter, this Agreement shall control as to the number of Restricted Stock Units granted, the date of the grant, the vesting schedule, and the settlement schedule, but the Employment Letter shall control as to all other terms.      IN WITNESS WHEREOF, the Company has caused this Agreement to be exercised by its duly authorized officer effective as of the Grant Date.               BEARINGPOINT, INC.                   Harry L. You         Chief Executive Officer     - 10 - --------------------------------------------------------------------------------   Acknowledgement, Acceptance and Agreement: By signing below and returning this Restricted Stock Unit Agreement to Lauren C. Lutz, General Counsel and Secretary, BearingPoint, Inc., I hereby acknowledge receipt of the Agreement, accept the RSUs granted to me, and agree to be bound by the terms and conditions of the Agreement.               /s/ Judy Ethell   Signature       10/3/06   Date                   Judy Ethell   Print Name             - 11 -

Exhibit 10.5   EMPLOYMENT AGREEMENT     Between Mirant Corporation and Robert E. Driscoll   THIS AGREEMENT is made as of                                     , 2006 between Mirant Corporation (the “Company”), Mirant Services, LLC (“Services”) and Robert E. Driscoll (“Executive”).   In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:   1. EMPLOYMENT. THE COMPANY AND SERVICES SHALL EMPLOY EXECUTIVE, AND EXECUTIVE HEREBY ACCEPTS EMPLOYMENT WITH THE COMPANY AND SERVICES, UPON THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT, FOR THE PERIOD BEGINNING ON JANUARY 3, 2006 (THE “COMMENCEMENT DATE”) AND ENDING AS PROVIDED IN SECTION 4 HEREOF (THE “EMPLOYMENT PERIOD”).   2. POSITION AND DUTIES.   (A) DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL SERVE AS MIRANT’S SENIOR VICE PRESIDENT AND HEAD OF ASSET MANAGEMENT – US REGION. DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL RENDER SUCH ADMINISTRATIVE, FINANCIAL AND OTHER EXECUTIVE AND MANAGERIAL SERVICES TO THE COMPANY AND ITS AFFILIATES (THE “COMPANY GROUP”) AS ARE CONSISTENT WITH EXECUTIVE’S POSITION AND THE BY-LAWS OF THE COMPANY AND AS THE CHIEF EXECUTIVE OFFICER (“CEO”) AND EXECUTIVE VICE PRESIDENT AND US REGION HEAD MAY FROM TIME TO TIME REASONABLY DIRECT. EXECUTIVE SHALL ALSO SERVE FOR NO ADDITIONAL COMPENSATION OR REMUNERATION AS AN OFFICER OR DIRECTOR OF SUCH SUBSIDIARIES OF THE COMPANY AS MAY FROM TIME TO TIME BE DESIGNATED BY THE BOARD.   (B) DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL REPORT TO THE EXECUTIVE VICE PRESIDENT AND US REGION HEAD AND SHALL DEVOTE HIS BEST EFFORTS AND HIS FULL BUSINESS TIME AND ATTENTION (EXCEPT FOR PERMITTED VACATION PERIODS AND REASONABLE PERIODS OF ILLNESS OR OTHER INCAPACITY) TO THE BUSINESS AND AFFAIRS OF THE COMPANY. EXECUTIVE SHALL PERFORM HIS DUTIES, RESPONSIBILITIES AND FUNCTIONS TO THE COMPANY HEREUNDER TO THE BEST OF HIS ABILITIES IN A DILIGENT, TRUSTWORTHY, PROFESSIONAL AND EFFICIENT MANNER AND SHALL COMPLY WITH THE COMPANY’S POLICIES AND PROCEDURES IN ALL MATERIAL RESPECTS. IN PERFORMING HIS DUTIES AND EXERCISING HIS AUTHORITY UNDER THIS AGREEMENT, EXECUTIVE SHALL SUPPORT AND IMPLEMENT THE BUSINESS AND STRATEGIC PLANS APPROVED FROM TIME TO TIME BY THE BOARD AND SHALL SUPPORT AND COOPERATE WITH THE COMPANY’S EFFORTS TO OPERATE PROFITABLY AND IN CONFORMITY WITH THE BUSINESS AND STRATEGIC PLANS APPROVED BY THE BOARD. DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL NOT SERVE AS AN OFFICER OR DIRECTOR OF, OR OTHERWISE PERFORM SERVICES FOR COMPENSATION FOR, ANY OTHER ENTITY WITHOUT THE PRIOR WRITTEN   --------------------------------------------------------------------------------   CONSENT OF THE BOARD WHICH SHALL NOT BE UNREASONABLY WITHHELD; PROVIDED, HOWEVER, THAT THE BOARD HEREBY CONSENTS TO EXECUTIVE’S SERVICE ON AND AFTER THE COMMENCEMENT DATE AS A DIRECTOR OF EACH OF THE CORPORATIONS LISTED ON EXHIBIT A. EXECUTIVE MAY SERVE AS AN OFFICER OR DIRECTOR OF OR OTHERWISE PARTICIPATE IN PURELY EDUCATIONAL, WELFARE, SOCIAL, RELIGIOUS AND CIVIC ORGANIZATIONS SO LONG AS SUCH ACTIVITIES DO NOT MATERIALLY INTERFERE WITH EXECUTIVE’S REGULAR PERFORMANCE OF DUTIES AND RESPONSIBILITIES HEREUNDER. NOTHING CONTAINED HEREIN SHALL PRECLUDE EXECUTIVE FROM (I) ENGAGING IN CHARITABLE AND COMMUNITY ACTIVITIES, (II) PARTICIPATING IN INDUSTRY AND TRADE ORGANIZATION ACTIVITIES, (III) MANAGING HIS AND HIS FAMILY’S PERSONAL INVESTMENTS AND AFFAIRS, AND (IV) DELIVERING LECTURES, FULFILLING SPEAKING ENGAGEMENTS OR TEACHING AT EDUCATIONAL INSTITUTIONS, PROVIDED THAT SUCH ACTIVITIES DO NOT MATERIALLY INTERFERE WITH THE REGULAR PERFORMANCE OF HIS DUTIES AND RESPONSIBILITIES UNDER THIS AGREEMENT.   3. COMPENSATION AND BENEFITS.   (A)                                  THE COMPANY SHALL PAY EXECUTIVE AN ANNUAL SALARY (THE “BASE SALARY”) AT THE RATE OF $280,000.00 IN REGULAR INSTALLMENTS IN ACCORDANCE WITH THE COMPANY’S ORDINARY PAYROLL PRACTICES (IN EFFECT FROM TIME TO TIME), BUT IN ANY EVENT NO LESS FREQUENTLY THAN MONTHLY.   (A) BONUSES AND INCENTIVE COMPENSATION.   (I)                                     ANNUAL BONUS. FOR EACH FISCAL YEAR DURING THE EMPLOYMENT PERIOD, EXECUTIVE WILL BE ELIGIBLE TO EARN AN ANNUAL BONUS BASED ON ACHIEVEMENT OF PERFORMANCE CRITERIA THAT ARE APPLICABLE TO MEMBERS OF THE COMPANY’S EXECUTIVE COMMITTEE ESTABLISHED BY THE BOARD AS SOON AS ADMINISTRATIVELY PRACTICABLE FOLLOWING THE BEGINNING OF EACH SUCH FISCAL YEAR (THE “ANNUAL BONUS”). THE TARGET AMOUNT (THE “TARGET BONUS”) OF EXECUTIVE’S ANNUAL BONUS SHALL EQUAL 50% OF EXECUTIVE’S BASE SALARY (AT THE ANNUAL RATE IN EFFECT AT THE START OF THE FISCAL YEAR), WITH A MAXIMUM ANNUAL BONUS IN AN AMOUNT EQUAL TO 100% OF EXECUTIVE’S BASE SALARY (AT THE ANNUAL RATE IN EFFECT AT THE START OF THE FISCAL YEAR). THE COMPANY SHALL PAY THE ANNUAL BONUS FOR EACH FISCAL YEAR IN A SINGLE CASH LUMP SUM AFTER THE END OF THE COMPANY’S FISCAL YEAR IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE BOARD, BUT IN NO EVENT LATER THAN TWO AND A HALF MONTHS FOLLOWING THE END OF SUCH FISCAL YEAR.   (II)                                  EMERGENCE EQUITY GRANT. THE COMPANY SHALL GRANT EXECUTIVE A COMBINATION OF RESTRICTED STOCK UNITS (“RESTRICTED STOCK UNITS”) THAT ARE TO BE SETTLED IN COMMON STOCK OF THE COMPANY (“COMMON STOCK”) AND OPTIONS TO PURCHASE COMMON STOCK (“STOCK OPTIONS”) WITH AN AGGREGATE ECONOMIC VALUE OF $800,000 (SUCH GRANT OF RESTRICTED STOCK UNITS AND STOCK OPTIONS ARE TOGETHER REFERRED TO AS THE “EXECUTIVE LTIP”). THE $800,000 AGGREGATE ECONOMIC VALUE OF THE RESTRICTED STOCK UNITS AND STOCK OPTIONS TO BE AWARDED UNDER THE EXECUTIVE LTIP SHALL BE DETERMINED IN THE GOOD FAITH JUDGMENT OF THE COMPENSATION COMMITTEE OF THE BOARD TAKING INTO ACCOUNT THE REQUIREMENTS SET FORTH IN (A) AND (B) BELOW.   (A)                              TEN DAYS FOLLOWING THE COMPANY’S EMERGENCE FROM BANKRUPTCY PROTECTION (THE “EMERGENCE DATE”) UNDER CHAPTER 11 OF TITLE 11 OF THE UNITED STATES CODE, EXECUTIVE SHALL BE AWARDED RESTRICTED STOCK UNITS AND STOCK OPTIONS WITH AN AGGREGATE VALUE OF   2 --------------------------------------------------------------------------------   $400,000, WITH ONE-THIRD OF SUCH VALUE TO CONSIST OF RESTRICTED STOCK UNITS. THE EXACT NUMBER OF RESTRICTED STOCK UNITS TO BE AWARDED TEN DAYS FOLLOWING THE EMERGENCE DATE SHALL BE DETERMINED SOLELY BASED ON THE AVERAGE OF THE DAILY CLOSING PRICE OF A SHARE OF COMMON STOCK ON THE NEW YORK STOCK EXCHANGE OR, IF THE COMMON STOCK IS NOT TRADED ON THE NEW YORK STOCK EXCHANGE, THE AVERAGE OF THE MIDPOINT OF THE DAILY BID AND ASK PRICE OF A SHARE OF COMMON STOCK ON THE OTC BULLETIN BOARD, FROM THE EMERGENCE DATE TO THE DATE OF GRANT OF SUCH RESTRICTED STOCK UNITS, WITHOUT ANY DISCOUNT BASED ON VESTING REQUIREMENTS OR LACK OF TRANSFERABILITY. THE STOCK OPTIONS GRANTED TEN DAYS FOLLOWING THE EMERGENCE DATE SHALL HAVE AN EXERCISE PRICE PER SHARE EQUAL TO THE CLOSING PRICE OF A SHARE OF COMMON STOCK ON THE NEW YORK STOCK EXCHANGE OR, IF THE COMMON STOCK IS NOT TRADED ON THE NEW YORK STOCK EXCHANGE, THE MIDPOINT OF THE BID AND ASK PRICE OF A SHARE OF COMMON STOCK ON THE OTC BULLETIN BOARD, ON THE DATE OF GRANT OF SUCH STOCK OPTIONS. SUCH STOCK OPTIONS SHALL HAVE A TEN-YEAR TERM. THE EXACT NUMBER OF STOCK OPTIONS GRANTED TEN DAYS FOLLOWING THE EMERGENCE DATE SHALL BE DETERMINED BASED UPON A BLACK-SCHOLES OR OTHER VALUATION MODEL, USING REASONABLE ASSUMPTIONS AS DETERMINED IN GOOD FAITH BY THE COMPENSATION COMMITTEE OF THE BOARD.   (B)                                FORTY FIVE DAYS AFTER THE EMERGENCE DATE, EXECUTIVE SHALL BE AWARDED RESTRICTED STOCK UNITS AND STOCK OPTIONS WITH AN AGGREGATE VALUE OF $400,000, WITH ONE-THIRD OF SUCH VALUE TO CONSIST OF RESTRICTED STOCK UNITS. THE EXACT NUMBER OF RESTRICTED STOCK UNITS TO BE AWARDED 45 DAYS AFTER THE EMERGENCE DATE SHALL BE DETERMINED SOLELY BASED ON THE AVERAGE OF THE DAILY CLOSING PRICE OF A SHARE OF COMMON STOCK ON THE NEW YORK STOCK EXCHANGE OR, IF THE COMMON STOCK IS NOT TRADED ON THE NEW YORK STOCK EXCHANGE, THE AVERAGE OF THE MIDPOINT OF THE DAILY BID AND ASK PRICE OF A SHARE OF COMMON STOCK ON THE OTC BULLETIN BOARD, FROM THE EMERGENCE DATE TO THE DATE OF GRANT OF SUCH RESTRICTED STOCK UNITS, WITHOUT ANY DISCOUNT BASED ON VESTING REQUIREMENTS OR LACK OF TRANSFERABILITY. THE STOCK OPTIONS GRANTED 45 DAYS AFTER THE EMERGENCE DATE SHALL HAVE AN EXERCISE PRICE EQUAL TO THE CLOSING PRICE OF A SHARE OF COMMON STOCK ON THE NEW YORK STOCK EXCHANGE OR, IF THE COMMON STOCK IS NOT TRADED ON THE NEW YORK STOCK EXCHANGE, THE MIDPOINT OF THE BID AND ASK PRICE OF A SHARE OF COMMON STOCK ON THE OTC BULLETIN BOARD, ON THE DATE OF GRANT OF SUCH STOCK OPTIONS. SUCH STOCK OPTIONS SHALL HAVE A TEN-YEAR TERM. THE EXACT NUMBER OF STOCK OPTIONS GRANTED 45 DAYS AFTER THE EMERGENCE DATE SHALL BE DETERMINED BASED UPON A BLACK-SCHOLES OR OTHER VALUATION MODEL, USING REASONABLE ASSUMPTIONS AS DETERMINED IN GOOD FAITH BY THE COMPENSATION COMMITTEE OF THE BOARD.   3 --------------------------------------------------------------------------------   The terms and conditions of the Executive LTIP shall be governed by and subject to the award agreements to be entered into between Executive and the Company, substantially in the forms of Exhibits B and C respectively (the “LTIP Award Agreements”). The Restricted Stock Units and Options granted pursuant to the Executive LTIP shall, subject to the treatment of the Executive LTIP upon termination of Executive’s employment as provided in the LTIP Award Agreement, vest over a period of three years, with 25% to vest six months after the Emergence Date, 25% to vest one year after the Emergence Date, 25% to vest two years after the Emergence Date and 25% to vest three years after the Emergence Date.   (III)                               ANNUAL EQUITY GRANT. BEGINNING WITH FISCAL YEAR 2007 AND FOR EACH FISCAL YEAR THEREAFTER DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL BE ELIGIBLE TO RECEIVE ADDITIONAL EQUITY-BASED COMPENSATION UNDER THE LONG TERM INCENTIVE PLAN OF THE COMPANY IN EFFECT AT THE TIME OF SUCH AWARD, THE AMOUNT, TERMS AND CONDITIONS OF SUCH AWARD TO BE SET BY THE BOARD AT THE TIME OF GRANT. SUCH AWARDS SHALL OTHERWISE BE GOVERNED BY THE TERMS AND CONDITIONS SET FORTH IN THE LONG TERM INCENTIVE PLAN OF THE COMPANY AS MAY BE IN EFFECT AT THE TIME OF SUCH AWARD AND THE CORRESPONDING AWARD AGREEMENT AND SHALL BE MADE AT SUCH TIME AS GRANTS ARE MADE TO OTHER SENIOR EXECUTIVES OF THE COMPANY.   (B) DURING THE EMPLOYMENT PERIOD, THE COMPANY SHALL REIMBURSE EXECUTIVE FOR ALL REASONABLE BUSINESS EXPENSES INCURRED BY HIM IN THE COURSE OF PERFORMING HIS DUTIES AND RESPONSIBILITIES UNDER THIS AGREEMENT IN ACCORDANCE WITH THE COMPANY’S POLICIES IN EFFECT FROM TIME TO TIME WITH RESPECT TO TRAVEL, ENTERTAINMENT AND OTHER BUSINESS EXPENSES FOR SENIOR EXECUTIVES.   (C) EXECUTIVE SHALL ALSO BE ENTITLED TO THE FOLLOWING BENEFITS DURING THE EMPLOYMENT PERIOD, UNLESS OTHERWISE MODIFIED BY THE BOARD:   (I)                                     PARTICIPATION IN THE COMPANY’S RETIREMENT PLANS, HEALTH AND WELFARE PLANS, DISABILITY INSURANCE PLANS AND OTHER BENEFIT PLANS OF THE COMPANY AS IN EFFECT FROM TIME TO TIME, UNDER THE TERMS OF SUCH PLANS AND TO THE SAME EXTENT AND UNDER THE SAME CONDITIONS SUCH PARTICIPATION AND COVERAGES ARE PROVIDED GENERALLY TO OTHER SENIOR EXECUTIVES OF THE COMPANY;   (II)                                  REIMBURSEMENT FOR THE REASONABLE COST OF TEMPORARY LIVING ACCOMMODATIONS FOR EXECUTIVE AND HIS SPOUSE IN ATLANTA, GEORGIA FOR UP TO SIX MONTHS AND RELOCATION EXPENSES REIMBURSED IN ACCORDANCE WITH THE COMPANY’S THEN EXISTING RELOCATION POLICY FOR SENIOR EXECUTIVES;   (III)                               COVERAGE FOR SERVICES RENDERED TO THE COMPANY, ITS SUBSIDIARIES AND AFFILIATES WHILE EXECUTIVE IS A DIRECTOR OR OFFICER OF THE COMPANY, OR OF ANY OF ITS SUBSIDIARIES OR AFFILIATES, UNDER ANY DIRECTOR AND OFFICER LIABILITY INSURANCE POLICY(IES) MAINTAINED BY THE COMPANY FROM TIME TO TIME; AND   (IV)                              FOUR WEEKS OF VACATION PER YEAR.   4. TERMINATION. THE EMPLOYMENT PERIOD SHALL END ON THE THIRD ANNIVERSARY OF THE COMMENCEMENT DATE; PROVIDED, HOWEVER, THAT THE EMPLOYMENT PERIOD SHALL BE AUTOMATICALLY   4 --------------------------------------------------------------------------------   RENEWED FOR SUCCESSIVE ONE-YEAR TERMS THEREAFTER ON THE SAME TERMS AND CONDITIONS SET FORTH HEREIN UNLESS EITHER PARTY PROVIDES THE OTHER PARTY WITH NOTICE THAT IT HAS ELECTED NOT TO RENEW THE EMPLOYMENT PERIOD AT LEAST 90 DAYS PRIOR TO THE END OF THE INITIAL EMPLOYMENT PERIOD OR ANY SUBSEQUENT EXTENSION THEREOF. NOTWITHSTANDING THE FOREGOING, (I) THE EMPLOYMENT PERIOD SHALL TERMINATE IMMEDIATELY UPON EXECUTIVE’S RESIGNATION (WITH OR WITHOUT GOOD REASON, AS DEFINED HEREIN), DEATH OR DISABILITY (AS DEFINED HEREIN) AND (II) THE EMPLOYMENT PERIOD MAY BE TERMINATED BY THE COMPANY AT ANY TIME PRIOR TO SUCH DATE FOR CAUSE (AS DEFINED HEREIN) OR WITHOUT CAUSE. EXCEPT AS OTHERWISE PROVIDED HEREIN, ANY TERMINATION OF THE EMPLOYMENT PERIOD BY THE COMPANY SHALL BE EFFECTIVE AS SPECIFIED IN A WRITTEN NOTICE FROM THE COMPANY TO EXECUTIVE, BUT IN NO EVENT MORE THAN 90 DAYS FROM THE DATE OF SUCH NOTICE. THE TERMINATION OF THE EMPLOYMENT PERIOD SHALL NOT AFFECT THE RESPECTIVE RIGHTS AND OBLIGATIONS OF THE PARTIES WHICH, PURSUANT TO THE TERMS OF THIS AGREEMENT, APPLY FOLLOWING THE DATE OF EXECUTIVE’S TERMINATION OF EMPLOYMENT WITH THE COMPANY.   5. SEVERANCE.   (A) TERMINATION WITHOUT CAUSE, NON-RENEWAL OR FOR GOOD REASON. IN THE EVENT OF EXECUTIVE’S TERMINATION OF EMPLOYMENT WITH THE COMPANY (1) BY THE COMPANY WITHOUT CAUSE (AS DEFINED HEREIN), (2) BY REASON OF THE FAILURE OF THE COMPANY TO OFFER TO RENEW THE AGREEMENT ON TERMS THAT ARE BASED ON COMPETITIVE PRACTICES FOR COMPANIES OF COMPARABLE SIZE AND STANDING IN THE SAME INDUSTRY, OR (3) BY EXECUTIVE FOR GOOD REASON (AS DEFINED HEREIN), SUBJECT TO EXECUTION OF A RELEASE SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT D, EXECUTIVE SHALL BE ENTITLED TO THE BENEFITS SET FORTH BELOW IN THIS SECTION 5(A).   (I)                                     THE COMPANY SHALL PAY EXECUTIVE AN AMOUNT EQUAL TO 1.0 TIMES EXECUTIVE’S BASE SALARY PLUS 1.0 TIMES EXECUTIVE’S TARGET BONUS (AS IN EFFECT ON THE DATE OF EXECUTIVE’S TERMINATION). THE SEVERANCE AMOUNT DESCRIBED IN THE PREVIOUS SENTENCE SHALL BE PAID OVER A PERIOD OF TWO YEARS FROM THE DATE OF TERMINATION IN ACCORDANCE WITH THE PAYROLL PRACTICES OF THE COMPANY (IN EFFECT FROM TIME TO TIME); PROVIDED, HOWEVER, THAT, IN THE EVENT THAT EXECUTIVE IS CONSIDERED A “SPECIFIED EMPLOYEE” AS DEFINED IN SECTION 409A OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “JOBS ACT”), AND PAYMENTS UNDER THIS SECTION 5(A) ARE CONSIDERED “DEFERRED COMPENSATION” UNDER THE JOBS ACT, THE FIRST PAYMENT SHALL BE DELAYED FOR SIX MONTHS, IN WHICH EVENT EXECUTIVE SHALL RECEIVE A LUMP SUM PAYMENT EQUAL TO ONE TIMES HIS BASE SALARY SIX MONTHS AFTER THE DATE HIS EMPLOYMENT TERMINATES (PLUS INTEREST ON SUCH PAYMENT OF ONE TIMES BASE SALARY AT A FLOATING RATE EQUAL TO LIBOR, FROM THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT TO THE DATE THAT IS SIX MONTHS AFTER TERMINATION OF EXECUTIVE’S EMPLOYMENT), AND THE REMAINDER OF SUCH SEVERANCE AMOUNT SHALL BE PAID IN EQUAL INSTALLMENTS OVER A PERIOD OF 18 MONTHS THEREAFTER IN ACCORDANCE WITH THE ORDINARY PAYROLL PRACTICES OF THE COMPANY (IN EFFECT FROM TIME TO TIME).   (II)                                  THE EXECUTIVE LTIP SHALL BE GOVERNED BY THE TERMS OF THE APPLICABLE LTIP AWARD AGREEMENTS.   (III)                               THE COMPANY SHALL PAY EXECUTIVE THE AMOUNTS DESCRIBED IN SECTION 5(D) WITHIN 14 DAYS OF THE DATE OF TERMINATION.   5 --------------------------------------------------------------------------------   (IV)                              DURING THE PERIOD OF 12 MONTHS FOLLOWING EXECUTIVE’S TERMINATION OF EMPLOYMENT IN ACCORDANCE WITH SECTION 5(A), THE COMPANY SHALL PROVIDE TO EXECUTIVE CONTINUED COVERAGE UNDER THE RETIREMENT, LIFE INSURANCE, LONG-TERM DISABILITY, MEDICAL, DENTAL AND OTHER GROUP HEALTH BENEFITS AND PLANS IN EFFECT FOR SENIOR EXECUTIVES OF THE COMPANY, AS IN EFFECT ON THE DATE OF EXECUTIVE’S TERMINATION OF EMPLOYMENT (OR SUBSTANTIALLY COMPARABLE COVERAGE) FOR EXECUTIVE AND, WHERE APPLICABLE, EXECUTIVE’S SPOUSE, DEPENDENTS AND BENEFICIARIES, AT THE SAME CONTRIBUTION OR PREMIUM RATE AS MAY BE CHARGED FROM TIME TO TIME TO SENIOR EXECUTIVES OF THE COMPANY GENERALLY, AS IF EXECUTIVE HAD CONTINUED IN EMPLOYMENT DURING SUCH PERIOD. AS AN ALTERNATIVE, THE COMPANY MAY ELECT TO PAY EXECUTIVE CASH IN LIEU OF SUCH CONTRIBUTIONS OR COVERAGE IN AN AMOUNT EQUAL TO EXECUTIVE’S AFTER-TAX COST OF RECEIVING SUCH CONTRIBUTIONS OR CONTINUING SUCH COVERAGE, WHERE SUCH CONTRIBUTIONS OR COVERAGE MAY NOT BE CONTINUED (OR WHERE SUCH CONTINUATION WOULD ADVERSELY AFFECT THE TAX STATUS OF THE PLAN PURSUANT TO WHICH THE CONTRIBUTION OR COVERAGE IS PROVIDED). THE COBRA HEALTH CARE CONTINUATION COVERAGE PERIOD UNDER SECTION 4980B OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, (THE “CODE”), OR ANY REPLACEMENT OR SUCCESSOR PROVISION OF UNITED STATES TAX LAW, SHALL COMMENCE IMMEDIATELY AFTER THE 12 MONTH PERIOD.   (V)                                 THE COMPANY SHALL PROVIDE A RELEASE SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS EXHIBIT G. IF THE COMPANY DOES NOT PROVIDE THE RELEASE REQUIRED PURSUANT TO THIS SUBSECTION (V), THE RELEASE BY THE EXECUTIVE SHALL BE NULL, VOID AND WITHOUT EFFECT, AND EXECUTIVE SHALL STILL RECEIVE ALL OF THE PAYMENTS AND BENEFITS DESCRIBED IN SUBSECTIONS (I) THROUGH (IV) ABOVE.   (B) TERMINATION FOR CAUSE OR VOLUNTARY RESIGNATION. IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT WITH THE COMPANY IS TERMINATED (I) BY THE BOARD FOR CAUSE OR (II) BY EXECUTIVE’S RESIGNATION FROM THE COMPANY FOR ANY REASON OTHER THAN GOOD REASON OR DISABILITY (AS DEFINED HEREIN), SUBJECT TO APPLICABLE LAW, THE COMPANY AGREES TO THE FOLLOWING:   (I)                                     THE EXECUTIVE LTIP SHALL BE GOVERNED BY THE TERMS OF THE APPLICABLE LTIP AWARD AGREEMENTS.   (II)                                  THE COMPANY SHALL PAY EXECUTIVE THE AMOUNTS DESCRIBED IN SECTION 5(D) WITHIN 14 DAYS OF THE DATE OF TERMINATION.   For purposes of this Agreement, Executive’s retirement shall be considered Executive’s resignation from the Company without Good Reason.   (C) DEATH OR DISABILITY. IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT WITH THE COMPANY IS TERMINATED AS A RESULT OF EXECUTIVE’S DEATH OR DISABILITY, THE COMPANY AGREES TO THE FOLLOWING:   (I)                                     THE COMPANY SHALL PAY EXECUTIVE (OR HIS ESTATE OR LEGAL REPRESENTATIVE, IF APPLICABLE) IN A LUMP SUM PAYMENT AN AMOUNT EQUAL TO HIS TARGET ANNUAL BONUS FOR THE YEAR OF TERMINATION PRORATED FOR THE NUMBER OF DAYS DURING SUCH YEAR THAT EXECUTIVE WAS EMPLOYED BY THE COMPANY; PROVIDED, HOWEVER, THAT, IN THE EVENT THAT EXECUTIVE IS CONSIDERED A “SPECIFIED EMPLOYEE” AS DEFINED IN THE JOBS ACT AND   6 --------------------------------------------------------------------------------   PAYMENTS UNDER THIS SECTION 5(C) ARE CONSIDERED “DEFERRED COMPENSATION” UNDER THE JOBS ACT, SUCH PAYMENT SHALL BE DELAYED FOR SIX MONTHS, AND EXECUTIVE SHALL RECEIVE INTEREST ON SUCH PAYMENT AT A FLOATING RATE EQUAL TO LIBOR, FROM THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT TO THE DATE THAT IS SIX MONTHS AFTER TERMINATION OF EXECUTIVE’S EMPLOYMENT.   (II)                                  THE EXECUTIVE LTIP SHALL BE GOVERNED BY THE TERMS OF THE APPLICABLE LTIP AWARD AGREEMENTS.   (III)                               THE COMPANY SHALL PAY EXECUTIVE THE AMOUNTS DESCRIBED IN SECTION 5(D) WITHIN 14 DAYS OF THE DATE OF TERMINATION.   (D) IN THE CASE OF ANY TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, EXECUTIVE OR HIS ESTATE OR LEGAL REPRESENTATIVE SHALL BE ENTITLED TO RECEIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FROM THE COMPANY (I) EXECUTIVE’S BASE SALARY THROUGH THE DATE OF TERMINATION TO THE EXTENT NOT PREVIOUSLY PAID, (II) TO THE EXTENT NOT PREVIOUSLY PAID, THE AMOUNT OF ANY BONUS, INCENTIVE COMPENSATION, AND OTHER COMPENSATION EARNED OR ACCRUED BY EXECUTIVE AS OF THE DATE OF TERMINATION UNDER ANY COMPENSATION AND BENEFIT PLANS, PROGRAMS OR ARRANGEMENTS MAINTAINED IN FORCE BY THE COMPANY (FOR THIS PURPOSE, EXECUTIVE’S ANNUAL BONUS, IF ANY, FOR ANY FISCAL YEAR OF THE COMPANY ENDED PRIOR TO THE YEAR OF TERMINATION THAT IS THEN UNPAID, AND IN THE CASE OF A TERMINATION UNDER SECTION 5(A) OR (C) A PRO-RATA PORTION OF THE TARGET BONUS FOR THE FISCAL YEAR IN WHICH THE DATE OF TERMINATION OCCURS BASED ON THE NUMBER OF DAYS IN THAT FISCAL YEAR DURING WHICH EXECUTIVE WAS EMPLOYED, SHALL BE DEEMED TO BE EARNED), (III) ANY VACATION PAY, EXPENSE REIMBURSEMENTS AND OTHER CASH ENTITLEMENTS ACCRUED BY EXECUTIVE, IN ACCORDANCE WITH COMPANY POLICY FOR SENIOR EXECUTIVES, AS OF THE DATE OF TERMINATION TO THE EXTENT NOT PREVIOUSLY PAID, (IV) ANY RESTRICTED STOCK UNITS, STOCK OPTIONS AND OTHER EQUITY AWARDS OUTSTANDING UNDER ANY COMPANY LONG TERM INCENTIVE PLANS OR ARRANGEMENTS (OTHER THAN THE EXECUTIVE LTIP), IN ACCORDANCE WITH THE TERMS OF THE PLANS OR ARRANGEMENTS UNDER WHICH SUCH AWARDS WERE CREATED OR MAINTAINED, AND (V) ALL BENEFITS ACCRUED BY EXECUTIVE UNDER ALL BENEFIT PLANS AND QUALIFIED AND NONQUALIFIED RETIREMENT, PENSION, 401(K) AND SIMILAR PLANS AND ARRANGEMENTS OF THE COMPANY, IN SUCH MANNER AND AT SUCH TIMES AS ARE PROVIDED UNDER THE TERMS OF SUCH PLANS AND ARRANGEMENTS.   (E) TERMINATION WITHOUT CAUSE, NON-RENEWAL OR FOR GOOD REASON FOLLOWING A CHANGE OF CONTROL. IN THE EVENT OF EXECUTIVE’S TERMINATION OF EMPLOYMENT WITH THE COMPANY (1) BY THE COMPANY WITHOUT CAUSE, (2) AS A RESULT OF THE FAILURE OF THE COMPANY TO OFFER TO RENEW THE AGREEMENT ON TERMS THAT ARE CONSISTENT WITH COMPETITIVE PRACTICES FOR COMPANIES OF COMPARABLE SIZE AND STANDING IN THE SAME INDUSTRY, OR (3) BY EXECUTIVE FOR GOOD REASON, IN ANY CASE, DURING THE PERIOD BEGINNING SIX MONTHS BEFORE AND ENDING TWO YEARS FOLLOWING A CHANGE OF CONTROL (AS DEFINED HEREIN) OF THE COMPANY, SUBJECT TO EXECUTION OF A RELEASE SUBSTANTIALLY IN THE FORM ATTACHED AS EXHIBIT D, EXECUTIVE SHALL BE ENTITLED TO THE BENEFITS SET FORTH BELOW IN THIS SECTION 5(E).   (I)                                     THE COMPANY SHALL PAY EXECUTIVE THE PAYMENTS SET FORTH IN SECTION 5(A)(I), EXCEPT THE APPLICABLE MULTIPLIER SHALL BE 3; PROVIDED, HOWEVER, THAT IN DETERMINING THE AMOUNT OF PAYMENT DUE UNDER SECTION 5(A)(I), EXECUTIVE’S ACTUAL ANNUAL BONUS FOR THE YEAR PRECEDING THE CHANGE OF CONTROL SHALL BE USED, IF HIGHER THAN HIS TARGET BONUS; AND PROVIDED, FURTHER, THAT PAYMENT SHALL BE MADE IN A LUMP SUM ON THE   7 --------------------------------------------------------------------------------   LATER OF THE DATE OF THE CHANGE OF CONTROL OR 10 BUSINESS DAYS AFTER EXECUTIVE’S TERMINATION OF EMPLOYMENT; PROVIDED, HOWEVER, THAT, IN THE EVENT EXECUTIVE IS CONSIDERED A “SPECIFIED EMPLOYEE” AS DEFINED IN THE JOBS ACT, AND PAYMENTS UNDER THIS SECTION 5(E) ARE CONSIDERED “DEFERRED COMPENSATION” UNDER THE JOBS ACT, THE PAYMENT SHALL BE DELAYED FOR SIX MONTHS FROM THE DATE OF EXECUTIVE’S TERMINATION OF EMPLOYMENT AND EXECUTIVE SHALL RECEIVE INTEREST AT A FLOATING RATE EQUAL TO LIBOR FROM THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT TO THE DATE THAT IS SIX MONTHS AFTER TERMINATION OF EXECUTIVE’S EMPLOYMENT.   (II)                                  THE COMPANY SHALL PROVIDE THE BENEFITS SET FORTH IN SECTION 5(A)(IV) EXCEPT THE APPLICABLE PERIOD SHALL BE 24 MONTHS.   (III)                               THE EXECUTIVE LTIP SHALL FULLY VEST, TO THE EXTENT NOT ALREADY VESTED, AND OTHERWISE BE GOVERNED BY THE TERMS OF THE APPLICABLE LTIP AWARD AGREEMENTS.   (IV)                              THE COMPANY SHALL PAY EXECUTIVE THE AMOUNTS DESCRIBED IN SECTION 5(D).   (V)                                 THE COMPANY SHALL PROVIDE A RELEASE SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS EXHIBIT G. IF THE COMPANY DOES NOT PROVIDE THE RELEASE REQUIRED PURSUANT TO THIS SUBSECTION (V), THE RELEASE BY THE EXECUTIVE SHALL BE NULL, VOID AND WITHOUT EFFECT, AND EXECUTIVE SHALL STILL RECEIVE ALL OF THE PAYMENTS AND BENEFITS DESCRIBED IN SUBSECTIONS (I) THROUGH (IV) ABOVE.   (F) EXCESS PARACHUTE PAYMENTS.   (I)                                     IN THE EVENT ANY PAYMENT GRANTED TO EXECUTIVE PURSUANT TO THE TERMS OF THIS AGREEMENT OR OTHERWISE (A “PAYMENT”) IS DETERMINED TO BE SUBJECT TO ANY EXCISE TAX (“EXCISE TAX”) IMPOSED BY SECTION 4999 OF THE CODE (OR ANY SUCCESSOR TO SUCH SECTION), THE COMPANY SHALL PAY TO EXECUTIVE, PRIOR TO THE TIME ANY EXCISE TAX IS PAYABLE WITH RESPECT TO SUCH PAYMENT (THROUGH WITHHOLDING OR OTHERWISE), AN ADDITIONAL AMOUNT (A “GROSS-UP PAYMENT”) WHICH, AFTER THE IMPOSITION OF ALL INCOME, EMPLOYMENT, EXCISE AND OTHER TAXES, PENALTIES AND INTEREST THEREON, IS EQUAL TO THE SUM OF (A) THE EXCISE TAX ON SUCH PAYMENT PLUS (B) ANY PENALTY AND INTEREST ASSESSMENTS ASSOCIATED WITH SUCH EXCISE TAX; PROVIDED, HOWEVER, THAT THE AMOUNT OF THE GROSS UP PAYMENT SHALL NOT EXCEED $2 MILLION.   (II)                                  THE DETERMINATIONS TO BE MADE WITH RESPECT TO THIS SECTION 5(F) SHALL BE MADE BY A CERTIFIED PUBLIC ACCOUNTING FIRM DESIGNATED BY THE COMPANY AND REASONABLY ACCEPTABLE TO EXECUTIVE AND EXECUTIVE MAY RELY ON SUCH DETERMINATION IN MAKING PAYMENTS TO THE INTERNAL REVENUE SERVICE.   (G) NO OTHER PAYMENTS. EXCEPT AS PROVIDED IN SECTIONS 5(A), (B), (C), (D), (E) AND (F) ABOVE, ALL OF EXECUTIVE’S RIGHTS TO SALARY, BONUSES, EMPLOYEE BENEFITS AND OTHER COMPENSATION HEREUNDER WHICH WOULD HAVE ACCRUED OR BECOME PAYABLE AFTER THE TERMINATION OR EXPIRATION OF THE EMPLOYMENT PERIOD SHALL CEASE UPON SUCH TERMINATION OR EXPIRATION, OTHER THAN THOSE EXPRESSLY REQUIRED UNDER APPLICABLE LAW (SUCH AS COBRA).   8 --------------------------------------------------------------------------------   (H) NO MITIGATION, NO OFFSET. IN THE EVENT OF EXECUTIVE’S TERMINATION OF EMPLOYMENT FOR WHATEVER REASON, EXECUTIVE SHALL BE UNDER NO OBLIGATION TO SEEK OTHER EMPLOYMENT, AND THERE SHALL BE NO OFFSET AGAINST AMOUNTS DUE HIM UNDER THIS AGREEMENT OR OTHERWISE ON ACCOUNT OF ANY REMUNERATION ATTRIBUTABLE TO ANY SUBSEQUENT EMPLOYMENT OR CLAIMS ASSERTED BY THE COMPANY OR ANY AFFILIATE, PROVIDED THAT THIS PROVISION SHALL NOT APPLY WITH RESPECT TO ANY AMOUNTS THAT EXECUTIVE OWES TO THE COMPANY OR ANY MEMBER OF THE COMPANY GROUP ON ACCOUNT OF ANY LOAN, ADVANCE OR OTHER PAYMENT, IN RESPECT OF ANY OF WHICH EXECUTIVE IS OBLIGATED TO MAKE REPAYMENT TO THE COMPANY OR ANY MEMBER OF THE COMPANY GROUP.   (I) DEFINITIONS. FOR PURPOSES OF THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:   “Cause” shall mean one or more of the following:   (A)                              THE CONVICTION OF, OR AN AGREEMENT TO A PLEA OF NOLO CONTENDERE TO, A CRIME INVOLVING MORAL TURPITUDE OR ANY FELONY;   (B)                                EXECUTIVE’S WILLFUL REFUSAL SUBSTANTIALLY TO PERFORM DUTIES AS REASONABLY DIRECTED BY THE CEO UNDER THIS OR ANY OTHER AGREEMENT;   (C)                                IN CARRYING OUT HIS DUTIES, EXECUTIVE ENGAGES IN CONDUCT THAT CONSTITUTES FRAUD, WILLFUL NEGLECT OR WILLFUL MISCONDUCT WHICH, IN EITHER CASE, WOULD RESULT IN DEMONSTRABLE HARM TO THE BUSINESS, OPERATIONS, PROSPECTS OR REPUTATION OF THE COMPANY;   (D)                               A MATERIAL VIOLATION OF THE REQUIREMENTS OF THE SARBANES-OXLEY ACT OF 2002 (“SOX”) OR OTHER FEDERAL OR STATE SECURITIES LAW, RULE OR REGULATION; OR   (E)                                 ANY OTHER MATERIAL BREACH OF THIS AGREEMENT.   For purpose of this Agreement, the Company is not entitled to assert that Executive’s termination is for Cause unless the Company gives Executive written notice describing the facts which are the basis for such termination and such grounds for termination (if susceptible to correction) are not corrected by Executive within 30 days of Executive’s receipt of such notice to the reasonable, good faith satisfaction of the CEO.   “Change of Control” shall mean the first to occur of any of the following events:   (A)                              ANY “PERSON” (AS THAT TERM IS USED IN SECTIONS 13 AND 14(D)(2) OF THE SECURITIES EXCHANGE ACT OF 1934 (“EXCHANGE ACT”)) BECOMES THE BENEFICIAL OWNER (AS THAT TERM IS USED IN SECTION 13(D) OF THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF FIFTY PERCENT (50%) OR MORE OF THE COMPANY’S CAPITAL STOCK ENTITLED TO VOTE IN THE ELECTION OF DIRECTORS;   9 --------------------------------------------------------------------------------   (B)                                PERSONS WHO ON THE DAY FOLLOWING THE EMERGENCE DATE CONSTITUTE THE BOARD (THE “EMERGENCE DIRECTORS”) CEASE FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF A TENDER OFFER, PROXY CONTEST, MERGER OR SIMILAR TRANSACTION, TO CONSTITUTE AT LEAST A MAJORITY THEREOF, PROVIDED, HOWEVER, THAT ANY PERSON WHO BECOMES A DIRECTOR OF THE COMPANY SUBSEQUENT TO THE EMERGENCE DATE SHALL BE CONSIDERED AN EMERGENCE DIRECTOR IF SUCH PERSON’S ELECTION OR NOMINATION FOR ELECTION WAS APPROVED BY A VOTE OF AT LEAST TWO-THIRDS (2/3) OF THE EMERGENCE DIRECTORS; BUT PROVIDED FURTHER THAT ANY SUCH PERSON WHOSE INITIAL ASSUMPTION OF OFFICE IS IN CONNECTION WITH AN ACTUAL OR THREATENED ELECTION CONTEST RELATING TO THE ELECTION OF MEMBERS OF THE BOARD OR OTHER ACTUAL OR THREATENED SOLICITATION OF PROXIES OR CONSENTS BY OR ON BEHALF OF A PERSON OTHER THAN THE BOARD, INCLUDING BY REASON OF AGREEMENT INTENDED TO AVOID OR SETTLE ANY SUCH ACTUAL OR THREATENED CONTEST OR SOLICITATION, SHALL NOT BE CONSIDERED AN EMERGENCE DIRECTOR;   (C)                                CONSUMMATION OF A REORGANIZATION, MERGER, CONSOLIDATION, SALE OR OTHER DISPOSITION OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY (A “BUSINESS COMBINATION”), IN EACH CASE, UNLESS, FOLLOWING SUCH BUSINESS COMBINATION, ALL OR SUBSTANTIALLY ALL OF THE INDIVIDUALS AND ENTITIES WHO WERE THE BENEFICIAL OWNERS OF OUTSTANDING VOTING SECURITIES OF THE COMPANY IMMEDIATELY PRIOR TO SUCH BUSINESS COMBINATION BENEFICIALLY OWN, DIRECTLY OR INDIRECTLY, MORE THAN 50% OF THE COMBINED VOTING POWER OF THE THEN OUTSTANDING VOTING SECURITIES ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS, AS THE CASE MAY BE, OF THE COMPANY RESULTING FROM SUCH BUSINESS COMBINATION (INCLUDING, WITHOUT LIMITATION, A COMPANY WHICH, AS A RESULT OF SUCH TRANSACTION, OWNS THE COMPANY OR ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS EITHER DIRECTLY OR THROUGH ONE OR MORE SUBSIDIARIES) IN SUBSTANTIALLY THE SAME PROPORTIONS AS THEIR OWNERSHIP, IMMEDIATELY PRIOR TO SUCH BUSINESS COMBINATION, OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY; AND   (D)                               THE SHAREHOLDERS OF THE COMPANY APPROVE ANY PLAN OR PROPOSAL FOR THE LIQUIDATION OR DISSOLUTION OF THE COMPANY.   Notwithstanding the foregoing, in no event shall the confirmation of the plan of reorganization confirmed under 11 U.S.C. § 1129 (the “Plan of Reorganization”), the implementation of the transactions contemplated by the Plan of Reorganization on or after the Emergence Date or the effectuation of the corporate governance provisions set forth therein, including the implementation of the Board of Directors as specified therein, be considered a Change of Control.   “Disability” shall mean Executive’s (i) being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental   10 --------------------------------------------------------------------------------   impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.   “Good Reason” shall mean Executive’s resignation from employment with the Company prior to the end of the Employment Period as a result of one or more of the following reasons:   (A)                              THE COMPANY REDUCES THE AMOUNT OF EXECUTIVE’S THEN CURRENT BASE SALARY OR THE TARGET FOR HIS ANNUAL BONUS (IT BEING UNDERSTOOD THAT EXECUTIVE SHALL NOT HAVE A BASIS TO RESIGN FOR GOOD REASON IF NO BONUS IS PAID, OR THE AMOUNT OF THE BONUS IS REDUCED AS A RESULT OF THE FAILURE OF EXECUTIVE OR THE COMPANY TO ACHIEVE APPLICABLE PERFORMANCE TARGETS FOR SUCH BONUS);   (B)                                A MATERIAL DIMINUTION IN EXECUTIVE’S TITLE, AUTHORITY, DUTIES OR RESPONSIBILITIES OR THE ASSIGNMENT OF DUTIES TO EXECUTIVE WHICH ARE MATERIALLY INCONSISTENT WITH HIS POSITION; PROVIDED, HOWEVER, THAT, FOLLOWING A CHANGE OF CONTROL, ANY DIMINUTION OF EXECUTIVE’S TITLE, DUTIES OR RESPONSIBILITIES SHALL CONSTITUTE GOOD REASON;   (C)                                THE FAILURE OF THE COMPANY TO OBTAIN IN WRITING THE OBLIGATION TO PERFORM THIS AGREEMENT BY ANY SUCCESSOR TO THE COMPANY OR A PURCHASER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY WITHIN 15 DAYS AFTER A MERGER, CONSOLIDATION, SALE OR SIMILAR TRANSACTION;   (D)                               THE FAILURE OF THE COMPANY TO GRANT EXECUTIVE THE EXECUTIVE LTIP WITHIN 60 DAYS AFTER THE EFFECTIVE DATE; OR   (E)                                 FOLLOWING A CHANGE IN CONTROL, THE REQUIREMENT THAT EXECUTIVE MOVE HIS PRINCIPAL PLACE OF BUSINESS BY MORE THAN 50 MILES FROM THAT PREVIOUSLY THE CASE WITHOUT HIS CONSENT.   Notwithstanding the foregoing, Executive agrees that he shall not be entitled to terminate his employment for Good Reason in the event he is subject to any unintended or adverse tax consequences under the JOBS Act, the Company amends this Agreement or the terms of any employee benefit plan, program arrangement or agreement to avoid such adverse tax consequences or he is required to forfeit incentive or other compensation pursuant to Section 304 of SOX. For purposes of this Agreement, Executive is not entitled to assert that his termination is for Good Reason unless Executive gives the CEO written notice describing the event or events which are the basis for such termination within ninety (90) days after the event or events occur and such grounds for termination (if susceptible to correction) are not corrected by   11 --------------------------------------------------------------------------------   the Company within 30 days of the Company’s receipt of such notice to the reasonable, good faith satisfaction of Executive.   6. INDEMNIFICATION.   (A) THE COMPANY AGREES THAT (I) IF EXECUTIVE IS MADE A PARTY, OR IS THREATENED TO BE MADE A PARTY, TO ANY THREATENED OR ACTUAL ACTION, SUIT OR PROCEEDING, WHETHER CIVIL, CRIMINAL, ADMINISTRATIVE, INVESTIGATIVE, APPELLATE OR OTHER (EACH, A “PROCEEDING”) BY REASON OF THE FACT THAT HE IS OR WAS A DIRECTOR, OFFICER, EMPLOYEE, AGENT, MANAGER, OR REPRESENTATIVE OF THE COMPANY OR IS OR WAS SERVING AT THE REQUEST OF THE COMPANY AS A DIRECTOR, OFFICER, MEMBER, EMPLOYEE, AGENT, MANAGER, OR REPRESENTATIVE OF ANY MEMBER OF THE COMPANY GROUP OR (II) IF ANY CLAIM, DEMAND, REQUEST, INVESTIGATION, DISPUTE, CONTROVERSY, THREAT, DISCOVERY REQUEST OR REQUEST FOR TESTIMONY OR INFORMATION (EACH, A “CLAIM”) IS MADE, OR THREATENED TO BE MADE, THAT ARISES OUT OF OR RELATES TO EXECUTIVE’S SERVICE IN ANY OF THE FOREGOING CAPACITIES, THEN EXECUTIVE SHALL BE INDEMNIFIED AND HELD HARMLESS BY THE COMPANY TO THE FULLEST EXTENT LEGALLY PERMITTED OR AUTHORIZED BY THE COMPANY’S CERTIFICATE OF INCORPORATION, BY-LAWS, BOARD RESOLUTIONS OR, IF GREATER, BY APPLICABLE LAW, AGAINST ANY AND ALL COSTS, EXPENSES, LIABILITIES AND LOSSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY’S FEES, JUDGMENTS, INTEREST, EXPENSES OF INVESTIGATION, PENALTIES, FINES, ERISA EXCISE TAXES OR PENALTIES AND AMOUNTS PAID OR TO BE PAID IN SETTLEMENT) INCURRED OR SUFFERED BY EXECUTIVE IN CONNECTION THEREWITH, AND SUCH INDEMNIFICATION SHALL CONTINUE AS TO EXECUTIVE EVEN IF HE HAS CEASED TO BE A DIRECTOR, MEMBER, EMPLOYEE, AGENT, MANAGER, OR REPRESENTATIVE OF THE COMPANY OR ANY MEMBER OF THE COMPANY GROUP AND SHALL INURE TO THE BENEFIT OF EXECUTIVE’S HEIRS, EXECUTORS AND ADMINISTRATORS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY SHALL ADVANCE TO EXECUTIVE ALL COSTS AND EXPENSES INCURRED BY HIM IN CONNECTION WITH ANY SUCH PROCEEDING OR CLAIM WITHIN 15 DAYS AFTER RECEIVING WRITTEN NOTICE REQUESTING SUCH AN ADVANCE. SUCH NOTICE SHALL INCLUDE, TO THE EXTENT REQUIRED BY APPLICABLE LAW, AN UNDERTAKING BY EXECUTIVE TO REPAY THE AMOUNT ADVANCED IF HE IS ULTIMATELY DETERMINED NOT TO BE ENTITLED TO INDEMNIFICATION AGAINST SUCH COSTS AND EXPENSES.   (B)                                 NEITHER THE FAILURE OF THE COMPANY (INCLUDING THE BOARD, INDEPENDENT LEGAL COUNSEL OR STOCKHOLDERS) TO HAVE MADE A DETERMINATION IN CONNECTION WITH ANY REQUEST FOR INDEMNIFICATION OR ADVANCEMENT UNDER SECTION 6(A) THAT EXECUTIVE HAS SATISFIED ANY APPLICABLE STANDARD OF CONDUCT NOR A DETERMINATION BY THE COMPANY (INCLUDING THE BOARD, INDEPENDENT LEGAL COUNSEL OR STOCKHOLDERS) THAT EXECUTIVE HAS NOT MET ANY APPLICABLE STANDARD OF CONDUCT SHALL CREATE A PRESUMPTION THAT EXECUTIVE HAS OR HAS NOT MET AN APPLICABLE STANDARD OF CONDUCT.   (C)                                  THE COMPANY AGREES TO USE REASONABLE COMMERCIAL EFFORTS TO MAINTAIN DIRECTOR’S AND OFFICER’S LIABILITY INSURANCE COVERING THE EXECUTIVE FOR SERVICES RENDERED TO THE COMPANY, ITS SUBSIDIARIES AND AFFILIATES WHILE EXECUTIVE IS A DIRECTOR OR OFFICER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR AFFILIATES.   7. CONFIDENTIAL INFORMATION. EXECUTIVE AGREES TO ENTER INTO THE CONFIDENTIALITY AGREEMENT ATTACHED AS EXHIBIT E SIMULTANEOUSLY WITH THE EXECUTION OF THIS AGREEMENT.   8. INTELLECTUAL PROPERTY, INVENTIONS AND PATENTS. EXECUTIVE AGREES TO ENTER INTO THE INTELLECTUAL PROPERTY AGREEMENT ATTACHED AS EXHIBIT F SIMULTANEOUSLY WITH THE EXECUTION OF THIS AGREEMENT.   12 --------------------------------------------------------------------------------   9. NON-COMPETE, NON-SOLICITATION.   (A) IN FURTHER CONSIDERATION OF THE COMPENSATION TO BE PAID TO EXECUTIVE HEREUNDER, EXECUTIVE ACKNOWLEDGES THAT DURING THE COURSE OF HIS EMPLOYMENT WITH THE COMPANY, HE SHALL BECOME FAMILIAR WITH THE COMPANY GROUP’S TRADE SECRETS AND WITH OTHER CONFIDENTIAL INFORMATION CONCERNING THE COMPANY GROUP AND THAT HIS SERVICES SHALL BE OF SPECIAL, UNIQUE AND EXTRAORDINARY VALUE TO THE COMPANY GROUP, AND, THEREFORE, EXECUTIVE AGREES THAT, DURING THE EMPLOYMENT PERIOD AND FOR ONE (1) YEAR THEREAFTER (THE “NONCOMPETE PERIOD”), HE SHALL NOT DIRECTLY OR INDIRECTLY OWN ANY INTEREST IN, MANAGE, CONTROL, BE EMPLOYED IN AN EXECUTIVE, MANAGERIAL OR ADMINISTRATIVE CAPACITY BY, OR OTHERWISE RENDER EXECUTIVE, MANAGERIAL OR ADMINISTRATIVE SERVICES TO, ANY COMPANY ENGAGED IN THE BUSINESS OF OWNING AND OPERATING POWER GENERATION FACILITIES OR ENERGY TRADING AND MARKETING OPERATIONS WHICH COMPETES WITH THE BUSINESSES OF THE COMPANY ON THE DATE OF THE TERMINATION OR EXPIRATION OF THE EMPLOYMENT PERIOD, WITHIN ANY GEOGRAPHICAL AREA IN WHICH THE COMPANY ENGAGES IN SUCH BUSINESSES. NOTHING HEREIN SHALL PROHIBIT EXECUTIVE FROM BEING A PASSIVE OWNER OF NOT MORE THAN 2% OF THE OUTSTANDING STOCK OF ANY CLASS OF A CORPORATION WHICH IS PUBLICLY TRADED, SO LONG AS EXECUTIVE HAS NO ACTIVE PARTICIPATION IN THE BUSINESS OF SUCH CORPORATION.   (B) DURING THE NONCOMPETE PERIOD, EXECUTIVE SHALL NOT DIRECTLY OR INDIRECTLY THROUGH ANOTHER PERSON OR ENTITY (I) INDUCE OR ATTEMPT TO INDUCE ANY EMPLOYEE OF THE COMPANY TO LEAVE THE EMPLOY OF THE COMPANY, OR IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN THE COMPANY AND ANY EMPLOYEE THEREOF; (II) HIRE ANY PERSON WHO WAS A MANAGERIAL OR HIGHER LEVEL EMPLOYEE OF THE COMPANY DURING THE LAST SIX MONTHS OF THE EMPLOYMENT PERIOD; OR (III) INDUCE OR ATTEMPT TO INDUCE ANY CUSTOMER, SUPPLIER, LICENSEE, LICENSOR, FRANCHISEE OR OTHER BUSINESS RELATION OF THE COMPANY TO CEASE DOING BUSINESS WITH THE COMPANY, OR IN ANY WAY INTERFERE WITH THE RELATIONSHIP BETWEEN ANY SUCH CUSTOMER, SUPPLIER, LICENSEE OR BUSINESS RELATION OF THE COMPANY (INCLUDING, WITHOUT LIMITATION, MAKING ANY NEGATIVE OR DISPARAGING STATEMENTS OR COMMUNICATIONS REGARDING THE COMPANY. THE COMPANY COVENANTS THAT IT WILL NOT, AND IT WILL ADVISE MEMBERS OF SENIOR MANAGEMENT OF THE COMPANY AND THE BOARD NOT TO, MAKE ANY NEGATIVE OR DISPARAGING STATEMENTS OR COMMUNICATIONS REGARDING EXECUTIVE.   (C) IF, AT THE TIME OF ENFORCEMENT OF THIS SECTION 9, A COURT SHALL HOLD THAT THE DURATION, SCOPE OR AREA RESTRICTIONS STATED HEREIN ARE UNREASONABLE UNDER CIRCUMSTANCES THEN EXISTING, THE PARTIES AGREE THAT THE MAXIMUM DURATION, SCOPE OR AREA REASONABLE UNDER SUCH CIRCUMSTANCES SHALL BE SUBSTITUTED FOR THE STATED DURATION, SCOPE OR AREA AND THAT THE COURT SHALL BE ALLOWED TO REVISE THE RESTRICTIONS CONTAINED HEREIN TO COVER THE MAXIMUM PERIOD, SCOPE AND AREA PERMITTED BY LAW. EXECUTIVE ACKNOWLEDGES THAT THE RESTRICTIONS CONTAINED IN THIS SECTION 9 ARE REASONABLE AND THAT HE HAS REVIEWED THE PROVISIONS OF THIS AGREEMENT WITH HIS LEGAL COUNSEL.   (D) EXECUTIVE ACKNOWLEDGES THAT IN THE EVENT OF THE BREACH OR A THREATENED BREACH BY EXECUTIVE OF ANY OF THE PROVISIONS OF THIS SECTION 9, THE COMPANY WOULD SUFFER IRREPARABLE HARM, AND, IN ADDITION AND SUPPLEMENTARY TO OTHER RIGHTS AND REMEDIES EXISTING IN ITS FAVOR, THE COMPANY SHALL BE ENTITLED TO SPECIFIC PERFORMANCE AND/OR INJUNCTIVE OR OTHER EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION IN ORDER TO ENFORCE OR PREVENT ANY VIOLATIONS OF THE PROVISIONS HEREOF (WITHOUT POSTING A BOND OR OTHER SECURITY). IN ADDITION, IN THE EVENT OF A BREACH OR VIOLATION BY EXECUTIVE OF SECTION 9(A), THE NONCOMPETE PERIOD SHALL BE AUTOMATICALLY   13 --------------------------------------------------------------------------------   EXTENDED BY THE AMOUNT OF TIME BETWEEN THE INITIAL OCCURRENCE OF THE BREACH OR VIOLATION AND WHEN SUCH BREACH OR VIOLATION HAS BEEN DULY CURED.   10. EXECUTIVE’S REPRESENTATIONS. EXECUTIVE HEREBY REPRESENTS AND WARRANTS TO THE COMPANY THAT (I) THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT BY EXECUTIVE DO NOT AND SHALL NOT CONFLICT WITH, BREACH, VIOLATE OR CAUSE A DEFAULT UNDER, ANY CONTRACT, AGREEMENT, INSTRUMENT, ORDER, JUDGMENT OR DECREE TO WHICH EXECUTIVE IS A PARTY OR BY WHICH HE IS BOUND WHICH HAS NOT BEEN WAIVED; (II) EXECUTIVE IS NOT A PARTY TO OR BOUND BY ANY EMPLOYMENT AGREEMENT, NONCOMPETE AGREEMENT OR CONFIDENTIALITY AGREEMENT WITH ANY OTHER PERSON OR ENTITY WHICH HAS NOT BEEN WAIVED; (III) EXECUTIVE HAS CONSULTED WITH THE EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL AND DOES NOT HAVE ANY FINANCIAL INVOLVEMENT WITH OR FINANCIAL INTEREST IN ANY OF THE COMPANY’S SUPPLIERS, VENDORS, CUSTOMERS, PARTNERS, SUBCONTRACTORS OR COMPETITORS THAT WOULD BE CONSIDERED A CONFLICT OF INTEREST UNDER THE COMPANY’S GLOBAL COMPLIANCE POLICY RELATING TO CONFLICTS OF INTEREST AND (IV) ON THE COMMENCEMENT DATE, THIS AGREEMENT SHALL BE THE VALID AND BINDING OBLIGATION OF EXECUTIVE, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS. EXECUTIVE HEREBY ACKNOWLEDGES AND REPRESENTS THAT HE HAS CONSULTED WITH INDEPENDENT LEGAL COUNSEL REGARDING HIS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THAT HE FULLY UNDERSTANDS THE TERMS AND CONDITIONS CONTAINED HEREIN.   11. NOTICES. ALL NOTICES OR COMMUNICATIONS HEREUNDER SHALL BE IN WRITING, ADDRESSED AS FOLLOWS:   To the Company:   Mirant Corporation Chief Executive Officer 1155 Perimeter Center West Atlanta, GA 30338-5416   with a copy to:                                                                 Legal Department Mirant Services, LLC 1155 Perimeter Center West Atlanta, GA 30338-5416 Fax: 678-579-5589   To Executive:   To the address on file with Company   All such notices shall be conclusively deemed to be received and shall be effective (i) if sent by hand delivery, upon receipt or (ii) if sent by electronic mail or facsimile, upon confirmation of receipt by the sender of such transmission.   12. SEVERABILITY. IN THE EVENT ANY PROVISION OR PART OF THIS AGREEMENT IS FOUND TO BE INVALID OR UNENFORCEABLE, ONLY THAT PARTICULAR PROVISION OR PART SO FOUND, AND NOT THE ENTIRE AGREEMENT, WILL BE INOPERATIVE.   14 --------------------------------------------------------------------------------   13. COMPLETE AGREEMENT. THIS AGREEMENT, THE LTIP AWARD AGREEMENTS AND THOSE DOCUMENTS EXPRESSLY REFERRED TO HEREIN EMBODY THE COMPLETE AGREEMENT AND UNDERSTANDING AMONG THE PARTIES AND SUPERSEDE AND PREEMPT ANY PRIOR UNDERSTANDINGS, AGREEMENTS OR REPRESENTATIONS BY OR AMONG THE PARTIES, WRITTEN OR ORAL, WHICH MAY HAVE RELATED TO THE SUBJECT MATTER HEREOF IN ANY WAY.   14. NO STRICT CONSTRUCTION. THE LANGUAGE USED IN THIS AGREEMENT SHALL BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES HERETO TO EXPRESS THEIR MUTUAL INTENT, AND NO RULE OF STRICT CONSTRUCTION SHALL BE APPLIED AGAINST ANY PARTY.   15. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN SEPARATE COUNTERPARTS, EACH OF WHICH IS DEEMED TO BE AN ORIGINAL AND ALL OF WHICH TAKEN TOGETHER CONSTITUTE ONE AND THE SAME AGREEMENT.   16. SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE BENEFICIARIES, HEIRS AND REPRESENTATIVES OF EXECUTIVE AND THE SUCCESSORS AND ASSIGNS OF THE COMPANY. THE COMPANY SHALL REQUIRE ANY SUCCESSOR (WHETHER DIRECT OR INDIRECT, BY PURCHASE, MERGER, REORGANIZATION, CONSOLIDATION, ACQUISITION OF PROPERTY OR STOCK, LIQUIDATION, OR OTHERWISE) TO ALL OR A MAJORITY OF ITS ASSETS, BY AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO EXECUTIVE, EXPRESSLY TO ASSUME AND AGREE TO PERFORM THIS AGREEMENT IN THE SAME MANNER AND TO THE SAME EXTENT THAT THE COMPANY WOULD BE REQUIRED TO PERFORM THIS AGREEMENT IF NO SUCH SUCCESSION HAD TAKEN PLACE. EXECUTIVE MAY NOT ASSIGN HIS RIGHTS (EXCEPT BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION) OR DELEGATE HIS DUTIES OR OBLIGATIONS HEREUNDER. EXCEPT AS PROVIDED BY THIS SECTION 16, THIS AGREEMENT IS NOT ASSIGNABLE BY ANY PARTY AND NO PAYMENT TO BE MADE HEREUNDER SHALL BE SUBJECT TO ANTICIPATION, ALIENATION, SALE, TRANSFER, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER CHARGE.   17. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.   18. AMENDMENT AND WAIVER. THE PROVISIONS OF THIS AGREEMENT MAY BE AMENDED, MODIFIED OR WAIVED ONLY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY AND EXECUTIVE, AND NO COURSE OF CONDUCT OR COURSE OF DEALING OR FAILURE OR DELAY BY ANY PARTY HERETO IN ENFORCING OR EXERCISING ANY OF THE PROVISIONS OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, THE COMPANY’S RIGHT TO TERMINATE THE EMPLOYMENT PERIOD FOR CAUSE) SHALL AFFECT THE VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF THIS AGREEMENT OR BE DEEMED TO BE AN IMPLIED WAIVER OF ANY PROVISION OF THIS AGREEMENT.   19. JOBS ACT COMPLIANCE. IF ANY PROVISION OF THIS AGREEMENT WOULD RESULT IN UNINTENDED OR ADVERSE TAX CONSEQUENCES TO EXECUTIVE OR THE COMPANY OR WOULD, IN THE JUDGMENT OF THE BOARD, CONTRAVENE THE FINAL REGULATIONS ANTICIPATED TO BE PROMULGATED UNDER THE JOBS ACT OR OTHER DEPARTMENT OF TREASURY GUIDANCE, THE COMPANY MAY REFORM THIS AGREEMENT OR ANY PROVISIONS HEREOF TO MAINTAIN TO THE MAXIMUM EXTENT PRACTICABLE THE ORIGINAL PURPOSE OF THE PROVISION WITHOUT VIOLATING THE PROVISIONS OF THE JOBS ACT.   15 --------------------------------------------------------------------------------   20. INSURANCE. THE COMPANY MAY, AT ITS DISCRETION, APPLY FOR AND PROCURE IN ITS OWN NAME AND FOR ITS OWN BENEFIT LIFE AND/OR DISABILITY INSURANCE ON EXECUTIVE IN ANY AMOUNT OR AMOUNTS CONSIDERED ADVISABLE. EXECUTIVE AGREES TO COOPERATE IN ANY MEDICAL OR OTHER EXAMINATION, SUPPLY ANY INFORMATION AND EXECUTE AND DELIVER ANY APPLICATIONS OR OTHER INSTRUMENTS IN WRITING AS MAY BE REASONABLY NECESSARY TO OBTAIN AND CONSTITUTE SUCH INSURANCE. EXECUTIVE HEREBY REPRESENTS THAT HE HAS NO REASON TO BELIEVE THAT HIS LIFE IS NOT INSURABLE AT RATES NOW PREVAILING FOR HEALTHY MEN OF HIS AGE.   21. WITHHOLDING. ANY PAYMENTS MADE OR BENEFITS PROVIDED TO EXECUTIVE UNDER THIS AGREEMENT SHALL BE REDUCED BY ANY APPLICABLE WITHHOLDING TAXES OR OTHER AMOUNTS REQUIRED TO BE WITHHELD BY LAW OR CONTRACT.   22. ARBITRATION. ANY DISPUTE OR CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE IN CONNECTION WITH THE EXECUTIVE’S EMPLOYMENT BY THE COMPANY THAT CANNOT BE MUTUALLY RESOLVED BY THE PARTIES TO THIS AGREEMENT AND THEIR RESPECTIVE ADVISORS AND REPRESENTATIVES SHALL BE SETTLED EXCLUSIVELY BY ARBITRATION IN ATLANTA, GEORGIA IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION BEFORE ONE ARBITRATOR OF EXEMPLARY QUALIFICATIONS AND STATURE, WHO SHALL BE SELECTED JOINTLY BY AN INDIVIDUAL TO BE DESIGNATED BY THE COMPANY AND AN INDIVIDUAL TO BE SELECTED BY EXECUTIVE, OR IF SUCH TWO INDIVIDUALS CANNOT AGREE ON THE SELECTION OF THE ARBITRATOR, WHO SHALL BE SELECTED BY THE AMERICAN ARBITRATION ASSOCIATION. THE COMPANY SHALL REIMBURSE EXECUTIVE’S REASONABLE LEGAL FEES IF HE PREVAILS ON A MATERIAL ISSUE IN AN ARBITRATION.   23. CORPORATE OPPORTUNITY. DURING THE EMPLOYMENT PERIOD, EXECUTIVE SHALL SUBMIT TO THE BOARD ALL BUSINESS, COMMERCIAL AND INVESTMENT OPPORTUNITIES OR OFFERS PRESENTED TO EXECUTIVE THAT RELATE TO THE BUSINESS OF POWER COMPANIES (“CORPORATE OPPORTUNITIES”), IF EXECUTIVE WISHES TO ACCEPT OR PURSUE, DIRECTLY OR INDIRECTLY, SUCH CORPORATE OPPORTUNITIES ON EXECUTIVE’S OWN BEHALF. THIS SECTION 23 SHALL NOT APPLY TO PURCHASES OF PUBLICLY TRADED STOCK BY EXECUTIVE.   24. EXECUTIVE’S COOPERATION. DURING THE EMPLOYMENT PERIOD AND THEREAFTER, EXECUTIVE SHALL COOPERATE WITH THE COMPANY AND ITS AFFILIATES, UPON THE COMPANY’S REASONABLE REQUEST, WITH RESPECT TO ANY INTERNAL INVESTIGATION OR ADMINISTRATIVE, REGULATORY OR JUDICIAL PROCEEDING INVOLVING MATTERS WITHIN THE SCOPE OF EXECUTIVE’S DUTIES AND RESPONSIBILITIES TO THE COMPANY GROUP DURING THE EMPLOYMENT PERIOD (INCLUDING, WITHOUT LIMITATION, EXECUTIVE BEING AVAILABLE TO THE COMPANY UPON REASONABLE NOTICE FOR INTERVIEWS AND FACTUAL INVESTIGATIONS, APPEARING AT THE COMPANY’S REASONABLE REQUEST TO GIVE TESTIMONY WITHOUT REQUIRING SERVICE OF A SUBPOENA OR OTHER LEGAL PROCESS, AND TURNING OVER TO THE COMPANY ALL RELEVANT COMPANY DOCUMENTS WHICH ARE OR MAY COME INTO EXECUTIVE’S POSSESSION DURING THE EMPLOYMENT PERIOD); PROVIDED, HOWEVER, THAT ANY SUCH REQUEST BY THE COMPANY SHALL NOT BE UNDULY BURDENSOME OR INTERFERE WITH EXECUTIVE’S PERSONAL SCHEDULE OR ABILITY TO ENGAGE IN GAINFUL EMPLOYMENT. IN THE EVENT THE COMPANY REQUIRES EXECUTIVE’S COOPERATION IN ACCORDANCE WITH THIS SECTION 24, THE COMPANY SHALL REIMBURSE EXECUTIVE FOR REASONABLE OUT-OF-POCKET EXPENSES (INCLUDING TRAVEL, LODGING AND MEALS) INCURRED BY EXECUTIVE IN CONNECTION WITH SUCH COOPERATION, SUBJECT TO REASONABLE DOCUMENTATION.   16 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.     MIRANT CORPORATION       By:       Its:       MIRANT SERVICES, LLC       By:       Its:                 Robert E. Driscoll   17 --------------------------------------------------------------------------------   Exhibit A   LIST OF APPROVED DIRECTORSHIPS   A-1 --------------------------------------------------------------------------------   Exhibit B   MIRANT CORPORATION RESTRICTED STOCK UNIT AWARD AGREEMENT   This Restricted Stock Unit Award (this “Award”) is made as of [INSERT DATE THAT IS [10] [45] DAYS AFTER EMERGENCE DATE], by MIRANT CORPORATION, a                      corporation (the “Company”) to Robert E. Driscoll (“Executive”).   W I T N E S S E T H:   WHEREAS, the Company entered into an employment agreement with Executive, dated as of [                        , 2006] (the “Agreement”) providing for the grant to Executive of restricted stock units (“Restricted Stock Units”) upon the Company’s emergence from bankruptcy protection; and   WHEREAS, pursuant to the terms of the Agreement the Compensation Committee of the Board of Directors of the Company (the “Board”) has granted to Executive an award of Restricted Stock Units to promote Executive’s long-term interests in the success of the Company;   NOW THEREFORE, the Company awards Restricted Stock Units to Executive pursuant to the following terms and conditions:   1. Restricted Stock Unit Award. The Company hereby grants to Executive an award of [           ] Restricted Stock Units that are to be settled in common stock of the Company (“Common Stock”). The Restricted Stock Units shall be transferable only in accordance with the provisions of Section 8 of this Award and subject to the restrictions and other conditions set forth herein. The shares to be delivered to Executive in settlement of the Restricted Stock Units shall be issued under the Company’s then existing omnibus incentive plan and, if the Common Stock is then traded on a national securities exchange or inter-dealer quotation system, including without limitation, NASDAQ, or if the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor provision thereto, the Company shall take all action necessary to keep in effect a registration statement under the Securities Act of 1933, as amended, or any successor provision thereto (the “1933 Act”) enabling Executive to resell Common Stock without restriction; provided, however, that the Company need not take such action if, at the time of distribution of Common Stock to Executive, such shares do not constitute “restricted securities” as defined in Rule 144 under the 1933 Act and Executive is not an “affiliate” of the Company under Rule 405 of the 1933 Act. Capitalized terms used, but not otherwise defined, shall have the meaning set forth in the Agreement.   2. Restrictions. Except as provided in Section 3 below, the Restricted Stock Units shall vest and become transferable as follows:   a.               twenty-five percent (25%) of the Restricted Stock Units shall vest [insert date that is six months after the Company’s emergence from bankruptcy protection];   B-1 --------------------------------------------------------------------------------   b.              twenty-five percent (25%) of the Restricted Stock Units shall vest [insert date that is one year after the Company’s emergence from bankruptcy protection];   c.               twenty-five percent (25%) of the Restricted Stock Units shall vest [insert date that is two years after the Company’s emergence from bankruptcy protection]; and   d.              twenty-five percent (25%) of the Restricted Stock Units shall vest [insert date that is three years after the Company’s emergence from bankruptcy protection].   3. Change in Employment Status.   a. Termination Without Cause, Non-Renewal, for Good Reason, Death or Disability. In the event of Executive’s termination of employment with the Company (regardless of whether such termination is in connection with a Change in Control (as defined in the Agreement)) (i) by the Company without Cause (as defined in the Agreement), (ii) by reason of the failure of the Company to offer to renew the Agreement (as provided in the Agreement), (iii) by Executive for Good Reason (as defined in the Agreement) or (iv) as a result of Executive’s death or Disability (as defined in the Agreement), all Restricted Stock Units that have not already vested, as of the date of such termination, shall vest immediately and become nonforfeitable.   b. Termination for Cause, Voluntary Resignation Without Good Reason. In the event of Executive’s termination of employment with the Company (i) by the Company for Cause or (ii) by reason of Executive’s resignation from the Company for any reason other than Good Reason, all Restricted Stock Units that have not already vested as of the date of such termination shall be immediately forfeited by Executive.   4. Book Entry Account. Within a reasonable time after the date of this Award, the Company shall instruct its transfer agent to establish a book entry account representing the Restricted Stock Units in Executive’s name effective as of the grant date, provided that the Company shall retain control of such account until the Restricted Stock Units have become vested in accordance with this Award.   5. Distribution of Shares. Consistent with the provisions of Section 3 of this Award, on the day following Executive’s termination of employment with the Company or immediately prior to the occurrence of a Change of Control, Executive shall receive one share of the Company’s common stock, as provided in Section 1 above in satisfaction of each Restricted Stock Unit credited to his account under Section 4 above and vested either theretofore or by reason of the event resulting in such termination.   6. Stockholder Rights. Executive shall not have any of the rights of a stockholder with respect to the Restricted Stock Units, including the right to vote the Common Stock that will be issued upon vesting of the Restricted Stock Units, other than the right to receive dividends or other distributions paid or made available with respect to Common Stock of the Company when otherwise paid to shareholders; provided, however, until such Restricted Stock Units are vested, any dividends shall be credited to Executive’s account under Section 4 and paid in a lump sum when such Restricted Stock Units to which the dividends are attributable vest.   B-2 --------------------------------------------------------------------------------   7. Withholding.  Executive shall pay all applicable federal, state and local income and employment taxes (including taxes of any foreign jurisdiction), which the Company is required to withhold at any time with respect to the Restricted Stock Units.  Such payment shall be made in full, at Executive’s election, in cash or check, by withholding from Executive’s next normal payroll check, or by the tender of shares of Common Stock (including shares then vesting under this Award).  Shares tendered as payment of required withholding shall be valued at the closing price per share of Common Stock on the date such withholding obligation arises.   8.  Transferability.  Except as otherwise provided in this Section 8, the Restricted Stock Units shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner, whether by the operation of law or otherwise.  Executive may transfer the Restricted Stock Units, in whole or in part, to a spouse or lineal descendant (a “Family Member”), a trust for the exclusive benefit of Executive and/or Family Members, a partnership or other entity in which all the beneficial owners are Executive and/or Family Members, or any other entity affiliated with Executive that may be approved by the Compensation Committee (a “Permitted Transferee”).  Subsequent transfers of the Restricted Stock Units shall be prohibited except in accordance with this Section 8.  All terms and conditions of the Restricted Stock Units, including provisions relating to the termination of Executive’s employment with the Company, shall continue to apply following a transfer made in accordance with this Section 8.  Any attempted transfer of the Restricted Stock Units prohibited by this Section 8 shall be null and void.   9.  Adjustments.  In the event that the outstanding shares of Common Stock are subject to a stock split or changed into or exchanged for a different number or kind of shares or other securities of the Company or other corporation by reason of a merger, consolidation, reorganization, recapitalization, reclassification, combination of shares or a dividend payable in capital stock, or a similar corporate structural change, then the rights of the Executive shall be appropriately adjusted as to the number of shares of Common Stock subject to the Restricted Stock Unit Award.  The granting of the Restricted Stock Units pursuant to this Award shall not affect in any way the right or power of the Company to make adjustments, reorganizations, reclassifications, or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer all or any part of its business or assets.   10. Change in Control.  Subject to the provisions of Section 3 of this Award, the Compensation Committee, in its sole discretion, may at any time prior to, coincident with or after the time of a Change in Control:   (i)            provide for the acceleration of any vesting of the Restricted Stock Units upon a Change in Control; or   (ii)           provide that such Restricted Stock Units shall vest in accordance with the provisions of this Agreement as though no Change in Control had occurred, except that, as appropriate, the shares of Common Stock represented by the Restricted Stock Units shall be treated in the same manner as other shares of Common Stock in any transaction constituting a Change in Control; or   B-3 --------------------------------------------------------------------------------   (iii)          cause new rights to be substituted for the Restricted Stock Units by the surviving corporation in such Change in Control.   Any such actions shall be authorized by the Compensation Committee, whose determination as to what actions shall be taken and the extent thereof, shall be final.   11. Agreement Provisions.  In addition to the terms and conditions set forth herein, this Award is subject to and governed by the terms and conditions set forth in the Agreement, which is incorporated herein by reference.  In the event of any conflict between the provisions of this Award and the Agreement, the Agreement shall control.   12. Notice.  Any written notice required or permitted by this Award shall be mailed, certified mail (return receipt requested) or hand-delivered, addressed to Company’s Senior Vice President – Administration at Company’s North American headquarters at 1155 Perimeter Center West, Atlanta, Georgia 30338, with a copy to Legal Department, Mirant Services LLC 1155 Perimeter Center West, Atlanta, Georgia 30338. or to Executive at his most recent home address on record with the Company.  Notices are effective upon receipt.   13. Miscellaneous.   (a)           Limitation of Rights.  The granting of this Award shall not give Executive any rights to similar grants in future years or any right to be retained in the employ or service of the Company or its subsidiary or interfere in any way with the right of the Company or any such subsidiary to terminate Executive’s services at any time, or the right of Executive to terminate his services at any time.   (b)           Severability.  If any term, provision, covenant or restriction contained in this Award is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Award shall remain in full force and effect, and shall in no way be affected, impaired or invalidated.   (c)           Controlling Law.  All issues and questions concerning the construction, validity, enforcement and interpretation of this Award shall be governed by, and construed in accordance with, the laws of the State of Georgia.   (d)           Arbitration.  Any dispute or controversy arising under or in connection with the Agreement or this Award or otherwise in connection with the Executive’s employment by the Company that cannot be mutually resolved by the parties to the Agreement or this Award and their respective advisors and representatives shall be settled exclusively by arbitration in Atlanta, Georgia in accordance with the rules of the American Arbitration Association before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by an individual to be designated by the Company and an individual to be selected by Executive, or if such two individuals cannot agree on the selection of the arbitrator, who shall be selected by the American Arbitration Association.  The Company shall reimburse Executive’s reasonable legal fees if he prevails on a material issue in an arbitration.   B-4 --------------------------------------------------------------------------------   (e)           Construction.  This Award contains the entire understanding between the parties and supersedes any prior understanding and agreements between them representing the subject matter hereof, except that this Award shall be subject to the terms and conditions set forth in the Agreement.  There are no other representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein.   (f)            Headings.  Section and other headings contained in this Award are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Award or any provision hereof.   IN WITNESS WHEREOF, the undersigned Chairman of the Compensation Committee of the Board executes this Award on behalf of the Company as of day and year first set forth above.     MIRANT CORPORATION           By:           Its:   B-5 --------------------------------------------------------------------------------   Exhibit C   MIRANT CORPORATION STOCK OPTION AWARD   This Stock Option Award (this “Award”) is made as of [INSERT DATE THAT IS [10] [45] DAYS AFTER EMERGENCE DATE], by MIRANT CORPORATION, a                       corporation (the “Company”) to Robert E. Driscoll (“Executive”).   W I T N E S S E T H:   WHEREAS, the Company entered into an employment agreement with Executive, dated as of [                      , 2006] (the “Agreement”) providing for the grant to Executive of options to purchase the common stock (“Common Stock”) of the Company (“Stock Options”) upon the Company’s emergence from bankruptcy protection; and   WHEREAS, pursuant to the terms of the Agreement, the Compensation Committee of the Board of Directors of the Company (the “Board”) has granted to Executive an award of Stock Options to promote Executive’s long-term interests in the success of the Company;   NOW THEREFORE, the Company awards Stock Options to Executive pursuant to the following terms and conditions:   1.             Stock Option Award.  Subject to the terms and conditions contained herein and in the Agreement, the Company hereby grants to the Executive an award of [          ] Stock Options, at an exercise price of $[         ] (the “Exercise Price”).  The Stock Options are not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended.  Each such Stock Option shall entitle Executive to purchase, upon payment of the Exercise Price, one share of Common Stock.  Capitalized terms used, but not otherwise defined, shall have the meaning set forth in the Agreement.   2.             Vesting.  Except as provided in Section 5 below, the Stock Options shall vest and become transferable as follows:   e.     twenty-five percent (25%) of the Stock Options shall vest on [insert date that is six months after the Company’s emergence from bankruptcy protection];   f.      twenty-five percent (25%) of the Stock Options shall vest on [insert date that is one year after the Company’s emergence from bankruptcy protection];   g.     twenty-five percent (25%) of the Stock Options shall vest on [insert date that is two years after the Company’s emergence from bankruptcy protection];   h.     twenty-five percent (25%) of the Stock Options shall vest on [insert date that is three years after the Company’s emergence from bankruptcy protection].   C-1 --------------------------------------------------------------------------------   3.             Term.  The Stock Options shall expire on the earlier of 10 years from the date of grant or the date specified for termination of such Stock Options, as provided in Section 5(c).   4.             Exercise, Payment and Other Conditions.  The Stock Options may be exercised in whole or in part to the extent vested.  The Executive may exercise the Stock Options by delivery to the Company of written notice providing:  (i) the name of Executive; (ii) the address to which Common Stock certificates are to be mailed; and (iii) the number of shares of Common Stock subject to the Stock Options to be exercised.  Prior to the delivery to Executive of any stock certificates, the Executive shall have paid to the Company the Exercise Price of all shares of Common Stock purchased pursuant to such exercise of the Stock Options as provided in this Award.  The Board may, in its discretion, require the Executive to pay to the Company an amount equal to the federal, state and local taxes, if any, required to be withheld or paid by the Company as a result of such exercise.  All payments shall be in United States dollars in the form of cash, certified check or bank draft, or, with the consent of the Board by delivering to the Company (or by attesting to the ownership of) shares of Common Stock which Executive has owned for at least six months having a fair market value on the date of exercise equal to the Exercise Price, plus the minimum withholding tax due in accordance with Section 7, for the shares of Common Stock with respect to which Executive has exercised such Stock Options.  The Stock Options shall be considered exercised on the date the notice and payment are received by the Chairman of the Compensation Committee of the Board (“Compensation Committee”).  As promptly as practicable after receipt of such notice and payment, the Company shall deliver to Executive a certificate or certificates for the number of shares of Common Stock with respect to which the Stock Options have been so exercised, issued in Executive’s name.  Such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificate or certificates in the United States mail, addressed to Executive, at the address specified in the notice.   5.             Change in Employment Status.   a.             Termination Without Cause, Non-Renewal, for Good Reason, Death or Disability.  In the event of Executive’s termination of employment with the Company (regardless of whether such termination is in connection with a Change in Control (as defined in the Agreement)) (i) by the Company without Cause (as defined in the Agreement)), (ii) by reason of the failure of the Company to offer to renew the Agreement (as provided in the Agreement), (iii) by Executive for Good Reason (as defined in the Agreement) or (iv) as a result of Executive’s death or Disability (as defined in the Agreement), all Stock Options that have not already vested, as of the date of such termination shall vest immediately and become nonforfeitable.   b.             Termination for Cause, Voluntary Resignation Without Good Reason.  In the event that of Executive’s termination of employment with the Company (i) by the Company for Cause or (ii) by reason of Executive’s resignation from the Company for any reason other than Good Reason, all Stock Options that have not already vested as of the date of such termination shall be immediately forfeited by Executive and Executive shall have no further right or interest therein.   c.             Post-Termination Exercise. Upon termination of Executive’s employment for any reason other than that described in subsection b above, Executive shall have one year to   C-2 --------------------------------------------------------------------------------   exercise any Stock Options that are vested or become vested as of the date of Executive’s termination of employment, subject to earlier expiration of the Stock Option as provided in Section 3.   6.             Stockholder Rights.  Executive shall not have any of the rights of a stockholder with respect to the Stock Options, including the right to vote the Common Stock that will be issued upon the exercise of the Stock Options or to receive dividends or other distributions paid or made available with respect to Common Stock of the Company until such Stock Options are exercised.   7.             Withholding.  Executive shall pay all applicable federal, state and local income and employment taxes (including taxes of any foreign jurisdiction), which the Company is required to withhold at any time with respect to the Stock Options.  Such payment shall be made in full, at Executive’s election, in cash or check, by withholding from Executive’s next normal payroll check, or by the tender of shares of Common Stock (including shares acquired upon exercise of the Stock Options).  Shares tendered as payment of required withholding shall be valued at the closing price per share of Common Stock on the date such withholding obligation arises.   8.             Transferability.  Except as otherwise provided in this Section 8, the Stock Options shall not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner, whether by the operation of law or otherwise.  Executive may transfer the Stock Options, in whole or in part, to a spouse or lineal descendant (a “Family Member”), a trust for the exclusive benefit of Executive and/or Family Members, a partnership or other entity in which all the beneficial owners are Executive and/or Family Members, or any other entity affiliated with Executive that may be approved by the Compensation Committee (a “Permitted Transferee”).  Subsequent transfers of the Stock Options shall be prohibited except in accordance with this Section 8.  All terms and conditions of the Stock Options, including provisions relating to the termination of Executive’s employment with the Company, shall continue to apply following a transfer made in accordance with this Section 8.  Any attempted transfer of the Stock Options prohibited by this Section 8 shall be null and void.  The shares to be delivered to Executive upon the exercise of any Stock Options shall be issued under the Company’s then existing omnibus incentive plan and, if the Common Stock is then traded on a national securities exchange or inter-dealer quotation system, including without limitation, NASDAQ, or if the Company is subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or any successor provision thereto, the Company shall take all action necessary to keep in effect a registration statement under the Securities Act of 1933, as amended, or any successor provision thereto (the “1933 Act”) enabling Executive to resell Common Stock without restriction; provided, however, that the Company need not take such action if, at the time of distribution of Common Stock to Executive, such shares do not constitute “restricted securities” as defined in Rule 144 under the 1933 Act and Executive is not an “affiliate” of the Company under Rule 405 of the 1933 Act.   9.             Adjustments.  In the event that the outstanding shares of Common Stock are subject to a stock split or changed into or exchanged for a different number or kind of shares or other securities of the Company or other corporation by reason of a merger, consolidation, reorganization, recapitalization, reclassification, combination of shares or a dividend payable in   C-3 --------------------------------------------------------------------------------   capital stock, or a similar corporate structural change, then the rights of the Executive shall be appropriately adjusted as to the number of shares of Common Stock subject to the Stock Options and/or as to the Exercise Price.  The granting of the Stock Options pursuant to this Award shall not affect in any way the right or power of the Company to make adjustments, reorganizations, reclassifications, or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer all or any part of its business or assets.   10.           Change in Control.  Subject to the provisions of Section 5 of this Award, the Compensation Committee, in its sole discretion, may at any time prior to, coincident with or after the time of a Change in Control:   (i)            provide for the acceleration of any vesting conditions relating to the exercise of the Stock Option or that the Stock Option may be exercised in full on or before a date fixed by the Committee;   (ii)           provide for the purchase of the Stock Option, upon Executive’s request, for an amount of cash equal to the amount, as determined by the Compensation Committee in its sole discretion, which could have been realized upon the exercise of the Stock Options had the option been currently exercisable; or   (iii)          cause the Stock Options then to be assumed, or new rights substituted therefore, by the surviving corporation in such Change in Control.   Any such actions shall be authorized by the Compensation Committee, whose determination as to what actions shall be taken and the extent thereof, shall be final.   11.           Agreement Provisions.  In addition to the terms and conditions set forth herein, this Award is subject to and governed by the terms and conditions set forth in the Agreement, which is incorporated herein by reference.  In the event of any conflict between the provisions of this Award and the Agreement, the Agreement shall control.   12.           Notice.  Any written notice required or permitted by this Award shall be mailed, certified mail (return receipt requested) or hand-delivered, addressed to Company’s Senior Vice President – Administration at Company’s North American headquarters at 1155 Perimeter Center West, Atlanta, Georgia 30338, with a copy to Legal Department, Mirant Services, LLC, 1155 Perimeter Center West, Atlanta, GA  30338, or to Executive at his most recent home address on record with the Company.  Notices are effective upon receipt.   13.           Miscellaneous.   (a)           Limitation of Rights.  The granting of this Award shall not give Executive any rights to similar grants in future years or any right to be retained in the employ or service of the Company or its subsidiary or interfere in any way with the right of the Company or any such subsidiary to terminate Executive’s services at any time, or the right of Executive to terminate his services at any time.   C-4 --------------------------------------------------------------------------------   (b)           Severability.  If any term, provision, covenant or restriction contained in this Award is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Award shall remain in full force and effect, and shall in no way be affected, impaired or invalidated.   (c)           Controlling Law.  All issues and questions concerning the construction, validity, enforcement and interpretation of this Award shall be governed by, and construed in accordance with, the laws of the State of Georgia.   (d)           Arbitration.  Any dispute or controversy arising under or in connection with the Agreement or this Award or otherwise in connection with the Executive’s employment by the Company that cannot be mutually resolved by the parties to the Agreement or this Award and their respective advisors and representatives shall be settled exclusively by arbitration in Atlanta, Georgia in accordance with the rules of the American Arbitration Association before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by an individual to be designated by the Company and an individual to be selected by Executive, or if such two individuals cannot agree on the selection of the arbitrator, who shall be selected by the American Arbitration Association.  The Company shall reimburse Executive’s reasonable legal fees if he prevails on a material issue in an arbitration.   (e)           Construction.  This Award contains the entire understanding between the parties and supersedes any prior understanding and agreements between them representing the subject matter hereof, except that this Award shall be subject to the terms and conditions set forth in the Agreement.  There are no other representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein.   (f)            Headings.  Section and other headings contained in this Award are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Award or any provision hereof.   IN WITNESS WHEREOF, the undersigned Chairman of the Compensation Committee of the Board executes this Award on behalf of the Company as of day and year first set forth above.     MIRANT CORPORATION           By:           Its:   C-5 --------------------------------------------------------------------------------   Exhibit D   FORM OF RELEASE   This General Release of all Claims (this “Agreement”) is entered into by Robert           . Driscoll (“Executive”“) and Mirant Services, LLC and Mirant Corporation (collectively, the “Company”), effective as of                              .   In further consideration of the promises and mutual obligations set forth in the Employment Agreement between Executive and the Company, dated                              (the “Employment Agreement”), Executive and the Company agree as follows:   2.             Return of Property.  All Company files, access keys, desk keys, ID badges, computers, electronic devices, telephones and credit cards, and such other property of the Company as the Company may reasonably request, in Executive’s possession must be returned no later than the date of Executive’s termination from the Company.   3.             General Release and Waiver of Claims.   (A)           RELEASE.  IN CONSIDERATION OF THE PAYMENTS AND BENEFITS PROVIDED TO EXECUTIVE UNDER THE EMPLOYMENT AGREEMENT AND AFTER CONSULTATION WITH COUNSEL, EXECUTIVE, PERSONALLY AND ON BEHALF OF EACH OF EXECUTIVE’S RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, REPRESENTATIVES, AGENTS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASORS”) HEREBY IRREVOCABLY AND UNCONDITIONALLY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES AND EACH OF THEIR RESPECTIVE OFFICERS, EMPLOYEES, DIRECTORS, AND AGENTS (“RELEASEES”) FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION, RIGHTS, JUDGMENTS, OBLIGATIONS, DAMAGES, DEMANDS, ACCOUNTINGS OR LIABILITIES OF WHATEVER KIND OR CHARACTER (COLLECTIVELY, “CLAIMS”), INCLUDING, WITHOUT LIMITATION, ANY CLAIMS UNDER ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW, THAT THE RELEASORS HAD, HAVE, MAY HAVE, OR IN THE FUTURE MAY POSSESS, ARISING OUT OF (I) EXECUTIVE’S EMPLOYMENT RELATIONSHIP WITH AND SERVICE AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY, AND THE TERMINATION OF SUCH RELATIONSHIP OR SERVICE, AND (II) ANY EVENT, CONDITION, CIRCUMSTANCE OR OBLIGATION THAT OCCURRED, EXISTED OR AROSE ON OR PRIOR TO THE DATE HEREOF; PROVIDED, HOWEVER, THAT EXECUTIVE DOES NOT RELEASE, DISCHARGE OR WAIVE ANY RIGHTS TO PAYMENTS AND BENEFITS PROVIDED UNDER THE EMPLOYMENT AGREEMENT THAT ARE CONTINGENT UPON THE EXECUTION BY EXECUTIVE OF THIS AGREEMENT NOR ANY RIGHTS TO INDEMNIFICATION OR AS A SHAREHOLDER OF THE COMPANY.   (B)           SPECIFIC RELEASE OF ADEA CLAIMS.  IN FURTHER CONSIDERATION OF THE PAYMENTS AND BENEFITS PROVIDED TO EXECUTIVE UNDER THE EMPLOYMENT AGREEMENT, THE RELEASORS HEREBY UNCONDITIONALLY RELEASE AND FOREVER DISCHARGE THE RELEASEES FROM ANY AND ALL CLAIMS THAT THE RELEASORS MAY HAVE AS OF THE DATE EXECUTIVE SIGNS THIS AGREEMENT ARISING UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, AND THE APPLICABLE RULES AND REGULATIONS PROMULGATED THEREUNDER (“ADEA”).  BY SIGNING THIS AGREEMENT, EXECUTIVE HEREBY ACKNOWLEDGES AND CONFIRMS THE FOLLOWING:  (I) EXECUTIVE WAS ADVISED BY THE COMPANY IN CONNECTION WITH HIS TERMINATION TO CONSULT WITH AN ATTORNEY OF HIS CHOICE PRIOR TO SIGNING THIS AGREEMENT AND TO HAVE SUCH ATTORNEY EXPLAIN TO EXECUTIVE THE TERMS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE TERMS RELATING TO EXECUTIVE’S RELEASE OF CLAIMS ARISING UNDER   D-1 --------------------------------------------------------------------------------   ADEA, AND EXECUTIVE HAS IN FACT CONSULTED WITH AN ATTORNEY; (II) EXECUTIVE WAS GIVEN A PERIOD OF NOT FEWER THAN 21 DAYS TO CONSIDER THE TERMS OF THIS AGREEMENT AND TO CONSULT WITH AN ATTORNEY OF HIS CHOOSING WITH RESPECT THERETO; AND (III) EXECUTIVE KNOWINGLY AND VOLUNTARILY ACCEPTS THE TERMS OF THIS AGREEMENT.  EXECUTIVE ALSO UNDERSTANDS THAT HE HAS SEVEN (7) DAYS FOLLOWING THE DATE ON WHICH HE SIGNS THIS AGREEMENT WITHIN WHICH TO REVOKE THE RELEASE CONTAINED IN THIS PARAGRAPH, BY PROVIDING THE COMPANY A WRITTEN NOTICE OF HIS REVOCATION OF THE RELEASE AND WAIVER CONTAINED IN THIS PARAGRAPH.   (C)           NO ASSIGNMENT.  EXECUTIVE REPRESENTS AND WARRANTS THAT HE HAS NOT ASSIGNED ANY OF THE CLAIMS BEING RELEASED UNDER THIS AGREEMENT.   4.             Proceedings.  Executive has not filed, and agrees not to initiate or cause to be initiated on his behalf, any complaint, charge, claim or proceeding against the Releasees before any local, state or federal agency, court or other body relating to his employment or the termination of his employment, other than with respect to the obligations of the Company to Executive under the Employment Agreement (each, individually, a “Proceeding”), and agrees not to participate voluntarily in any Proceeding.  Executive waives any right he may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding.   5.             Remedies.  In the event Executive initiates or voluntarily participates in any Proceeding, or if he fails to abide by any of the terms of this Agreement or his post-termination obligations contained in the Employment Agreement, or if he revokes the ADEA release contained in Paragraph 2(b) of this Agreement within the seven-day period provided under Paragraph 2(b), the Company may, in addition to any other remedies it may have, reclaim any amounts paid to him under the severance provisions of the Employment Agreement or terminate any benefits or payments that are subsequently due under the Employment Agreement, without waiving the release granted herein.  Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of his post-termination obligations under the Employment Agreement or his obligations under Paragraphs 2 and 3 of this Agreement would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms.  Accordingly, Executive acknowledges, consents and agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, the Company shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining Executive from breaching his post-termination obligations under the Employment Agreement or his obligations under Paragraphs 2 and 3 of this Agreement.  Such injunctive relief in any court shall be available to the Company, in lieu of, or prior to or pending determination in, any arbitration proceeding.   Executive understands that by entering into this Agreement he will be limiting the availability of certain remedies that he may have against the Company and limiting also his ability to pursue certain claims against the Company.   D-2 --------------------------------------------------------------------------------   6.             Severability Clause.  In the event any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Agreement, will be inoperative.   7.             Non-admission.  Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of the Company.   8.             Governing Law.  All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of Georgia applicable to contracts executed in and to be performed in that State.   9.             Arbitration.  Any dispute or controversy arising under or in connection with this Agreement or otherwise in connection with Executive’s employment by the Company that cannot be mutually resolved by the parties to this Agreement and their respective advisors and representatives shall be settled exclusively by arbitration in Atlanta, Georgia in accordance with the rules of the American Arbitration Association before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by an individual to be designated by the Company and an individual to be selected by Executive or, if such two individuals cannot agree on the selection of the arbitrator, who shall be selected by the American Arbitration Association.   10.           Notices.  All notices or communications hereunder shall be in writing, addressed as follows:   To the Company:   Mirant Corporation     To Executive:   With a copy to:     All such notices shall be conclusively deemed to be received and shall be effective (i) if sent by hand delivery, upon receipt or (ii) if sent by electronic mail or facsimile, upon confirmation of receipt by the sender of such transmission.   EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND THAT HE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT HE HEREBY EXECUTES THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS OWN FREE WILL.   D-3 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.       MIRANT CORPORATION       By:       Its:       MIRANT SERVICES, LLC       By:       Its:                 Robert E. Driscoll   D-4 --------------------------------------------------------------------------------   [g97712ke03i001.jpg]   Exhibit E   CONFIDENTIALITY AGREEMENT   In consideration of my Employment or continued Employment with Mirant Corporation and for other valuable and adequate consideration which I agree has been exchanged, I agree to comply with the Company’s Confidentiality Policy and this Confidentiality Agreement, specifically:   1.             I agree that the following words and phrases mean:   a)                                      “Affiliate(s)” means any corporation or entity that is a subsidiary or business unit of Mirant Corporation.   b)                                     “Company” means Mirant Corporation, its divisions, its parents, its present and future subsidiaries, and successors.   c)                                      “Confidential Information” means and includes items that the Company marks or treats as confidential.  It also includes information (other than Trade Secrets) that has any value to the Company, is known to persons inside the Company for purposes of doing their jobs, and is not generally made known to persons outside the Company.   d)                                     “Confidentiality Policy” means the policies and procedures the Company uses to protect its valuable information.  The Confidentiality Policy may change periodically and all Mirant employees are expected to comply with the current Confidentiality Policy at all times.   e)                                      “Employment” means my present or future job with the Company.  Except during those times when my job may have been subject to a valid employment agreement, Employment with the Company is, has been, and after this Agreement continues to be “employment at will.”   f)                                        “Third Party” or “Third Parties” means a person, firm or some entity other than the Company and its employees.   g)                                     “Trade Secret(s)” means those things defined as trade secrets by law.  Trade Secrets include information about the Company business that is valuable to the Company and gives the Company an advantage in the market place.  This type of information is not generally made known or available to people outside the   E-1 --------------------------------------------------------------------------------   Company, and the Company protects it from being disclosed.  Information that is a Trade Secret may be found in such things as software (code and programs), formulas, patterns, plans, charts, client lists (actual and possible), leads, pricing information, confidential business arrangements, marketing plans, and proposals.  Trade Secrets may be found in other kinds of material as well.   2.                                       I agree that during my Employment, I have been or may be given access to Trade Secrets or Confidential Information belonging to the Company, its Affiliates, or to Third Parties.  I agree that I will only use this information for the benefit of the Company except as required by applicable law or in any judicial or administrative process.  I understand and agree that I must not copy, reveal, give or make known to anyone outside the Company any Trade Secret or Confidential Information, without authorization by management and appropriate safeguards.  I further understand and agree that the Company is entitled to this protection:  (a) for Trade Secrets as long as it is a Trade Secret under the law, and (b) for Confidential Information as long as I am employed by the Company and for three (3) years after my Employment ends.   3.                                       I agree to not disclose any Confidential Information or Trade Secrets belonging to Third Parties when:  (a) the Company has agreed to protect such information, and (b) I am told or determine that the Third Party’s information should be treated as confidential.  I will keep the Third Party’s information confidential in the manner required by the Company.   4.                                       I agree that I will provide the Company all of its Confidential Information and Trade Secrets I have or that are under my control (including any belonging to any Affiliate or Third Party) at any time the Company requests it.   5.                                       I agree to return the originals and all copies of the Confidential Information whether in electronic, printed or any other form before the last day of my Employment.   6.                                       I agree that this Confidentiality Agreement (a) is governed by the law of the State of Georgia; (b) is binding on my heirs and representatives; (c) may be assigned by Mirant Corporation; (d) continues in effect after the end of my Employment; and (e) cannot be amended or released except in a document signed by me and the Company.   7.                                       I agree that this Confidentiality Agreement is intended to replace any previous agreement, or portions of any agreement that contains confidentiality requirements, that conflicts with this one.  I further agree that this Confidentiality Agreement is to be read to give the Company the greatest protection possible without being contrary to law.  If any court finds part of this Confidentiality Agreement to be unenforceable, I   E-2 --------------------------------------------------------------------------------   agree that part will be struck out and the remainder of the Confidentiality Agreement will continue in effect.   In witness hereof, I have executed this Confidentiality Agreement this                   day of                          , 2006.             HR Representative Employee Signature                 Print Name & Title Print Name   E-3 --------------------------------------------------------------------------------   [g97712ke03i001.jpg]   Exhibit F   INTELLECTUAL PROPERTY AGREEMENT   In consideration of my Employment or continued Employment with Mirant Corporation, and for other valuable and adequate consideration which I agree has been exchanged, I agree to comply with the Company’s Intellectual Property Policy and this Intellectual Property Agreement (“Agreement”), specifically:   1.             I agree that the following words and phrases mean:   a)                                      “Affiliate(s)” means any corporation or entity that is a subsidiary or business unit of Mirant Corporation.   b)                                     “Company” means Mirant Corporation, its divisions, its parents, its present and future subsidiaries, and successors.   c)                                      “Employment” means my present or future job with the Company.  Except during those times when my job may have been subject to a valid employment agreement, Employment with the Company is, has been, and after this Agreement continues to be “employment at will.”   d)                                     “Intellectual Property” means any invention, discovery, creation, improvement or design.  Such Intellectual Property includes machines, processes, concepts, chemical compounds, computer programs, authored material, trademarks, service marks, and improvements to any of these items; Intellectual Property may also include other things not listed here.  An individual’s work (and that of those working together) will be considered the Company’s Intellectual Property if it: (i) is related to any job the individual holds or has held with the Company or its Affiliates, (ii) is created, worked on or implemented while the individual is at work, or (iii) is created, worked on or implemented using Company or Affiliate personnel, facilities, equipment knowledge, information, resources or materials.   e)                                      “Intellectual Property Policy” means the policies and procedures the Company uses to protect its valuable Intellectual Property.  The Intellectual Property Policy may change periodically and all Mirant employees are expected to comply with the current Intellectual Property Policy at all times.   f)                                        “Third Party” or “Third Parties” means a person, firm or some entity other than the Company and its employees.   F-1 --------------------------------------------------------------------------------   2.                                       I agree that I will fully inform the Company about any material that might be Intellectual Property at the earliest possible time.  I also agree that I will not disclose innovations or potential Intellectual Property to Third Parties and will treat it as covered by the Company’s Confidentiality Policy and my Confidentiality Agreement with the Company.   3.                                       As a part of this Agreement, I transfer to the Company all rights to Intellectual Property which comes into existence during my Employment.  I agree that all Intellectual Property is a “work for hire” (as defined in the United States Code) belonging exclusively to the Company.  No Intellectual Property I transfer will be considered “joint work” belonging to anyone other than the Company.   4.                                       I agree to sign any documents, and provide any assistance the Company may need to protect the Intellectual Property, obtain registrations (including Patents, Trademarks, Copyrights, etc.), and establish and maintain its title to the Intellectual Property.  The Company will pay expenses required to obtain these protections.   5.                                       I understand that the Company may decide, for whatever reason, not to pursue legal protection for Intellectual Property created by me.  The company may also choose to release its interest in the Intellectual Property to me.  If this happens, I agree to execute any documents necessary to give the Company the perpetual right and license to use, maintain, modify, make derivative works from, practice and market the Intellectual Property at no cost to the Company.   6.                                       I agree that I will provide the Company all of its Intellectual Property that I have or that is under my control (including any belonging to any Affiliate or Third Party) at any time the Company requests it.   7.                                       I agree to return the originals and all copies of the Intellectual Property information whether in electronic, printed or any other form before the last day of my Employment.   8.                                       I agree that this Agreement (a) is governed by the laws of the State of Georgia; (b) is binding on my heirs and representatives; (c) may be assigned by the Company; (d) continues in effect after the end of my Employment; and (e) cannot be amended or released except in a document signed by me and the Company.   9.                                       I agree that this Agreement is intended to replace any previous agreement, or portions of any agreement that contains intellectual property requirements, that conflicts with this one.  I further agree that this Agreement is be read to give the Company the greatest protection possible without being contrary to law.  If any court finds part of this Agreement to be unenforceable, I agree that part will be struck out and the remainder of the Agreement will continue in effect.   F-2 --------------------------------------------------------------------------------   In witness hereof, I have executed this Confidentiality Agreement this                day of                            ,                                 .             HR Representative Employee Signature                 Print Name & Title Print Name   F-3 --------------------------------------------------------------------------------   EXHIBIT G   FORM OF RELEASE BY THE COMPANY   This Release of Claims (this “Agreement”) is entered into by Robert E. Driscoll (“Executive”) and Mirant Services, LLC and Mirant Corporation (collectively, the “Company”), effective as of [DATE].   In consideration of the promises and mutual obligations set forth in the Employment Agreement between Executive and the Company, dated                                 (the “Employment Agreement”) and other good and valuable consideration, Executive and the Company agree as follows:   1.             General Release and Waiver of Claims.   (A)           RELEASE.  THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES (“COMPANY RELEASORS”) HEREBY IRREVOCABLY AND UNCONDITIONALLY RELEASE AND FOREVER DISCHARGE EXECUTIVE PERSONALLY AND EACH OF EXECUTIVE’S HEIRS, EXECUTORS, ADMINISTRATORS, REPRESENTATIVES, AGENTS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “EXECUTIVE RELEASEES”) FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION, RIGHTS, JUDGMENTS, OBLIGATIONS, DAMAGES, DEMANDS, ACCOUNTINGS OR LIABILITIES OF WHATEVER KIND OR CHARACTER (COLLECTIVELY, “CLAIMS”), INCLUDING, WITHOUT LIMITATION, ANY CLAIMS UNDER ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW, THAT THE COMPANY RELEASORS HAD, HAVE, MAY HAVE, OR IN THE FUTURE MAY POSSESS, ARISING OUT OF EXECUTIVE’S EMPLOYMENT RELATIONSHIP WITH AND SERVICE AS AN EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY, AND THE TERMINATION OF SUCH RELATIONSHIP OR SERVICE; PROVIDED, HOWEVER, THAT THE COMPANY RELEASORS DO NOT RELEASE, DISCHARGE OR WAIVE ANY CLAIMS ARISING OUT OF OR RESULTING FROM EXECUTIVE’S FRAUD, GROSS-NEGLIGENCE OR OTHER VIOLATION OF LAW.   (B)           NO ASSIGNMENT.  THE COMPANY REPRESENTS AND WARRANTS THAT IT HAS NOT ASSIGNED ANY OF THE CLAIMS BEING RELEASED UNDER THIS AGREEMENT.   2.             Proceedings.  The Company has not filed, and agrees not to initiate or cause to be initiated on its behalf, any complaint, charge, claim or proceeding against the Executive Releasees before any local, state or federal agency, court or other body based on the Claims released under this Agreement (a “Proceeding”) and agrees not to participate voluntarily in any Proceeding.   3.             Remedies.  The Company acknowledges and agrees that the remedy at law available to the Executive for breach of any of the Company’s obligations under Paragraphs 1 and 2 of this Agreement would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms.  Accordingly, the Company acknowledges, consents and agrees that, in addition to any other rights or remedies that Executive may have at law or in equity, Executive shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Company from breaching its obligations under Paragraphs 1 and 2 of   G-1 --------------------------------------------------------------------------------   this Agreement.  Such injunctive relief in any court shall be available to Executive, in lieu of, or prior to or pending determination in, any arbitration proceeding.   The Company understands that by entering into this Agreement it will be limiting the availability of certain remedies that it may have against Executive and limiting also its ability to pursue certain claims against Executive.   4.             Severability Clause.  In the event any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Agreement, will be inoperative.   5.             Non-admission.  Nothing contained in this Agreement will be deemed or construed as an admission of wrongdoing or liability on the part of Executive.   6.             Governing Law.  All matters affecting this Agreement, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the State of Georgia applicable to contracts executed in and to be performed in that State.   7.             Arbitration.  Any dispute or controversy arising under or in connection with this Agreement or otherwise in connection with Executive’s employment by the Company that cannot be mutually resolved by the parties to this Agreement and their respective advisors and representatives shall be settled exclusively by arbitration in Atlanta, Georgia in accordance with the rules of the American Arbitration Association before one arbitrator of exemplary qualifications and stature, who shall be selected jointly by an individual to be designated by the Company and an individual to be selected by Executive or, if such two individuals cannot agree on the selection of the arbitrator, who shall be selected by the American Arbitration Association.   8.             Notices.  All notices or communications hereunder shall be in writing, addressed as follows:   To the Company:   Mirant Corporation     To Executive:   G-2 --------------------------------------------------------------------------------   All such notices shall be conclusively deemed to be received and shall be effective (i) if sent by hand delivery, upon receipt or (ii) if sent by electronic mail or facsimile, upon confirmation of receipt by the sender of such transmission.   THE COMPANY ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT AND THAT IT FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT IT HEREBY EXECUTES THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF ITS OWN FREE WILL.   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.       MIRANT CORPORATION       By:       Its:       MIRANT SERVICES, LLC       By:       Its:                 Robert E. Driscoll   G-3 --------------------------------------------------------------------------------

  EXHIBIT 10.4 AMENDMENT NO. 2 TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT      THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, effective as of December 15, 2006 (this “Amendment”), is entered into by and among DEJ 98 Finance, LLC, a Delaware limited liability company (the “Seller”), Wolverine Finance, LLC, a Tennessee limited liability company, as initial servicer (the “Servicer”), Wolverine Tube, Inc., a Delaware corporation, as performance guarantor (the “Performance Guarantor” and, together with the Seller and the Servicer, the “Seller Parties”), Variable Funding Capital Company LLC, a Delaware limited liability company (“VFCC”), The CIT Group/Business Credit, Inc., a New York corporation (“CIT/BC”), individually and as co-agent (the “Co-Agent”), and Wachovia Bank, National Association, individually (together with VFCC and CIT/BC, the “Purchasers”), and as agent for the Purchasers (together with its successors and assigns in such capacity, the “Agent”). PRELIMINARY STATEMENTS      The Seller Parties, the Purchasers and the Agent are parties to that certain Amended and Restated Receivables Purchase Agreement dated as of April 4, 2006, as heretofore amended (the “Existing Agreement”).      The parties wish to amend the Existing Agreement as hereinafter set forth.      NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:      1. Definitions. Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Existing Agreement.      2. Amendment. The definition of “U.S. Originator” set forth in the Existing Agreement is hereby amended and restated in its entirety to read as follows:      “U.S. Originator” means each of Wolverine Tube, Inc., a Delaware corporation, Tube Forming, LP, a Delaware limited partnership, Wolverine Joining Technologies, LLC, a Delaware limited liability company and Small Tube Manufacturing LLC, a Delaware limited liability company, each in its capacity as a seller under the U.S. Receivables Sale Agreement.   --------------------------------------------------------------------------------        3. Representations.      3.1. Each of the Seller Parties represents and warrants to the Purchasers and the Agent that it has duly authorized, executed and delivered this Amendment and that the Existing Agreement, as amended hereby, constitutes, a legal, valid and binding obligation of such Seller Party, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability).      3.2. Each of the Seller Parties further represents and warrants to the Purchasers and the Agent that, after giving effect to this Amendment, each of its representations and warranties set forth in Section 5.1 of the Existing Agreement is true and correct as of the date hereof and that no Amortization Event or Unmatured Amortization Event exists as of the date hereof and is continuing.      4. Condition Precedent. This Amendment shall become effective as of the date first above written upon receipt by the Agent of a counterpart hereof duly executed by each of the parties hereto.      5. Miscellaneous.      5.1. Except as expressly amended hereby, the Existing Agreement shall remain unaltered and in full force and effect, and each of the parties hereby ratifies and confirms the Existing Agreement and each of the other Transaction Documents to which it is a party. Without limiting the generality of the foregoing, the Performance Guarantor hereby specifically ratifies and confirms the Performance Undertaking and agrees that it remains unaltered and in full force and effect.      5.2. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.      5.3. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Amendment. Delivery of any executed counterpart by facsimile or electronic mail with an attached image of such executed counterpart shall have the same force and effect as delivery of an originally executed counterpart.   --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the date first above written.             DEJ 98 FINANCE, LLC       By:   /s/ James E. Deason         Name:   James E. Deason        Title:   Member, Board of Managers                  WOLVERINE FINANCE, LLC       By:   /s/ James E. Deason         Name:   James E. Deason        Title:   Vice Manager and Treasurer      --------------------------------------------------------------------------------                         WOLVERINE TUBE, INC.       By:   /s/ James E. Deason         Name:   James E. Deason        Title:   Senior Vice President, Chief Financial Officer and Secretary      --------------------------------------------------------------------------------                         THE CIT GROUP/BUSINESS CREDIT, INC., individually and as Co-Agent       By:   /s/ C. Mark Smith         Name:   C. Mark Smith        Title:   Vice President      --------------------------------------------------------------------------------                         WACHOVIA BANK, NATIONAL ASSOCIATION, individually and as Agent       By:   /s/ Elizabeth R. Wagner         Name:   Elizabeth R. Wagner        Title:   Managing Director      --------------------------------------------------------------------------------             VARIABLE FUNDING CAPITAL COMPANY LLC By: Wachovia Capital Markets, LLC, its attorney-in-fact                   By:   /s/ Douglas R. Wilson, SR.         Name:   Douglas R. Wilson, SR.        Title:   Vice President       

-------------------------------------------------------------------------------- --------------------------------------------------------------------------------   FINAL   Settlement Agreement   PREAMBLE   This Settlement Agreement (the “Agreement”) is made as of September 29, 2006 (“Effective Date”), by and between Chembio Diagnostic Systems, Inc., a Delaware corporation having its principal place of business at 3661 Horseblock road, Medford, NY 11763 (“Chembio”), and StatSure Diagnostic Systems, Inc., (f/k/a Saliva Diagnostic Systems) a Delaware corporation having its principal place of business at One Clarks Hill, Framingham, MA 01702 (“SDS”) (Chembio and SDS are each referred to herein as a “Party” and jointly as the “Parties”).   RECITALS   Chembio has brought an action against SDS (Civil Action No. 04-CV-1149) in the United States District Court for the Eastern District of New York seeking a declaration of invalidity of the SDS Patents, a declaration of unenforceability of the SDS Patents and a declaration of non-infringement of the SDS Patents by the HIV Barrel Product (the “Pending Litigation”). SDS has filed an Answer and Counterclaim alleging that the HIV Barrel Product infringes the SDS Patent Number 5,935,854 and has sought leave to amend its pleading to assert that Chembio has breached the Manufacturing Agreement between SDS and Chembio dated January __, 2001, (the “SDS/Chembio Manufacturing Agreement”), among other things (the “Counterclaim”).   SDS and Chembio with to dismiss with prejudice the Pending Litigation and the Counterclaim as set forth herein.   SDS, Chembio and Inverness Medical Innovations, Inc., a Delaware corporation, (“Inverness”) have entered into a License, Marketing and Distribution Agreement of even date herewith (the “3-Way Agreement”).   SDS and Chembio intend to provide for joint Exploitation of products in the Barrel Field for the diagnosis or detection of HIV infection pursuant to the 3-Way Agreement and upon its expiration or termination through a separate agreement between them (“Joint HIV Barrel Product Commercialization Agreement”).   NOW, THEREFORE, in consideration of the premises and the mutual promises, covenants and conditions hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, Chembio and SDS hereby agree as follows:   1. Definitions.   For purposes of this Agreement, in addition to the terms that are defined on first use herein, capitalized terms herein shall have the meanings defined in the 3-Way Agreement unless otherwise defined herein except that the 3-Way Agreement shall be a Related Document for purposes of this Agreement; provided, however, that no amendment of any definition in the 3-Way Agreement will amend any definition in this Agreement unless the Parties expressly agree in writing.   2. Settlement of Pending Litigation   2.1. Dismissal of Pending Litigation. Chembio and SDS will execute and file, within five business days of the effective date of this Agreement, a stipulation of dismissal in the form of Exhibit A hereto, dismissing the Pending Litigation. Nothing in this Agreement or in any of the Related Documents shall preclude any party from asserting res judicata, collateral estoppel, or law of the case with respect to any ruling(s) previously made in the Pending Litigation. Nothing herein shall grant any rights under any SDS Patents to Chembio for any products other than HIV Barrel Products.   2.2. SDS Agreement Not to Sue. SDS agrees not to bring (and shall cause its Affiliates not to bring) an infringement action under the SDS Patents against Chembio with respect to any product in the Barrel Field for the diagnosis or detection of HIV infection that is being jointly marketed and sold by SDS and Chembio under the 3-Way Agreement or the Joint HIV Barrel Product Commercialization Agreement.   2.3. Chembio Agreement Not to Sue. Chembio agrees not to bring (and shall cause its Affiliates not to bring) an action against SDS alleging that any product in the Barrel Field for the diagnosis or detection of HIV infection that is being jointly marketed and sold by SDS and Chembio under the 3-Way Agreement or the Joint HIV Barrel Product Commercialization Agreement does not infringe any of the SDS Patents.   2.4. Limitations on Agreement Not to Sue. The obligations of SDS and Chembio under Section 2.2 and 2.3, or any other provisions in this Agreement, shall not extend to any product that is not an HIV Barrel Product, including any product in the Barrel Field for the detection or diagnosis of any target other than HIV.   3. Agreements and Obligations of the Parties.   3.1. Patent Validity. Chembio, having investigated and analyzed the SDS Patents during the course of the Pending Litigation, hereby acknowledges that each of the SDS Patents is valid and enforceable.   3.2. No Validity Challenge.    (a) Chembio agrees not to (and to cause its Affiliates not to) Challenge Patent Rights in the SDS Patents, or to assist any Third Party in doing so.   (b) SDS agrees not to (and to cause its Affiliates not to) Challenge any Patent Rights included in the Chembio IP or to assist any party in doing so, unless such Patent Rights are enforced or threatened to be enforced against SDS or an SDS customer or partner for infringement resulting from an SDS product or service other than a product in the Barrel Field that diagnoses or detects HIV or HIV infection which SDS product or service is sold in violation of this Agreement or the 3-Way Agreement. SDS further agrees not to challenge Chembio’s right to continued use for manufacture of the HIV Barrel Product of the Confidential Information or Technology utilized by Chembio in the manufacture of the HIV Barrel Product.   3.3. SDS/Chembio Manufacturing Agreement. Effective upon execution of this Agreement, neither Party shall have any rights or obligations under the SDS/Chembio Manufacturing Agreement. Each Party hereby irrevocably releases the other Party with respect to any prior breach of the SDS/Chembio Manufacturing Agreement.   4. Press Release.   The parties agree that each will issue, in its customary fashion, a press release in mutually agreed form.   5. Representations and Warranties.   5.1. Corporate Power. Each Party represents to the other Party that it has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof. Each Party represents to the other that this Agreement constitutes a valid and binding agreement, enforceable against it in accordance with its terms.   5.2. No Default or Violation. Each Party represents and warrants to the other Party that the execution, delivery and performance of this Agreement does not (i) violate or require any registration, qualification, consent, approval, or filing under, (1) any law, statute, ordinance, rule or regulation, or (2) any judgment, injunction, order, writ or decree of any court, arbitrator, or governmental entity by which such Party or any of its assets or properties may be bound or (ii) except in the case of the Existing SDS Agreements and the Existing Chembio Agreements, conflict with, require any consent, approval, or filing under, result in the breach or termination of any provision of, constitute a default under, result in the acceleration of the performance of any obligations under, result in the vesting or enhancement of any other Person’s rights under, or result in the creation of any lien upon any of such Party’s properties, assets, or businesses pursuant to (x) its organizing documents or By-Laws or (y) any material indenture, mortgage, deed of trust, license, permit, approval, consent, franchise, lease, contract, or other instrument or agreement to which such Party is a party or by which such Party or any of such Party’s properties or assets is bound.   5.3. Exclusion of Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. NEITHER PARTY WARRANTS THAT THE OTHER PARTY WILL RECEIVE ANY PARTICULAR AMOUNT, OR ANY, REVENUES OR PROFITS AS A RESULT OF ENTERING INTO THE BUSINESS ARRANGEMENTS DESCRIBED IN THIS AGREEMENT.   6. General.   6.1. Term. Unless otherwise terminated by agreement of the Parties, this Agreement shall continue in effect perpetually.   6.2. Waivers and Amendments.   (a) This Agreement may be amended, modified or supplemented only by a written instrument executed by the Parties hereto.   (b) No waiver of any provision of this Agreement, or consent to any departure from the terms hereof, shall be effective unless the same shall be in writing and signed by the Party waiving or consenting thereto. No failure on the part of either Party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right or remedy. The waiver by either Party hereto of a breach of any provision of this Agreement shall not operate as a waiver of any subsequent breach. All rights and remedies hereunder are cumulative and are in addition to and not exclusive of any other rights and remedies provided by law.   6.3. Entire Agreement. This Agreement and the Related Documents, including all schedules or attachments, taken together, constitute the entire agreement between the Parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, between the Parties in connection with such subject matter.   6.4. Relationship of the Parties. This Agreement shall not constitute either Party the agent or legal representative of the other Party for any purpose whatsoever, and neither Party shall hold itself out as an agent of the other Party. This Agreement creates no relationship of joint venturers, partners, associates, employment or principal and agent between the Parties, and each of the Parties is acting as an independent contractor. Neither Party is granted herein any right or authority to, and shall not attempt to, assume or create any obligation or responsibility for or on behalf of the other Party. Neither Party shall have any authority to bind the other Party to any contract.   6.5. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation) or mailed by registered or certified mail (return receipt requested) or delivered by recognized courier service providing evidence of delivery to the Parties at the following addresses:   (a) if to Chembio, to:   Chembio Diagnostic Systems, Inc. 3661 Horseblock Road Medford, New York 11763 Attention: Lawrence A. Siebert, President Telecopier No.: (631) 924-6033 with a copy to:   Ruskin Moscou Faltischek, P.C. 1425 Reckson Plaza 15th Floor, East Tower Uniondale, New York 11556 Attention: Michael L. Faltischek, Esq, Telecopier No.: (516) 663-6640   (b) if to SDS, to:   StatSure Diagnostic Systems, Inc. One Clark’s Hill Framingham, MA 01702 Attention: Chief Executive Officer Telecopier No.:   with a copy to:   Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center Boston, MA 02111 Attention: Jeffrey M. Wiesen, Esq. Telecopier No.: 617-542-2241 or at such other address for a Party as shall be specified by like notice.   6.6. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of New York, without giving effect to its conflicts of laws rules.    6.7. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart. Facsimile execution and delivery of this Agreement by either of the Parties shall be legal, valid and binding execution and delivery of such document for all purposes.   6.8. Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.   6.9. Dispute Resolution. In the event of any dispute or disagreement between the Parties as to the interpretation of any provision of this Agreement or the performance of any obligations hereunder, the matter, upon written request of either Party, shall be referred to [mediation and] arbitration in accordance with the procedures set forth in Schedule F to this Agreement.   6.10. Injunctive Relief. Each Party acknowledges that any breach or threatened breach of any of the terms and/or conditions set forth in this Agreement will result in substantial, continuing and irreparable injury to the other Party. Therefore, each Party hereby agrees that, in addition to any other remedy that may be available to the other Party, the other Party shall be entitled to injunctive or other equitable relief by a court of appropriate jurisdiction in the event of any breach or threatened breach of the terms of this Agreement.   6.11. Assignment. This Agreement is personal to each of the Parties, and neither Party shall assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the other Party, which consent may be withheld for any reason, provided, however, that without the consent of the other Party, each Party may (i) assign its rights under this Agreement and delegate its obligations hereunder, in whole or in part, to any Person that shall acquire the business of such Party to which this Agreement relates, or to any Affiliate of such Party, if the assignee shall assume such Party’s obligations hereunder in writing, and (ii) assign this Agreement in connection with a sale or transfer of substantially all of the assets of, or a majority interest in the voting shares of, such Party or its corporate parent to, or the merger or consolidation of such Party or its corporate parent with or into, any other Person.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Parties have executed, or caused their duly authorized representatives to execute, this Agreement under seal as of the date first written above.   Chembio Diagnostic Systems, Inc.   By:    Title:    StatSure Diagnostic Systems, Inc.   By:    Title:    -------------------------------------------------------------------------------- Exhibit A IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK   ---------------------------------------------------------------x   :   CHEMBIO DIAGNOSTIC SYSTEMS INC.  :   :   Plaintiff,  :   v.     : Civil Action No. 04-CV-1149-JS-ETB   SALIVA DIAGNOSTIC SYSTEMS INC.  :    :   Defendant.  :   :   ---------------------------------------------------------------x     STIPULATION OF DISMISSAL     It is hereby stipulated, by and between the parties through their respective counsel, that that above litigation, and all claims and counterclaims asserted therein, is hereby dismissed. Such dismissal shall be with prejudice with respect to the claims of the Plaintiff and without prejudice with respect to the counterclaims of the Defendant, all pursuant to and subject to the terms and conditions of a Settlement Agreement dated September 29, 2006.   Each party shall bear its own costs and fees arising out of or related to this action.   [signatures to be inserted]   TRA 2203497v.3       -------------------------------------------------------------------------------- --------------------------------------------------------------------------------

Exhibit 10.1 December 28, 2006 James A. Fontaine c/o Microtune, Inc. 2201 10th Street Plano, Texas 75074   RE: Microtune, Inc. Stock Options Dear Mr. Fontaine: In connection with an internal investigation of the stock option grant practices of Microtune, Inc. (the “Company”), conducted by the Audit Committee (the “Committee”) of the Company’s Board of Directors (the “Board”), the Board, the Committee and the Company’s current management have concluded that certain stock option grants were approved and granted for accounting purposes on a date (the “Measurement Date”) other than the date reflected in the option grant award documentation. Unless these stock option awards are amended by December 31, 2006, to make the exercise price of the portions of such stock option awards that were not vested as of December 31, 2004 equal to at least the fair market value of the Company’s common stock on the actual Measurement Date (as of each such date, the “Fair Market Value”), you will be subject to an additional 20% tax under Section 409A of the Internal Revenue Code of 1986, as amended to date (the “Code”). To avoid the imposition of the additional Section 409A tax, the Company is proposing to amend each of the affected stock option awards referenced below (the “Eligible Options”), to increase the exercise price of the portions of such stock option awards that were not vested as of December 31, 2004 to the Fair Market Value of the Company’s common stock on the Measurement Date for such award. The Measurement Date was determined in connection with the investigation being performed by the Committee and will be used for financial reporting purposes in conjunction with the restatement of the Company’s financial statements for the years 2001 through 2005, and the quarter ended March 31, 2006. Portions of the Eligible Options that vested on or before December 31, 2004 are not affected by this amendment. If you acknowledge and accept the amendment of the Eligible Options to increase the exercise price of the portions of such awards that were not vested as of December 31, 2004: (1) the exercise price (the “Original Exercise Price”) of the portions of each such Eligible Option that were not vested as of December 31, 2004 shall be increased to an adjusted exercise price that is equivalent to the Fair Market Value of the Company’s common stock as of the Measurement Date (the “Adjusted Exercise Price”); and (2) provided you are employed on the applicable payment date, the Company will pay to you as additional compensation an amount in cash equal to the difference between the Original Exercise Price and the Adjusted Exercise Price times the number of “Amended Option Shares” (which reflects the portion of the “Original Option Shares” that were not vested as of December 31, 2004), as set forth below (the “Cash Payment”):   -------------------------------------------------------------------------------- Grant Date   Original Option Shares   Amended Option Shares   Original Exercise Price   Adjusted Exercise Price   Amount of Cash Payment August 19, 2004   66,668   66,668   $4.47   $4.99   $34,667 Although the Company has offered to pay you the Cash Payment above, you have declined to accept the Cash Payment. All Options. You represent and warrant that the above table accurately describes the terms of the Eligible Options and our understanding as to the amendment of the Eligible Options. Entire Agreement; Amendment. The terms described in this Letter Agreement, together with the underlying option agreement for each of the Eligible Options, set forth the entire agreement and understanding between you and the Company and merges and supersedes all prior agreements, arrangements and understandings, written or oral, between you and the Company concerning the subject matter hereof. You acknowledge and agree that you are not relying on any representations or promises by any representative of the Company concerning the meaning or any aspect of this Letter Agreement. This Letter Agreement may not be altered or modified other than in writing signed by you and an authorized representative of the Company. Severability. It is the desire and intent of the parties hereto that the provisions of this Letter Agreement shall be enforced to the fullest extent permissible under applicable law. In the event that any one or more of the provisions of this Letter Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Letter Agreement shall be held to be excessively broad as to duration, scope, activity or subject, such provisions shall be construed by limiting or reducing them so as to be enforceable to the maximum extent compatible with applicable law. No Waiver. No waiver by either party of any breach by the other party of any condition or provision of this Letter Agreement to be performed by such other party shall be deemed a waiver of any other provision or condition at the time or at any prior or subsequent time. This Letter Agreement and the provisions contained in it shall not be construed or interpreted for or against either party because that party drafted or caused that party’s legal representative to draft any of its provisions. Binding Arbitration. Any dispute, claim or controversy arising under or in connection with this Letter Agreement and any dispute as to the enforceability of this provision, shall be resolved exclusively by final and binding arbitration administered by the JAMS arbitration service and in accordance with its Employment Arbitration Rules and Procedures then in effect; provided, however, that nothing herein shall require arbitration of any claim or charge which, by law, cannot be the subject of a compulsory arbitration agreement. Any arbitration proceeding brought under this Letter Agreement shall be conducted before a single arbitrator and shall be conducted in Dallas, Texas. The written decision of the arbitrator shall be final and binding upon the parties and in such form that judgment may be entered in, enforced by, or appealed from, any court having jurisdiction over the parties. Any arbitration proceedings, decision or award rendered hereunder, and the validity, effect and interpretation of this arbitration provision, shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq, or the Texas Arbitration Act.   2 -------------------------------------------------------------------------------- Governing Law. This Letter Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without reference to its choice of law rules. Counterparts. This Letter Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. To acknowledge and agree to the amendments as described above, please execute and date this letter where indicated below and return it to me by December 28, 2006 at: Microtune, Inc. 2201 10th Street Plano, Texas 75074 If you choose not to agree to amend the above-referenced option(s), you will be subject to the additional tax pursuant to Section 409A of the Code with respect to those options, and you will not be reimbursed by the Company. No part of this letter should be relied upon as tax advice. The Company recommends that you consult with your tax advisor regarding the proposed options amendment. Descriptions of the potential tax effects of Section 409A of the Code are described herein for informational purposes only and are not legal advice. SUCH INFORMATION DOES NOT CONSTITUTE AN OPINION AND IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER. You should not act upon the information without seeking professional legal counsel and consulting with your tax advisor. [signature page follows]   3 -------------------------------------------------------------------------------- If the foregoing is acceptable to you, please so indicate by placing your signature in the appropriate space set forth below, whereupon this letter shall become a binding obligation of each of the undersigned.     Very truly yours, MICROTUNE, INC., a Delaware corporation By:   /s/ Jeffrey A. Kupp Name:   Jeffrey A. Kupp Title:   Chief Financial Officer   Agreed to and Accepted this 28th day of December, 2006. By:   /s/ James A. Fontaine Name:   James A. Fontaine, individually I hereby ACKNOWLEDGE and AGREE to the amendment of the applicable stock option award agreement(s) relating to the Eligible Options referenced above to increase the Original Exercise Price of the Amended Option Shares portion of the Eligible Options to the Adjusted Exercise Price as set forth in the table above. I further understand that I have declined the payment of the Cash Payment described above and shall have no claim nor right to receipt of payment of the Cash Payment in the future.   /s/ James A. Fontaine James A. Fontaine December 28, 2006   4

Exhibit 10.10 ICF INTERNATIONAL, INC. RESTRICTED STOCK AWARD AGREEMENT (Non-Employee Director Award) This Restricted Stock Award Agreement (this “Agreement”) is by and between ICF International, Inc., a Delaware corporation (the “Corporation”), and Joel R. Jacks (the “Participant”), a non-employee director of the Corporation, and is effective as of the opening of business on September 28, 2006 (the “Effective Date”). 1. Award of Restricted Stock. Subject to the provisions of the ICF International, Inc. 2006 Long-Term Equity Incentive Plan (the “Plan”) and this Agreement, the Corporation hereby grants to the Participant Six Thousand (6,000) shares (the “Award”) of the Corporation’s Common Stock, par value $0.001 per share (the “Common Stock”), to which the restrictions referred to in Section 2 (the “Vesting Conditions”) attach (the “Restricted Stock”). 2. Vesting Conditions. (a) Vesting Schedule. The Restricted Stock shall be initially unvested (the unvested shares of Restricted Stock are referred to in this Agreement as the “Unvested Shares”) and shall vest, if at all, as provided in this Section 2 over a three (3) year period measured from the Effective Date (the “Vesting Period”). Except as otherwise provided in Section 2(c) below, thirty-three and 1/3 percent (33 1/3%) of the Restricted Stock shall vest upon the date that is 366 days after the Effective Date, thirty-three and 1/3 percent (33 1/3%) of the Restricted Stock shall vest on the second anniversary of the Effective Date, and thirty-three and 1/3 percent (33 1/3%) of the Restricted Stock shall vest on the third anniversary of the Effective Date (each, a “Vesting Date”). (b) Rounding. The number of shares of Restricted Stock vesting as of a particular Vesting Date shall be rounded down to the nearest whole share; provided, however, that all remaining Unvested Shares shall vest completely on the final Vesting Date. (c) Other Vesting. Notwithstanding anything to the contrary contained in this Section 2, all of the Restricted Stock shall vest immediately upon the occurrence of a Change in Control (as defined in Section 8 hereof) of the Corporation at any time prior to the satisfaction of the Vesting Conditions. 3. Rights During Vesting Period. The Participant generally shall have the rights and privileges of a stockholder as to the Restricted Stock, including the right to receive cash dividends and the right to vote. However, notwithstanding any other provision hereof, the following restrictions shall apply to shares of Restricted Stock prior to satisfaction of the Vesting Conditions as to those shares: (a) the Participant shall not be entitled to delivery of a certificate for the Restricted Stock until the satisfaction of the Vesting Conditions; (b) none of the Restricted Stock may be sold, transferred (except by will or the laws of descent and distribution), -------------------------------------------------------------------------------- assigned, pledged or otherwise encumbered or disposed of prior to satisfaction of the Vesting Conditions; and (c) except as otherwise expressly provided herein and in the Plan, the Participant shall forfeit and immediately transfer back to the Corporation without payment all of the Restricted Stock, and all rights of the Participant to such Restricted Stock shall terminate without further obligation on the part of the Corporation, if and when the Participant ceases to be a director of the Corporation prior to the satisfaction of the Vesting Conditions. As a condition of the Award, the Corporation may require the Participant to deliver to the Corporation a duly signed stock power, endorsed in blank, with respect to the shares of Common Stock subject to the Award. 4. Satisfaction of Vesting Conditions. Upon the satisfaction of the Vesting Conditions as to particular shares of Restricted Stock, the restrictions on the applicable number of shares of Restricted Stock shall terminate and a stock certificate for such number of shares of Common Stock shall be delivered, free and clear of all such restrictions, to the Participant or, subject to Section 5, the Participant’s beneficiary or estate, as the case may be, subject to the provisions of Sections 7 and 8(e). The Corporation shall not be required to deliver any fractional share of Common Stock, but will pay, in lieu thereof, the fair market value of such fractional share to the Participant or the Participant’s beneficiary or estate, as the case may be. The Corporation shall pay any original issue tax that may be due upon the issuance of the Restricted Stock and all other costs incurred by the Corporation in issuing such shares of Common Stock. 5. Nontransferability of Restricted Stock. The Restricted Stock is not transferrable by the Participant prior to the satisfaction of the Vesting Conditions except by will or the laws of descent and distribution. Without limiting the generality of the foregoing, prior to the expiration of the Vesting Conditions, the Award and Restricted Stock may not be sold, transferred except as aforesaid, assigned, pledged, or otherwise encumbered or disposed of, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process. Any attempted sale, transfer, pledge, assignment or other encumbrance or disposition of the Restricted Stock contrary to the provisions hereof, or the levy of any execution, attachment or similar process upon the Restricted Stock, shall be null and void and without effect. 6. Reorganization or Liquidation of the Corporation. In the event the Corporation is succeeded by another corporation in a reorganization, which term includes a merger, consolidation, acquisition of all or substantially all of the assets or voting stock of the Corporation, or other extraordinary transaction with similar effect, the Participant shall be entitled to receive (subject to any required action by stockholders) such securities of the surviving or resulting corporation or other consideration as the board of directors of such corporation shall determine to be as nearly equivalent as practicable to the nearest whole number and class of shares of stock or other securities or other consideration to which the Participant would have been entitled under the terms of such reorganization (without adjustment for any fractional interest thereby eliminated), as if, immediately prior to such event, the Participant had been the holder of record of the number of shares of Common Stock which were then Restricted Stock without any restriction whatsoever. Any such shares of stock or other securities issued to the Participant in connection with any such reorganization shall, after any such reorganization, be deemed to be Restricted Stock for all purposes of this Agreement and the Plan.   - 2 - -------------------------------------------------------------------------------- 7. Compliance with Securities Laws; Legend on Share Certificates. (a) As of the Effective Date, the Restricted Stock has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or under any applicable state securities laws (the Securities Act and such state laws being hereinafter sometimes referred to as the “Securities Laws”). The Restricted Stock shall not be transferrable except pursuant to the provisions of the Securities Laws. The Participant represents that the Participant (i) is acquiring the Restricted Stock for the Participant’s own account and not with a view to reselling, splitting, sharing or otherwise participating in a distribution thereof in violation of any Securities Laws, (ii) understands that the effect of such representation is that the Restricted Stock must be held indefinitely unless subsequently registered under the Securities Laws or an exemption from such registration is available at the time of any proposed sale or other transfer thereof, (iii) understands that the Corporation is under no obligation to register the Restricted Stock for resale, and (iv) is fully familiar with the circumstances under which the Participant is required to hold the Restricted Stock and the limitations upon transfer or other disposition thereof. (b) The Participant agrees that each certificate for the Restricted Stock shall be stamped or otherwise imprinted with legends in substantially the following forms: (i) The shares represented hereby have not been registered under the Securities Act of 1933, as amended (the “Act”), or under the state securities or blue sky laws of any state. Such shares may not be sold or transferred except pursuant to an effective registration statement under the Act or an opinion of counsel satisfactory to the Corporation that such registration is not required. (ii) The sale or other transfer of the shares represented hereby is subject to certain restrictions contained in a certain Restricted Stock Award Agreement by and between the registered owner and ICF International, Inc., as the same may be amended from time to time, to which reference is hereby made for a full statement of provisions thereof. A copy of said Agreement will be furnished to any stockholder on request and writing in without charge. 8. Change of Control. As used herein, a “Change in Control” of the Corporation means, and shall be deemed to have occurred upon, any of the following events: (a) The acquisition by any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof) (other than persons acting in concert as of August 31, 2006 who, as of such date, beneficially owned more than twenty percent (20%) or more of the securities entitled to vote generally in the election of directors of the   - 3 - -------------------------------------------------------------------------------- Corporation), of beneficial ownership (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act) of securities representing thirty-five percent (35%) or more of the securities entitled to vote generally in the election of directors of the Corporation, provided, however, that the following acquisitions shall not constitute a Change in Control for purposes of this subparagraph (a): (i) any acquisition directly from the Corporation; (ii) any acquisition by the Corporation or any of its Subsidiaries; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any of its Subsidiaries; or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subparagraph (c) below; or (b) Individuals who, as of August 31, 2006, constitute the board of directors of the Corporation (the “Incumbent Board”) cease for any reason to constitute at least a majority of the board of directors of the Corporation; provided, however, that any individual who becomes a director of the Corporation subsequent to August 31, 2006 and whose election, or whose nomination for election by the Corporation’s stockholders, to the board of directors was either (i) approved by a vote of at least a majority of the directors then comprising the Incumbent Board or (ii) recommended by a nominating committee comprised entirely of directors who are then Incumbent Board members shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act), other actual or threatened solicitation of proxies or consents or an actual or threatened tender offer; or (c) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a “Business Combination”), in each case unless following such Business Combination, (i) all or substantially all of the persons who were the Beneficial Owners (“Beneficial Owners” having the meaning used in Rule 13d-3 promulgated under the Exchange Act), respectively, of the outstanding shares and outstanding securities entitled to voted generally in the election of directors immediately prior to such Business Combination own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Corporation, as the case may be, of the entity resulting from the Business Combination (including, without limitation, an entity which, as a result of such transaction, owns the Corporation or all or substantially all of the Corporation’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding securities entitled to vote generally in the election of directors (provided, however, that for purposes of this clause (i) any shares of common stock or such voting securities of such resulting entity received by such Beneficial Owners in such Business Combination other than as the result of such Beneficial Owners’ ownership of outstanding shares or such outstanding voting securities immediately prior to such Business Combination shall not be considered to be owned by such Beneficial Owners for the purposes of calculating their percentage of ownership of the outstanding common stock and voting power of the resulting entity); (ii) no person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such entity resulting from the Business Combination) beneficially owns, directly or indirectly, thirty-five percent (35%) or more of the combined voting power of   - 4 - -------------------------------------------------------------------------------- the then outstanding securities entitled to vote generally in the election of directors of such entity resulting from the Business Combination unless such person owned thirty-five percent (35%) or more of the outstanding shares or outstanding securities entitled to vote generally in the election of directors immediately prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the board of directors, providing for such Business Combination; or (d) Approval by the Corporation’s stockholders of a complete liquidation or dissolution of the Corporation. For purposes of clause (c), any person who acquires outstanding securities entitled to vote generally in the election of directors of the entity resulting from the Business Combination by virtue of ownership, prior to such Business Combination, of such voting securities of both the Corporation and the entity or entities with which the Corporation is combined shall be treated as two persons after the Business Combination, who shall be treated as owning such outstanding voting securities of the entity resulting from the Business Combination by virtue of ownership, prior to such Business Combination of, respectively, such outstanding voting securities of the Corporation, and of the entity or entities with which the Corporation is combined. 9. Miscellaneous. (a) Notices. Any notice hereunder shall be in writing, and delivered or sent by first-class U.S. mail, postage prepaid, addressed to:     (i) if to the Corporation, at: ICF International, Inc. 9300 Lee Highway Fairfax, VA 22031 Attn: Chief Financial Officer     (ii) if to the Participant, at the address shown on the signature page hereof, subject to the right of either party, by written notice hereunder, to designate at any time hereafter some other address. (b) Compliance with Law and Regulations. The Restricted Stock shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. Notwithstanding any other provision of this Agreement, the restrictions on the Restricted Stock shall not terminate or expire if such termination or expiration would be contrary to applicable law. (c) Section 83(b) Election. If the Participant elects, in accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended from time to time, or subsequent comparable statute (the “Code”), to recognize ordinary income in the year in which the Restricted Stock is awarded, the Participant shall furnish to the Corporation a copy of a completed and signed election form within thirty (30) days after the Effective Date.   - 5 - -------------------------------------------------------------------------------- (d) Corporation’s Rights. The existence of the Restricted Stock shall not affect in any way the right or power of the Corporation or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation’s capital structure or its business, or any merger or consolidation of the Corporation, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of the Corporation’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (e) Plan Governs. The Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by its terms, all of which are incorporated herein by reference. The Plan shall govern in the event of any conflict between this Agreement and the Plan. (f) Choice of Law. This Agreement shall be construed in accordance with and be governed by the laws of the State of Delaware. (g) Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the Restricted Stock granted hereunder. Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Restricted Stock granted hereunder shall be void and ineffective for all purposes. (h) Amendment. This Agreement may be amended from time to time by the written mutual consent of the parties hereto. (i) Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and be binding upon the Participant and the Participant’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person has become a party to this Agreement or has agreed in writing to join herein and to be bound by the terms, conditions and restrictions hereof. (j) Impact on Other Benefits. The value of the Restricted Stock (either on the date hereof or at the time the Restricted Stock vests) shall not be includable as compensation or earnings for purposes of any benefit plan offered by the Corporation. (k) Headings. The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. (l) Counterparts. This Agreement may be executed in two counterparts each of which shall constitute one and the same instrument. [Signature Page Follows]   - 6 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the Effective Date.   ICF INTERNATIONAL, INC. By:   /s/ Sudhakar Kesavan Name:   Sudhakar Kesavan Title:   President and Chief Executive Officer PARTICIPANT: /s/ Joel R. Jacks Joel R. Jacks Address for Notices:         - 7 -

Exhibit 10.5   FOURTH AMENDMENT TO THE QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN   THIS AGREEMENT by Quanex Corporation, a Delaware corporation (the “Sponsor”),   W I T N E S S E T H:   WHEREAS, the Sponsor previously established the Quanex Corporation Hourly Bargaining Unit Employees Savings Plan, as amended and restated effective January 1, 1998 (the “Plan”);   WHEREAS, the Sponsor reserved the right in Section 12.01 to amend the Plan; and   WHEREAS, the Sponsor has determined to amend the Plan;   NOW, THEREFORE, the Sponsor agrees that effective for mandatory distributions under the Plan on and after March 28, 2005, Section 5.04 of the Plan is amended to provide as follows:   5.04         Immediate Payment of Small Amount Upon Separation From Service. Each Participant or former Participant whose Nonforfeitable Interest in his Account balance at the time of a distribution to him on account of his Separation From Service is, in the aggregate, less than or equal to $1,000.00, shall be paid in the form of an immediate single sum cash payment and/or as a Direct Rollover, as elected by him under section 5.05. However, if a Distributee who is subject to this Section 5.04 does not furnish instructions in accordance with Plan procedures to directly roll over his Plan benefit within 45 days after he has been given direct rollover forms, he will be deemed to have elected to receive an immediate lump sum cash distribution of his entire Plan benefit. If a Participant’s or former Participant’s Nonforfeitable Interest in his Account balance payable upon his Separation From Service is zero (because he has no Nonforfeitable Interest in his Account balance), he will be deemed to receive an immediate distribution of his entire Nonforfeitable Interest in his Account balance.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the Sponsor has caused this Agreement to be executed on the 19th day of December, 2005.       QUANEX CORPORATION                     /s/ Kevin P. Delaney       By: Kevin P. Delaney       Title: Senior Vice President – General Counsel and Secretary   --------------------------------------------------------------------------------

Exhibit 10(e) AMENDMENT NO. 4 TO ASSET PURCHASE AGREEMENT This Amendment No. 4 to Asset Purchase Agreement (this “Amendment”) is made as of December 31, 2005 by and between Alfa Financial Corporation, an Alabama corporation (the “Seller”), and OFC Servicing Corporation, a Georgia corporation (the “Buyer”). The Buyer and the Seller are referred to collectively as the “Parties.” The Parties entered into that certain Asset Purchase Agreement dated June 6, 2005, as amended August 31, 2005, October 4, 2005 and December 5, 2005 (the “Agreement”), and they now desire to further amend the Agreement as set forth herein. In consideration of the mutual promises made in the Agreement, the Parties hereby agree as follows: 1. Defined Terms. Any capitalized term used but not defined in this Amendment shall have the meaning set forth in the Agreement. 2. Updated Schedules. The Agreement is hereby amended to substitute the words “November 30, 2005” in each place that the words “February 28, 2005” appear therein. In addition, the following Schedules to the Agreement and the following section of the Disclosure Schedule are hereby amended and restated in their entirety by replacing them with Annex A attached hereto:   Schedule 1.1    Contract Trial Balance Schedule 1.2    FF&E Schedule 1.4    Past Due Leases Schedule 1.5    Pending Leases Schedule 1.7    Pre-Funded Leases Schedule 1.8    Prepaid Expenses Schedule 1.9    Reserve Listing Schedule 1.11    Transferred Employees Schedule 1.12    UNL Leases Schedule 1.13    Vehicle Leases Schedule 1.14    VenCore Receivables Schedule 2    Settlement Statement Schedule 5    Recourse Pool Section 3(l) of the Disclosure Schedule — Litigation 3. New Schedule. The attached new Schedule 1.15 is hereby added to the Agreement. Such Schedule 1.15 sets forth the initial direct costs as of November 30, 2005 of all Acquired Receivables originated or arising after June 6, 2005. Such Schedule 1.15 will be updated as of the Closing Date as part of the post-closing Updated Schedules in accordance with Section 2(c)(3)(A) of the Agreement. -------------------------------------------------------------------------------- 4. Definition of “Net Book Value.” The definition of “Net Book Value” in Section 1 of the Agreement is hereby amended by deleting all of clause (c) thereof and replacing it with the following: “(c) with respect to the FF&E, $221,750.” 5. Closing Date Payment. Section 2(c)(2) of the Agreement is hereby amended by deleting the entire text thereof and replacing such deleted text with the following: “Closing Date Payment. At the Closing, the Buyer shall pay to the Seller $59,365,517.64 (the “Closing Date Payment”), which is the Purchase Price computed as of November 30, 2005 as set forth on the settlement statement attached hereto as Schedule 2 (the “Settlement Statement”). Such Closing Date Payment shall be paid by (i) the Buyer delivering to the Seller a promissory note (the “Term Note”) in accordance with the Seller Financing Documents in the principal amount of $57,102,998.16, and (ii) the Buyer paying to the Seller the amount of $2,262,519.48 in cash.” 6. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 7. No Other Amendments. Except as expressly set forth herein, the Parties make no other amendment, alteration or modification of the Agreement nor do they, nor does any of them, by executing this Amendment, waive any provision of the Agreement or any right that they or it may have thereunder. [Signatures on next page]   - 2 - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date first above written.   “Seller” ALFA FINANCIAL CORPORATION By:   /s/ Jerry A. Newby Name:   Jerry A. Newby Title:   President and Chief Executive Officer “Buyer” OFC SERVICING CORPORATION By:   /s/ Robert F. Hatcher Name:   Robert F. Hatcher Title:   President   - 3 -

EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (this "Agreement") is made and entered into as of July 1, 2006 (the "Effective Date"), by and among Fireline Restoration, Inc., a Florida corporation (the "Employer"), a wholly owned subsidiary of Home Solutions of America, Inc., a Delaware corporation ("HSOA") and Brian Marshall, an individual resident of the State of Florida (the "Executive"). WITNESSETH WHEREAS, the Executive has certain skills, experience, and abilities that may be valuable to the success of the Employer's operations and future profitability; WHEREAS, the Employer desires to employ and retain the services of the Executive as a full-time employee in the position of President of Employer, and the Executive desires to work for and be employed by Employer in such position; and WHEREAS, the Employer and the Executive desire to set forth the terms and conditions pursuant to which the Executive will be employed by the Employer. NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows: Section 1:         EMPLOYMENT TERM AND DUTIES 1.01     Employment.  The Employer hereby employs the Executive, and the Executive hereby accepts employment by the Employer, upon the terms and conditions set forth in this Agreement. 1.02     Term.  Unless earlier terminated as herein provided, the Executive's employment with the Employer pursuant to this Agreement shall commence on the Effective Date and shall end on the final day of the Term (as defined in this Section 1.02).  For purposes of this Agreement, the "Term" shall mean the period commencing with the effective date of this Agreement and continuing until thirty-six (36) months thereafter, provided that the Executive shall have the option to extend the Term hereof for two (2) additional twelve (12) month periods, by written notice to the Employer within sixty (60) days of what would otherwise be the last day of Term.   1 -------------------------------------------------------------------------------- 1.03     Duties and Services.  The Executive will be employed as the President of Employer in Tampa, Florida, and will have such duties and perform such services as are customary with such positions.   The Executive will not have to relocate without his written consent.   The Executive will devote 90% of his business time, attention, skill, and energy to the business of the Employer (as he did historically in his capacity as an employee of Fireline Restoration, Inc.).  It is acknowledged and agreed that the Executive will continue to be involved in the businesses identified on the attached Exhibit A and that such involvement will not constitute a breach or violation of any of the terms and conditions of this Agreement.  The Executive will comply with all applicable Employer policies and procedures as well as with all applicable laws in performing his duties for the Employer.  The Executive will be available to travel on Employer business as the Executive deems advisable. Section 2:         COMPENSATION 2.01     Salary and Bonus. Subject to the provisions of Section 4 of this Agreement that relate to compensation of the Executive following the termination of the Employment Period (as defined in Section 8 of this Agreement), for the Employer's fiscal years 2006 and 2007, the Executive will be paid an annual base salary of $ 300,000.00 (such amount, as it may be increased from time to time, is hereinafter referred to as "Salary").  The Employer shall withhold from each installment of the Salary, all applicable federal, state, and local income and other payroll taxes.      For the Employer's fiscal years after 2007, the Board of Directors of the Employer will consider annually whether to increase the Salary of the Executive.  In no event will the Executive's Salary be decreased. The Executive will be entitled allocate a bonus among the Fireline employees, including himself, in an aggregate amount of five percent (5%) of Fireline's Earnings Before Interest, Taxes, Depreciation and Amortization in any given year ending December 31, which shall be payable by March 31 of the following year.  2.02     Benefits.  For the duration of the Employment Period and as otherwise set forth herein, the Executive and his dependents (if applicable), will be permitted to participate in such pension, bonus, health insurance, disability income insurance, and other employee benefit plans of the Employer (collectively, "Benefits") that may be in effect from time to time to the extent the Executive and his dependents are eligible for participation under the terms of such plans.  It is contemplated that as soon as practicable, the Employer will put in place health insurance, retirement, disability and 401K type benefit plans for employees of the Employer and the Executive shall have the responsibility and authority to implement same.             The Executive will be provided with an up to $1500 per month vehicle allowance for lease or purchase of a vehicle and the Employer shall in addition pay for all expenses of operating said vehicle, including, but not limited to, insurance, gasoline, maintenance and repairs. 2 --------------------------------------------------------------------------------             The Executive will be provided with a monthly rental allowance to take into account the Executive's required availability in Vero Beach, Florida at the convenience and for the benefit of the Employer. The Rental Reimbursement shall be in the amount of twelve thousand ($12,000) per month plus an amount attributable to utilities, pest service and cleaning service not to exceed $ 1200 per month (collectively, "Rental Reimbursement").  The Rental Reimbursement shall be treated for all purposes as a reimbursed expense under Section 62(a)(2)(A) of the Code; provided, however, Executive and not Employer shall be required to satisfy any requirements as to deductibility from Adjusted Gross Income under said Code section, and provided, further, that Executive's ability or inability to satisfy said requirements under the Code do not in any way affect Employer's requirement to pay the Reimbursement Amount during the entire period Executive is employed by Employer. Section 3:         FACILITIES AND EXPENSES The Executive will use the office space, equipment, supplies, and such other facilities, property, and personnel as are currently being provided by the Employer for such purposes to perform his duties under this Agreement.  The Employer will reimburse the Executive for reasonable expenses incurred by the Executive in the performance of his duties in accordance with the Employer's employment policies in effect from time to time, provided, that in all events, the Executive will be reimbursed for travel, entertainment and promotional expenses consistent with the business practices of Fireline Restoration, Inc. prior to July 1, 2006.  The Executive will be provided with a credit card to be used with respect to the Employer's business. Section 4:         TERMINATION 4.01     Termination of Employment Period. (a)        Death of the Executive.  The Employment Period shall terminate immediately and automatically upon the death of the Executive. (b)        Termination by the Employer.  The Employer may terminate the Employment Period (i) immediately upon the delivery of a Notice of Termination (as defined in Section 4.01(d) of this Agreement) by the Employer to the Executive setting forth the facts that indicate that a determination has been made that the Executive has a Disability in accordance with Section 4.02 of this Agreement; (ii) immediately upon delivery of a Notice of Termination by the Employer to the Executive setting forth the facts that indicate that an event constituting Cause (as defined in Section 4.03 of this Agreement) has occurred, or on such later date as may be set forth in such Notice of Termination; or (iii) at any time without Cause effective as of the 30th day following the delivery of a Notice of Termination by the Employer to the Executive, or on such later date as may be set forth in such Notice of Termination. (c)        Termination by the Executive.  The Executive may terminate the Employment Period (i) immediately upon delivery of a Notice of Termination by the Executive to the Employer setting forth facts that indicate that an event constituting Good Reason (as defined in Section 4.04 of this Agreement) has occurred within the 30 days immediately prior to the date of delivery of such Notice of Termination, or (ii) at any time without Good Reason effective as of the 30th day following the delivery of a Notice of Termination by the Executive to the Employer, or on such later date as may be set forth in such Notice of Termination. 3 --------------------------------------------------------------------------------                         (d)        Notice of Termination.  For purposes of this Agreement, a "Notice of Termination" shall mean a written notice (delivered in accordance with Section 7.06) that indicates the specific termination provision in this Agreement upon which the person intending to terminate the Employment Period is relying and sets forth in reasonable detail the facts and circumstances that provide a basis for termination of the Employment Period under such termination provision. 4.02     Definition of "Disability."  For purposes of this Agreement, the Executive will be deemed to have a "Disability" under any of the following conditions: (a) the Executive is unable to render and perform substantially and continuously the Executive's duties and services as required by this Agreement by reason of any medically determinable physical or mental condition that is expected to result in death or can be expected to last for a continuous period of not less than 12 months, (b) the Executive is determined to be disabled in accordance with a disability income insurance program sponsored by the Employer, provided the definition of disability applied under such program complies with the requirements of Section 409A of the Code (as defined in Section 8 of this Agreement), or (c) the Executive is determined to be totally disabled by the Social Security Administration.  Upon the request of either party hereto following written notice to the other, the Disability of the Executive in accordance with part (a) of the preceding sentence will be determined by a medical doctor (the "Examining Doctor") who shall be selected as follows: the Employer and the Executive shall each select a medical doctor, and those two medical doctors will select a third medical doctor who will be the Examining Doctor.  The determination of the Examining Doctor as to whether or not the Executive has a Disability pursuant to part (a) hereof will be binding on both parties hereto.  For purposes of a determination under part (a) herein, the Executive must submit to a reasonable number of examinations by the Examining Doctor, and the Executive hereby authorizes the disclosure and release to the Employer of such determination and the results of such examinations; provided, however, if the Executive is not legally competent, the Executive's legal guardian or duly authorized attorney-in-fact will act in the Executive's stead under this Section 4.02 for the purposes of submitting the Executive to examinations and providing any such authorizations of disclosure. 4.03     Definition of "Cause."  For purposes of this Agreement, "Cause" shall mean: (a) the Executive's material and persistent failure to perform his duties and services in accordance with this Agreement, unless such failure is due to the Executive's Disability, or the Executive's material violation of this Agreement or any material inaccuracy of any representation or warranty of the Executive contained herein, unless, for any such failure, violation, or inaccuracy that is capable of being cured, the Executive cures such failure, violation, or inaccuracy within 10 days of the Employer providing written notice to the Executive of such failure, violation, or inaccuracy; (b) the appropriation by Executive of a material business opportunity of the Employer, including, but not limited to, attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Employer; (c) the theft, fraud, or embezzlement by the Executive of any of the real or personal property, tangible or intangible, of the Employer or any of its Affiliates (as defined in Section 8 of this Agreement); (d) the commission of an act of fraud by the Executive upon, or willful misconduct toward, the Employer or any of its Affiliates; (e) conduct by the Executive constituting gross negligence or recklessness, that is materially injurious to the Employer, a customer of the Employer, or any of the Employer's Affiliates; or (f) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest by the Executive with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment.  Whether "Cause" exists and whether Executive has cured any violation of this Agreement, shall be determined pursuant to the procedures set forth in Section 7.14 of this Agreement. 4 -------------------------------------------------------------------------------- 4.04     Definition of "Good Reason."  For the purposes of this Agreement, the phrase "Good Reason" means (i) the Employer's material breach of this Agreement and the Employer's failure to remedy such breach within 10 days following the delivery of written notice of such breach by the Executive to the Employer; (ii) the assignment by the Employer to the Executive, without the prior written consent of the Executive, of responsibilities or duties that are substantially different from the duties set forth in Section 1.03 of this Agreement; (iii) the proposed relocation of the Executive from Tampa, Florida, or (iv) demotion of the Executive (whether in name or fact) in rank, title or duties. 4.05     Effect of Termination of Employment Period; Post-Termination Benefits.  Upon the termination of the Employment Period in accordance with Section 4.01 of this Agreement, the Executive's obligation to render to the Employer the services described in Section 1.03 of this Agreement shall cease and the Employer shall pay the Executive or, in the event of his death while amounts remain payable hereunder, his Designated Beneficiary (as defined in this Section 4.05), if at all, as follows:                        (a)        Termination by the Employer with Cause or by the Executive without Good Reason.  If the Employment Period is terminated in accordance with Section 4.01(b)(ii) or Section 4.01(c)(ii) of this Agreement, the Executive will be entitled to receive solely that portion of his Salary, payable in accordance with the Employer's normal payroll practices, accrued by the Executive as of the effective date of the termination of the Employment Period.  The Executive shall not receive, and shall not be entitled to receive, any Salary or Benefits thereafter, except as otherwise required in accordance with federal or state law or the terms of the plans governing the benefits provided hereunder.                        (b)        Termination by the Employer without Cause or by the Executive with Good Reason.  If the Employment Period is terminated in accordance with Section 4.01(b)(iii) or Section 4.01(c)(i) of this Agreement, the (i) Executive will be entitled to receive the Salary that would have been payable for the remainder of the Term, (ii) Section 5 of this Agreement shall be null and void with respect to any Confidential Information owned by the Employer prior to July 1, 2006 and (iii) Section 6 of this Agreement shall be null and void.                          In addition, the Executive will be entitled to receive coverage under the group health plan sponsored by the Employer, if any, to the same extent as provided on the date of the termination of the Employment Period, for the remainder of the Term.  The cost of coverage under the Employer's group health plan will be payable solely by the Employer. Except to the extent otherwise permitted under Section 409A of the Code, the Salary and payments for the cost of group health plan coverage shall be accumulated by the Employer and payable to the Executive no earlier than the first day of the seventh calendar month following the date on which the Employment Period is terminated, or if earlier, the date of the Executive's death.  If, at the time the Employment Period is terminated, or at any time thereafter, the Salary or payments for the cost of the group health plan coverage to which the Executive is entitled under this Section 4.05(b) is not required to be deferred under Section 409A of the Code, then such amounts shall instead be payable in monthly installments on the first day of each calendar month, provided, that the first installment shall not be made earlier than the later of (i) the first day of the calendar month immediately following the date of termination of the Employment Period or (ii) the date which is fifteen (15) days following the date of the termination of the Employment Period. 5 --------------------------------------------------------------------------------   (c)        Termination upon Death or Disability.  If the Employment Period is terminated in accordance with Section 4.01(a) or Section 4.01(b)(i), the Employer will pay to the disabled Executive or to the Executive's Designated Beneficiary, as the case may be, Salary that would have been payable during the Employment Period until the earlier of (i) the Expiration Date or (ii) the 90th day following the date of the Executive's death or the date of the determination that the Executive has a Disability, whichever is applicable.  In addition, an Executive who is determined to have a Disability will be entitled to receive coverage under the group health plan sponsored by the Employer, if any, to the same extent as provided on the date of the determination that the Executive has a Disability until the earlier of (i) the Expiration Date or (ii) the 90th day following the date of the determination that the Executive has a Disability and, if the Employer has maintained the disability income insurance referred to in Section 2.02 of this Agreement, the benefits to which the Executive is entitled thereunder, if any. The cost of coverage under the Employer's group health plan will be payable solely by the Employer.  Notwithstanding the preceding sentences of this paragraph (c), in the event the Employer has not maintained such disability income insurance, then the Employer shall continue to pay Salary and the cost of group health plan coverage for the remainder of the Term.  Amounts to which the Executive or the Executive's Designated Beneficiary are entitled to receive hereunder shall be payable in monthly installments on the first day of each calendar month; provided, that the first installment shall not be made earlier than the later of (i) first day of the calendar month immediately following the date of the termination of the Employment Period or (ii) the date which is fifteen (15) days following the date of the termination of the Employment Period and, provided further, that, notwithstanding any provision herein to the  contrary, benefits to which the Executive is entitled to receive under the disability income insurance maintained by the Employer, if any, shall be payable in accordance with the terms of such program. Except to the extent otherwise provided in this Section 4.05(c), the Executive or the Executive's Designated Beneficiary shall have no right to receive, and the Employer shall have no further obligation to pay to the Executive, further monthly installments of Salary or Benefits.  For the purposes of this Agreement, the Executive's "Designated Beneficiary" means such individual beneficiary or trust, located at such address as the Executive may designate by written notice to the Employer from time to time or, if the Executive fails to give written notice to the Employer of such a beneficiary, the Executive's estate; provided, however, that, notwithstanding the preceding sentence, the Employer shall have no duty under any circumstances to attempt to open an estate on behalf of the Executive, to determine whether any beneficiary designated by the Executive is alive, to determine the existence of any trust, to determine whether any person or entity purporting to act as the Executive's personal representative (or the trustee of a trust established by the Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee. 6 -------------------------------------------------------------------------------- (d)        Accrued Benefits.  Unless otherwise required by this Agreement, federal or state law, or the terms of the relevant plans providing Benefits hereunder, the Executive's accrual of the Benefits pursuant to Section 2.02 will cease on the date of the termination of the Employment Period, and the Executive will thereafter be entitled to the payment of accrued Benefits pursuant to such plans only as provided in such plans. (e)        Release.  No amount shall be payable to the Executive under Section 4.05(b) or (c) following the termination of the Employment Period unless the Executive (or the Executive's Designated Beneficiary in the event of termination of this Agreement due to the Executive's death) signs and delivers to the Employer, within fifteen (15) days after the termination of the Employment Period, a release and waiver of claims in a form prepared by and acceptable to the Employer. Section 5:         CONFIDENTIAL INFORMATION 5.01     Confidential Information Defined.  For the purposes of this Section 5, the phrase "Confidential Information" means any and all of the following: trade secrets concerning the business and affairs of the Employer, HSOA, and their direct or indirect subsidiaries and other Affiliates (the "Employer Group"), product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code, machine code, and source code), computer software and database technologies, systems, structures, and architecture (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, and methods); information concerning the business and affairs of any member of the Employer Group (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training techniques and materials, however documented); and notes, analysis, compilations, studies, summaries, and other material prepared by or for any member of the Employer Group containing or based, in whole or in part, on any information included in the foregoing.  Notwithstanding the foregoing, Confidential Information shall not include any information that the Executive demonstrates was or became generally available to the public other than as a result of a disclosure of such information by the Executive or any other person under a duty to keep such information confidential.  5.02     Executive's Access to the Confidential Information.  Immediately upon the Executive's execution of this Agreement and continuing throughout his employment with the Employer, the Employer shall provide the Executive with access to Confidential Information that Executive had not previously received.  The Executive acknowledges:  (a) that the Employer has devoted substantial time, effort, and resources to develop and compile the Confidential Information; (b) public disclosure of such Confidential Information would have an adverse effect on the Employer and its business; (c) the Employer would not disclose such information to the Executive, nor employ or continue to employ the Executive without the agreements and covenants set forth in this Section 5; and (d) the provisions of this Section 5 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information. 7 --------------------------------------------------------------------------------   5.03     Executive's Nondisclosure Duties Regarding the Confidential Information.  The Executive agrees to use his best efforts to preserve and protect the Confidential Information to the greatest degree possible and therefore agrees as follows: (a)        Nondisclosure Commitment.  The Executive will hold in strictest confidence the Confidential Information and will not disclose it to any Person (as defined in Section 8 of this Agreement) except with the specific prior written consent of the Employer or as may be required by court order, law, government agencies with which the Employer deals in the ordinary course of its business, or except to the extent such disclosure is necessary for Executive to perform his duties under this Agreement.  Any trade secrets of the Employer will be entitled to all of the protections and benefits afforded under applicable laws.  If any information that the Employer deems to be a trade secret is ruled by a court of competent jurisdiction not to be a trade secret, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement.  The Executive hereby waives any requirement that the Employer submit proof of the economic value of any trade secret or post a bond or other security.  The Executive will not remove from the premises or record (regardless of the media) of any member of the Employer Group, any Confidential Information of any member of the Employer Group, except to the extent such removal or recording is necessary for the Executive to perform his duties.  The Executive acknowledges and agrees that all Confidential Information, and physical embodiments thereof, whether or not developed by the Executive, are the exclusive property of a member or members of the Employer Group, as the case may be. (b)        Third Party Information.  The Executive recognizes that the members of the Employer Group have received and in the future will receive from third parties their confidential or proprietary information subject to a duty on their parts to maintain the confidentiality of such information and to use it only for certain limited purposes.  The Executive agrees that he owes the members of the Employer Group, and such third parties, during the Employment Period and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any Person (except as necessary in carrying out his duties for the Employer consistent with the Employer's agreement with such third party) or to use it for the benefit of anyone other than for the Employer or such third party (consistent with the Employer's agreement with such third party) without the express written authorization of the appropriate member or members of the Employer Group, as the case may be. (c)        Returning Employer Documents.  The Executive agrees that, at the time of the termination of the Employment Period, he will deliver to the Employer  (and will not keep in his possession or deliver to any other Person) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any of the aforementioned items or any property belonging to a member or members of the Employer Group, and their respective successors or assigns, regardless of whether such items are represented in tangible, electronic, digital, magnetic or any other media.  In the event of the termination of the Employment Period, the Executive agrees to sign and deliver the "Termination Certification" attached hereto as Exhibit B. 8 --------------------------------------------------------------------------------   5.04     Disputes or Controversies.  The Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court or other third party, the preservation of the secrecy of Confidential Information may be jeopardized.  All pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Employer, the Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive, use, and maintain all such Confidential Information in secrecy, except as may be agreed by them in writing. 5.05     Effect of Stock Purchase Agreement.   The Executive, the Employer and HSOA have, effective July 1, 2006, entered into a certain Stock Purchase Agreement (the "SPA").  In the event that the Executive shall be permitted to freely compete in business with the Purchaser Group (as defined in the SPA) as a result of the terms and conditions set forth in Section 7.14(b) of the SPA, Section 5 of this Agreement shall be null and void with respect to any Confidential Information of the Business or Fireline. 5.06     Time Period of Restrictions.  The terms and conditions of this Section 5 shall apply during the Restricted Period, unless sooner terminated in accordance with the terms of Section 5.05 or Section 4.05(b) of this Agreement. Section 6:         RESTRICTIONS DURING AND AFTER EMPLOYMENT 6.01     Restrictive Covenants.  The Executive agrees that the Employer's commitment described in Section 5.02 to provide its Confidential Information to him gives rise to the Employer's interest in restraining Executive from competing against it and that the restrictions in this Section are designed to enforce Executive's promise in Section 5.03 not to disclose or use Confidential Information belonging to the Employer, except in the performance of Executive's duties for the Employer.  The Executive agrees that the restrictions in this Section are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Employer.  For these reasons, the Executive agrees to the following: (a)        Noncompete.  Except as set forth in Section 6.04, or otherwise pursuant to Employer's prior written consent, which shall not be unreasonably withheld, with respect to a particular job or work order for which Employer has determined not to accept or perform, during the Restricted Period the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend the Executive's name or any similar name to, lend the Executive's credit to or render services that are similar to the services he rendered to the Employer under this Agreement to any business engaged or about to become engaged in the Business of the members of the Employer Group, in the Market Area (defined below).  For purposes of this Agreement, the "Business" of the Employer Group is providing recovery, restoration, rebuilding/remodeling, and other specialty interior services to residential and commercial properties.  9 --------------------------------------------------------------------------------   (b)        Solicitation of Customers.  During the Restricted Period the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, solicit a Current Customer (defined below) of any member of the Employer Group with whom he had contact during the Employment Period, for purposes of selling products or services to such Current Customer that are in competition with the products and services offered or sold by any member of the Employer Group. (c)        Solicitation of Employees.  During the Restricted Period the Executive will not, directly or indirectly, on behalf of himself or any other person or entity, employ any current employee of any member of the Employer Group or any individual who was an employee of any member of the Employer Group at any time during Term, and will not solicit, or contact in any manner that could reasonably be construed as a solicitation, any employee of any member of the Employer Group or its Affiliates for the purpose of encouraging such employee to leave or terminate his or her employment with any member of the Employer Group. (d)        Solicitation of Vendors.  During the Restricted Period the Executive will not, either directly or indirectly, on behalf of himself or any other person or entity, solicit a current vendor or supplier of any member of the Employer Group for purposes of encouraging such vendor or supplier to cease or diminish providing products or services to any member of the Employer Group, or to change adversely the terms under which such vendor or supplier provides such products or services to any member of the Employer Group. (e)        Non-interference.  During the Restricted Period the Executive will not, directly or indirectly, interfere with the Employer's relationship with any person who at the relevant time is an employee, contractor, supplier, or customer of any member of the Employer Group.  Following the termination of the Employment Period, the Executive will not, either directly or indirectly, access the computer systems of any member of the Employer Group, download files or any other information from the computer systems of any member of the Employer Group or in any way interfere, disrupt, modify or change any computer program used by any member of the Employer Group or any data stored on the computer systems of any member of the  Employer Group. (f)         Restricted Period.  For purposes of this Section 6.01, the term "Restricted Period" means the period commencing with the Effective Date and terminating two years after the termination of the Employment Period. (g)        Market Area.  For purposes of this Section 6.01, the term "Market Area" includes any state or province in which, during the Employment Period, (i) any member of the Employer Group has provided goods or services and (ii) the Executive has overseen, directed, managed, or otherwise participated in the operations of any member of the Employer Group. 10 -------------------------------------------------------------------------------- 6.02     Scope.  The Executive acknowledges and agrees that the geographic area, length and scope of the restrictions contained in Section 6.01 are reasonable and necessary to protect the legitimate business interests of the Employer Group.  The duration of the agreements contained in Section 6.01 shall be extended for the amount of any time of any violation thereof and the time, if greater, necessary to enforce such provisions or obtain any relief or damages for such violation through the court system.  The Employer may, at any time on written notice approved by its Board of Directors, reduce the geographic area, length or scope of any restrictions contained in Section 6.01 and, thereafter, the Executive shall comply with the restriction as so reduced, subject to subsequent reductions.  If any covenant in Section 6.01 of this Agreement is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as an arbitrator or a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Executive.  In the event of termination of the Executive's employment with the Employer for any reason, the Executive consents to the Employer communicating with the Executive's new employer, any entity in the Business or through or in connection with which the Executive is restricted hereunder, or any other party about the restrictions and obligations imposed on the Executive under this Agreement. 6.03     Required Notice.  Executive agrees that prior to beginning any new employment following the termination of his employment with Employer he will provide Employer with 30 days' written notice regarding his new employment.  The notice will identify Executive's new employer, describe the duties Executive will perform for the new employer, and provide verification that Executive has informed his new employer of his confidentiality and other obligations under this Agreement. 6.04     Exception for Executive's Other Businesses.  Other business owned by Executive are subject to the restrictions set forth in Section 6.01 of this Agreement expect that any business owned by Executive may perform services as a subcontractor for any member of the Employer Group without any violation of Section 6.01. 6.05     Effect of Stock Purchase Agreement.  In the event that the Executive shall be permitted to freely compete in business with the Purchaser Group (as defined in the SPA) as a result of the terms and conditions set forth in Section 7.14(b) of the SPA, Section 6 of this Agreement shall be null and void, unless sooner terminated in accordance with the terms of Section 4.05(b) of this Agreement. Section 7:         GENERAL PROVISIONS 7.01     Injunctive Relief and Additional Remedy.  The Executive acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of Sections 5 or 6 hereof might be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy.  Consequently, the Employer will have the right, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Sections 5 and 6 hereof. 11 -------------------------------------------------------------------------------- 7.02     Covenants of Sections 5 and 6 are Essential and Independent Covenants.  The covenants by the Executive in Sections 5 and 6 are essential elements of this Agreement, and without the Executive's agreement to comply with such covenants, the Employer would not have entered into this Agreement or employed or continued the employment of the Executive.  The Employer and the Executive have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by the Employer. 7.03     Representations and Warranties by the Executive.  The Executive represents and warrants to the Employer that (a) the Executive has never taken any action of the types set forth in Section 4.03(b) though (f) and (b) the execution and delivery by the Executive of this Agreement does not, and the performance by the Executive of the Executive's obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (i) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or (ii) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound. 7.04     Obligations Contingent on Performance.  The obligations of the Employer hereunder, including its obligation to pay the compensation provided for herein, are contingent upon the Executive's performance of the Executive's obligations hereunder. 7.05     Binding Effect; Delegation of Duties Prohibited.  This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which the Employer may merge or consolidate or to which all or substantially all of its assets may be transferred.  The covenants of the Executive under this Agreement, being personal, may not be delegated.             7.06     Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested) or, (d) mailed by registered or certified mail, postage prepaid and return receipt requested, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):             If to Employer: Home Solutions of America, Inc.   1500 Dragon Street Suite B   Dallas, TX 75207   Facsimile: (214) 333-9435             With a copy to: Melissa Youngblood, Esq.   Hallett & Perrin, P.C.   2001 Bryan Street, Suite 3900 12 --------------------------------------------------------------------------------                                                               Dallas, TX 75201   Facsimile: (214) 922-4170     If to the Executive: Brian Marshall   3018 Horatio Street   Tampa, FL 33609   Facsimile: (813) 353-9720       7.07     Entire Agreement; Amendments.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof.  This Agreement may not be amended orally; but only by an agreement in writing signed by the parties hereto. 7.08     GOVERNING LAW; VENUE.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES OR CHOICE OF LAWS RULES THEREOF.  VENUE FOR ANY ACTION BROUGHT HEREUNDER SHALL BE AS DETERMINED UNDER THAT CERTAIN STOCK PURCHASE AGREEMENT BY, AMONG OTHERS, THE EMPLOYER AND EXECUTIVE DATED AS OF JULY 1, 2006. 7.09     Headings; Construction.  The headings in this Agreement are provided for convenience only and will not affect its construction or interpretation.  All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement unless otherwise specified.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require. 7.10     Severability.  If any provision of this Agreement is held invalid or unenforceable by an arbitrator or any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 7.11     Counterparts.  This Agreement may be executed in one or more counterparts, including by facsimile signature, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 7.12     Survival of Obligations.  The obligations of the Employer and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term shall survive such expiration. 7.13     Withholding and Set Off.  All payments and benefits made or provided under this Agreement shall be subject to withholding as required under applicable law. 13 -------------------------------------------------------------------------------- 7.14     Arbitration.       The parties shall use their respective best efforts to settle amicably any disputes, differences or controversies arising among the parties out of or in connection with this Agreement. However, if not so settled, any controversy or claim arising out of or in connection with this Agreement, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association (the "AAA"), and judgment rendered by the arbitrator may be entered in any court having jurisdiction thereover; provided, however, that nothing in this Section 7.14 shall be construed as to deny the Employer the right and power to seek and obtain injunctive relief in a court of competent jurisdiction for any breach or threatened breach by Executive of the covenants in Sections 5 and 6 of this Agreement.  The arbitration shall be conducted in Atlanta, Georgia unless otherwise agreed by the parties thereto and shall be conducted before a panel of three (3) arbitrators in accordance with the Commercial Arbitration Rules of the AAA.  A party hereto shall initiate arbitration by sending written notice of its intention to arbitrate to the other parties and to the AAA office located in Atlanta, Georgia.  Such written notice will contain a description of the dispute and the remedy sought.  The Executive, on the one side, and the Employer, on the other, shall appoint one arbitrator of such party's choosing, and the parties shall mutually agree on the third arbitrator.  In the event that the parties have not mutually agreed on the third arbitrator within thirty (30) days after the demand for arbitration is filed, the third arbitrator shall be appointed in the manner provided by the Commercial Arbitration Rules of the AAA.  The decision of the arbitrators will be final and binding on the parties hereto and their successors and assignees.  Where consistent with applicable law, the arbitrators shall have the authority to order the non-prevailing party to pay the prevailing party's attorney's fees and all costs of the arbitration.  The parties will participate in good faith in a non-binding mediation of their dispute at least 60 days prior to the date of the arbitration hearing.  The parties shall jointly select the mediator but if they are unable to agree on a mediator, then the arbitrators shall appoint the mediator.  Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptable of the award and any order of enforcement as the case may be.  The parties intend this agreement to arbitrate to be irrevocable. 7.15     Attorneys' Fees. In the event that any action or proceeding, including arbitration, is commenced by any party hereto for the purpose of enforcing any provision of this Agreement, the prevailing party in such action, proceeding or arbitration may receive as part of any award, judgment, decision or other resolution of such action, proceeding or arbitration its costs and attorneys' fees as determined by the judge, arbitrator or body making such award, judgment, decision or resolution.  Should any claim hereunder be settled short of the commencement of any such action or proceeding, including arbitration, the parties in such settlement shall be entitled to include as part of the damages alleged to have been incurred reasonable costs of attorneys or other professionals in investigation or counseling on such claim. 7.16     Income Taxation of Deferred Payments.  This Agreement shall be administered subject to and in compliance with the requirements of Section 409A of the Code. 14 -------------------------------------------------------------------------------- Section 8:         CERTAIN DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings indicated below: "Affiliate" shall mean, as to any Person, any Person controlled by, controlling, or under common control with such Person, and, in the case of a Person who is an individual, a member of the family of such individual consisting of a spouse, sibling, in-law, lineal descendant, or ancestor (including by adoption), and the spouses of any such individuals.  For purposes of this definition, "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, directly or indirectly, alone or in concert with others, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of securities, by contract or otherwise, and no Person shall be deemed in control of another solely by virtue of being a director, officer or holder of voting securities of any entity.  A Person shall be presumed to control any partnership of which such Person is a general partner. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Current Customer" shall mean any person or entity who is currently utilizing any product or service sold or provided by any member of the Employer Group through any facility managed by the Executive; any person or entity who utilized any such product or service within the previous 12 months; and any person or entity with whom any member of the Employer Group is currently conducting negotiations concerning the utilization of such products or services. "Employment Period" shall mean the period during which the Executive has an obligation to render to the Employer all or any portion of the services described in Section 1.03 of this Agreement, until terminated in accordance with the terms of Section 4.  The Employment Period shall in no event, however, extend past the Expiration Date. "Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended, as modified and used in Sections 13(d)(3) and 14(d)(2) of such act.    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]         15 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. EMPLOYER:   FIRELINE RESTORATION, INC.   By:  /s/ Frank J. Fradella                                  Name: Frank J. Fradella Title:   Chief Executive Officer                                                                         HSOA: HOME SOLUTIONS OF AMERICA, INC.:     By:  /s/ Frank J. Fradella                                    Name: Frank J. Fradella                                                                         Title:   Chief Executive Officer   EXECUTIVE: /s/ Brian Marshall                                                                                                                       Brian Marshall       16 --------------------------------------------------------------------------------

Exhibit 10.1   EXECUTION   REGISTRATION RIGHTS AGREEMENT     by and between     AXCELIS TECHNOLOGIES, INC.,   as Issuer,   and   QUANTUM PARTNERS LDC,   as Purchaser     Dated as of May 2, 2006   --------------------------------------------------------------------------------   REGISTRATION RIGHTS AGREEMENT dated as of May 2, 2006 by and between Axcelis Technologies, Inc., a Delaware corporation (the “Company”), and Quantum Partners LDC, a Cayman Islands limited duration company (the “Purchaser”), pursuant to the Exchange and Purchase Agreement dated May 2, 2006 (the “Purchase Agreement”), between the Company and the Purchaser. In order to induce the Purchaser to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement.   The Company agrees with the Purchaser, (i) for its benefit as Purchaser and (ii) for the benefit of the beneficial owners (including the Purchaser) from time to time of the Notes (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the Notes (each of the foregoing a “Holder” and together the “Holders”), as follows:   (A)           DEFINITIONS. CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION SHALL HAVE THEIR RESPECTIVE MEANINGS SET FORTH IN THE PURCHASE AGREEMENT. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:   “Affiliate” means with respect to any specified person, an “affiliate,” as defined in Rule 144, of such person.   “Amendment Effectiveness Deadline Date” has the meaning set forth in Section 2(d) hereof.   “Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which either banking institutions in The City of New York are authorized or obligated by law or executive order to close or the SEC is closed.   “Common Stock” means the shares of common stock, $0.001 par value, of the Company, together with the rights evidenced by such common stock to the extent provided in the Rights Agreement dated as of June 30, 2000 between the Company and EquiServe Trust Company N.A. (or any substitute rights), and any other shares of common stock (and accompanying rights) as may constitute “Common Stock” for purposes of the Indenture, including the Underlying Common Stock.   “Conversion Price” has the meaning assigned such term in the Indenture.   “Damages Accrual Period” has the meaning set forth in Section 2(e) hereof.   “Damages Payment Date” means each January 15 and July 15.   “Deferral Notice” has the meaning set forth in Section 3(i) hereof.   “Deferral Period” has the meaning set forth in Section 3(i) hereof.   “Effectiveness Deadline Date” has the meaning set forth in Section 2(a) hereof.   1 --------------------------------------------------------------------------------   “Effectiveness Period” means the period commencing on the date hereof and ending on the date that all Registrable Securities have ceased to be Registrable Securities.   “Event” has the meaning set forth in Section 2(e) hereof.   “Event Date” has the meaning set forth in Section 2(e) hereof.   “Event Termination Date” has the meaning set forth in Section 2(e) hereof.   “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.   “Filing Deadline Date” has the meaning set forth in Section 2(a) hereof.   “Holder” has the meaning set forth in the second paragraph of this Agreement.   “Indenture” means the Indenture, dated as of May 2, 2006, between the Company and U.S. Bank National Association, as trustee, pursuant to which the Notes are being issued.   “Initial Shelf Registration Statement” has the meaning set forth in Section 2(a) hereof.   “Issue Date” means the first date of original issuance of the Notes.   “Liquidated Damages Amount” has the meaning set forth in Section 2(e) hereof.   “Losses” has the meaning set forth in Section 6 hereof.   “Material Event” has the meaning set forth in Section 3(i) hereof.   “Notes” means the 4 1/4% Convertible Senior Subordinated Notes due 2009 of the Company to be purchased or exchanged for pursuant to the Purchase Agreement.   “Notice and Questionnaire” has the meaning set forth in Section 2(d) hereof.   “Notice Holder” has the meaning set forth in Section 2(a) hereof.   “Purchase Agreement” has the meaning set forth in the preamble hereof.   “Prospectus” means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus.   “Purchaser” has the meaning set forth in the preamble hereof.   “Record Holder” means with respect to any Damages Payment Date relating to any Notes or Underlying Common Stock as to which any Liquidated Damages Amount has accrued, the   2 --------------------------------------------------------------------------------   registered holder of such Note or Underlying Common Stock on the January 1 immediately preceding a Damages Payment Date occurring on a January 15, and on the July 1 immediately preceding a Damages Payment Date occurring on a July 15.   “Registrable Securities” means the Notes until such Notes have been converted into or exchanged for the Underlying Common Stock and, at all times subsequent to any such conversion or exchange the Underlying Common Stock and any securities into or for which such Underlying Common Stock has been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, (A) the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable under Rule 144(k) to a sale by a non-Affiliate of the Company or (iii) its sale to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, and (B) as a result of the event or circumstance described in any of the foregoing clauses (i) through (iii), the legend with respect to transfer restrictions required under the Indenture are removed or removable in accordance with the terms of the Indenture or such legend, as the case may be.   “Registration Expenses” has the meaning set forth in Section 5 hereof.   “Registration Statement” means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement.   “Restricted Securities” means “Restricted Securities” as defined in Rule 144.   “Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.   “Rule 144A” means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.   “SEC” means the Securities and Exchange Commission.   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.   “Shelf Registration Statement” has the meaning set forth in Section 2(a) hereof.   “Special Counsel” means Akin Gump Strauss Hauer & Feld LLP or one such other successor counsel as shall be specified by the Holders of a majority of the Registrable Securities, but which may, with the written consent of the Purchaser (which shall not be unreasonably withheld), be another nationally recognized law firm experienced in securities law matters designated by the Company, the reasonable fees and expenses of which will be paid by the Company pursuant to Section 5 hereof. For purposes of determining the holders of a majority of the Registrable Securities in this definition, Holders of Notes shall be deemed to be the Holders   3 --------------------------------------------------------------------------------   of the number of shares of Underlying Common Stock into which such Notes are or would be convertible as of the date the consent is requested.   “Subsequent Shelf Registration Statement” has the meaning set forth in Section 2(b) hereof.   “TIA” means the Trust Indenture Act of 1939, as amended.   “Trustee” means U.S. Bank National Association, the Trustee under the Indenture.   “Underlying Common Stock” means the Common Stock into which the Notes are convertible or issued upon any such conversion.   SECTION 2.           Shelf Registration. (a) The Company shall prepare and file or cause to be prepared and filed with the SEC, as soon as practicable but in any event by the date (the “Filing Deadline Date”) ninety (90) days after the Issue Date, a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a “Shelf Registration Statement”) registering the resale from time to time by Holders thereof of all of the Registrable Securities (the “Initial Shelf Registration Statement”). Any Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders and set forth in the Initial Shelf Registration Statement. The Company shall use its reasonable best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date (the “Effectiveness Deadline Date”) that is one hundred eighty (180) days after the Issue Date, and, subject to the exceptions provided herein, to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period. At the time the Initial Shelf Registration Statement is declared effective, each Holder that delivered a Notice and Questionnaire (each, a “Notice Holder”) on or prior to the date ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. None of the Company’s security holders (other than the Holders of Registrable Securities) shall have the right to include any of the Company’s securities in the Shelf Registration Statement.   (B)           IF THE INITIAL SHELF REGISTRATION STATEMENT OR ANY SUBSEQUENT SHELF REGISTRATION STATEMENT CEASES TO BE EFFECTIVE FOR ANY REASON AT ANY TIME DURING THE EFFECTIVENESS PERIOD (OTHER THAN BECAUSE ALL REGISTRABLE SECURITIES REGISTERED THEREUNDER SHALL HAVE BEEN RESOLD PURSUANT THERETO OR SHALL HAVE OTHERWISE CEASED TO BE REGISTRABLE SECURITIES), THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO OBTAIN THE PROMPT WITHDRAWAL OF ANY ORDER SUSPENDING THE EFFECTIVENESS THEREOF, AND IN ANY EVENT SHALL WITHIN THIRTY (30) DAYS OF SUCH CESSATION OF EFFECTIVENESS AMEND THE SHELF REGISTRATION STATEMENT IN A MANNER REASONABLY EXPECTED TO OBTAIN THE WITHDRAWAL OF THE ORDER SUSPENDING THE EFFECTIVENESS THEREOF, OR FILE AN ADDITIONAL SHELF REGISTRATION STATEMENT COVERING ALL OF THE SECURITIES THAT AS OF THE DATE OF SUCH FILING ARE REGISTRABLE SECURITIES (A “SUBSEQUENT SHELF REGISTRATION STATEMENT”). IF A SUBSEQUENT SHELF REGISTRATION STATEMENT IS   4 --------------------------------------------------------------------------------   FILED, THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO CAUSE THE SUBSEQUENT SHELF REGISTRATION STATEMENT TO BECOME EFFECTIVE AS PROMPTLY AS IS PRACTICABLE AFTER SUCH FILING AND TO KEEP SUCH REGISTRATION STATEMENT (OR SUBSEQUENT SHELF REGISTRATION STATEMENT) CONTINUOUSLY EFFECTIVE UNTIL THE END OF THE EFFECTIVENESS PERIOD.   (C)           THE COMPANY SHALL SUPPLEMENT AND AMEND THE SHELF REGISTRATION STATEMENT IF REQUIRED BY THE RULES, REGULATIONS OR INSTRUCTIONS APPLICABLE TO THE REGISTRATION FORM USED BY THE COMPANY FOR SUCH SHELF REGISTRATION STATEMENT, IF REQUIRED BY THE SECURITIES ACT OR AS REASONABLY REQUESTED BY THE PURCHASER OR BY THE TRUSTEE ON BEHALF OF THE HOLDERS OF THE REGISTRABLE SECURITIES COVERED BY SUCH SHELF REGISTRATION STATEMENT.   (D)           EACH HOLDER AGREES THAT IF SUCH HOLDER WISHES TO SELL REGISTRABLE SECURITIES PURSUANT TO A SHELF REGISTRATION STATEMENT AND RELATED PROSPECTUS, IT WILL DO SO ONLY IN ACCORDANCE WITH THIS SECTION 2(D) AND SECTION 3(I). EACH HOLDER WISHING TO SELL REGISTRABLE SECURITIES PURSUANT TO A SHELF REGISTRATION STATEMENT AND RELATED PROSPECTUS AGREES TO DELIVER AT LEAST THREE (3) BUSINESS DAYS PRIOR TO ANY INTENDED DISTRIBUTION OF REGISTRABLE SECURITIES UNDER THE SHELF REGISTRATION STATEMENT SUCH INFORMATION REGARDING SUCH HOLDER, THE REGISTRABLE SECURITIES HELD BY SUCH HOLDER AND SUCH HOLDER’S INTENDED PLAN OF DISTRIBUTION AS THE COMPANY SHALL REASONABLY REQUEST AND AS SHALL BE REQUIRED BY APPLICABLE SECURITIES LAWS IN ORDER TO EFFECT ANY REGISTRATION BY THE COMPANY PURSUANT TO THIS AGREEMENT (A “NOTICE AND QUESTIONNAIRE”); PROVIDED, THAT A HOLDER SHALL NOT BE REQUIRED TO DELIVER SUCH NOTICE AND QUESTIONNAIRE PRIOR TO ANY SUCH INTENDED DISTRIBUTION TO THE EXTENT IT HAS PREVIOUSLY PROVIDED A NOTICE AND QUESTIONNAIRE AND OTHERWISE IS IN COMPLIANCE WITH ITS OBLIGATIONS SET FORTH IN SECTION 4 BELOW. THE COMPANY WILL PROVIDE ANY DESIRED NOTICE AND QUESTIONNAIRE TO THE PURCHASER WITHIN 10 DAYS OF THE ISSUE DATE AND WITHIN 10 DAYS OF A REQUEST FROM ANY OTHER HOLDER. FROM AND AFTER THE DATE THE INITIAL SHELF REGISTRATION STATEMENT IS DECLARED EFFECTIVE, THE COMPANY SHALL, AS PROMPTLY AS PRACTICABLE AFTER THE DATE A NOTICE AND QUESTIONNAIRE IS DELIVERED, AND IN ANY EVENT UPON THE LATER OF (X) TEN (10) BUSINESS DAYS AFTER SUCH DATE (BUT NO EARLIER THAN TEN (10) BUSINESS DAYS AFTER EFFECTIVENESS) OR (Y) TEN (10) BUSINESS DAYS AFTER THE EXPIRATION OF ANY DEFERRAL PERIOD IN EFFECT WHEN THE NOTICE AND QUESTIONNAIRE IS DELIVERED OR PUT INTO EFFECT WITHIN TEN (10) BUSINESS DAYS OF SUCH DELIVERY DATE:   (1)           IF REQUIRED BY APPLICABLE LAW, FILE WITH THE SEC A POST-EFFECTIVE AMENDMENT TO THE SHELF REGISTRATION STATEMENT OR PREPARE AND, IF REQUIRED BY APPLICABLE LAW, FILE A SUPPLEMENT TO THE RELATED PROSPECTUS OR A SUPPLEMENT OR AMENDMENT TO ANY DOCUMENT INCORPORATED THEREIN BY REFERENCE OR FILE ANY OTHER REQUIRED DOCUMENT SO THAT THE HOLDER DELIVERING SUCH NOTICE AND QUESTIONNAIRE IS NAMED AS A SELLING SECURITYHOLDER IN THE SHELF REGISTRATION STATEMENT AND THE RELATED PROSPECTUS IN SUCH A MANNER AS TO PERMIT SUCH HOLDER TO DELIVER SUCH PROSPECTUS TO PURCHASERS OF THE REGISTRABLE SECURITIES IN ACCORDANCE WITH APPLICABLE LAW AND, IF THE COMPANY SHALL FILE A POST-EFFECTIVE AMENDMENT TO THE SHELF REGISTRATION STATEMENT, USE ITS REASONABLE BEST EFFORTS TO CAUSE SUCH POST-EFFECTIVE AMENDMENT TO BE DECLARED EFFECTIVE UNDER THE SECURITIES ACT AS PROMPTLY AS IS PRACTICABLE, BUT IN ANY EVENT BY THE DATE (THE “AMENDMENT EFFECTIVENESS DEADLINE DATE”) THAT IS FORTY-FIVE (45) DAYS AFTER THE DATE SUCH POST-EFFECTIVE AMENDMENT IS REQUIRED BY THIS CLAUSE TO BE FILED;   5 --------------------------------------------------------------------------------   (2)           PROVIDE SUCH HOLDER COPIES OF ANY DOCUMENTS FILED PURSUANT TO SECTION 2(D)(I); AND   (3)           NOTIFY SUCH HOLDER AS PROMPTLY AS PRACTICABLE AFTER THE EFFECTIVENESS UNDER THE SECURITIES ACT OF ANY POST-EFFECTIVE AMENDMENT FILED PURSUANT TO SECTION 2(D)(I);   provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(i). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Registration Statement or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten (10) Business Days from the expiration of a Deferral Period (and the Company shall incur no obligation to pay Liquidated Damages during such extension) if such Deferral Period shall be in effect on the Amendment Effectiveness Deadline Date.   (E)           THE PARTIES HERETO AGREE THAT THE HOLDERS OF REGISTRABLE SECURITIES WILL SUFFER DAMAGES, AND THAT IT WOULD NOT BE FEASIBLE TO ASCERTAIN THE EXTENT OF SUCH DAMAGES WITH PRECISION, IF   (1)           THE INITIAL SHELF REGISTRATION STATEMENT HAS NOT BEEN FILED ON OR PRIOR TO THE FILING DEADLINE DATE,   (2)           THE INITIAL SHELF REGISTRATION STATEMENT HAS NOT BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT ON OR PRIOR TO THE EFFECTIVENESS DEADLINE DATE,   (3)           THE COMPANY HAS FAILED TO PERFORM ITS OBLIGATIONS SET FORTH IN SECTION 2(D) WITHIN THE TIME PERIOD REQUIRED THEREIN,   (4)           ANY POST-EFFECTIVE AMENDMENT TO A SHELF REGISTRATION STATEMENT FILED PURSUANT TO SECTION 2(D)(I) HAS NOT BECOME EFFECTIVE UNDER THE SECURITIES ACT ON OR PRIOR TO THE AMENDMENT EFFECTIVENESS DEADLINE DATE,   (5)           THE AGGREGATE DURATION OF DEFERRAL PERIODS IN ANY PERIOD EXCEEDS THE NUMBER OF DAYS PERMITTED IN RESPECT OF SUCH PERIOD PURSUANT TO SECTION 3(I) HEREOF, OR   (6)           THE NUMBER OF DEFERRAL PERIODS IN ANY PERIOD EXCEEDS THE NUMBER PERMITTED IN RESPECT OF SUCH PERIOD PURSUANT TO SECTION 3(I) HEREOF.   Each event described in any of the foregoing clauses (i) through (vi) is individually referred to herein as an “Event.” For purposes of this Agreement, each Event set forth above shall begin and end on the dates set forth in the table set forth below:   6 --------------------------------------------------------------------------------   Type of Event by Clause   Beginning Date   Ending Date (i)   Filing Deadline Date   the date the Initial Shelf Registration Statement is filed           (ii)   Effectiveness Deadline Date   the date the Initial Shelf Registration Statement becomes effective under the Securities Act           (iii)   the date by which the Company is required to perform its obligations under Section 2(d)   the date the Company performs its obligations set forth in Section 2(d)           (iv)   the Amendment Effectiveness Deadline Date   the date the applicable post-effective amendment to a Shelf Registration Statement becomes effective under the Securities Act           (v)   the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i)   termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods to be exceeded           (vi)   the date of commencement of a Deferral Period that causes the number of Deferral Periods to exceed the number permitted by Section 3(i)   termination of the Deferral Period that caused the number of Deferral Periods to exceed the number permitted by Section 3(i)   For purposes of this Agreement, Events shall begin on the beginning dates set forth in the table above and shall continue until the ending dates set forth in the table above.   Commencing on (and including) any date that an Event has begun and ending on (but excluding) the next date on which there are no Events that have occurred and are continuing (a “Damages Accrual Period”), the Company shall pay, as liquidated damages and not as a penalty, to Record Holders of Registrable Securities an amount (the “Liquidated Damages Amount”) accruing, for each day in the Damages Accrual Period, (i) in respect of any Note, at a rate per annum equal to 0.5% of the aggregate principal amount of such Note and (ii) in respect of each share of Underlying Common Stock at a rate per annum equal to 0.5% on the Conversion Price on such date; provided that in the case of a Damages Accrual Period that is in effect solely as a result of an Event of the type described in clause (iii) or (iv) of the preceding paragraph, such Liquidated Damages Amount shall be paid only to the Holders (as set forth in the succeeding paragraph) that have delivered Notices and Questionnaires that caused the Company to incur the obligations set forth in Section 2(d) the non-performance of which is the basis of such Event, and only with respect to the Notes covered by such Notices and Questionnaires. In calculating the Liquidated Damages Amount on any date on which no Notes are outstanding, the Conversion   7 --------------------------------------------------------------------------------   Price and the Liquidated Damages Amount shall be calculated as if the Notes were still outstanding. Notwithstanding the foregoing, no Liquidated Damages Amount shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events.   The Liquidated Damages Amount shall accrue from the first day of the applicable Damages Accrual Period, and shall be payable on each Damages Payment Date during the Damages Accrual Period (and on the Damages Payment Date next succeeding the end of the Damages Accrual Period if the Damages Accrual Period does not end on a Damages Payment Date) to the Record Holders of the Registrable Securities entitled thereto; provided that any Liquidated Damages Amount accrued with respect to any Note or portion thereof redeemed by the Company on a redemption date or converted into Underlying Common Stock on a conversion date prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Note or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion); provided further, that, in the case of an Event of the type described in clause (iii) or (iv) of the first paragraph of this Section 2(e), such Liquidated Damages Amount shall be paid only to the Holders entitled thereto pursuant to such first paragraph by check mailed to the address set forth in the Notice and Questionnaire delivered by such Holder. The Trustee shall be entitled, on behalf of registered holders of Notes or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of such Liquidated Damages Amount. Notwithstanding the foregoing, the parties agree that the sole damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages except to the extent such violation relates to a violation by the Company of this Section 3 and such violation is willful or intentional, in which case the Holder shall be entitled to seek actual damages. Nothing shall preclude any Holder from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement.   All of the Company’s obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)).   The parties hereto agree that the liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of a Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof.   SECTION 3.           Registration Procedures. In connection with the registration obligations of the Company under Section 2 hereof, the Company shall:   (A)           PREPARE AND FILE WITH THE SEC A REGISTRATION STATEMENT OR REGISTRATION STATEMENTS ON ANY APPROPRIATE FORM UNDER THE SECURITIES ACT AVAILABLE FOR THE SALE OF THE REGISTRABLE   8 --------------------------------------------------------------------------------   SECURITIES BY THE HOLDERS THEREOF IN ACCORDANCE WITH ALL INTENDED METHODS OF DISTRIBUTION THEREOF OF WHICH THE HOLDER HAS GIVEN NOTICE TO THE COMPANY (INCLUDING MAKING ALL REQUISITE FILINGS AND TAKING ALL ACTIONS TO QUALIFY THE INDENTURE UNDER THE TIA), AND USE ITS REASONABLE BEST EFFORTS TO CAUSE EACH SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE AND REMAIN EFFECTIVE AS PROVIDED HEREIN; PROVIDED THAT BEFORE FILING ANY REGISTRATION STATEMENT OR PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO WITH THE SEC, THE COMPANY SHALL FURNISH TO THE PURCHASER AND THE SPECIAL COUNSEL OF SUCH OFFERING, IF ANY, SUBJECT TO AN OBLIGATION OF CONFIDENTIALITY, COPIES OF ALL SUCH DOCUMENTS PROPOSED TO BE FILED AND USE ITS REASONABLE BEST EFFORTS TO REFLECT IN EACH SUCH DOCUMENT WHEN SO FILED WITH THE SEC SUCH COMMENTS AS THE PURCHASER OR THE SPECIAL COUNSEL, IF ANY, REASONABLY SHALL PROPOSE WITHIN FIVE (5) BUSINESS DAYS OF THE DELIVERY OF SUCH COPIES TO THE PURCHASER AND THE SPECIAL COUNSEL.   (B)           PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO EACH REGISTRATION STATEMENT AS MAY BE NECESSARY TO KEEP SUCH REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE FOR THE APPLICABLE PERIOD SPECIFIED IN SECTION 2(A); CAUSE THE RELATED PROSPECTUS TO BE SUPPLEMENTED BY ANY REQUIRED PROSPECTUS SUPPLEMENT, AND AS SO SUPPLEMENTED TO BE FILED PURSUANT TO RULE 424 (OR ANY SIMILAR PROVISIONS THEN IN FORCE) UNDER THE SECURITIES ACT; AND USE ITS REASONABLE BEST EFFORTS TO COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT APPLICABLE TO IT WITH RESPECT TO THE DISPOSITION OF ALL SECURITIES COVERED BY SUCH REGISTRATION STATEMENT DURING THE EFFECTIVENESS PERIOD IN ACCORDANCE WITH THE INTENDED METHODS OF DISPOSITION BY THE SELLERS THEREOF SET FORTH IN SUCH REGISTRATION STATEMENT AS SO AMENDED OR SUCH PROSPECTUS AS SO SUPPLEMENTED.   (C)           AS PROMPTLY AS PRACTICABLE GIVE NOTICE TO THE NOTICE HOLDERS, THE PURCHASER AND THE SPECIAL COUNSEL, (I) WHEN ANY PROSPECTUS, PROSPECTUS SUPPLEMENT, REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT HAS BEEN FILED WITH THE SEC AND, WITH RESPECT TO A REGISTRATION STATEMENT OR ANY POST-EFFECTIVE AMENDMENT, WHEN THE SAME HAS BEEN DECLARED EFFECTIVE, (II) OF ANY REQUEST, FOLLOWING THE EFFECTIVENESS OF THE INITIAL SHELF REGISTRATION STATEMENT UNDER THE SECURITIES ACT, BY THE SEC OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL AUTHORITY FOR AMENDMENTS OR SUPPLEMENTS TO ANY REGISTRATION STATEMENT OR RELATED PROSPECTUS OR FOR ADDITIONAL INFORMATION, (III) OF THE ISSUANCE BY THE SEC OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL AUTHORITY OF ANY STOP ORDER SUSPENDING THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT OR THE INITIATION OR THREATENING OF ANY PROCEEDINGS FOR THAT PURPOSE, (IV) OF THE RECEIPT BY THE COMPANY OF ANY NOTIFICATION WITH RESPECT TO THE SUSPENSION OF THE QUALIFICATION OR EXEMPTION FROM QUALIFICATION OF ANY OF THE REGISTRABLE SECURITIES FOR SALE IN ANY JURISDICTION OR THE INITIATION OR THREATENING OF ANY PROCEEDING FOR SUCH PURPOSE, (V) OF THE OCCURRENCE OF A MATERIAL EVENT AND (VI) OF THE DETERMINATION BY THE COMPANY THAT A POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT WILL BE FILED WITH THE SEC, WHICH NOTICE MAY, AT THE DISCRETION OF THE COMPANY (OR AS REQUIRED PURSUANT TO SECTION 3(I)), STATE THAT IT CONSTITUTES A DEFERRAL NOTICE, IN WHICH EVENT THE PROVISIONS OF SECTION 3(I) SHALL APPLY.   (D)           USE ITS REASONABLE BEST EFFORTS TO OBTAIN THE WITHDRAWAL OF ANY ORDER SUSPENDING THE EFFECTIVENESS OF A REGISTRATION STATEMENT OR THE LIFTING OF ANY SUSPENSION OF THE QUALIFICATION (OR EXEMPTION FROM QUALIFICATION) OF ANY OF THE REGISTRABLE SECURITIES FOR SALE IN ANY JURISDICTION IN WHICH THEY HAVE BEEN QUALIFIED FOR SALE, IN EITHER CASE AT THE EARLIEST POSSIBLE MOMENT, AND PROVIDE IMMEDIATE NOTICE TO EACH NOTICE HOLDER AND THE PURCHASER OF THE WITHDRAWAL OF ANY SUCH ORDER.   9 --------------------------------------------------------------------------------   (E)           IF REASONABLY REQUESTED BY THE PURCHASER OR ANY NOTICE HOLDER, AS PROMPTLY AS PRACTICABLE INCORPORATE IN A PROSPECTUS SUPPLEMENT OR POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT SUCH INFORMATION AS THE PURCHASER AND THE SPECIAL COUNSEL, OR SUCH NOTICE HOLDER SHALL ON THE BASIS OF A WRITTEN OPINION OF NATIONALLY-RECOGNIZED COUNSEL EXPERIENCED IN SUCH MATTERS, DETERMINE TO BE REQUIRED TO BE INCLUDED THEREIN BY APPLICABLE LAW AND MAKE ANY REQUIRED FILINGS OF SUCH PROSPECTUS SUPPLEMENT OR POST-EFFECTIVE AMENDMENT.   (F)            UPON REQUEST, AS PROMPTLY AS PRACTICABLE FURNISH TO EACH NOTICE HOLDER, THE SPECIAL COUNSEL AND THE PURCHASER, WITHOUT CHARGE, AT LEAST ONE (1) CONFORMED COPY OF THE REGISTRATION STATEMENT AND ANY AMENDMENT THERETO, INCLUDING EXHIBITS AND ALL DOCUMENTS INCORPORATED OR DEEMED TO BE INCORPORATED THEREIN BY REFERENCE.   (G)           DURING THE EFFECTIVENESS PERIOD, DELIVER TO EACH NOTICE HOLDER, THE SPECIAL COUNSEL, IF ANY, AND THE PURCHASER, IN CONNECTION WITH ANY SALE OF REGISTRABLE SECURITIES PURSUANT TO A REGISTRATION STATEMENT, WITHOUT CHARGE, AS MANY COPIES OF THE PROSPECTUS OR PROSPECTUSES RELATING TO SUCH REGISTRABLE SECURITIES (INCLUDING EACH PRELIMINARY PROSPECTUS) AND ANY AMENDMENT OR SUPPLEMENT THERETO AS SUCH NOTICE HOLDER MAY REASONABLY REQUEST; AND THE COMPANY HEREBY CONSENTS (EXCEPT DURING SUCH PERIODS THAT A DEFERRAL NOTICE IS OUTSTANDING AND HAS NOT BEEN REVOKED) TO THE USE OF SUCH PROSPECTUS OR EACH AMENDMENT OR SUPPLEMENT THERETO BY EACH NOTICE HOLDER IN CONNECTION WITH ANY OFFERING AND SALE OF THE REGISTRABLE SECURITIES COVERED BY SUCH PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT THERETO IN THE MANNER SET FORTH THEREIN.   (H)           PRIOR TO ANY PUBLIC OFFERING OF THE REGISTRABLE SECURITIES PURSUANT TO A REGISTRATION STATEMENT, USE ITS REASONABLE BEST EFFORTS TO REGISTER OR QUALIFY OR COOPERATE WITH THE NOTICE HOLDERS AND THE SPECIAL COUNSEL IN CONNECTION WITH THE REGISTRATION OR QUALIFICATION (OR EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION) OF SUCH REGISTRABLE SECURITIES FOR OFFER AND SALE UNDER THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTIONS WITHIN THE UNITED STATES AS ANY NOTICE HOLDER REASONABLY REQUESTS IN WRITING (WHICH REQUEST MAY BE INCLUDED IN THE NOTICE AND QUESTIONNAIRE); PRIOR TO ANY PUBLIC OFFERING OF THE REGISTRABLE SECURITIES PURSUANT TO THE SHELF REGISTRATION STATEMENT, USE ITS REASONABLE BEST EFFORTS TO KEEP EACH SUCH REGISTRATION OR QUALIFICATION (OR EXEMPTION THEREFROM) EFFECTIVE DURING THE EFFECTIVENESS PERIOD IN CONNECTION WITH SUCH NOTICE HOLDER’S OFFER AND SALE OF REGISTRABLE SECURITIES PURSUANT TO SUCH REGISTRATION OR QUALIFICATION (OR EXEMPTION THEREFROM) AND DO ANY AND ALL OTHER ACTS OR THINGS REASONABLY NECESSARY OR ADVISABLE TO ENABLE THE DISPOSITION IN SUCH JURISDICTIONS OF SUCH REGISTRABLE SECURITIES IN THE MANNER SET FORTH IN THE RELEVANT REGISTRATION STATEMENT AND THE RELATED PROSPECTUS; PROVIDED THAT THE COMPANY WILL NOT BE REQUIRED TO (I) QUALIFY AS A FOREIGN CORPORATION OR AS A DEALER IN SECURITIES IN ANY JURISDICTION WHERE IT WOULD NOT OTHERWISE BE REQUIRED TO QUALIFY BUT FOR THIS AGREEMENT OR (II) TAKE ANY ACTION THAT WOULD SUBJECT IT TO GENERAL SERVICE OF PROCESS IN SUITS OR TO ADDITIONAL TAXATION IN ANY SUCH JURISDICTION.   (I)            UPON (A) THE ISSUANCE BY THE SEC OF A STOP ORDER SUSPENDING THE EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT OR THE INITIATION OF PROCEEDINGS WITH RESPECT TO THE SHELF REGISTRATION STATEMENT UNDER SECTION 8(D) OR 8(E) OF THE SECURITIES ACT, (B) THE OCCURRENCE OF ANY EVENT OR THE EXISTENCE OF ANY FACT (A “MATERIAL EVENT”) AS A RESULT OF WHICH ANY REGISTRATION STATEMENT SHALL CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, OR ANY   10 --------------------------------------------------------------------------------   PROSPECTUS SHALL CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, OR (C) THE OCCURRENCE OR EXISTENCE OF ANY PENDING CORPORATE DEVELOPMENT THAT, IN THE REASONABLE DISCRETION OF THE COMPANY, MAKES IT APPROPRIATE TO SUSPEND THE AVAILABILITY OF THE SHELF REGISTRATION STATEMENT AND THE RELATED PROSPECTUS FOR A DISCRETE PERIOD OF TIME:   (1)           IN THE CASE OF CLAUSE (B) ABOVE, SUBJECT TO THE NEXT SENTENCE, AS PROMPTLY AS PRACTICABLE PREPARE AND FILE, IF NECESSARY PURSUANT TO APPLICABLE LAW, A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT OR A SUPPLEMENT TO THE RELATED PROSPECTUS OR ANY DOCUMENT INCORPORATED THEREIN BY REFERENCE OR FILE ANY OTHER REQUIRED DOCUMENT THAT WOULD BE INCORPORATED BY REFERENCE INTO SUCH REGISTRATION STATEMENT AND PROSPECTUS SO THAT SUCH REGISTRATION STATEMENT DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, AND SUCH PROSPECTUS DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, AS THEREAFTER DELIVERED TO THE PURCHASERS OF THE REGISTRABLE SECURITIES BEING SOLD THEREUNDER, AND, IN THE CASE OF A POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT, SUBJECT TO THE NEXT SENTENCE, USE ITS REASONABLE BEST EFFORTS TO CAUSE IT TO BE DECLARED EFFECTIVE AS PROMPTLY AS IS PRACTICABLE, AND   (2)           GIVE NOTICE TO THE NOTICE HOLDERS, AND THE SPECIAL COUNSEL, IF ANY, THAT THE AVAILABILITY OF THE SHELF REGISTRATION STATEMENT IS SUSPENDED (A “DEFERRAL NOTICE”) AND, UPON RECEIPT OF ANY DEFERRAL NOTICE, EACH NOTICE HOLDER AGREES NOT TO SELL ANY REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT UNTIL SUCH NOTICE HOLDER’S RECEIPT OF COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS PROVIDED FOR IN CLAUSE (I) ABOVE, OR UNTIL IT IS ADVISED IN WRITING BY THE COMPANY THAT THE PROSPECTUS MAY BE USED, AND HAS RECEIVED COPIES OF ANY ADDITIONAL OR SUPPLEMENTAL FILINGS THAT ARE INCORPORATED OR DEEMED INCORPORATED BY REFERENCE IN SUCH PROSPECTUS.   The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and (z) in the case of clause (C) above, as soon as in the reasonable discretion of the Company, such suspension is no longer appropriate. The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of the Shelf Registration Statement or any Prospectus, without incurring or accruing any obligation to pay liquidated damages pursuant to Section 2(e), no more than one (1) time in any three month period or three (3) times in any twelve month period, and any such period during which the availability of the Registration Statement and any Prospectus is suspended (the “Deferral Period”) shall, without incurring any obligation to pay liquidated damages pursuant to Section 2(e), not exceed 30 days; provided that the aggregate duration of any Deferral Periods shall not exceed 30 days in any three month period (or 60 days in any three month period in the event of a Material Event pursuant to which the Company has delivered a second notice as required below) or 90 days in any twelve (12)   11 --------------------------------------------------------------------------------   month period; provided that in the case of a Material Event relating to an acquisition or a probable acquisition or financing, recapitalization, business combination or other similar transaction, the Company may, without incurring any obligation to pay liquidated damages pursuant to Section 2(e), deliver to Notice Holders a second notice to the effect set forth above, which shall have the effect of extending the Deferral Period by up to an additional 30 days, or such shorter period of time as is specified in such second notice.   (J)            IF REQUESTED IN WRITING IN CONNECTION WITH A DISPOSITION OF REGISTRABLE SECURITIES PURSUANT TO A REGISTRATION STATEMENT, MAKE REASONABLY AVAILABLE FOR INSPECTION DURING NORMAL BUSINESS HOURS BY A REPRESENTATIVE FOR THE NOTICE HOLDERS OF SUCH REGISTRABLE SECURITIES, ANY BROKER-DEALERS, ATTORNEYS AND ACCOUNTANTS RETAINED BY SUCH NOTICE HOLDERS, AND ANY ATTORNEYS OR OTHER AGENTS RETAINED BY A BROKER-DEALER ENGAGED BY SUCH NOTICE HOLDERS, ALL RELEVANT FINANCIAL AND OTHER RECORDS AND PERTINENT CORPORATE DOCUMENTS AND PROPERTIES OF THE COMPANY AND ITS SUBSIDIARIES, AND CAUSE THE APPROPRIATE OFFICERS, DIRECTORS AND EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES TO MAKE REASONABLY AVAILABLE FOR INSPECTION DURING NORMAL BUSINESS HOURS ON REASONABLE NOTICE ALL RELEVANT INFORMATION REASONABLY REQUESTED BY SUCH REPRESENTATIVE FOR THE NOTICE HOLDERS, OR ANY SUCH BROKER-DEALERS, ATTORNEYS OR ACCOUNTANTS IN CONNECTION WITH SUCH DISPOSITION, IN EACH CASE AS IS CUSTOMARY FOR SIMILAR “DUE DILIGENCE” EXAMINATIONS; PROVIDED THAT SUCH PERSONS SHALL FIRST AGREE IN WRITING WITH THE COMPANY THAT ANY INFORMATION THAT IS REASONABLY AND IN GOOD FAITH DESIGNATED BY THE COMPANY IN WRITING AS CONFIDENTIAL AT THE TIME OF DELIVERY OF SUCH INFORMATION SHALL BE KEPT CONFIDENTIAL BY SUCH PERSONS AND SHALL BE USED SOLELY FOR THE PURPOSES OF EXERCISING RIGHTS UNDER THIS AGREEMENT, UNLESS (I)  DISCLOSURE OF SUCH INFORMATION IS REQUIRED BY COURT OR ADMINISTRATIVE ORDER OR IS NECESSARY TO RESPOND TO INQUIRIES OF REGULATORY AUTHORITIES, (II) DISCLOSURE OF SUCH INFORMATION IS REQUIRED BY LAW (INCLUDING ANY DISCLOSURE REQUIREMENTS PURSUANT TO FEDERAL SECURITIES LAWS IN CONNECTION WITH THE FILING OF ANY REGISTRATION STATEMENT OR THE USE OF ANY PROSPECTUS REFERRED TO IN THIS AGREEMENT), (III) SUCH INFORMATION BECOMES GENERALLY AVAILABLE TO THE PUBLIC OTHER THAN AS A RESULT OF A DISCLOSURE OR FAILURE TO SAFEGUARD BY ANY SUCH PERSON OR (IV) SUCH INFORMATION BECOMES AVAILABLE TO ANY SUCH PERSON FROM A SOURCE OTHER THAN THE COMPANY AND SUCH SOURCE IS NOT BOUND BY A CONFIDENTIALITY AGREEMENT, AND PROVIDED FURTHER THAT THE FOREGOING INSPECTION AND INFORMATION GATHERING SHALL, TO THE GREATEST EXTENT POSSIBLE, BE COORDINATED ON BEHALF OF ALL THE NOTICE HOLDERS AND THE OTHER PARTIES ENTITLED THERETO BY THE SPECIAL COUNSEL.   (K)           COMPLY WITH ALL APPLICABLE RULES AND REGULATIONS OF THE SEC AND MAKE GENERALLY AVAILABLE TO ITS SECURITYHOLDERS EARNING STATEMENTS (WHICH NEED NOT BE AUDITED) SATISFYING THE PROVISIONS OF SECTION 11(A) OF THE SECURITIES ACT AND RULE 158 THEREUNDER (OR ANY SIMILAR RULE PROMULGATED UNDER THE SECURITIES ACT) FOR A 12-MONTH PERIOD COMMENCING ON THE FIRST DAY OF THE FIRST FISCAL QUARTER OF THE COMPANY COMMENCING AFTER THE EFFECTIVE DATE OF A REGISTRATION STATEMENT, WHICH STATEMENTS SHALL BE MADE AVAILABLE NO LATER THAN 45  DAYS AFTER THE END OF THE 12-MONTH PERIOD OR 90 DAYS IF THE 12-MONTH PERIOD COINCIDES WITH A FISCAL YEAR OF THE COMPANY.   (L)            COOPERATE WITH EACH NOTICE HOLDER TO FACILITATE THE TIMELY PREPARATION AND DELIVERY OF CERTIFICATES REPRESENTING REGISTRABLE SECURITIES SOLD OR TO BE SOLD PURSUANT TO A REGISTRATION STATEMENT,  WHICH CERTIFICATES SHALL NOT BEAR ANY RESTRICTIVE LEGENDS, AND CAUSE SUCH REGISTRABLE SECURITIES TO BE IN SUCH DENOMINATIONS AS ARE PERMITTED BY THE INDENTURE AND REGISTERED IN SUCH NAMES AS SUCH NOTICE HOLDER MAY REQUEST IN WRITING AT LEAST ONE (1) BUSINESS DAY PRIOR TO ANY SALE OF SUCH REGISTRABLE SECURITIES.   12 --------------------------------------------------------------------------------   (M)          PROVIDE A CUSIP NUMBER FOR ALL REGISTRABLE SECURITIES COVERED BY EACH REGISTRATION STATEMENT NOT LATER THAN THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT AND PROVIDE THE TRUSTEE AND THE TRANSFER AGENT FOR THE COMMON STOCK WITH PRINTED CERTIFICATES FOR THE REGISTRABLE SECURITIES THAT ARE IN A FORM ELIGIBLE FOR DEPOSIT WITH THE DEPOSITORY TRUST COMPANY.   (N)           COOPERATE AND ASSIST IN ANY FILINGS REQUIRED TO BE MADE WITH THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.   (O)           UPON (I) THE FILING OF THE INITIAL SHELF REGISTRATION STATEMENT AND (II) THE EFFECTIVENESS OF THE INITIAL SHELF REGISTRATION STATEMENT, ANNOUNCE THE SAME, IN EACH CASE BY RELEASE TO REUTERS ECONOMIC SERVICES AND BLOOMBERG BUSINESS NEWS.   (P)           IF FOR ANY REASON FROM TIME TO TIME THE COMPANY SHALL NOT BE ELIGIBLE UNDER APPLICABLE SEC REGULATIONS TO USE A SHELF REGISTRATION STATEMENT, AT THE REQUEST OF THE PURCHASER, THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO FILE, HAVE DECLARED EFFECTIVE AND MAINTAIN CONTINUOUSLY EFFECTIVE A REGISTRATION STATEMENT ON SUCH FORM AS THE SEC REGULATIONS SHALL PERMIT AND THE PROVISIONS OF THIS AGREEMENT SHALL, TO THE EXTENT RELEVANT, APPLY TO SUCH REGISTRATION STATEMENT; PROVIDED, THAT THE HOLDERS SHALL ADDITIONALLY BE ENTITLED TO THE LIQUIDATED DAMAGES AMOUNT AS CONTEMPLATED BY SECTION 2(E) DURING THE PERIOD THE SHELF REGISTRATION STATEMENT IS NOT EFFECTIVE AS OTHERWISE CONTEMPLATED BY THIS AGREEMENT.   SECTION 4.           Holder’s Obligations. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading. The Holder’s liability for any breach of this Section 4 shall be limited to the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement affected by such breach and giving rise to such liability (without duplicating any liability of the Holder otherwise payable under Section 6(b)).   SECTION 5.           Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under Sections 2   13 --------------------------------------------------------------------------------   and 3 of this Agreement whether or not any Registration Statement is declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of the Special Counsel in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company and the Special Counsel in connection with the Shelf Registration Statement (provided that the Company shall not be liable for the fees and expenses of more than one separate firm for all parties participating in any transaction hereunder), (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock and (vi) Securities Act liability insurance obtained by the Company in its sole discretion. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing by the Company of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company. Notwithstanding the provisions of this Section 5, each seller of Registrable Securities shall pay selling expenses and, to the extent, but only to the extent, required by applicable law, all registration expenses.   SECTION 6.           Indemnification.   (A)           INDEMNIFICATION BY THE COMPANY. THE COMPANY SHALL INDEMNIFY AND HOLD HARMLESS EACH NOTICE HOLDER AND EACH PERSON, IF ANY, WHO CONTROLS ANY NOTICE HOLDER (WITHIN THE MEANING OF EITHER SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE EXCHANGE ACT) FROM AND AGAINST ANY LOSSES, LIABILITIES, CLAIMS, DAMAGES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ANY LEGAL OR OTHER EXPENSES REASONABLY INCURRED IN CONNECTION WITH DEFENDING OR INVESTIGATING ANY SUCH ACTION OR CLAIM) (COLLECTIVELY, “LOSSES”), ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY REGISTRATION STATEMENT OR PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT THERETO OR IN ANY PRELIMINARY PROSPECTUS, OR ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, PROVIDED THAT THE COMPANY SHALL NOT BE LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH LOSSES ARISE OUT OF OR ARE BASED UPON AN UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT CONTAINED IN OR OMISSION OR ALLEGED OMISSION FROM ANY OF SUCH DOCUMENTS IN RELIANCE UPON AND CONFORMITY WITH ANY OF THE INFORMATION RELATING TO THE HOLDERS FURNISHED TO THE COMPANY IN WRITING BY A HOLDER EXPRESSLY FOR USE THEREIN; PROVIDED FURTHER, THAT THE INDEMNIFICATION CONTAINED IN THIS PARAGRAPH SHALL NOT INURE TO THE BENEFIT OF ANY HOLDER (OR TO THE BENEFIT OF ANY PERSON CONTROLLING SUCH HOLDER) ON ACCOUNT OF ANY SUCH LOSSES ARISING OUT OF OR BASED UPON AN UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION MADE IN ANY PRELIMINARY PROSPECTUS OR PROSPECTUS PROVIDED IN EACH CASE THE COMPANY HAS PERFORMED ITS OBLIGATIONS UNDER SECTION 3(A) HEREOF IF (A) (I) SUCH HOLDER FAILED TO SEND OR DELIVER A COPY OF THE PROSPECTUS WITH OR PRIOR TO THE   14 --------------------------------------------------------------------------------   DELIVERY OF WRITTEN CONFIRMATION OF THE SALE BY SUCH HOLDER TO THE PERSON ASSERTING THE CLAIM FROM WHICH SUCH LOSSES ARISE AND (II) THE PROSPECTUS WOULD HAVE CORRECTED SUCH UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OR SUCH OMISSION OR ALLEGED OMISSION, (B) (X) SUCH UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT, OMISSION OR ALLEGED OMISSION IS CORRECTED IN AN AMENDMENT OR SUPPLEMENT TO THE PROSPECTUS AND (Y) HAVING PREVIOUSLY BEEN FURNISHED BY OR ON BEHALF OF THE COMPANY WITH COPIES OF THE PROSPECTUS AS SO AMENDED OR SUPPLEMENTED, SUCH HOLDER THEREAFTER FAILS TO DELIVER SUCH PROSPECTUS AS SO AMENDED OR SUPPLEMENTED, WITH OR PRIOR TO THE DELIVERY OF WRITTEN CONFIRMATION OF THE SALE OF A REGISTRABLE SECURITY TO THE PERSON ASSERTING THE CLAIM FROM WHICH SUCH LOSSES ARISE, OR (C) SUCH UNTRUE OR ALLEGED UNTRUE STATEMENT OR OMISSION IS CONTAINED IN A PRELIMINARY PROSPECTUS OR PROSPECTUS USED DURING A DEFERRAL PERIOD.   (B)           INDEMNIFICATION BY HOLDERS. EACH HOLDER AGREES SEVERALLY AND NOT JOINTLY TO INDEMNIFY AND HOLD HARMLESS THE COMPANY AND ITS RESPECTIVE DIRECTORS AND OFFICERS, AND EACH PERSON, IF ANY, WHO CONTROLS THE COMPANY (WITHIN THE MEANING OF EITHER SECTION 15 OF THE SECURITIES ACT OR SECTION 20 OF THE EXCHANGE ACT) OR ANY OTHER HOLDER, FROM AND AGAINST ALL LOSSES ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY REGISTRATION STATEMENT OR PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT THERETO OR IN ANY PRELIMINARY PROSPECTUS, OR ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, TO THE EXTENT, BUT ONLY TO THE EXTENT, THAT SUCH UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION WAS MADE IN RELIANCE UPON AND IN CONFORMITY WITH INFORMATION FURNISHED TO THE COMPANY BY SUCH HOLDER EXPRESSLY FOR USE IN SUCH REGISTRATION STATEMENT OR PROSPECTUS OR AMENDMENT OR SUPPLEMENT THERETO. IN NO EVENT SHALL THE LIABILITY OF ANY HOLDER HEREUNDER BE GREATER IN AMOUNT THAN THE DOLLAR AMOUNT OF THE PROCEEDS RECEIVED BY SUCH HOLDER UPON THE SALE OF THE REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION.   (C)           CONDUCT OF INDEMNIFICATION PROCEEDINGS. IN CASE ANY PROCEEDING (INCLUDING ANY GOVERNMENTAL INVESTIGATION) SHALL BE INSTITUTED INVOLVING ANY PERSON IN RESPECT OF WHICH INDEMNITY MAY BE SOUGHT PURSUANT TO SECTION 6(A) OR 6(B) HEREOF, SUCH PERSON (THE “INDEMNIFIED PARTY”) SHALL PROMPTLY NOTIFY THE PERSON AGAINST WHOM SUCH INDEMNITY MAY BE SOUGHT (THE “INDEMNIFYING PARTY”) IN WRITING AND THE INDEMNIFYING PARTY, UPON REQUEST OF THE INDEMNIFIED PARTY, SHALL RETAIN COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY TO REPRESENT THE INDEMNIFIED PARTY AND ANY OTHERS THE INDEMNIFYING PARTY MAY DESIGNATE IN SUCH PROCEEDING AND SHALL PAY THE REASONABLE FEES AND DISBURSEMENTS OF SUCH COUNSEL RELATED TO SUCH PROCEEDING. IN ANY SUCH PROCEEDING, ANY INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO RETAIN ITS OWN COUNSEL, BUT THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF SUCH INDEMNIFIED PARTY UNLESS (I) THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY SHALL HAVE MUTUALLY AGREED TO THE RETENTION OF SUCH COUNSEL OR (II) THE NAMED PARTIES TO ANY SUCH PROCEEDING (INCLUDING ANY IMPLEADED PARTIES) INCLUDE BOTH THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY AND REPRESENTATION OF BOTH PARTIES BY THE SAME COUNSEL WOULD BE INAPPROPRIATE DUE TO ACTUAL OR POTENTIAL DIFFERING INTERESTS BETWEEN THEM. IT IS UNDERSTOOD THAT THE INDEMNIFYING PARTY SHALL NOT, IN RESPECT OF THE LEGAL EXPENSES OF ANY INDEMNIFIED PARTY IN CONNECTION WITH ANY PROCEEDING OR RELATED PROCEEDINGS IN THE SAME JURISDICTION, BE LIABLE FOR THE FEES AND EXPENSES OF MORE THAN ONE SEPARATE FIRM (IN ADDITION TO ANY LOCAL COUNSEL) FOR ALL INDEMNIFIED PARTIES, AND THAT ALL SUCH FEES AND EXPENSES SHALL BE REIMBURSED AS THEY ARE INCURRED. SUCH SEPARATE FIRM SHALL BE DESIGNATED IN WRITING BY, IN THE CASE OF PARTIES INDEMNIFIED PURSUANT TO SECTION 6(A), THE HOLDERS OF A MAJORITY (WITH HOLDERS OF NOTES DEEMED   15 --------------------------------------------------------------------------------   TO BE THE HOLDERS, FOR PURPOSES OF DETERMINING SUCH MAJORITY, OF THE NUMBER OF SHARES OF UNDERLYING COMMON STOCK INTO WHICH SUCH NOTES ARE OR WOULD BE CONVERTIBLE AS OF THE DATE ON WHICH SUCH DESIGNATION IS MADE) OF THE REGISTRABLE SECURITIES COVERED BY THE REGISTRATION STATEMENT HELD BY HOLDERS THAT ARE INDEMNIFIED PARTIES PURSUANT TO SECTION 6(A) AND, IN THE CASE OF PARTIES INDEMNIFIED PURSUANT TO SECTION 6(B), THE COMPANY. THE INDEMNIFYING PARTY SHALL NOT BE LIABLE FOR ANY SETTLEMENT OF ANY PROCEEDING EFFECTED WITHOUT ITS WRITTEN CONSENT, BUT IF SETTLED WITH SUCH CONSENT OR IF THERE BE A FINAL JUDGMENT FOR THE PLAINTIFF, THE INDEMNIFYING PARTY AGREES TO INDEMNIFY THE INDEMNIFIED PARTY FROM AND AGAINST ANY LOSS OR LIABILITY BY REASON OF SUCH SETTLEMENT OR JUDGMENT. NOTWITHSTANDING THE FOREGOING SENTENCE, IF AT ANY TIME AN INDEMNIFIED PARTY SHALL HAVE REQUESTED AN INDEMNIFYING PARTY TO REIMBURSE THE INDEMNIFIED PARTY FOR FEES AND EXPENSES OF COUNSEL AS CONTEMPLATED BY THE SECOND AND THIRD SENTENCES OF THIS PARAGRAPH, THE INDEMNIFYING PARTY AGREES THAT IT SHALL BE LIABLE FOR ANY SETTLEMENT OF ANY PROCEEDING EFFECTED WITHOUT ITS WRITTEN CONSENT IF (I) SUCH SETTLEMENT IS ENTERED INTO MORE THAN 60 DAYS AFTER RECEIPT BY SUCH INDEMNIFYING PARTY OF THE AFORESAID REQUEST AND (II) SUCH INDEMNIFYING PARTY SHALL NOT HAVE REIMBURSED THE INDEMNIFIED PARTY IN ACCORDANCE WITH SUCH REQUEST PRIOR TO THE DATE OF SUCH SETTLEMENT; PROVIDED THAT THE INDEMNIFYING PARTY SHALL NOT BE SO LIABLE FOR A SETTLEMENT EFFECTED WITHOUT ITS WRITTEN CONSENT SO LONG AS IT IS REASONABLY CONTESTING IN GOOD FAITH THE AMOUNT OF THE FEES AND EXPENSES OF COUNSEL OF THE INDEMNIFIED PARTY THAT MUST BE REIMBURSED. NO INDEMNIFYING PARTY SHALL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY, EFFECT ANY SETTLEMENT OF ANY PENDING OR THREATENED PROCEEDING IN RESPECT OF WHICH ANY INDEMNIFIED PARTY IS OR COULD HAVE BEEN A PARTY AND INDEMNITY COULD HAVE BEEN SOUGHT HEREUNDER BY SUCH INDEMNIFIED PARTY, UNLESS SUCH SETTLEMENT INCLUDES AN UNCONDITIONAL RELEASE OF SUCH INDEMNIFIED PARTY FROM ALL LIABILITY ON CLAIMS THAT ARE THE SUBJECT MATTER OF SUCH PROCEEDING.   (D)           CONTRIBUTION. TO THE EXTENT THAT THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION 6 IS UNAVAILABLE TO AN INDEMNIFIED PARTY UNDER SECTION 6(A) OR 6(B) HEREOF IN RESPECT OF ANY LOSSES OR IS INSUFFICIENT TO HOLD SUCH INDEMNIFIED PARTY HARMLESS, THEN EACH APPLICABLE INDEMNIFYING PARTY, IN LIEU OF INDEMNIFYING SUCH INDEMNIFIED PARTY, SHALL CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT OF SUCH LOSSES (I) IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE BENEFITS RECEIVED BY THE INDEMNIFYING PARTY OR PARTIES ON THE ONE HAND AND THE INDEMNIFIED PARTY OR PARTIES ON THE OTHER HAND OR (II) IF THE ALLOCATION PROVIDED BY CLAUSE (I) ABOVE IS NOT PERMITTED BY APPLICABLE LAW, IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE BENEFITS REFERRED TO IN CLAUSE (I) ABOVE BUT ALSO THE RELATIVE FAULT OF THE INDEMNIFYING PARTY OR PARTIES ON THE ONE HAND AND OF THE INDEMNIFIED PARTY OR PARTIES ON THE OTHER HAND IN CONNECTION WITH THE STATEMENTS OR OMISSIONS THAT RESULTED IN SUCH LOSSES, AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. BENEFITS RECEIVED BY THE COMPANY SHALL BE DEEMED TO BE EQUAL TO THE TOTAL NET PROCEEDS FROM THE INITIAL PLACEMENT PURSUANT TO THE PURCHASE AGREEMENT (BEFORE DEDUCTING EXPENSES) OF THE REGISTRABLE SECURITIES TO WHICH SUCH LOSSES RELATE. BENEFITS RECEIVED BY ANY HOLDER SHALL BE DEEMED TO BE EQUAL TO THE VALUE OF RECEIVING REGISTRABLE SECURITIES THAT ARE REGISTERED UNDER THE SECURITIES ACT. THE RELATIVE FAULT OF THE HOLDERS ON THE ONE HAND AND THE COMPANY ON THE OTHER HAND SHALL BE DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER THE UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT OR THE OMISSION OR ALLEGED OMISSION TO STATE A MATERIAL FACT RELATES TO INFORMATION SUPPLIED BY THE HOLDERS OR BY THE COMPANY, AND THE PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO CORRECT OR PREVENT SUCH STATEMENT OR OMISSION. THE HOLDERS’ RESPECTIVE OBLIGATIONS TO CONTRIBUTE PURSUANT TO THIS PARAGRAPH ARE SEVERAL IN PROPORTION TO THE RESPECTIVE   16 --------------------------------------------------------------------------------   NUMBER OF REGISTRABLE SECURITIES THEY HAVE SOLD PURSUANT TO A REGISTRATION STATEMENT, AND NOT JOINT.   The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method or allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding this Section 6(d), an indemnifying party that is a selling Holder shall not be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such indemnifying party and distributed to the public were offered to the public exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.   (E)           THE INDEMNITY, CONTRIBUTION AND EXPENSE REIMBURSEMENT OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE IN ADDITION TO ANY LIABILITY ANY INDEMNIFIED PARTY MAY OTHERWISE HAVE HEREUNDER, UNDER THE PURCHASE AGREEMENT OR OTHERWISE.   (F)            THE INDEMNITY AND CONTRIBUTION PROVISIONS CONTAINED IN THIS SECTION 6 SHALL REMAIN OPERATIVE AND IN FULL FORCE AND EFFECT REGARDLESS OF (I) ANY TERMINATION OF THIS AGREEMENT, (II) ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY HOLDER OR ANY PERSON CONTROLLING ANY HOLDER, OR THE COMPANY, OR THE COMPANY’S OFFICERS OR DIRECTORS OR ANY PERSON CONTROLLING THE COMPANY AND (III) THE SALE OF ANY REGISTRABLE SECURITIES BY ANY HOLDER.   17 --------------------------------------------------------------------------------   SECTION 7.           Information Requirements. The Company covenants that, if at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder and take such further reasonable action as any Holder may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company’s most recent report filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities (other than the Common Stock) under any section of the Exchange Act.   SECTION 8.           Miscellaneous.   (A)           NO CONFLICTING AGREEMENTS. THE COMPANY IS NOT, AS OF THE DATE HEREOF, A PARTY TO, NOR SHALL IT, ON OR AFTER THE DATE OF THIS AGREEMENT, ENTER INTO, ANY AGREEMENT WITH RESPECT TO ITS SECURITIES THAT CONFLICTS WITH THE RIGHTS GRANTED TO THE HOLDERS IN THIS AGREEMENT. THE COMPANY REPRESENTS AND WARRANTS THAT THE RIGHTS GRANTED TO THE HOLDERS HEREUNDER DO NOT IN ANY WAY CONFLICT WITH THE RIGHTS GRANTED TO THE HOLDERS OF THE COMPANY’S SECURITIES UNDER ANY OTHER AGREEMENTS.   (B)           AMENDMENTS AND WAIVERS. THE PROVISIONS OF THIS AGREEMENT, INCLUDING THE PROVISIONS OF THIS SENTENCE, MAY NOT BE AMENDED, MODIFIED OR SUPPLEMENTED, AND WAIVERS OR CONSENTS TO DEPARTURES FROM THE PROVISIONS HEREOF MAY NOT BE GIVEN, UNLESS THE COMPANY HAS OBTAINED THE WRITTEN CONSENT OF HOLDERS OF A MAJORITY OF THE THEN OUTSTANDING REGISTRABLE SECURITIES (WITH HOLDERS OF NOTES DEEMED TO BE THE HOLDERS, FOR PURPOSES OF THIS SECTION, OF THE NUMBER OF SHARES OF UNDERLYING COMMON STOCK INTO WHICH SUCH NOTES ARE OR WOULD BE CONVERTIBLE AS OF THE DATE ON WHICH SUCH CONSENT IS REQUESTED). NOTWITHSTANDING THE FOREGOING, A WAIVER OR CONSENT TO DEPART FROM THE PROVISIONS HEREOF WITH RESPECT TO A MATTER THAT RELATES EXCLUSIVELY TO THE RIGHTS OF HOLDERS WHOSE SECURITIES ARE BEING SOLD PURSUANT TO A REGISTRATION STATEMENT AND THAT DOES NOT DIRECTLY OR INDIRECTLY AFFECT THE RIGHTS OF OTHER HOLDERS MAY BE GIVEN BY HOLDERS OF AT LEAST A MAJORITY OF THE REGISTRABLE SECURITIES BEING SOLD BY SUCH HOLDERS PURSUANT TO SUCH REGISTRATION STATEMENT; PROVIDED, THAT THE PROVISIONS OF THIS SENTENCE MAY NOT BE AMENDED, MODIFIED, OR SUPPLEMENTED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THE IMMEDIATELY PRECEDING SENTENCE. EACH HOLDER OF REGISTRABLE SECURITIES OUTSTANDING AT THE TIME OF ANY SUCH AMENDMENT, MODIFICATION, SUPPLEMENT, WAIVER OR CONSENT OR THEREAFTER SHALL BE BOUND BY ANY SUCH AMENDMENT, MODIFICATION, SUPPLEMENT, WAIVER OR CONSENT EFFECTED PURSUANT TO THIS SECTION 8(B), WHETHER OR NOT ANY NOTICE, WRITING OR MARKING INDICATING SUCH AMENDMENT, MODIFICATION, SUPPLEMENT, WAIVER OR CONSENT APPEARS ON THE REGISTRABLE SECURITIES OR IS DELIVERED TO SUCH HOLDER.   (C)           NOTICES. ALL NOTICES AND OTHER COMMUNICATIONS PROVIDED FOR OR PERMITTED HEREUNDER SHALL BE MADE IN WRITING BY HAND DELIVERY, BY TELECOPIER, BY COURIER GUARANTEEING OVERNIGHT DELIVERY OR BY FIRST-CLASS MAIL, RETURN RECEIPT REQUESTED, AND SHALL BE DEEMED GIVEN   18 --------------------------------------------------------------------------------   (I) WHEN MADE, IF MADE BY HAND DELIVERY, (II) UPON CONFIRMATION, IF MADE BY TELECOPIER, (III) ONE (1) BUSINESS DAY AFTER BEING DEPOSITED WITH SUCH COURIER, IF MADE BY OVERNIGHT COURIER OR (IV) ON THE DATE INDICATED ON THE NOTICE OF RECEIPT, IF MADE BY FIRST-CLASS MAIL, TO THE PARTIES AS FOLLOWS:   (1)           IF TO A HOLDER, AT THE MOST CURRENT ADDRESS GIVEN BY SUCH HOLDER TO THE COMPANY IN A NOTICE AND QUESTIONNAIRE OR ANY AMENDMENT THERETO;   (2)           IF TO THE COMPANY, TO:   Axcelis Technologies, Inc. 108 Cherry Hill Drive Beverly, Massachusetts 01915 Attention: General Counsel Telecopy No.: (978) 787-4200   with a copy to (which shall not constitute notice):   Edwards Angell Palmer & Dodge LLP 111 Huntington Avenue Boston, MA  02199-7613 Attention:  Matthew Dallett Telecopy No.: (617) 227-4420   (3)           IF TO THE PURCHASER, TO:   Quantum Partners LDC c/o Soros Fund Management LLC 888 Seventh Avenue New York, NY  10106 Attention:  Cynthia Paul Telecopy No.: (646) 731-5431   with a copy to:   Akin, Gump, Strauss, Hauer and Feld, LLP 590 Madison Avenue New York, NY  10022 Attention:  Patrick J. Dooley, Esq. Telecopy No.: (212) 872-1002   or to such other address as such person may have furnished to the other persons identified in this Section 8(c) in writing in accordance herewith.   (D)           APPROVAL OF HOLDERS. WHENEVER THE CONSENT OR APPROVAL OF HOLDERS OF A SPECIFIED PERCENTAGE OF REGISTRABLE SECURITIES IS REQUIRED HEREUNDER, REGISTRABLE SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES (AS SUCH TERM IS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) (OTHER THAN THE PURCHASER OR SUBSEQUENT HOLDERS IF SUCH SUBSEQUENT HOLDERS ARE DEEMED TO BE SUCH   19 --------------------------------------------------------------------------------   AFFILIATES SOLELY BY REASON OF THEIR HOLDINGS OF SUCH REGISTRABLE SECURITIES) SHALL NOT BE COUNTED IN DETERMINING WHETHER SUCH CONSENT OR APPROVAL WAS GIVEN BY THE HOLDERS OF SUCH REQUIRED PERCENTAGE.   (E)           SUCCESSORS AND ASSIGNS. ANY PERSON WHO PURCHASES ANY REGISTRABLE SECURITIES FROM THE PURCHASER SHALL BE DEEMED, FOR PURPOSES OF THIS AGREEMENT, TO BE AN ASSIGNEE OF THE PURCHASER. THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF EACH OF THE PARTIES AND SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON EACH HOLDER OF ANY REGISTRABLE SECURITIES.   (F)            COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS AND BY THE PARTIES HERETO IN SEPARATE COUNTERPARTS, EACH OF WHICH WHEN SO EXECUTED SHALL BE DEEMED TO BE ORIGINAL AND ALL OF WHICH TAKEN TOGETHER SHALL CONSTITUTE ONE AND THE SAME AGREEMENT.   (G)           HEADINGS. THE HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT LIMIT OR OTHERWISE AFFECT THE MEANING HEREOF.   (H)           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES.   (I)            SEVERABILITY. IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF THIS AGREEMENT IS HELD TO BE INVALID, ILLEGAL, VOID OR UNENFORCEABLE, THE REMAINDER OF THE TERMS, PROVISIONS, COVENANTS AND RESTRICTIONS SET FORTH HEREIN SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED THEREBY, AND THE PARTIES HERETO SHALL USE THEIR REASONABLE BEST EFFORTS TO FIND AND EMPLOY AN ALTERNATIVE MEANS TO ACHIEVE THE SAME OR SUBSTANTIALLY THE SAME RESULT AS THAT CONTEMPLATED BY SUCH TERM, PROVISION, COVENANT OR RESTRICTION, IT BEING INTENDED THAT ALL OF THE RIGHTS AND PRIVILEGES OF THE PARTIES SHALL BE ENFORCEABLE TO THE FULLEST EXTENT PERMITTED BY LAW.   (J)            ENTIRE AGREEMENT. THIS AGREEMENT IS INTENDED BY THE PARTIES AS A FINAL EXPRESSION OF THEIR AGREEMENT AND IS INTENDED TO BE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO IN RESPECT OF THE SUBJECT MATTER CONTAINED HEREIN AND THE REGISTRATION RIGHTS GRANTED BY THE COMPANY WITH RESPECT TO THE REGISTRABLE SECURITIES. EXCEPT AS PROVIDED IN THE PURCHASE AGREEMENT, THERE ARE NO RESTRICTIONS, PROMISES, WARRANTIES OR UNDERTAKINGS, OTHER THAN THOSE SET FORTH OR REFERRED TO HEREIN, WITH RESPECT TO THE REGISTRATION RIGHTS GRANTED BY THE COMPANY WITH RESPECT TO THE REGISTRABLE SECURITIES. THIS AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERTAKINGS AMONG THE PARTIES WITH RESPECT TO SUCH REGISTRATION RIGHTS. NO PARTY HERETO SHALL HAVE ANY RIGHTS, DUTIES OR OBLIGATIONS OTHER THAN THOSE SPECIFICALLY SET FORTH IN THIS AGREEMENT. IN NO EVENT WILL SUCH METHODS OF DISTRIBUTION TAKE THE FORM OF AN UNDERWRITTEN OFFERING OF THE REGISTRABLE SECURITIES WITHOUT THE PRIOR AGREEMENT OF THE COMPANY.   (K)           TERMINATION. THIS AGREEMENT AND THE OBLIGATIONS OF THE PARTIES HEREUNDER SHALL TERMINATE UPON THE END OF THE EFFECTIVENESS PERIOD, EXCEPT FOR ANY LIABILITIES OR OBLIGATIONS UNDER SECTION 4, 5 OR 6 HEREOF AND THE OBLIGATIONS TO MAKE PAYMENTS OF AND PROVIDE FOR LIQUIDATED   20 --------------------------------------------------------------------------------   DAMAGES UNDER SECTION 2(E) HEREOF TO THE EXTENT SUCH DAMAGES ACCRUE PRIOR TO THE END OF THE EFFECTIVENESS PERIOD, EACH OF WHICH SHALL REMAIN IN EFFECT IN ACCORDANCE WITH ITS TERMS.   [signature page follows]   21 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.     AXCELIS TECHNOLOGIES, INC.           By  /s/ Mary G. Puma     Name: Mary G. Puma     Title: Chairman, CEO, and President     Confirmed and accepted as of the date first above written:   QUANTUM PARTNERS LDC     By  /s/ Jay Schoenfarber     Name: Jay Schoenfarber   Title: Attorney-in-fact   [Registration Rights Agreement]   --------------------------------------------------------------------------------

Exhibit 10.3 Materials Monitoring Technologies, Inc. 2109 East Palm Avenue, Tampa, Florida 33605 -------------------------------------------------------------------------------- Consulting Agreement This Consulting Agreement is made and effective this August 18, 2006, by and between Materials Monitoring Technologies, Inc., offices located at 2109 East Palm Avenue, Tampa, Florida 33605 (“Client”), and Mannur J. Sundaresan, PhD residing at 4212 Shoal Creek Drive, Greensboro, NC  27410 (Consultant) Now, therefore, Consultant and Client agree as follows: 1. Engagement: Client hereby engages Consultant, and Consultant accepts engagement, to provide the Client the following services when and as requested: Review, evaluate and make recommendations regarding the development, application, and testing of * US Patent 6,399,939 “Sensor Array System” * US Patent 7,075,424 “System for Damage Location Using a Single Channel Continuous Acoustic Emission Sensor” developed at the North Carolina Agricultural and Technical State University.  Consultant will provide recommendations to the Client with regards to implementation and improvement of the new technology and the integration of this technology with the Client’s current products. It is the intention of Materials Monitoring Technologies, Inc. to effectuate a merger with a technology company that will introduce the invention into the marketplace. Upon the consummation of this merger, Dr. Sundaresan will provide the services described under this Consulting Agreement to this technology company. 2. Term: Consultant shall provide services to the Client pursuant to this Agreement for a term commencing on August 10, 2006 and ending on August 9, 2007, unless otherwise modified or extended by mutual agreement. 3.  Place of Work: Consultant shall render services at Consultant’s offices, but will, upon request, provide services at Client’s office for the performance of particular services. Travel expenses incurred, as a result of the Client’s request of the Consultant to travel will be paid by the Client.   4. Time: Consultant shall provide 80 hours of consulting time to Client under the terms of this Agreement. Client relies upon Consultant to devote his best efforts to fulfill the spirit and purpose of this Agreement.  If more than 80 hours is required, an extension can be added based on a mutually agreeable rate of compensation. -------------------------------------------------------------------------------- 5.  Payment: The payment for the consulting Agreement will be $10,000.  This consulting fee is in consideration of 80 hours of consulting services (based on an hourly rate of $125/hour) to be provided within twelve (12) months of the effective date of this Agreement.  If payment is not received by consultant within ten (10) working days of client executing this Agreement, this Agreement will be null and void. 6. Confidentiality: During the term of this Agreement, Consultant shall not, without the prior written consent of the Client, disclose to anyone any confidential information which consultant has learned from his consulting status with the Client. “Confidential Information” for the purposes of this Agreement shall include Client’s proprietary and confidential information such as, but not limited to, technology plans, research and development plans, designs, models, software, product specifications, marketing plans, production plans, and new concepts. Confidential information shall not include any information that: 1. Is disclosed by the Client without restriction. 2. Becomes publicly available through no act of the Consultant. 3. Is rightfully received by the Consultant from a third party. 4. Is required by the Client to be disseminated for the purposes of this agreement. 7. Independent Contractor: Consultant is and throughout this Agreement an Independent Contractor.  While performing work for the Client, Consultant may use the title of “Scientific Advisor.” 8. Termination: This Agreement may be terminated by the Client as follows: 1. If Consultant is unable to provide the consulting services by reason of temporary or permanent illness, disability, incapacity or death. 2. Breach or default of any obligation of the Consultant as described in this Agreement, which breech or default is not cured within five (5) days of written notice from Client. Consultant may terminate this Agreement as follows: 1. Breach or default of any material obligation of the Client as described in this Agreement, which breech or default is not cured within five (5) days of written notice from Consultant. Upon termination of this Agreement by the Client or the Consultant for any of the above listed reasons, Consultant will return any pro-rated, pre-paid refundable monies not utilized during the term of this Agreement. 9. Controlling Law: This Agreement shall be governed by and be construed in accordance with the laws of the State of California. 2 -------------------------------------------------------------------------------- 10. Headings: The headings in this Agreement are inserted for convenience only and shall not be used to define, limit or describe the scope of this Agreement or any of the obligations herein. 11. Final Agreement: This Agreement constitutes the final understanding and agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations, understandings and agreements between the parties, whether written or oral. This Agreement may be amended, supplemented or changed, only by an Agreement in writing, signed by both of the parties. 12. Notices: Any notice to be given or otherwise given pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by certified mail, return receipt requested or sent by overnight courier service as follows: If to Consultant: Mannur J. Sundaresan, Ph. D. 4212 Shoal Creek Drive, Greensboro, NC  27410 Phone: (336) 605-3655 If to Client: Materials Monitoring Technologies, Inc. 2109 East Palm Avenue Tampa, Florida 33605 Phone: (813) 754-4330 13. Severability: If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first above written. Materials Monitoring Technologies, Inc.                        Dr. Mannur J. Sundaresan /s/ Joel Edelson                                                                  /s/ M. J. Sundaresan               Joel Edelson                                                                         Dr. Mannur J. Sundaresan President                                                                              Consultant 3        --------------------------------------------------------------------------------

  Exhibit 10.1 COVAD COMMUNICATIONS GROUP, INC. INDEMNIFICATION AGREEMENT           This Agreement (“Agreement”) is made as of this 20th day of April, 2006, by and between Covad Communications Group, Inc., a Delaware corporation (the “Company”), and Robert Neumeister (“Indemnitee”).           WHEREAS, the Company and Indemnitee recognize the increasing difficulty in obtaining directors’ and officers’ liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;           WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and           WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers and directors of the Company and to indemnify its officers and directors so as to provide them with the maximum protection permitted by law.           NOW, THEREFORE, in consideration for Indemnitee’s services as an officer or director of the Company, the Company and Indemnitee hereby agree as follows:           1.     Indemnification.                   (a)      Third Party Proceedings. The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or any alternative dispute resolution mechanism, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was unlawful.   --------------------------------------------------------------------------------                     (b)      Proceedings By or in the Right of the Company. The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.                   (c)      Mandatory Payment of Expenses. To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Subsections (a) and (b) of this Section 1, or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.           2.     Agreement to Serve. In consideration of the protection afforded by this Agreement, if Indemnitee is a director of the Company he agrees to serve at least for the 90 days after the effective date of this Agreement as a director and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors. If Indemnitee is an officer of the Company not serving under an employment contract, he agrees to serve in such capacity at least for 90 days and not to resign voluntarily during such period without the written consent of a majority of the Board of Directors. Following the applicable period set forth above, Indemnitee agrees to continue to serve in such capacity at the will of the Company (or under separate agreement, if such agreement exists) so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as he tenders his resignation in writing. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.           3.     Expenses; Indemnification Procedure.                   (a)      Advancement of Expenses. The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referenced in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that -2- --------------------------------------------------------------------------------   Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within thirty (30) days following delivery of a written request therefor by Indemnitee to the Company.                   (b)      Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the President of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee and given as provided in Section 14). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.                   (c)      Procedure. Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than thirty (30) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within thirty (30) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 14 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. However, Indemnitee shall be entitled to receive interim payments of expenses pursuant to Subsection 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including it Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.                   (d)      Notice to Insurers. If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies. -3- --------------------------------------------------------------------------------                     (e)      Selection of Counsel. In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel subject to the approval of Indemnitee, which shall not be unreasonably withheld. After delivery of written notice of the assumption of the defense, approval of such counsel by Indemnitee as described above and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.           4.     Additional Indemnification Rights; Nonexclusivity.                   (a)      Scope. Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s obligations, under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.                   (b)      Nonexclusivity. The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested Directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he may have ceased to serve in such capacity at the time of any action, suit or other covered proceeding.           5.     Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by him in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled. -4- --------------------------------------------------------------------------------             6.     Mutual Acknowledgement. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.           7.     Officer and Director Liability Insurance. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company.           8.     Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.           9.     Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:                   (a)      Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit; or -5- --------------------------------------------------------------------------------                     (b)      Lack of Good Faith. To indemnify Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or                   (c)      Insured Claims. To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company.                   (d)      Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.           10.   Construction of Certain Phrases.                   (a)      For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.                   (b)      For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.           11.   Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.           12.   Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of Indemnitee and Indemnitee’s estate, heirs, legal representatives and assigns. -6- --------------------------------------------------------------------------------             13.   Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.           14.   Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.           15.   Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.           16.   Choice of Law. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware without regard to the conflict of law principles thereof.           17.   Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.           18.   Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.           19.   Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. -7- --------------------------------------------------------------------------------             20.   Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. -8- --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.               COVAD COMMUNICATIONS GROUP, INC.          /s/ Charles Hoffman         Signature of Authorized Signatory                                 President and CEO         Print Name and Title                            Address:   110 Rio Robles         San Jose, CA 95134       AGREED TO AND ACCEPTED:                 INDEMNITEE:                 /s/ Robert Neumeister           Signature           Robert Neumeister           Print Name           Address:   110 Rio Robles     San Jose, CA 95134 -9-

MATRIA HEALTHCARE, INC. BOARD OF DIRECTORS CORPORATE GOVERNANCE AND NOMINATING COMMITTEE CHARTER I. PURPOSE: The primary purpose of the Committee is to provide oversight on the broad range of issues surrounding the composition and operation of the Board of Directors, including identifying individuals qualified to become Board members, recommending to the Board director nominees for the next annual meeting of shareholders, and recommending to the Board a set of corporate governance principles applicable to the Corporation. The Committee also provides assistance to the Board and the Chairman of the Board in the areas of Committee selection and rotation practices, evaluation of the overall effectiveness of the Board and management, and review and consideration of developments in corporate governance practices. The Committee’s goal is to assure that the composition, practices, and operation of the Board contribute to value creation and effective representation of the Corporation’s shareholders. II. COMMITTEE MEMBERS: The Committee shall be comprised solely of at least three but not more than five non-officer directors each of whom meet any applicable NASDAQ listing requirements for eligibility to serve on such a committee. Committee members shall be appointed and may be removed by the Board of Directors. III. COMMITTEE MEETINGS: The Committee will meet at least two times a year, with authority to convene additional meetings as circumstances require. The Committee will invite members of management and others to attend meetings and provide pertinent information, as necessary. Meeting agendas will be prepared, along with appropriate briefing materials. Minutes will be prepared and the Committee will report to the Board the results of its meetings. IV. DUTIES AND RESPONSIBILITIES: The Committee has the following specific duties, in addition to any additional similar matters which may be referred to the Committee from time to time by the full Board or the Chairman of the Board or which the Committee raises on its own initiative: 1. Identifies and makes recommendations to the full Board of Directors concerning all nominees for Board membership, including the re-election of existing Board members. The Committee shall select individuals as director nominees who the Committee believes have the highest personal and professional integrity, have demonstrated ability and judgment and will be effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the shareholders. 2. Evaluates and makes recommendations to the full Board of Directors concerning the number and accountability of Board Committees. Recommends to the full Board of Directors for its approval Committee assignments.   1 --------------------------------------------------------------------------------   3. Develops and recommends to the Board of Directors for its approval a set of corporate governance guidelines. Reviews the guidelines on an annual basis, or more frequently, if appropriate, and recommends changes as necessary. 4. Reviews issues and developments relating to corporate governance and makes recommendations to the full Board of Directors. 5. Periodically reviews and makes recommendations to the full Board of Directors regarding Director orientation, compensation and continuing education. 6.   Evaluates annually the Committee’s performance in accordance with applicable law and NASDAQ listing requirements. 7.   Conducts an annual self-assessment of the Board’s performance as well as the performance of each Committee of the Board. The assessment will include a review of any areas in which the Board or management believes the Board can make a better contribution to the Corporation. Discusses the results with the full Board of Directors. Uses the results in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board members to various Committees. 8.   Conducts an assessment of the performance of the CEO at least on an annual basis. Communicates the results of the assessment to the CEO and the Chairperson of the Stock Option and Compensation Committee. The evaluation should be based on a combination of subjective and objective criteria, which should include the performance of the Corporation and its accomplishment of strategic objectives. V.   ENGAGEMENT OF ADVISORS: The Committee shall have the authority to retain any search firm engaged to assist in identifying director candidates, and to retain outside counsel and any other advisors as the Committee may deem appropriate in its sole discretion. The Committee shall have sole authority to approve related fees and retention terms. VI.   DELEGATION. The Committee shall have the authority to delegate any of its responsibilities to subcommittees as the Committee may deem appropriate in its sole discretion.   2 --------------------------------------------------------------------------------  

  AMENDMENT NUMBER 1 TO THE GOODRICH CORPORATION SEVERANCE PROGRAM      THIS AMENDMENT is made this 14th day of September, 2006, by Goodrich Corporation (hereinafter referred to as the “Company”); W I T N E S S E T H      WHEREAS, the Company maintains the Goodrich Corporation Severance Program, as amended and restated, effective February 21, 2006 (hereinafter referred to as the “Plan”);      WHEREAS, pursuant to Section 10 of the Plan, the Chief Executive Officer of the Company has the authority to amend the exhibits to the Plan; and      WHEREAS, the Chief Executive Officer desires to include the employees of Rohr, Inc. as Eligible Employees, as that term is defined in the Plan, by amending Exhibit A to the Plan.      NOW, THEREFORE, the Chief Executive Officer hereby amends Exhibit A to the Plan as set forth in the attached revision to Exhibit A effective for any Qualifying Termination, as that term is defined in the Plan, that occurs on or after September 14, 2006.      IN WITNESS WHEREOF, the Company, by its Chief Executive Officer, has caused this Amendment to be executed as of the day and year first above written.             GOODRICH CORPORATION       By:   /s/ MARSHALL O. LARSEN         Marshall O. Larsen, Chief Executive Officer              --------------------------------------------------------------------------------   Exhibit A To Goodrich Corporation Severance Program List of Domestic Subsidiaries Not Covered by the Goodrich Corporation Severance Program Employees of the following domestic subsidiaries shall not be considered “Eligible Employees” under the Severance Program.                   Place of Companies       Incorporation           Sensors Unlimited, Inc.       New Jersey Revised September 14, 2006

Exhibit 10.8   AMENDMENT NO. 6   to   CREDIT AGREEMENT   THIS AMENDMENT NO. 6 TO THE CREDIT AGREEMENT (this “Amendment”) is made as of February 8, 2006 by and among NATIONAL WINE & SPIRITS, INC. (the “Borrower”), the financial institutions listed on the signature pages hereof and LASALLE BANK NATIONAL ASSOCIATION, in its capacity as contractual representative (the “Agent”) under that certain Credit Agreement dated as of March 31, 2003 by and among the Borrower, the financial institutions party from time to time parties thereto (the “Banks”) and the Agent (as amended as of June 30, 2003, March 31, 2004, June 30, 2004, September 28, 2005 and October 25, 2005, and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement.   WITNESSETH   WHEREAS, the Borrower, the Banks and the Agent are parties to the Credit Agreement; and   WHEREAS, the Borrower, the Agent and the requisite number of Banks under Section 8.1 of the Credit Agreement have agreed to amend the Credit Agreement on the terms and conditions set forth herein;   NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto have agreed to the following amendment to the Credit Agreement:   1. Amendment to the Credit Agreement. Effective as of December 30, 2005 (the “Effective Date”) and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement is hereby amended as follows:     1.1. LaSalle Bank National Association’s Commitment under the Credit Agreement, its Percentage of the Aggregate Commitment and the reference to the Aggregate Commitment as set forth on its signature page thereto is amended in its entirety as follows:   Commitment Amount:    For the period commencing on December 30, 2005 through and including March 31, 2006, $43,750,000; and thereafter, $37,500,000 Percentage of Aggregate Commitment:    62.500000000% -------------------------------------------------------------------------------- Aggregate Commitment:    For the period commencing on December 30, 2005 through and including March 31, 2006, $70,000,000; and thereafter, $60,000,000     1.2. National City Bank of Indiana’s Commitment under the Credit Agreement, its Percentage of the Aggregate Commitment and the reference to the Aggregate Commitment as set forth on its signature page thereto is amended in its entirety as follows:   Commitment Amount:    For the period commencing on December 30, 2005 through and including March 31, 2006, $26,250,000; and thereafter, $22,500,000 Percentage of Aggregate Commitment:    37.500000000% Aggregate Commitment:    For the period commencing on December 30, 2005 through and including March 31, 2006, $70,000,000; and thereafter, $60,000,000     1.3 Section 5.2(C) of the Credit Agreement is hereby amended by deleting the amount “$5,000,000” now appearing therein and substituting the amount “$10,000,000” therefor.   2. Consent. At the request of the Borrower, effective as of the Effective Date and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Agent and the Banks hereby consent, pursuant to Section 8.1 of the Credit Agreement, to permit, notwithstanding and as an additional exception to the limitations set forth in Section 5.2(C) of the Credit Agreement, the Borrower and/or certain of its Subsidiaries to acquire (the “Subject Acquisition”) all of the capital stock of L & L Wine and Liquor Corporation, a Michigan corporation (“Target”); provided that (a) the Subject Acquisition shall be for a purchase price (including, without limitation or duplication, cash, Restricted Payments and Indebtedness assumed) not to exceed $18,000,000, (b) the Subject Acquisition shall be consummated on or before September 1, 2006 pursuant to that certain Stock Purchase Agreement dated as of September 1, 2005 (the “Stock Purchase Agreement”), by and between the Borrower, as purchaser, and Stephen H. Lewis and Milford T. Lewis, individually and as trustee of the Milford T. Lewis Revocable Living Trust Agreement, dated November 29, 1998, as sellers, as in effect as of the Effective Date and as such Stock Purchase Agreement shall have been amended or modified, or any material condition therein waived, with the prior written consent of the Administrative Agent and the Required Banks, (c) the aggregate purchase price and other acquisition costs of fixed assets and other capital expenditures made by the Company or any of its Restricted Subsidiaries during the 2006 fiscal year shall not exceed $5,000,000, calculated exclusive of the purchase price (including, without limitation or duplication, cash, Restricted Payments and Indebtedness assumed) of the Subject Acquisition, (d) the Borrower and its Subsidiaries shall otherwise satisfy the requirements described in Sections 5.1(G) and 5.2(F) of the Credit Agreement with respect to the Subject Acquisition, and (e) after giving effect to the Subject Acquisition, no Default or Event of Default shall exist. The consent set forth in this Section 2 shall supersede any prior consent with respect to the Subject Acquisition. -------------------------------------------------------------------------------- 3. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Agent shall have received the following:     (a) duly executed copies of this Amendment from each of the Borrower, the requisite number of Banks under Section 8.1 of the Credit Agreement and the Agent;     (b) duly executed copies of a Reaffirmation in the form of Exhibit A attached hereto;     (c) replacement Notes in substantially the form of Exhibit C to the Credit Agreement in favor of (i) LaSalle Bank National Association in the aggregate principal amount of $43,750,000 and (ii) National City Bank of Indiana in the aggregate principal amount of $26,250,000;     (d) such documents and certificates as the Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of this Amendment and any other legal matters relating to the Borrower, this Amendment or the other Loan Documents, all in form and substance reasonably satisfactory to the Agent and its counsel;     (e) a favorable written opinion letter (addressed to the Agent and the Banks and dated as of the date of this Amendment) from outside counsel for the Borrower, in form and substance reasonably satisfactory to the Agent and covering such matters relating to this Amendment and the other Loan Documents as the Agent shall reasonably request; and     (f) such other documents, instruments and agreements as the Agent shall reasonably request.   4. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:     4.1. This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms.     4.2. Upon the effectiveness of this Amendment and after giving effect hereto, (i) the Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement as amended hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the effective date of this Amendment (unless the applicable representation and warranty is specifically made as of an earlier date pursuant to the terms of the Credit Agreement) and (ii) no Default or Event of Default has occurred and is continuing.   5. Reference to the Effect on the Credit Agreement.     5.1. Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement or in any other Loan Document (including any reference therein to “this Credit Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring thereto) shall mean and be a reference to the Credit Agreement as amended by Section 1. --------------------------------------------------------------------------------   5.2. Upon the effectiveness of Section 2 hereof, on and after the date hereof, each reference in the Credit Agreement or in any other Loan Document (including any reference therein to “this Credit Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring thereto) shall mean and be a reference to the Credit Agreement as further modified by Section 2.     5.3. Except as specifically modified above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.     5.4. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Banks, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.   6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING 735 ILCS 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS) OF THE STATE OF ILLINOIS.   7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.   8. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.   [REMAINDER OF PAGE INTENTIONALLY BLANK] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.   NATIONAL WINE & SPIRITS, INC., as Borrower By:   /s/ Patrick A. Trefun -------------------------------------------------------------------------------- Name:   Patrick A. Trefun Title:   Treasurer LASALLE BANK NATIONAL ASSOCIATION, as Agent and as a Bank By:   /s/ Chris O’Hara -------------------------------------------------------------------------------- Name:   Chris O’Hara Title:   Senior Vice President NATIONAL CITY BANK OF INDIANA, as a Bank By:   /s/ David G. McNeely -------------------------------------------------------------------------------- Name:   David G. McNeely Title:   Vice President -------------------------------------------------------------------------------- REAFFIRMATION   Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 6 to the Credit Agreement dated as of March 31, 2003 by and among National Wine & Spirits, Inc. (the “Borrower”), the financial institutions from time to time party thereto (the “Banks”) and LaSalle Bank National Association, in its individual capacity as a Bank and in its capacity as contractual representative (the “Agent”) (as amended as of June 30, 2003, March 31, 2004, June 30, 2004, September 28, 2005 and October 25, 2005, and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), which Amendment No. 6 is dated as of February 8, 2006 (the “Amendment”). Capitalized terms used in this Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. Without in any way establishing a course of dealing by the Agent or any Bank, each of the undersigned reaffirms the terms and conditions of the Guaranty, the Pledge Agreement, Security Agreement and any other Loan Document executed by it and acknowledges and agrees that such agreement and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.   Dated as of February 8, 2006   NATIONAL WINE & SPIRITS CORPORATION NWS, INC. NWS-ILLINOIS, LLC NWS MICHIGAN, INC. UNITED STATES BEVERAGE, L.L.C. NATIONAL WINE & SPIRITS, LLC By:   /s/ John J. Baker -------------------------------------------------------------------------------- Its:   Secretary

EXECUTION COPY ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of February 27, 2006, between Residential Funding Corporation, a Delaware corporation ("RFC") and Residential Asset Mortgage Products, Inc., a Delaware corporation (the "Company"). Recitals A. RFC has entered into seller contracts ("Seller Contracts") with the seller/servicers pursuant to which such seller/servicers sell mortgage loans to RFC. B. The Company wishes to purchase from RFC certain Mortgage Loans (as hereinafter defined) originated pursuant to the Seller Contracts. C. The Company, RFC, as master servicer, and JPMorgan Chase Bank, N.A., as trustee (the "Trustee"), are entering into a Pooling and Servicing Agreement dated as of February 1, 2006 (the "Pooling and Servicing Agreement"), pursuant to which the Trust will issue Mortgage Asset-Backed Pass-Through Certificates, Series 2006-RZ1 (the "Certificates") consisting of fifteen classes designated as Class A-1, Class A-2, Class A-3, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class SB, Class R-I and Class R-II, representing beneficial ownership interests in a trust fund consisting primarily of a pool of fixed and adjustable rate one- to four-family mortgage loans identified on Exhibit F to the Pooling and Servicing Agreement (the "Mortgage Loans"). D. In connection with the purchase of the Mortgage Loans, the Company will assign to RFC a de minimis portion of the Class R-I and Class R-II Certificates (the "Retained Certificates"). E. In connection with the purchase of the Mortgage Loans and the issuance of the Certificates, RFC wishes to make certain representations and warranties to the Company. F. The Company and RFC intend that the conveyance by RFC to the Company of all its right, title and interest in and to the Mortgage Loans pursuant to this Agreement shall constitute a purchase and sale and not a loan. NOW THEREFORE, in consideration of the recitals and the mutual promises herein and other good and valuable consideration, the parties agree as follows: 1. All capitalized terms used but not defined herein shall have the meanings assigned thereto in the Pooling and Servicing Agreement. 2. Concurrently with the execution and delivery hereof, RFC hereby assigns to the Company without recourse all of its right, title and interest in and to the Mortgage Loans, including all interest and principal received on or with respect to the Mortgage Loans after the Cut-off Date (other than payments of principal and interest due on the Mortgage Loans in the month of the Cut-off Date). In consideration of such assignment, RFC will receive from the Company, in immediately available funds, an amount equal to $476,746,593.75, including accrued interest, and the Retained Certificates. In connection with such assignment and at the Company's direction, RFC has in respect of each Mortgage Loan endorsed the related Mortgage Note (other than any Destroyed Mortgage Note, as defined in the following sentence) to the order of the Trustee and delivered an assignment of mortgage in recordable form to the Trustee or its agent. A Destroyed Mortgage Note means a Mortgage Note the original of which was permanently lost or destroyed. The Company and RFC intend that the conveyance by RFC to the Company of all its right, title and interest in and to the Mortgage Loans pursuant to this Section 2 shall be, and be construed as, a sale of the Mortgage Loans by RFC to the Company. It is, further, not intended that such conveyance be deemed to be a pledge of the Mortgage Loans by RFC to the Company to secure a debt or other obligation of RFC. Nonetheless, (a) this Agreement is intended to be and hereby is deemed to be a security agreement within the meaning of Articles 8 and 9 of the Minnesota Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction; (b) the conveyance provided for in this Section shall be deemed to be a grant by RFC to the Company of a security interest in all of RFC's right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to (A) the Mortgage Loans, including the Mortgage Notes, the Mortgages, any related insurance policies and all other documents in the related Mortgage Files, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof and (C) any and all general intangibles consisting of, arising from or relating to any of the foregoing, and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Certificate Account or the Custodial Account, whether in the form of cash, instruments, securities or other property; (c) the possession by the Trustee, the Custodian or any other agent of the Trustee of Mortgage Notes or such other items of property as constitute instruments, money, payment intangibles, negotiable documents, goods, deposit accounts, letters of credit, advices of credit, investment property, certificated securities or chattel paper shall be deemed to be "possession by the secured party", or possession by a purchaser or a person designated by such secured party, for purposes of perfecting the security interest pursuant to the Minnesota Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction (including, without limitation, Sections 8-106, 9-313 and 9-106 thereof); and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Trustee for the purpose of perfecting such security interest under applicable law. RFC shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property described above, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. Without limiting the generality of the foregoing, RFC shall prepare and deliver to the Company not less than 15 days prior to any filing date, and the Company shall file, or shall cause to be filed, at the expense of RFC, all filings necessary to maintain the effectiveness of any original filings necessary under the Uniform Commercial Code as in effect in any jurisdiction to perfect the Company's security interest in or lien on the Mortgage Loans including without limitation (x) continuation statements, and (y) such other statements as may be occasioned by (1) any change of name of RFC or the Company, (2) any change of location of the place of business, state of formation or the chief executive office of RFC, or (3) any transfer of any interest of RFC in any Mortgage Loan. 3. Concurrently with the execution and delivery hereof, the Company hereby assigns to RFC without recourse all of its right, title and interest in and to the Retained Certificates as part of the consideration payable to RFC by the Company pursuant to this Agreement. 4. RFC represents and warrants to the Company that on the date of execution hereof (or, if otherwise specified below, as of the date so specified): (a) The information set forth in the Mortgage Loan Schedule for such Mortgage Loans is true and correct in all material respects as of the date or dates respecting which such information is furnished; (b) Each Mortgage Loan constitutes a qualified mortgage under Section 860G(a)(3)(A) of the Code and Treasury Regulations Section 1.860G-2(a)(1); (c) Immediately prior to the conveyance of the Mortgage Loans to the Company, RFC had good title to, and was the sole owner of, each Mortgage Loan free and clear of any pledge, lien, encumbrance or security interest (other than rights to servicing and related compensation) and such conveyance validly transfers ownership of the Mortgage Loans to the Company free and clear of any pledge, lien, encumbrance or security interest; (d) Each Mortgage Note constitutes a legal, valid and binding obligation of the Mortgagor enforceable in accordance with its terms except as limited by bankruptcy, insolvency or other similar laws affecting generally the enforcement of creditors' rights; (e) To the best of RFC's knowledge as of the Cut-off Date, there is no default, breach, violation or event of acceleration existing under the terms of any Mortgage Note or Mortgage and no event which, with notice and expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under the terms of any Mortgage Note or Mortgage, and no such default, breach, violation or event of acceleration has been waived by RFC or by any other entity involved in servicing a Mortgage Loan; (f) As of the Cut-off Date, none of the Mortgage Loans are 30 days or more delinquent in payment of principal and interest; (g) None of the Mortgage Loans are buydown Mortgage Loans; (h) To the best of RFC's knowledge, there is no delinquent tax or assessment lien against any related Mortgaged Property; (i) No Mortgagor has any valid right of offset, defense or counterclaim as to the related Mortgage Note or Mortgage, except as may be provided under the Relief Act; (j) No Mortgage Loan provides for payments that are subject to reduction by withholding taxes levied by any foreign (non-United States) sovereign government; (k) (1) The proceeds of each Mortgage Loan have been fully disbursed and (2) to the best of Seller's knowledge, there is no requirement for future advances thereunder and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor (including any escrow funds held to make Monthly Payments pending completion of such improvements) have been complied with. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loans were paid; (l) To the best of RFC's knowledge, with respect to each Mortgage Loan, there are no mechanics' liens or claims for work, labor or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of the related Mortgage, except such liens that are insured or indemnified against by a title insurance policy; (m) With respect to each Mortgage Loan, a policy of title insurance was effective as of the closing of each Mortgage Loan, is valid and binding, and remains in full force and effect, unless the Mortgaged Properties are located in the State of Iowa and an attorney's certificate has been provided; (n) To the best of RFC's knowledge, each Mortgaged Property is free of damage and in good repair and no notice of condemnation has been given with respect thereto and RFC knows of nothing involving any Mortgaged Property that could reasonably be expected to materially adversely affect the value or marketability of any Mortgaged Property; (o) Each Mortgage contains customary and enforceable provisions which render the rights and remedies of the holder adequate to realize the benefits of the security against the Mortgaged Property, including (i) in the case of a Mortgage that is a deed of trust, by trustee's sale, or (ii) by judicial foreclosure or, if applicable, non-judicial foreclosure, and to the best of RFC's knowledge, there is no homestead or other exemption available to the Mortgagor that would interfere with such right to sell at a trustee's sale or right to foreclosure, subject in each case to applicable federal and state laws and judicial precedents with respect to bankruptcy and right of redemption; (p) To the best of RFC's knowledge, with respect to each Mortgage that is a deed of trust, a trustee duly qualified under applicable law to serve as such is properly named, designated and serving, and except in connection with a trustee's sale after default by a Mortgagor, no fees or expenses are payable by the seller or RFC to the trustee under any Mortgage that is a deed of trust; (q) If the improvements securing a Mortgage Loan are located in a federal designated special flood hazard area, flood insurance in the amount required under the Program Guide covers such Mortgaged Property (either by coverage under the federal flood insurance program or by coverage from private insurers); (r) With respect to each Mortgage Loan, any appraisal made in connection with the origination of the Mortgage Loan was made by an appraiser who meets the minimum qualifications for appraisers as specified in the Program Guide; (s) Each Mortgage Loan is covered by a standard hazard insurance policy; (t) To the best of RFC's knowledge, any escrow arrangements established with respect to any Mortgage Loan are in compliance with all applicable local, state and federal laws and are in compliance with the terms of the related Mortgage Note; (u) No Mortgage Loan was originated on or after October 1, 2002 and before March 7, 2003, which is secured by property located in the State of Georgia; (v) As of the Cut-off Date, none of the Mortgage Loans are secured by a leasehold estate. If any of the Mortgage Loans are secured by a leasehold interest, with respect to each leasehold interest: the use of leasehold estates for residential properties is an accepted practice in the area where the related Mortgaged Property is located; residential property in such area consisting of leasehold estates is readily marketable; the lease is recorded and no party is in any way in breach of any provision of such lease; the leasehold is in full force and effect and is not subject to any prior lien or encumbrance by which the leasehold could be terminated or subject to any charge or penalty; and the remaining term of the lease does not terminate less than ten years after the maturity date of such Mortgage Loan; (w) Each Mortgage Loan as of the time of its origination complied in all material respects with all applicable local, state and federal laws, including, but not limited to, all applicable predatory lending laws; (x) None of the Mortgage Loans are subject to the Home Ownership and Equity Protection Act of 1994. None of the Mortgage Loans are loans that, under applicable state or local law in effect at the time of origination of the loan, are referred to as (1) "high cost" or "covered" loans or (2) any other similar designation if the law imposes greater restrictions or additional legal liability for residential mortgage loans with high interest rates, points and/or fees; (y) To the best of RFC's knowledge, the Subservicer for each Mortgage Loan has accurately and fully reported its borrower credit files to each of the Credit Repositories in a timely manner; (z) None of the proceeds of any Mortgage Loan were used to finance the purchase of single premium credit insurance policies; (aa) No loan is a High Cost Loan or Covered Loan, as applicable (as such terms are defined in the then current Standard & Poor's LEVELS(R)Glossary which is now Version 5.6c Revised, Appendix E) (attached hereto as Exhibit A)); provided that no representation and warranty is made in this clause (aa) with respect to any Mortgage Loan secured by a Mortgaged Property located in the States of Kansas or West Virginia; and provided further that no Qualified Substitute Mortgage Loan shall be a High Cost Loan or Covered Loan (as such terms are defined in Appendix E of the Standard & Poor's Glossary For File Format For LEVELS(R)in effect on the date of substitution, with such exceptions thereto as the Company and Standard & Poor's may reasonably agree); (bb) No Mortgage Property consists of a mobile home or a manufactured housing unit that is not permanently affixed to its foundation; (cc) The proceeds of the Mortgage Loan have been fully disbursed, there is no requirement for future advances thereunder; (dd) With respect to each Mortgage Loan, either (i) each Mortgage Loan contains a customary provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event the related Mortgaged Property is sold without the prior consent of the mortgagee thereunder or (ii) the Mortgage Loan is assumable pursuant to the terms of the Mortgage Note; (ee) No Mortgage Loan has a prepayment penalty term that extends beyond five years after the date of origination; (ff) No Mortgage Loan provides for deferred interest or negative amortization; and (gg) Each Mortgage Loan listed on the attached Exhibit B has an original term to maturity of 360 months and an original amortization term of 480 months. Upon discovery by RFC or upon notice from the Company or the Trustee of a breach of the foregoing representations and warranties in respect of any Mortgage Loan, or upon the occurrence of a Repurchase Event as described in Section 5 below, which materially and adversely affects the interests of any holders of the Certificates or the Company in such Mortgage Loan (notice of which breach or occurrence shall be given to the Company by RFC, if it discovers the same), RFC shall, within 90 days after the earlier of its discovery or receipt of notice thereof, either cure such breach or Repurchase Event in all material respects or, except as otherwise provided in Section 2.04 of the Pooling and Servicing Agreement, either (i) purchase such Mortgage Loan from the Trustee or the Company, as the case may be, at a price equal to the Purchase Price for such Mortgage Loan or (ii) substitute a Qualified Substitute Mortgage Loan or Loans for such Mortgage Loan in the manner and subject to the limitations set forth in Section 2.04 of the Pooling and Servicing Agreement. If the breach of representation and warranty that gave rise to the obligation to repurchase or substitute a Mortgage Loan pursuant to this Section 4 was the representation set forth in clause (w) of this Section 4, then RFC shall pay to the Trust Fund, concurrently with and in addition to the remedies provided in the preceding sentence, an amount equal to any liability, penalty or expense that was actually incurred and paid out of or on behalf of the Trust Fund, and that directly resulted from such breach, or if incurred and paid by the Trust Fund thereafter, concurrently with such payment. 5. With respect to each Mortgage Loan, a repurchase event ("Repurchase Event") shall have occurred if it is discovered that, as of the date hereof, the related Mortgage was not a valid first lien on the related Mortgaged Property subject only to (i) the lien of real property taxes and assessments not yet due and payable, (ii) covenants, conditions, and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage and such other permissible title exceptions as are listed in the Program Guide and (iii) other matters to which like properties are commonly subject which do not materially adversely affect the value, use, enjoyment or marketability of the Mortgaged Property. In addition, with respect to any Mortgage Loan as to which the Company delivers to the Trustee or the Custodian an affidavit certifying that the original Mortgage Note has been lost or destroyed, if such Mortgage Loan subsequently is in default and the enforcement thereof or of the related Mortgage is materially adversely affected by the absence of the original Mortgage Note, a Repurchase Event shall be deemed to have occurred and RFC will be obligated to repurchase or substitute for such Mortgage Loan in the manner set forth in Section 4 above. RFC hereby represents and warrants to the Company that, with respect to each Mortgage Loan, the REMIC's tax basis in each Mortgage Loan as of the Closing Date is equal to or greater than 100% of the Stated Principal Balance thereof. [Signature Page Follows] -------------------------------------------------------------------------------- This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, and no other person shall have any right or obligation hereunder. IN WITNESS WHEREOF, the parties have entered into this Assignment and Assumption Agreement as of the date first above written. RESIDENTIAL FUNDING CORPORATION By: Name: Title: RESIDENTIAL ASSET MORTGAGE PRODUCTS, INC. By: Name: Title: -------------------------------------------------------------------------------- EXHIBIT A APPENDIX E OF THE STANDARD & POOR'S GLOSSARY FOR FILE FORMAT FOR LEVELS(R)VERSION 5.6 REVISED July 11, 2005 APPENDIX E - STANDARD & POOR'S PREDATORY LENDING CATEGORIES Standard & Poor's has categorized loans governed by anti-predatory lending laws in the Jurisdictions listed below into three categories based upon a combination of factors that include (a) the risk exposure associated with the assignee liability and (b) the tests and thresholds set forth in those laws. Note that certain loans classified by the relevant statute as Covered are included in Standard & Poor's High Cost Loan Category because they included thresholds and tests that are typical of what is generally considered High Cost by the industry. STANDARD & POOR'S HIGH COST LOAN CATEGORIZATION ------------------------------------------------------------------------------------------------ ---------------------------------------- -------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Anti-Predatory Lending Law/Effective Date Law ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Arkansas Arkansas Home Loan Protection Act, High Cost Home Loan Ark. Code Ann.ss.ss.23-53-101 et seq. Effective July 16, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Cleveland Heights, OH Ordinance No. 72-2003 (PSH), Mun. Code Covered Loan ss.ss.757.01 et seq. Effective June 2, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Colorado Consumer Equity Protection, Colo. Covered Loan Stat. Ann.ss.ss.5-3.5-101 et seq. Effective for covered loans offered or entered into on or after January 1, 2003. Other provisions of the Act took effect on June 7, 2002 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Connecticut Connecticut Abusive Home Loan Lending High Cost Home Loan Practices Act, Conn. Gen. Stat.ss.ss. 36a-746 et seq. Effective October 1, 2001 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- District of Columbia Home Loan Protection Act, D.C. Codess.ss. Covered Loan 26-1151.01 et seq. Effective for loans closed on or after January 28, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Florida Fair Lending Act, Fla. Stat. Ann.ss.ss. High Cost Home Loan 494.0078 et seq. Effective October 2, 2002 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Georgia (Oct. 1, 2002 - Georgia Fair Lending Act, Ga. Code High Cost Home Loan Mar. 6, 2003) Ann.ss.ss.7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Georgia as amended (Mar. Georgia Fair Lending Act, Ga. Code High Cost Home Loan 7, 2003 - current) Ann.ss.ss.7-6A-1 et seq. Effective for loans closed on or after March 7, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- HOEPA Section 32 Home Ownership and Equity Protection High Cost Loan Act of 1994, 15 U.S.C.ss.1639, 12 C.F.R.ss.ss.226.32 and 226.34 Effective October 1, 1995, amendments October 1, 2002 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Illinois High Risk Home Loan Act, Ill. Comp. High Risk Home Loan Stat. tit. 815,ss.ss.137/5 et seq. Effective January 1, 2004 (prior to this date, regulations under Residential Mortgage License Act effective from May 14, 2001) ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Kansas Consumer Credit Code, Kan. Stat. Ann. High Loan to Value ss.ss.16a-1-101 et seq. Consumer Loan (id.ss. 16a-3-207) and; Sections 16a-1-301 and 16a-3-207 became effective April 14, 1999; Section 16a-3-308a became effective July 1, 1999 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- High APR Consumer Loan (id.ss.16a-3-308a) ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Kentucky 2003 KY H.B. 287 - High Cost Home Loan High Cost Home Loan Act, Ky. Rev. Stat.ss.ss.360.100 et seq. Effective June 24, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Maine Truth in Lending, Me. Rev. Stat. tit. High Rate High Fee 9-A,ss.ss.8-101 et seq. Mortgage Effective September 29, 1995 and as amended from time to time ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Massachusetts Part 40 and Part 32, 209 C.M.R.ss.ss. High Cost Home Loan 32.00 et seq. and 209 C.M.R.ss.ss.40.01 et seq. Effective March 22, 2001 and amended from time to time ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Nevada Assembly Bill No. 284, Nev. Rev. Stat. Home Loan ss.ss.598D.010 et seq. Effective October 1, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New Jersey New Jersey Home Ownership Security Act High Cost Home Loan of 2002, N.J. Rev. Stat.ss.ss.46:10B-22 et seq. Effective for loans closed on or after November 27, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New Mexico Home Loan Protection Act, N.M. Rev. High Cost Home Loan Stat.ss.ss.58-21A-1 et seq. Effective as of January 1, 2004; Revised as of February 26, 2004 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New York N.Y. Banking Law Article 6-l High Cost Home Loan Effective for applications made on or after April 1, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- North Carolina Restrictions and Limitations on High High Cost Home Loan Cost Home Loans, N.C. Gen. Stat.ss.ss. 24-1.1E et seq. Effective July 1, 2000; amended October 1, 2003 (adding open-end lines of credit) ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Ohio H.B. 386 (codified in various sections Covered Loan of the Ohio Code), Ohio Rev. Code Ann. ss.ss.1349.25 et seq. Effective May 24, 2002 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Oklahoma Consumer Credit Code (codified in Subsection 10 Mortgage various sections of Title 14A) Effective July 1, 2000; amended effective January 1, 2004 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- South Carolina South Carolina High Cost and Consumer High Cost Home Loan Home Loans Act, S.C. Code Ann.ss.ss. 37-23-10 et seq. Effective for loans taken on or after January 1, 2004 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- West Virginia West Virginia Residential Mortgage West Virginia Mortgage Lender, Broker and Servicer Act, W. Loan Act Loan Va. Code Ann.ss.ss.31-17-1 et seq. Effective June 5, 2002 ---------------------------- ---------------------------------------- -------------------------- STANDARD & POOR'S COVERED LOAN CATEGORIZATION ---------------------------- ---------------------------------------- -------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Anti-Predatory Lending Law/Effective Date Law ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Georgia (Oct. 1, 2002 - Georgia Fair Lending Act, Ga. Code Covered Loan Mar. 6, 2003) Ann.ss.ss.7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New Jersey New Jersey Home Ownership Security Act Covered Home Loan of 2002, N.J. Rev. Stat.ss.ss.46:10B-22 et seq. Effective November 27, 2003 - July 5, 2004 ---------------------------- ---------------------------------------- -------------------------- STANDARD & POOR'S HOME LOAN CATEGORIZATION ------------------------------------------------------------------------------------------------ ---------------------------- ---------------------------------------- -------------------------- State/Jurisdiction Name of Anti-Predatory Lending Category under Applicable Anti-Predatory Lending Law/Effective Date Law ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- Georgia (Oct. 1, 2002 - Georgia Fair Lending Act, Ga. Code Home Loan Mar. 6, 2003) Ann.ss.ss.7-6A-1 et seq. Effective October 1, 2002 - March 6, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New Jersey New Jersey Home Ownership Security Act Home Loan of 2002, N.J. Rev. Stat.ss.ss.46:10B-22 et seq. Effective for loans closed on or after November 27, 2003 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- New Mexico Home Loan Protection Act, N.M. Rev. Home Loan Stat.ss.ss.58-21A-1 et seq. Effective as of January 1, 2004; Revised as of February 26, 2004 ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- North Carolina Restrictions and Limitations on High Consumer Home Loan Cost Home Loans, N.C. Gen. Stat.ss.ss. 24-1.1E et seq. Effective July 1, 2000; amended October 1, 2003 (adding open-end lines of credit) ---------------------------- ---------------------------------------- -------------------------- ---------------------------- ---------------------------------------- -------------------------- South Carolina South Carolina High Cost and Consumer Consumer Home Loan Home Loans Act, S.C. Code Ann.ss.ss. 37-23-10 et seq. Effective for loans taken on or after January 1, 2004 ---------------------------- ---------------------------------------- -------------------------- -------------------------------------------------------------------------------- EXHIBIT A LIST OF MORTGAGE LOANS WITH ORIGINAL TERM TO MATURITY OF 360 MONTHS AND AN ORIGINAL AMORTIZATION TERM OF 480 MONTHS [SEE ATTACHMENT]

Exhibit 10.21   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- LEASE -------------------------------------------------------------------------------- Between 2545 Central, LLC and Insmed Incorporated   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SUMMARY OF BASIC LEASE TERMS   1. Tenant: Insmed Incorporated     (a) Tenant’s entity and jurisdiction: Delaware corporation     (b) Tenant’s federal taxpayer identification number: 54-1972729   2. Building Address: 5797 Central Avenue       Boulder, CO 80301 Type: Single User   3. Demised Premises:     (a) Entire Building described above containing approx. Total Rentable Square Footage: 15,725+/-     (b) Suite Number: 100   4. Initial Lease Term:     (a) Period: Approximately 5 years     (b) Commencement Date: January 1, 2006     (c) Expiration Date: December 31, 2010   5. Basic Rent: Rent Schedule:   January 1, 2006    to    December 31, 2006    $13,432.00 per month January 1, 2007    to    December 31, 2007    $14,103.00 per month January 1, 2008    to    December 31, 2008    $16,380.00 per month January 1, 2009    to    December 31, 2009    $17,199.00 per month January 1, 2010    to    December 31, 2010    $18,059.00 per month   6. Additional Rent Tenant’s Pro Rata Share (for Additional Rent): 100%.   7. Security Deposit Amount: $13,432.00   i Landlord Initials “ILLEGIBLE” Tenant Initials “ILLEGIBLE” -------------------------------------------------------------------------------- 8.    Place for Payments:          2545 Central, LLC c/o Flatiron Park Company 5540 Central Avenue Boulder, CO 80301       9.    Place for Notices:          2545 Central, LLC    copy to:    Packard & Dierking, LLC    c/o Flatiron Park Company       2595 Canyon Blvd., Suite 200    5540 Central Avenue       Boulder, CO 80302    Boulder, CO 80301       Attn: David M. Packard    Fax No.: 303-442-0265       Fax No.: 303-447-0451    Telephone No.: 303-442-6995       Telephone No.: 303-447-0450    Insmed Incorporated    copy to:    Insmed Incorporated    2590 Central Avenue       4851 Lake Brook Drive    Boulder, CO 80301       Glen Allen, VA 23060    Fax No.:                            Attn: Executive V.P. & Chief    Telephone No.:                                        Operating Officer          Fax No.: 804-565-3510          Telephone No.: 804-565-3022   10. Permitted Use(s) by Tenant: Research and development and associated lab and administrative offices.   11. Broker(s): None   12. Utilities: Direct   13. Renewal Option: Tenant will have a one-time option to renew the Lease for an additional five (5) year term under the same terms and conditions as set forth in the Lease so renewed, with the rent rate (excluding Additional Rent) as set forth below in the following RENT SCHEDULE FOR RENEWAL. Such option is governed by Section 3.4 of the Lease. RENT SCHEDULE FOR RENEWAL   January 1, 2011    to    December 31, 2011    $18,962.00 per month January 1, 2012    to    December 31, 2012    $19,910.00 per month January 1, 2013    to    December 31, 2013    $20,906.00 per month January 1, 2014    to    December 31, 2014    $21,951.00 per month January 1, 2015    to    December 31, 2015    $23,048.00 per month   ii Landlord Initials “ILLEGIBLE” Tenant Initials “ILLEGIBLE” -------------------------------------------------------------------------------- 14. Other: a. This lease will not become effective, if at all, until the occurrence of the following conditions precedent, which conditions must be satisfied on or before the Commencement Date designated above: 1. Landlord receiving from Baxter Hemoglobin Therapeutics Inc. a sum satisfactory to Landlord for all monies due through to the Commencement Date under this Lease and the rent shortfall during the remaining term of the lease for the Demised Premises between Landlord and Baxter Hemoglobin Therapeutics Inc. which results from acceptance of this Lease. 2. Landlord and Baxter Hemoglobin Therapeutics Inc. executing an agreement releasing Baxter Hemoglobin Therapeutics Inc., Baxter International, Inc. (which entities along with Baxter International, Inc. predecessor Somatogen, Inc. are hereinafter referred to as “Baxter”) from their obligations for the Demised Premises. Any release shall be based on terms and condition satisfactory to the Landlord, in its sole discretion. If a release agreement cannot be reached between the Landlord and Baxter, then this Lease shall be null and void. 3. Tenant’s receipt of an executed Bill of Sale from Baxter in form satisfactory to Tenant conveying to Tenant the property described on Exhibit M. 4. Landlord will deliver a copy to Tenant of the environmental assessment of the Demised Premises dated November 23, 2005, and any follow-up documentation confirming the performance of activities recommended therein. b. Landlord will, at its cost, complete the work described on the attached “Schedule 1” in reasonably diligent and workmanlike manner. Landlord may complete this work after the Commencement Date.   iii Landlord Initials “ILLEGIBLE” Tenant Initials “ILLEGIBLE” -------------------------------------------------------------------------------- TABLE OF CONTENTS             PAGE ARTICLE 1    GENERAL    1 1.1    Consideration    1 1.2    Exhibits and Addenda to Lease    1 ARTICLE 2    DEFINITIONS; DEMISE OF PREMISES    1 2.1    Demise    1 2.2    Demised Premises    1 2.3    Square Footage and Address    2 2.4    Land    2 2.5    Building    2 2.6    Improvements    2 2.7    Property    2 2.8    Common Facilities    2 2.9    Parking Area    2 2.10    Use of Common Facilities and Parking Area    2 2.11    Covenant of Quiet Enjoyment    3 2.12    Condition of Demised Premises    3 2.13    Tenant’s Equipment    3 ARTICLE 3    TERM OF LEASE    3 3.1    Lease Term    3 3.2    Commencement Date    3 3.3    Early Occupancy or Entry    3 3.4    Option to Renew    3 ARTICLE 4    RENT AND OTHER AMOUNTS PAYABLE    4 4.1    Basic Rent    4 4.2    Monthly Rental    4 4.3    Place of Payments    4 4.4    Lease a Net Lease and Rent Absolute    4 4.5    Additional Rent    4 4.6    Tenant’s Pro Rata Share    4 4.7    Monthly Deposits for Taxes, Insurance, and Common Facilities Charges    5 4.8    Security Deposit    5 4.9    General Provisions as to Monthly Deposits and Security Deposit    6 4.10    Rent Regulations    6   i -------------------------------------------------------------------------------- ARTICLE 5    TAXES AND ASSESSMENTS    6 5.1    Covenant to Pay Taxes and Assessments    6 5.2    Proration at Commencement and Expiration of Term    6 5.3    Special Assessments    6 5.4    New or Additional Taxes    6 5.5    Landlord’s Sole Right to Contest Taxes    7 ARTICLE 6    INSURANCE    7 6.1    Casualty Insurance    7 6.2    Liability Insurance    7 6.3    Other Insurance    7 6.4    General Provisions Respecting Insurance    8 6.5    Cooperation in the Event of Loss    8 ARTICLE 7    UTILITY, OPERATING, MAINTENANCE AND REPAIR EXPENSES    8 7.1    Utility Charges    8 7.2    Common Facilities Charges    8 7.3    Tenant’s Maintenance Obligation    9 7.4    Landlord’s Maintenance Obligation    9 ARTICLE 8    OTHER COVENANTS OF TENANT    10 8.1    Limitation on Use by Tenant    10 8.2    Compliance with Laws    10 8.3    Compliance with Insurance Requirements    10 8.4    No Waste or Impairment of Value    10 8.5    No Overloading    10 8.6    No Nuisance, Noxious or Offensive Activity    10 8.7    No Annoying Lights, Sounds or Odors    10 8.8    No Unsightliness    11 8.9    No Animals    11 8.10    Restriction on Signs and Exterior Lighting    11 8.11    No Violation of Covenants    11 8.12    Restriction on Changes and Alterations    11 8.13    No Mechanic’s Liens    12 8.14    No Other Encumbrances    12 8.15    Subordination to Landlord Mortgages    12 8.16    Assignment or Subletting    13 8.17    Annual Financial Statements    13 8.18    Payment of Other Taxes    14 8.19    Estoppel Certificates    14 8.20    Landlord Right to Inspect and Show Premises and to Install “For Sale” Signs    14 8.21    Landlord Right to Renovate, Expand or Modify Building    14   ii -------------------------------------------------------------------------------- 8.22    Landlord Title to Fixtures, Improvements and Equipment    14 8.23    Removal of Tenant’s Equipment    15 8.24    Tenant Indemnification of Landlord    15 8.25    Liability of Landlord    15 8.26    Release upon Transfer by Landlord    16 8.27    Rules and Regulations    16 8.28    Monitoring Equipment    16 ARTICLE 9    ENVIRONMENTAL MATTERS    16 9.1    Definitions    16    9.1.1 Hazardous Material    16    9.1.2 Environmental Requirements    17    9.1.3 Environmental Damages    17 9.2    Tenant’s Obligation to Indemnify, Defend and Hold Harmless    17 9.3    Tenant’s Obligation to Remediate    18 9.4    Notification    18 9.5    Negative Covenants    18    9.5.1 No Hazardous Material on Demised Premises    18    9.5.2 No Violations of Environmental Requirements    18 9.6    Landlord’s Right to Inspect and to Audit Tenant’s Records    18 9.7    Landlord’s Right to Remediate    19 9.8    Survival of Environmental Obligations    19 9.9    Environmental Certifications    19 ARTICLE 10    DAMAGE OR DESTRUCTION    19 10.1    Damage to Demised Premises    19 10.2    Options to Terminate if Damage to Demised Premises is Substantial    19 10.3    Damage to Building    20 10.4    Obligations to Repair and Restore    20 10.5    Application of Insurance Proceeds    20 ARTICLE 11    CONDEMNATION    21 11.1    Taking — Substantial Taking — Insubstantial Taking    21 11.2    Termination on Substantial Taking    21 11.3    Restoration on Insubstantial Taking    21 11.4    Right to Award    21 ARTICLE 12    DEFAULTS BY TENANT    21 12.1    Failure to Pay Rent or Other Amounts    21 12.2    Nonoccupancy of Demised Premises    21 12.3    Transfer of Interest Without Consent    22   iii -------------------------------------------------------------------------------- 12.4    Execution and Attachment Against    22 12.5    Bankruptcy or Related Proceedings    22 12.6    Violation of Lease Terms    22 ARTICLE 13    LANDLORD’S REMEDIES    22 13.1    13.1 Remedies Generally    22    13.1.1 Cure by Landlord    22    13.1.2 Termination of Lease and Damages    23    13.1.3 Repossession and Reletting    23    13.1.4 Waiver of Landlord Liens    24    13.1.5 Suits by Landlord    24    13.1.6 Recovery of Landlord Enforcement Costs    24    13.1.7 Administrative Late Charge    24    13.1.8 Interest on Past-Due Payments and Advances    24    13.1.9 Landlord’s Bankruptcy    24 13.2    Remedies Cumulative    24 ARTICLE 14    SURRENDER AND HOLDING OVER    24 14.1    Surrender upon Lease    24 14.2    Holding Over    25 14.3    Restoration Obligations    25 ARTICLE 15    MISCELLANEOUS    25 15.1    No Implied Waiver    25 15.2    Survival of Provisions    26 15.3    Covenants Independent    26 15.4    Covenants as Conditions    26 15.5    Tenant’s Remedies    26 15.6    Binding Effect    26 15.7    Short Form Lease    26 15.8    Notices and Demands    26 15.9    Force Majeure    27 15.10    Time of the Essence    27 15.11    Captions for Convenience    27 15.12    Severability    27 15.13    Governing Law and Venue    27 15.14    Entire Agreement    27 15.15    No Oral Amendment or Modifications    27 15.16    Real Estate Brokers    28 15.17    Relationship of Landlord and Tenant    28 15.18    Authority of Tenant    28   iv -------------------------------------------------------------------------------- LEASE This Lease is made this 14th day of December 2005, between 2545 Central, LLC, a Colorado limited liability company (“Landlord”), whose address is c/o Flatiron Park Company, 5540 Central Avenue, Boulder, Colorado 80301, and Insmed Incorporated, a Delaware corporation (“Tenant”), whose address is 2590 Central Avenue Boulder, Colorado 80301. ARTICLE 1 GENERAL 1.1 Consideration. Landlord enters into this Lease in consideration of the payment by Tenant of the rents herein reserved and the keeping, observance and performance by Tenant of the covenants and agreements of Tenant herein contained. 1.2 Exhibits and Addenda to Lease. The Exhibits and Addenda listed below shall be attached to this Lease and be deemed incorporated in this Lease by this reference. In the event of any inconsistency or conflict between such Exhibits and Addenda and the terms and provisions of this Lease, the terms and provisions of the Exhibits and Addenda shall control. The Attachments, Exhibits and Addenda to this Lease are:   Summary of Basic Lease Terms Exhibit A   Legal Description of Land Exhibit B   Location of Demised Premises within Building Exhibit C   Notice of Non-Liability for Mechanics’ Liens Exhibit D   Form of Subordination, Non-Disturbance and Attornment Agreement Exhibit E   Form of Sublease, Assumption and Consent Agreement Exhibit F   Form of Assignment, Assumption and Consent Agreement Exhibit G   Form of Estoppel Certificate Exhibit H   Environmental Investigation Exhibit I   Restoration Obligations Exhibit J   Tenant’s equipment Exhibit K   Declaration of Protective Covenants Schedule 1   Landlord’s Work ARTICLE 2 DEFINITIONS: DEMISE OF PREMISES 2.1 Demise. Subject to the provisions, covenants and agreements herein contained, Landlord hereby leases and demises to Tenant, and Tenant hereby leases from Landlord, the Demised Premises as hereinafter defined, for the Lease Term as hereinafter defined, subject to existing covenants, conditions, restrictions, easements and encumbrances affecting the same. 2.2 Demised Premises. The “Demised Premises” shall mean the space to be occupied by Tenant as depicted on Exhibit B attached hereto. The Demised Premises are the entire Building that is located on the Land, as the terms “Building” and “Land” are hereinafter defined. -------------------------------------------------------------------------------- 2.3 Square Footage and Address. The Demised Premises contains approximately the rentable floor area set forth in the Summary of Basic Lease Terms. The address of the Demised Premises is the address set forth in the Summary of Basic Lease Terms. 2.4 Land. “Land” shall mean the parcel of real property more particularly described in Exhibit A attached hereto, as the same may be replatted, resubdivided or adjusted from time to time by Landlord; provided, however, that Landlord shall not, without Tenant’s prior written approval, replat, resubdivide or adjust the Land in any manner that materially interferes with Tenant’s use of the Demised Premises or its ability to carryout the Permitted Use. 2.5 Building. “Building” shall mean the building or buildings constructed on the Land, as the same may be expanded, remodeled, reconstructed or otherwise modified from time to time by Tenant (as permitted pursuant to this Lease) or by Landlord (with Tenant’s prior written consent, except as otherwise permitted or required pursuant to the terms of this Lease. If there is more than one building constructed on the Land, the term “Building” shall mean collectively all buildings constructed upon the Land. 2.6 Improvements. “Improvements” shall mean the Building, the Parking Area as hereinafter defined, and all other fixtures and improvements on the Land, including landscaping thereon, but notwithstanding anything to the contrary in this Lease (except as provided in Section 8.23), excluding Tenant’s Equipment, as defined below. 2.7 Property. “Property” shall mean the Land, the Building and the Improvements and any fixtures and personal property used in operation and maintenance of the Land, Building and Improvements, excluding Tenant’s Equipment. 2.8 Common Facilities. “Common Facilities” shall mean all of the Property that is intended to be used by Tenant (in common with other tenants, if any), except (a) the Demised Premises and (b) the other premises in the Building leased or held for lease to other tenants, if any. Common Facilities shall include, without limitation, the Parking Area and any walks, driveways, and, if applicable, lobby areas, halls, stairs, elevators, restrooms, utility rooms, and janitorial closets designed for common use of Tenant and other users of space in the Building. 2.9 Parking Area. “Parking Area” shall mean that portion of the Land that is or is to be paved and otherwise improved or designated unimproved land for the parking of motor vehicles. Landlord shall not be responsible for any injuries to any person nor any damage to any automobile, vehicle or other property that occurs in or about the Parking Area, except to the extent caused by the gross negligence or willful misconduct of Landlord or its agents, contractors or employees. Tenant may operate multiple work shifts in the Demised Premises, and Landlord acknowledges that Tenant and Tenant’s employees, agents, invitees and contractors may park vehicles in the Parking Area at all hours of the day. Notwithstanding the foregoing, Tenant may not park trucks or truck trailers in the Parking Area other than for short term purposes of loading and unloading. 2.10 Use of Common Facilities and Parking Area. Tenant is hereby granted the non-exclusive right and license to use, in common with other tenants in the Building, if any, the Common Facilities, as they from time to time exist, subject to the rights of Landlord reserved herein. Tenant shall not interfere, at any time, with the rights of Landlord and others entitled to use any part of the Common Facilities, and shall not store, either permanently or temporarily, any materials, supplies or equipment on the Common Facilities. Landlord shall have the right, at any time, to change, reduce or otherwise alter the Common Facilities, in its sole discretion and without compensation to Tenant; provided, however, that Landlord shall   2 -------------------------------------------------------------------------------- provide reasonable parking in the Parking Areas, loading areas and access to the Demised Premises to Tenant. If there are multiple tenants in the Building, Landlord shall have the right at any time to assign spaces in the Parking Area to individual tenants, in its sole discretion, provided that Landlord shall provide a reasonable number of spaces for Tenant. Landlord shall not be responsible for any injuries to any person nor any damage to any automobile, vehicle or other property that occurs in or about the Parking Area. Tenant shall not park nor permit the parking of any vehicles in the Parking Area overnight without Landlord’s prior, written permission. 2.11 Covenant of Quiet Enjoyment. Landlord covenants and agrees that, provided Tenant is not in default beyond any applicable cure period, Tenant shall have quiet and peaceable possession of the Demised Premises and such possession shall not be disturbed or interfered with by Landlord or by any person claiming by, through or under Landlord. 2.12 Condition of Demised Premises. Except as otherwise provided in this Lease (or an Exhibit or Addenda hereto), Tenant covenants and agrees that, upon taking possession of the Demised Premises, Tenant shall be deemed to have accepted the Demised Premises “as is” and Tenant shall be deemed to have waived any warranty of condition or habitability, suitability for occupancy, use or habitation, fitness for a particular purpose or merchantability, express or implied, relating to the Demised Premises. 2.13 Tenant’s Equipment. “Tenant’s Equipment” shall mean all trade fixtures (whether movable or attached to the real estate), equipment, apparatus, machinery, signs, furniture, furnishings and personal property of Tenant or Tenant’s employees, agents, invitees or contractors, including, without limitation, the equipment and personal property listed on Exhibit J hereto. Notwithstanding anything to the contrary in this Lease (except Section 8.23), Landlord acknowledges and agrees that no Tenant’s Equipment shall become the property of Landlord, or shall become part of the real estate, or shall cease to be Tenant’s Equipment as a result of it being installed upon, affixed to or attached to real estate, the Land, the Building, the Demised Premises, or the Improvements. ARTICLE 3 TERM OF LEASE 3.1 Lease Term. “Lease Term” shall mean the period of time specified in the Summary of Basic Lease Terms commencing at midnight on the Commencement Date as defined below and expiring at midnight on the Expiration Date, as specified in the Summary of Basic Lease Terms. 3.2 Commencement Date. The term “Commencement Date” shall mean the later of the Commencement Date set forth in the Summary of Basic Lease Terms. 3.3 Early Occupancy or Entry. In the event Landlord permits Tenant or its agents or contractors to occupy or enter the Demised Premises for any reason prior to the Commencement Date, and Tenant avails itself of such right, then Tenant shall be subject to all terms and provisions hereof. 3.4 Option to Renew. Subject to requirements for exercising same set forth in this Lease, Landlord hereby grants to Tenant a one-time option to renew the Lease for one (1) additional five (5) year term under the same terms and conditions as set forth herein and with the Basic Rent as set forth on the Summary of Basic Lease Terms. Tenant shall exercise such option by giving written notice of its election to exercise; provided that (i) such written election must be given on or before July 1, 2008, prior to the expiration of the then-existing Lease Term, and (ii) such written election shall be null and void in the event that Tenant, at the time of Landlord’s receipt of same, is in default beyond any applicable cure   3 -------------------------------------------------------------------------------- period. If Tenant does not timely provide such notice in accordance with this Section 3.4, the option shall lapse and thereafter be null and void. Upon timely exercise of such notice, the Lease shall be deemed to be extended for the additional period at the Basic Rent as set forth herein and pursuant to all other terms and conditions set forth in the Lease. ARTICLE 4 RENT AND OTHER AMOUNTS PAYABLE 4.1 Basic Rent. Tenant covenants and agrees to pay to Landlord, without offset, deduction or abatement, basic rent for the full Lease Term in the amount specified as or calculable from Basic Rent in the Summary of Basic Lease Terms (“Basic Rent”). 4.2 Monthly Rental. Basic Rent shall be payable monthly in advance, without notice, in equal installments, together with installments of Additional Rent. Each installment of Basic Rent shall be in the amount of monthly rent specified in the rent schedule in the Summary of Basic Lease Terms (“Monthly Rental”). The first such monthly installment shall be due and payable on or before the Commencement Date and a like monthly installment shall be due and payable on or before the first day of each calendar month succeeding the Commencement Date during the Lease Term, except that the rental payment for any fractional calendar month at the commencement or end of the Lease Term shall be prorated based on a thirty (30) day month. 4.3 Place of Payments. Basic Rent and all other sums payable by Tenant to Landlord under this Lease shall be paid to Landlord at the place for payments specified in the Summary of Basic Lease Terms, or such other place as Landlord may, from time to time, designate in writing. 4.4 Lease a Net Lease and Rent Absolute. It is the intent of the parties that the Basic Rent provided in this Lease shall be a net payment to Landlord; that, except as otherwise expressly provided herein, the Lease shall continue for the full Lease Term notwithstanding any occurrence preventing or restricting use and occupancy of the Demised Premises, including any damage or destruction affecting the Demised Premises, and any action by governmental authority relating to or affecting the Demised Premises; that the Basic Rent shall be absolutely payable without offset, reduction or abatement for any cause except as otherwise specifically provided in this Lease; that Landlord shall not bear any costs or expenses relating to the Demised Premises or provide any services or do any act in connection with the Demised Premises except as otherwise specifically provided in this Lease; and that Tenant shall pay, in addition to Basic Rent, Additional Rent to cover costs and expenses relating to the Demised Premises, the Common Facilities, and the Property, all as hereinafter provided. 4.5 Additional Rent. Tenant covenants and agrees to pay directly to third parties or as Additional Rent, as applicable, all costs and expenses relating to the Demised Premises including utilities, maintenance and repair thereof; Tenant’s Pro Rata Share of all costs and expenses relating to the Common Facilities, pursuant to Section 7.2 hereof; Tenant’s Pro Rata Share of all Taxes and Assessments (hereinafter defined) and costs and expenses of Casualty Insurance (hereinafter defined); all costs and expenses of Liability Insurance (hereinafter defined) and other insurance described in Section 6.3 below; and all other costs and expenses that Tenant is obligated to pay under this Lease; except that Tenant is not obligated to pay sums expressly allocated to Landlord under other provisions of this Lease. 4.6 Tenant’s Pro Rata Share. “Tenant’s Pro Rata Share” shall mean the percentage set forth in the Summary of Basic Lease Terms as Tenant’s Pro Rata Share, which is the percentage derived by dividing the approximate rentable floor area of the Demised Premises, as set forth in the Summary of Basic Lease   4 -------------------------------------------------------------------------------- Terms, by the approximate rentable floor area within the Building, as set forth in the Summary of Basic Lease Terms. The percentage set forth in the Summary of Basic Lease Terms shall be conclusive and not subject to adjustment for remeasurement of the area of the Demised Premises or the Building. Landlord may modify Tenant’s Pro Rata Share from time to time based upon any increase or reduction in the rentable floor area of the Building or of the Demised Premises. 4.7 Monthly Deposits for Taxes, Insurance, and Common Facilities Charges. Tenant will pay to Landlord, monthly in advance, without notice, on each day that payment of Monthly Rental is due, amounts, as hereinafter specified, for payment of Tenant’s Pro Rata Share of Taxes and Assessments (defined in Section 5.1), Casualty Insurance (defined in Section 6.1), Liability Insurance, if applicable (defined in Section 6.2), Common Facilities Charges (defined in Section 7.2), and any other charges payable with respect to the Property hereunder as Additional Rent (collectively “Monthly Deposits”) and, if the Monthly Deposits are insufficient to pay Tenant’s Pro Rata Share of the actual cost of such items, to pay to Landlord, within twenty (20) days after written demand by Landlord, such amounts as are necessary to provide Landlord with sufficient funds to pay Tenant’s Pro Rata Share of the same. The Monthly Deposits shall each be equal to Tenant’s Pro Rata Share of 1/12 of the amounts, as reasonably estimated and re-estimated from time to time by Landlord (Tenant to receive written notice from time to time of each such estimate or re-estimate), of the annual Taxes and Assessments, annual Casualty Insurance premiums, annual Liability Insurance premiums, and annual Common Facilities Charges payable with respect to the Property. The initial Monthly Deposit shall be subject to adjustment as herein provided. To the extent the Monthly Deposits exceed Tenant’s Pro Rata Share of the actual cost of such items, the excess amount shall, at Landlord’s option, except as may be otherwise provided by law, either be paid to Tenant or credited against future Monthly Deposits or against Basic Rent, Additional Rent or other amounts payable by Tenant under this Lease. If Tenant so requests in writing within thirty (30) days after the date of Landlord’s annual reconciliation of Monthly Deposits, Landlord shall furnish Tenant with a copy of invoices or receipts for Taxes, Insurance, and Common Facilities Charges. The amounts of such taxes, insurance premiums and expenses payable by Tenant for the years in which the Lease Term commences and expires shall be subject to the provisions hereinafter contained in this Lease for proration of such amounts in such years. Prior to the dates on which payment is due for such items, Landlord shall make payment of the same. Except for Landlord’s obligation to make payments, the making of Monthly Deposits by Tenant shall not limit or alter Tenant’s obligation to pay taxes and assessments and to maintain insurance as elsewhere provided in this Lease. 4.8 Security Deposit. Upon execution of this Lease, Tenant shall deposit with Landlord, the amount specified as a security deposit in the Summary of Basic Lease Terms (“Security Deposit”). The Security Deposit shall be retained by Landlord and may be applied by Landlord, to the extent necessary, to pay and cover any loss, cost, damage or expense, including attorneys’ fees, sustained by Landlord by reason of the failure of Tenant to comply with any provisions, covenant or agreement of Tenant contained in this Lease. To the extent not necessary to cover such loss, cost, damage or expense, the Security Deposit, without any interest thereon, shall be returned to Tenant within sixty (60) days after expiration of the Lease Term or as may be otherwise provided by law; provided, however, that Landlord may also deduct any amount from the Security Deposit Landlord estimates may be required to cover any shortfall in Additional Rent deposits made by Tenant in the final year of the Lease until such time as Landlord has completed its annual Additional Rent reconciliation for such year in which event any excess will be returned to Tenant. The Security Deposit shall not be considered as an advance payment of rent or as a measure of the loss, cost, damage or expense that is or may be sustained by Landlord. In the event all or any portion of the Security Deposit is applied by Landlord to pay any such loss, cost, damage or expense, Tenant shall, from time to time, promptly upon written demand, deposit with Landlord such amounts as may be necessary to replenish the Security Deposit to its original amount.   5 -------------------------------------------------------------------------------- 4.9 General Provisions as to Monthly Deposits and Security Deposit. Landlord shall not be required to hold the Security Deposit in an escrow or trust deposit account, and Landlord may commingle the Monthly Deposits with Landlord’s own funds. Landlord shall not be obligated to pay interest to Tenant on account of the Monthly Deposits and Security Deposit. In the event of a transfer by Landlord of Landlord’s interest in the Demised Premises, Landlord or the property manager of Landlord will deliver the Monthly Deposits and Security Deposit to the transferee of Landlord’s interest and Landlord and such property manager shall thereupon be discharged from any further liability to Tenant with respect to such Monthly Deposits and Security Deposit. In the event of a transfer by Tenant of Tenant’s interest in the Demised Premises, Landlord shall be entitled to return the Monthly Deposits and Security Deposit to Tenant’s successor in interest and Landlord shall thereupon be discharged from any further liability with respect to the Monthly Deposits and Security Deposit. 4.10 Rent Regulations. If the Basic Rent, Additional Rent, or any other amounts to be paid by Tenant to Landlord hereunder is or becomes at any time subject to regulation by law such that they exceed the maximum rental or other amounts permitted by such laws, then the rent or other amounts to be so paid shall be the maximum rental or other amounts permitted by said laws. ARTICLE 5 TAXES AND ASSESSMENTS 5.1 Covenant to Pay Taxes and Assessments. Tenant covenants and agrees to pay, as Additional Rent, Tenant’s Pro Rata Share of Taxes and Assessments, as hereinafter defined, which accrue during or are attributable to the Lease Term. “Taxes and Assessments” shall mean all taxes, assessments or other impositions, general or special, ordinary or extraordinary, or every kind or nature, which may be levied, assessed or imposed upon or with respect to the Property or any part thereof, or upon any building, improvements or personal property at any time situated thereon. 5.2 Proration at Commencement and Expiration of Term. Taxes and Assessments shall be prorated between Landlord and Tenant for the year in which the Lease Term commences and for the year in which the Lease Term expires as of, respectively, the date of commencement of the Lease Term and the date of expiration of the Lease Term, except as herein provided. Additionally, for the year in which the Lease Term expires, Tenant shall be liable without proration for the full amount of Taxes and Assessments relating to any improvements, fixtures, equipment or personal property that Tenant is required to remove or in fact removes as of the expiration of the Lease Term. Proration of Taxes and Assessments shall be made on the basis of actual Taxes and Assessments. Tenant’s Pro Rata Share of Taxes and Assessments for the years in which the Lease Term commences and expires shall be paid and deposited with Landlord through Monthly Deposits as hereinabove provided, but, in the event actual Taxes and Assessments for either year are greater or less than as estimated for purposes of Monthly Deposits, appropriate adjustment and payment shall be made between the parties, at the time the actual Taxes and are known, as may be necessary to accomplish proration, as hereinafter provided, and such obligation shall survive the termination or expiration of this Lease. 5.3 Special Assessments. If any Taxes or Assessments are payable in installments over a period of years, Tenant shall be responsible only for installments payable for periods during the Lease Term with proration, as above provided, of any installment payable prior to or after expiration of the Lease Term. 5.4 New or Additional Taxes. Tenant’s obligation to pay Tenant’s Pro Rata Share of Taxes and Assessments shall include any Taxes and Assessments of a nature not presently in effect but that may hereafter be levied, assessed or imposed upon Landlord or upon the Property if such tax shall be based upon   6 -------------------------------------------------------------------------------- or arise out of the ownership, use or operation of or the rents received from the Property, other than income taxes or estate taxes of Landlord. For the purposes of computing Tenant’s liability for such new type of tax or assessment, the Property shall be deemed the only Property of Landlord. 5.5 Landlord’s Sole Right to Contest Taxes. Landlord shall have the sole right to contest any Taxes or Assessments. Landlord shall pay to or credit Tenant with Tenant’s Pro Rata Share of any abatement, reduction or recovery of any Taxes and Assessments attributable to the Lease Term less Tenant’s Pro Rata Share of all costs and expenses incurred by Landlord, including attorneys’ fees, in connection with such abatement, reduction or recovery. ARTICLE 6 INSURANCE 6.1 Casualty Insurance. Landlord covenants and agrees to obtain and keep in full force and effect during the Lease Term, Casualty Insurance as hereinafter defined. “Casualty Insurance” shall mean property insurance including “all risk” coverage with respect to the Property, in an amount equal to the full replacement cost thereof, with coinsurance clauses of no less than ninety percent (90%), and with coverage, by endorsement or otherwise, for all risks, vandalism and malicious mischief, sprinkler leakage, boilers, and rental loss and with a deductible in reasonable amount for each occurrence as Landlord may determine from time to time. Casualty Insurance obtained by Landlord shall name Tenant as an insured party and may, at Landlord’s option, name any mortgagee or holder of a deed of trust as an insured party as its interest may appear. Tenant covenants and agrees to pay, as Additional Rent, its Pro Rata Share of the cost of Casualty Insurance obtained by Landlord, and to pay, as Additional Rent, its Pro Rata Share of the cost of any deductible under such Casualty Insurance as provided by Section 10.5. Tenant shall be responsible for obtaining, at Tenant’s option, cost and expense, insurance coverage for personal property and leasehold improvements of Tenant and for business interruption of Tenant. 6.2 Liability Insurance. Tenant covenants and agrees to obtain and keep in full force and effect during the Lease Term, and to pay the premiums and costs of, Liability Insurance as herein defined. “Liability Insurance” shall mean comprehensive or commercial general liability insurance covering public liability for claims for bodily injury, personal injury, and property damage with respect to the use and operation of the Demised Premises and the Common Facilities, with limits of not less than two million dollars ($2,000,000.00) combined single limit of liability, with endorsements for assumed contractual liability with respect to the liabilities assumed by Tenant under Sections 8.24 and 9.2 of this Lease, and with no deductible, retention or self-insurance provision contained therein, unless otherwise approved in writing by Landlord. The coverage limits may be satisfied by a comprehensive or commercial general liability policy with limits of not less than one million dollars ($1,000,000.00) combined with a liability excess policy with limits of not less than two million dollars ($2,000,000.00). Landlord may, at its sole cost, also obtain and keep in full force and effect during the Lease Term liability insurance covering public liability with respect to the ownership, use and operation of the Property. 6.3 Other Insurance. Tenant covenants and agrees to obtain and keep in full force and effect during the Lease Term, and to pay the premiums and costs of, any other types of insurance relating to the Property or Tenant’s occupancy, use, and operation of the Demised Premises that any mortgagee or holder of a deed of trust on the Property may hereafter reasonably require. Tenant shall cause such other insurance to be in effect within thirty (30) days after receipt of written notice from Landlord. Landlord may obtain insurance coverage for lost rental income, the cost of which shall be paid by Tenant as Additional Rent.   7 -------------------------------------------------------------------------------- 6.4 General Provisions Respecting Insurance. Except as otherwise approved in writing by Landlord, all insurance obtained by Tenant shall be on forms and with insurers selected or approved by Landlord, which approval shall not be unreasonably withheld; and shall name Landlord, and, upon written request by Landlord providing all requisite information, Landlord’s manager(s) and agent(s), and the holder of any mortgage or deed of trust encumbering the Property, their interests may appear as insured, or additional insured, parties. All insurance obtained by either party as provided herein shall contain a waiver of rights of subrogation as among Tenant, Landlord and the holder of any such mortgage or deed of trust and by the respective insurers by endorsement; shall provide coverage on an occurrence basis; and shall provide, by certificate of insurance or otherwise, that the insurance coverage shall not be canceled or altered except upon thirty (30) days’ prior written notice to the other party and the holder of any such mortgage or deed of trust on the Demised Premises. Certificates of insurance obtained by Tenant shall be delivered to Landlord who may deposit the same with the holder of any such first mortgage or deed of trust. Upon written request, each party agrees to provide the other with copies of all policies of insurance obtained by such party hereunder. 6.5 Cooperation in the Event of Loss. Landlord and Tenant shall cooperate with each other in the collection of any insurance proceeds that may be payable in the event of any loss, including the execution and delivery of any proof of loss or other actions required to effect recovery. ARTICLE 7 UTILITY, OPERATING, MAINTENANCE AND REPAIR EXPENSES 7.1 Utility Charges. Tenant covenants and agrees to contract for in Tenant’s own name and to pay directly to the utility providers, all charges for water, sewage, disposal, storm drainage fees, gas, electricity, light, heat, power, telephone or other utility services used, rendered or supplied to or for the Demised Premises. If any such utility charges are not separately metered or billable to the Demised Premises, then (i) Landlord shall have the right to apportion utility charges based upon Landlord’s reasonable estimation of relative use of such utilities, and (ii) Tenant shall the right to cause such utilities to be separately metered at Tenant’s sole expense. In the event, from time to time, that Tenant shall fail to make payments to utility providers, as required above when due and payable, Landlord shall have the right at its option, to pay any and all amounts owing, and Tenant shall immediately reimburse Landlord for same upon written notice of such payment by Landlord, such reimbursement obligation to constitute Additional Rent. Tenant shall pay to Landlord the apportioned amount of such utilities as Additional Rent. In the event of an interruption of utilities or services necessary to Tenant’s use of the Demised Premises or its ability to carry out its Permitted Use, but only if such interruption is not caused by Tenant, Landlord will cooperate and exercise commercially reasonable efforts to assist Tenant with regaining service. 7.2 Common Facilities Charges. Tenant covenants and agrees to pay, as Additional Rent, Tenant’s Pro Rata Share of those costs and expenses that are incurred by Landlord during the term of operating, repairing, maintaining and upkeep of the Common Facilities including, without limitation, upkeep and replanting of grass, trees, shrubs and landscaping; removal of dirt, debris, obstructions and litter from Parking Areas, landscaped areas, sidewalks and driveways; repairs, resurfacing, resealing, restriping, sweeping and snow removal from the Parking Areas, sidewalks and driveways; sprinkler systems; building signs; stairways; heating, ventilation and air conditioning systems; utilities for the Common Facilities; fire protection systems and sprinkler systems; exterior painting; roof membranes, including penetrations of the membranes; water and sewage disposal systems; storm drainage systems; supplies, personnel, and the cost of any rental of equipment in implementing such services; charges for professional management of the Property and Common Facilities; the wages, salaries, benefits and payroll taxes paid by Landlord with respect to its non-supervisory employees (to the extent reasonably allocable to providing such services with   8 -------------------------------------------------------------------------------- respect to the Common Facilities); all alterations, additions, improvements and other changes made to the Improvements in order to conform to changes subsequent to the date of this Lease in any laws, ordinances, rules, regulations or orders of any applicable governmental authority, subject to amortization of such costs at a market rate of interest over the useful life thereof, as determined by Landlord’s accountants; and personal property taxes, licenses and permits (to the extent reasonably allocable to providing such services to the Common Facilities). Landlord may cause any or all of such services to be provided by employees of Landlord or by independent contractor(s) and subcontractor(s). Tenant shall pay to Landlord, monthly in advance, without notice, on each day that payment of Monthly Rental is due, the estimated monthly charge for the Common Facilities, as determined and redetermined from time to time by Landlord in accordance with Section 4.7 above. Notwithstanding anything to the contrary set forth in this Section 7.2, Tenant shall not be required to pay, as Additional Rent or otherwise (and Landlord shall bear) all costs and expenses incurred by Landlord in connection with maintaining, replacing or improving the Property (or any portion thereof) to the extent such costs and expenses (i) are for improvements or replacements having a useful life of five (5) years or more, as determined by Landlord’s accountants (excepting those incurred in connection with roof membranes or alterations, additions, improvements and other changes made to the Improvements in order to conform to changes subsequent to the date of this Lease in any laws, ordinances, rules, regulations or orders of any applicable governmental authority, as provided above), (ii) constitute legal, accounting, consulting or other professional fees or leasing fees, (iii) were incurred in connection with improvements made for the benefit of occupants of other buildings or properties, or to prepare space for occupancy by a purchaser or a new tenant, (iv) are reimbursed by third parties or (v) result from the gross negligence or willful misconduct of Landlord or its agents, contractors, invitees or employees. 7.3 Tenant’s Maintenance Obligation. Tenant, at its sole cost and expense, shall maintain, repair, replace (at Tenant’s reasonable option) and keep the Demised Premises and all non-structural improvements, fixtures and personal property (excluding Tenant’s Equipment) thereon (including, for purposes of this paragraph and without limitation, the heating, ventilation and air conditioning systems, fire protection systems and sprinkler systems, Tenant’s Equipment, the electrical, lighting and communications conduits, wires, switches and other electrical fixtures and the plumbing pipes, valves, meters and other plumbing fixtures for water and sewer) in good, safe and sanitary condition, order and repair and in accordance with all applicable laws, ordinances, orders, rules and regulations of governmental authorities having jurisdiction, ordinary wear and tear, casualty and condemnation excepted. Tenant will perform or contract for and promptly pay for trash and garbage disposal, janitorial and cleaning services, security services, interior painting, interior window washing, replacement of damaged or broken glass and other breakable materials, replacement of interior light bulbs and light fixtures in or serving the Demised Premises. All costs of maintenance and repairs to be performed by Tenant in accordance herewith, but incurred instead by Landlord, shall be considered Additional Rent hereunder. All maintenance and repairs to be performed by Tenant shall be done promptly, in a good and workmanlike fashion, and without diminishing the original quality of the Demised Premises or the Property. Tenant shall maintain the heating, ventilation and air conditioning equipment located in or about the Building by a contractor reasonably acceptable to Landlord. 7.4 Landlord’s Maintenance Obligation. Landlord shall be responsible for and shall bear the costs and expenses of replacement of, or extraordinary maintenance and repairs to, structural aspects of the roofs, foundations, exterior walls, and other structural elements of the Building and keep such structural elements in good and safe condition, order and repair. Landlord shall also maintain and repair the Common Facilities and provide routine maintenance of the structural elements, and Tenant shall pay its Pro Rata Share of all costs and expenses with respect thereto pursuant to Section 7.2 above.   9 -------------------------------------------------------------------------------- ARTICLE 8 OTHER COVENANTS OF TENANT 8.1 Limitation on Use by Tenant. Tenant covenants and agrees to use the Demised Premises only for the use or uses set forth as Permitted Uses by Tenant in the Summary of Basic Lease Terms and for no other purposes, except with the prior written consent of Landlord. Landlord has made no investigation of and makes no representations or warranties whatsoever regarding the permissibility of Tenant’s Permitted Uses under applicable zoning or land use laws, rules, regulations or approvals. 8.2 Compliance with Laws. Tenant covenants and agrees that at all times during the Lease Term, Tenant’s use of the Demised Premises shall be in compliance with all zoning, land use, and other applicable laws, rules, and regulations with respect thereto, and that nothing shall be done or kept on the Demised Premises in violation of applicable law, ordinance, order, rule or regulation of any governmental authority having jurisdiction, and that the Demised Premises shall be used, kept and maintained in compliance with any such law, ordinance, order, rule or regulation and with the certificate of occupancy issued for the Building and/or the Demised Premises; provided, however, that nothing in this Section 8.2 is intended, or shall be construed, to require Tenant to make or to pay for alterations, improvements or replacements to or of the Property (or any portion thereof) except those that may be required as a result of Tenant’s or Baxter’s use or alteration of the Demised Premises or Tenant’s business operations. 8.3 Compliance with Insurance Requirements. Tenant covenants and agrees that should anything be done or kept at the Demised Premises on the part of Tenant or Tenant’s employees, agents, invitees or contractors that increases the cost of insurance maintained with respect to the Demised Premises or the Property, then Tenant shall bear the full economic effect of such increase in premiums. 8.4 No Waste or Impairment of Value. Tenant covenants and agrees that nothing shall be done or kept on the Demised Premises or the Property that would impair the value of the Demised Premises or the Property, or that would constitute excessive wear and tear or waste. 8.5 No Overloading. Tenant covenants and agrees that nothing shall be done or kept on the Demised Premises or the Building and that no improvements, changes, alterations, additions, maintenance or repairs shall be made to the Demised Premises that might impair the structural soundness of the Building, Improvements, or Parking Area, that might result in an overload of electrical lines serving the Building or cause excessive tripping of circuit breakers, that might interfere with any telephone lines or equipment or any other electric or electronic equipment in the Building or on any adjacent or nearby property, that might place excessive demands on or exceed the capacity of the water lines or sewer lines servicing the Building, or that might in any other way overload any portion of the Property or Improvements or any equipment or facilities servicing the same. In the event of violations hereof, Tenant covenants and agrees to immediately remedy the violation at Tenant’s expense and in compliance with all requirements of governmental authorities and insurance underwriters. 8.6 No Nuisance, Noxious or Offensive Activity. Tenant covenants and agrees that no noxious or offensive activity shall be carried on upon the Demised Premises or the Property nor shall anything be done or kept on the Demised Premises or the Property that may be or become a public or private nuisance or that is likely to cause disturbance or annoyance to others on adjacent or nearby property. 8.7 No Annoying Lights, Sounds or Odors. Tenant covenants and agrees that no light shall be emitted from the Demised Premises that is unreasonably bright or causes unreasonable glare; no sound shall be emitted from the Demised Premises that is unreasonably loud or annoying; and no odor shall be emitted from the Demised Premises that is or might be noxious or offensive to others in the Building or on adjacent or nearby property.   10 -------------------------------------------------------------------------------- 8.8 No Unsightliness. Tenant covenants and agrees that no unsightliness shall be permitted on the Demised Premises or the Property that is visible from any adjacent or nearby property. Without limiting the generality of the foregoing, all unsightly conditions, equipment, objects and conditions shall be kept enclosed within the Demised Premises; no refuse, scrap, debris, garbage, trash, bulk materials or waste shall be kept, stored or allowed to accumulate on the Demised Premises or the Property except as may be enclosed within the Demised Premises; all pipes, wires, poles, antennas and other facilities for utilities or the transmission or reception of audio or visual signals or electricity shall be kept and maintained underground or enclosed within the Demised Premises or appropriately screened from view; and no temporary structure shall be placed or permitted on the Demised Premises or the Property without the prior written consent of Landlord. 8.9 No Animals. Tenant covenants and agrees that no animals shall be permitted or kept on the Demised Premises or the Property; provided, however, that nothing herein shall be construed as prohibiting qualified service animals that may not be legally excluded from the Demised Premises or Property pursuant to the Americans with Disabilities Act or any similar law, rule or regulation applicable to the Property. 8.10 Restriction on Signs and Exterior Lighting. Tenant covenants and agrees that no signs or advertising devices of any nature shall be erected or maintained by Tenant on the Demised Premises or the Property and no exterior lighting shall be permitted on the Demised Premises or the Property except as approved in writing by Landlord, which approval will not be unreasonably withheld, conditioned or delayed. 8.11 No Violation of Covenants. Tenant covenants and agrees not to commit, suffer or permit any violation of any covenant, condition or restriction affecting the Demised Premises or the Property. 8.12 Restriction on Changes and Alterations. Tenant covenants and agrees not to improve, change, alter, add to, remove or demolish any improvements on the Demised Premises, (“Changes”), without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, and unless Tenant complies with all reasonable conditions that may be imposed by Landlord in connection with such consent; and unless Tenant pays to Landlord the reasonable costs and expenses of Landlord for architectural, engineering, legal or other consulting that may be reasonably incurred by Landlord in determining whether to approve any such Changes. Landlord’s consent to any Changes and the conditions imposed in connection therewith shall be subject to all requirements and restrictions of any holder of a mortgage or deed of trust encumbering the Property. If such consent is given, no such changes shall be permitted unless Tenant shall have procured and paid for all necessary permits and authorizations from any governmental authorities having jurisdiction; unless such Changes will not reduce the value of the Property, and will not affect or impair existing insurance on the Property; and unless Tenant, at Tenant’s sole cost and expense, shall maintain or cause to be maintained workmen’s compensation (to the extent required by applicable law) covering all persons employed in connection with the work and obtains liability insurance covering any loss or damage to persons or property arising in connection with any such Changes and such other insurance or bonds as Landlord may reasonably require. Tenant covenants and agrees that any such Changes approved by Landlord shall be completed with due diligence and in a good and workmanlike fashion and in compliance with all conditions imposed by Landlord and all applicable permits, authorizations, laws, ordinances, orders, rules and regulations of governmental authorities having jurisdiction and that the costs and expenses with respect to such Changes shall be paid promptly when due and that the Changes shall be accomplished free of liens of mechanics and   11 -------------------------------------------------------------------------------- materialmen. Tenant covenants and agrees that all such Changes (except to the extent they constitute Tenant’s Equipment, whether or not affixed or attached to the real estate) shall become the property of Landlord at the expiration of the Lease Term if and to the extent that Landlord relieves Tenant from its Restoration Obligations at the expiration or termination of this Lease. 8.13 No Mechanic’s Liens. Tenant covenants and agrees not to permit or suffer, and to cause to be removed and released, any mechanic’s, materialmen’s or other lien on account of supplies, machinery, tools, equipment, labor or material furnished or used in connection with the construction, alteration, improvement, addition to or repair of the Demised Premises by, through or under Tenant. At least fifteen (15) days prior to any Changes, Tenant shall provide written notice to Landlord of the date of commencement of any Changes. Prior to the commencement of any Changes, Tenant shall post in conspicuous locations and maintain on the Demised Premises and Building Notices of Owner’s Non-Liability in the form attached hereto as Exhibit C or in such other form as Landlord may from time to time reasonably require in writing. Tenant shall have the right to contest, in good faith and with reasonable diligence, the validity of any such lien or claimed lien, provided that Tenant shall give to Landlord such security as may be reasonably requested by Landlord to insure the payment of any amounts claimed, including interest and costs, and to prevent any sale, foreclosure or forfeiture of any interest in the Property on account of any such lien, including, without limitation, bonding, escrow or endorsement of the title insurance policy of Landlord and any holder of a mortgage or deed of trust encumbering the Property. If Tenant so contests, then on final determination of the lien or claim for lien, Tenant shall immediately pay any judgment rendered, with interest and costs, if any, and will cause the lien to be released and any judgment satisfied. 8.14 No Other Encumbrances. Tenant covenants and agrees not to obtain any financing secured by Tenant’s interest in the Demised Premises and not to encumber the Demised Premises or Landlord’s or Tenant’s interest therein, without the prior written consent of Landlord, and to keep the Demised Premises free from all liens and encumbrances except liens and encumbrances existing upon the date of commencement of the Lease Term or liens and encumbrances created by Landlord or otherwise outside the control of Tenant. 8.15 Subordination to Landlord Mortgages. Tenant covenants and agrees that this Lease and Tenant’s interest in the Demised Premises shall be junior and subordinate to any mortgage or deed of trust now or hereafter encumbering the Property. In the event of a foreclosure of any such mortgage or deed of trust, Tenant shall attorn to the party acquiring title to the Property as the result of such foreclosure. No act or further agreement by Tenant shall be necessary to establish the subordination of this Lease to any such mortgage or deed of trust, which is self-executing, but Tenant covenants and agrees, upon request to Landlord, to execute such documents as may be reasonably necessary or appropriate to confirm and establish this Lease as subordinate to any such mortgage or deed of trust in accordance with the foregoing provisions, including, without limitation, the form of Subordination, Non-Disturbance and Attornment Agreement attached hereto as Exhibit D. Alternatively, Tenant covenants and agrees that, at the option of any mortgagee or beneficiary under a deed of trust, Tenant shall execute documents as may be reasonably necessary to establish this Lease and Tenant’s interest in the Demised Premises as superior to any such mortgage or deed of trust. If Tenant fails to execute any documents required to be executed by Tenant under the provisions hereof, Tenant hereby makes, constitutes and irrevocably appoints Landlord as Tenant’s attorney in fact and in Tenant’s name, place and stead to execute any such document. In the event Tenant requests any changes or revisions to any such document or agreement, Tenant shall pay to Landlord, within ten (10) days after demand by Landlord, the reasonable costs and expenses of Landlord in connection with the negotiation, drafting, and revision thereof, including attorneys’ fees.   12 -------------------------------------------------------------------------------- 8.16 Assignment or Subletting. Tenant covenants and agrees not to make or permit a Transfer by Tenant, as hereinafter defined, without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. A Transfer by Tenant shall include an assignment of this Lease, a sublease of all or any part of the Demised Premises or any assignment, sublease, license, franchise, transfer, mortgage, pledge or encumbrance of all or any part of Tenant’s interest under this Lease or in the Demised Premises, by operation of law or otherwise, or the use or occupancy of all or any part of the Demised Premises by anyone other than Tenant. Any such Transfer by Tenant without Landlord’s written consent shall be void and shall constitute a default under this Lease. In the event Landlord consents to any Transfer by Tenant, Tenant shall not be relieved of its obligations under this Lease and Tenant shall remain liable, jointly and severally and as a principal, and not as a guarantor or surety, under this Lease, to the same extent as though no Transfer by Tenant had been made, unless specifically provided to the contrary in Landlord’s prior written consent. The acceptance of rent by Landlord from any person other than Tenant shall not be deemed to be a waiver by Landlord of the provisions of this Section or of any other provision of this Lease and any consent by Landlord to a Transfer by Tenant shall not be deemed a consent to any subsequent Transfer by Tenant. In giving or withholding its consent to a proposed Transfer by Tenant, Landlord shall be entitled to consider any reasonable factor, including but not limited to the following: (a) financial strength and credit history of the proposed subtenant/assignee; (b) business reputation of the proposed subtenant/assignee; (c) proposed use of the Demised Premises by the proposed subtenant/assignee; (d) managerial and operational skills of the proposed subtenant/assignee; and (e) compatibility of the proposed subtenant with other tenants of the Building. Notwithstanding the foregoing, Tenant may assign this Lease or sublet any or all of its leasehold interest in the Demised Premises to an affiliate, subsidiary, or parent corporation of Tenant; (ii) resulting entity from a merger or consolidation involving Tenant; or (iii) an entity purchasing all or substantially all of the assets of Tenant, in each case without Landlord’s consent, provided that Tenant gives written notice to Landlord with a copy of the assignment or sublease and the assignee or sublessee agrees in writing with Landlord to be bound by the terms and conditions of the Lease; provided further that no such notice or consent shall be required in connection with the transfer of any voting stock or interests of Tenant. Despite any assignment or sublease, Tenant will not be relieved of its obligations under this Lease, and Tenant remains liable, jointly and severally and as a principal, and not as a guarantor or surety, under this Lease, to the same extent as though no assignment or sublease by Tenant had been made. Tenant covenants and agrees that in the event Landlord consents to a sublease by Tenant, Tenant and Tenant’s Subtenant shall enter into the form of Sublease, Assumption and Consent Agreement attached hereto as Exhibit E, and in the event Landlord consents to an assignment, Tenant and Tenant’s assignee shall enter into the form of Assignment, Assumption, and Consent Agreement attached hereto as Exhibit F, or the standard form of agreement in each case then being used by Landlord for subleases and assignments. In the event Tenant or Tenant’s transferee requests any changes or revisions to any such agreement, Tenant shall pay to Landlord, within ten (10) days after demand by Landlord, the reasonable costs and expenses of Landlord in connection with any request by Tenant for consent to a Transfer, including attorneys’ fees. 8.17 Annual Financial Statements. Tenant covenants and agrees to furnish to Landlord, within fifteen (15) days after Landlord’s written request, copies of Tenant’s most recent year end financial statements, and agrees that Landlord may deliver any such financial statements to any existing or prospective mortgagee or purchaser of the Property. The financial statements shall include a balance sheet as of the end of, and a statement of profit and loss for, the preceding fiscal year of Tenant and, if regularly prepared by Tenant, a statement of sources and use of funds for the preceding fiscal year of Tenant.   13 -------------------------------------------------------------------------------- 8.18 Payment of Other Taxes. Tenant covenants and agrees to pay promptly when due all personal property taxes on personal property of Tenant on the Demised Premises and all state and local sales taxes and use taxes, the nonpayment of which might give rise to a lien on the Demised Premises or Tenant’s interest therein to the extent applicable to the Demised Premises, and to furnish, if requested by Landlord, evidence of such payments. 8.19 Estoppel Certificates. Tenant covenants and agrees to execute, acknowledge and deliver to Landlord, upon Landlord’s written request, a written Estoppel Certificate certifying that this Lease is unmodified (or, if modified, stating the modifications) and in full force and effect; stating the dates to which Basic Rent has been paid, stating the amount of the Security Deposit held by Landlord; stating the amount of the Monthly Deposits held by Landlord for the then tax and insurance year; and stating whether or not Landlord is in default under this Lease (and, if so, specifying the nature of the default); and stating such other matters concerning this Lease as Landlord may reasonably request, including but not limited to, the form of Estoppel Certificate attached hereto as Exhibit G. Tenant agrees that such statement may be delivered to and relied upon by any existing or prospective mortgagee or purchaser of the Property. Tenant agrees that a failure to deliver such a statement within ten (10) days after written request from Landlord shall be conclusive upon Tenant that this Lease is in full force and effect without modification except as may be represented by Landlord; that there are no uncured defaults by Landlord under this Lease; and that any representation by Landlord with respect to Basic Rent, the Security Deposit and Monthly Deposits are true. In the event Tenant requests any changes or revisions to any such Estoppel Certificate other than to correct inaccuracies, Tenant shall pay to Landlord, within ten (10) days after demand by Landlord, the reasonable costs and expenses of Landlord in connection the negotiation, drafting and revision of such Estoppel Certificate, including attorneys’ fees. 8.20 Landlord Right to Inspect and Show Premises and to Install “For Sale” Signs. Tenant covenants and agrees that Landlord and the authorized representatives of Landlord shall have the right to enter the Demised Premises at any reasonable time for the purposes of inspecting, repairing or maintaining the same or performing any obligations of Tenant that Tenant has failed to perform hereunder or for the purposes of showing the Demised Premises to any existing or prospective mortgagee, purchaser or, during the last nine (9) months of the Lease Term, lessee of the Property or the Demised Premises. Except in the case of emergency, Landlord will notify Tenant a reasonable time prior to entering the Demised Premises. Tenant covenants and agrees that Landlord may at any time place on the Property or the Demised Premises a sign advertising the Property or the Demised Premises for sale or, within the last nine (9) months of the Term, for lease. 8.21 Landlord Right to Renovate, Expand or Modify Building. Tenant covenants and agrees that Landlord shall have the right to renovate, expand, reconstruct, or otherwise modify the Building and/or Common Facilities at any time, in Landlord’s sole discretion; provided, however, that no such renovation, expansion, reconstruction, or other modification shall permanently or materially interfere with Tenant’s right to the quiet use and enjoyment of the Demised Premises. Landlord will give Tenant prior written notice describing any work planned under the terms of this provision and the methods planned for performing such work. Tenant may require Landlord to modify its methods in reasonable manner to minimize any impact on Tenant’s operations. 8.22 Landlord Title to Fixtures, Improvements and Equipment. Subject to Tenant’s Restoration Obligations and excluding Tenant’s Equipment, Tenant covenants and agrees that all fixtures and improvements on the Demised Premises and all equipment and personal property relating to the use and operation of the Demised Premises (as distinguished from operations incident to the business of Tenant), including all plumbing, heating, lighting, electrical and air conditioning fixtures and equipment, whether or not attached to or affixed to the Demised Premises, and whether now or hereafter located upon the Demised Premises, shall be and remain the property of Landlord upon expiration of the Lease Term.   14 -------------------------------------------------------------------------------- 8.23 Removal of Tenant’s Equipment. In addition to Tenant’s Restoration Obligations, Tenant covenants and agrees to remove, at or prior to the expiration of the Lease Term, all of Tenant’s Equipment, as herein defined. If such removal shall injure or damage the Demised Premises Tenant covenants and agrees, at its sole cost and expense, at or prior to the expiration of the Lease Term, to repair such injury and damage in good and workmanlike fashion and to place the Demised Premises in the same condition as the Demised Premises would have been if such Tenant’s Equipment had not been installed. If Tenant fails to remove any Tenant’s Equipment by the Expiration of the Lease Term, Landlord may, at its option, keep and retain any such Tenant’s Equipment or dispose of the same and retain any proceeds therefrom, and Landlord shall be entitled to recover from Tenant any costs or expenses of Landlord in removing the same and in restoring the Demised Premises in excess of the actual proceeds, if any, received by Landlord from disposition thereof. Tenant releases and discharges Landlord from any and all claims and liabilities of any kind arising out of Landlord’s disposition of Tenant’s Equipment pursuant to this Section 8.23. 8.24 Tenant Indemnification of Landlord. Tenant covenants and agrees to protect, indemnify, defend, and hold Landlord harmless from and against all liability, obligations, claims, damages, penalties, causes of action, costs and expenses, including attorneys’ fees, imposed upon, incurred by or asserted against Landlord by reason of: (a) any accident, injury to or death of any person or loss of or damage to any property occurring on the Demised Premises or Common Facilities; (b) any act or omission of Tenant or of Tenant’s officers, employees, agents, guests or invitees or of anyone claiming by, through or under Tenant; (c) any use that may be made by Tenant of, or condition created by Tenant or Baxter upon, the Demised Premises or Common Facilities; (d) any improvements, fixtures or equipment upon the Demised Premises or Common Facilities installed by Tenant or by Baxter; (e) any failure on the part of Tenant to perform or comply with any of the provisions, covenants or agreements of Tenant contained in this Lease; (f) any violation of any applicable law, ordinance, order, rule or regulation of governmental authorities having jurisdiction by Tenant or Tenant’s officers, employees, agents, guests or invitees or by anyone claiming by, through or under Tenant; and (g) any repairs, maintenance or Changes to the Demised Premises made or caused to be made by, through or under Tenant. Tenant further covenants and agrees that, in case any action, suit or proceeding is brought against Landlord by reason of any of the foregoing, Tenant will, at Tenant’s sole cost and expense, pay all costs and expenses to defend Landlord in any such action, suit or proceeding with counsel of Landlord’s choosing. Tenant’s obligations under this Section 8.24 will not apply to any liability, obligations, claims, damages, penalties, causes of action, costs and expenses, including attorneys’ fees, imposed upon, incurred by or asserted against Landlord to the extent caused or contributed by the gross negligence or willful misconduct of Landlord or its officers, agents, contractors, guests, invitees or employees. 8.25 Liability of Landlord. Landlord shall be liable to Tenant for Landlord’s gross negligence and willful misconduct. Tenant waives and releases any claims Tenant may have against Landlord or Landlord’s officers, agents or employees for loss, damage or injury to person or property sustained by Tenant or Tenant’s officers, agents, employees, guests, invitees, or anyone claiming by, through or under Tenant resulting from any cause whatsoever other than gross negligence or willful misconduct. Notwithstanding anything to the contrary contained in this Lease, Landlord, its beneficiaries, successors and assigns, shall not be personally liable with respect to any of the terms, covenants and conditions of this Lease, and Tenant shall look solely to the equity of Landlord in the Property in the event of any default or liability of Landlord under this Lease, such exculpation of liability to be absolute and without any exception whatsoever.   15 -------------------------------------------------------------------------------- 8.26 Release upon Transfer by Landlord. In the event of a transfer by Landlord of the Property or of Landlord’s interest as Landlord under this Lease, Landlord’s successor or assignee shall take subject to and be bound by this Lease and, in such event, Tenant covenants and agrees that Landlord shall be released from all obligations of Landlord under this Lease, except obligations that arose and matured prior to such transfer by Landlord; that Tenant shall thereafter look solely to Landlord’s successor or assign for satisfaction of the obligations of Landlord under this Lease; and that, upon demand by Landlord or Landlord’s successor or assign, Tenant shall attorn to such successor or assign. 8.27 Rules and Regulations. Upon and after receipt of written notice thereof to Tenant, Tenant shall observe and comply with rules and regulations that may be promulgated and amended from time to time by Landlord, provided that such rules and regulations are reasonable and do not materially interfere with Tenant’s ability to carry out the Permitted Use at the Demised Premises. Landlord shall not be responsible to Tenant for the failure of any other tenant of the Building to observe or comply with any of the rules or regulations, but Landlord shall make reasonable efforts to enforce the rules and regulations (if any) for the benefit of all tenants of the Building. 8.28 Monitoring Equipment. Should equipment for monitoring fire systems and/or security systems be deemed necessary by Tenant or be required for the Demised Premises by federal, state, or local governing agencies because of Tenant’s equipment, the nature of Tenant’s business, or Tenant’s modification of the Demised Premises, Tenant shall be responsible for installation of such monitoring system, for any required building permits, monthly monitoring fees, and any fines, penalties or other charges for false alarms. Should such monitoring systems be otherwise required by federal, state, or local governing agencies, or deemed by Landlord to be advisable for the operation of the Building, Landlord shall be responsible for installation of such monitoring systems, and all costs and expenses relating thereto shall be included as Common Facilities Charges. ARTICLE 9 ENVIRONMENTAL MATTERS 9.1 Definitions. 9.1.1 Hazardous Material. Hazardous Material means any substance: 9.1.1.1 that is or becomes defined as a “hazardous material,” “hazardous waste,” “hazardous substance,” “regulated substance,” “pollutant” or “contaminant” under any applicable federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.); or 9.1.1.2 that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States, the State of Colorado or any political subdivision thereof; or 9.1.1.3 the presence of which on the Demised Premises causes or threatens to cause a nuisance upon the Demised Premises or to adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about the Demised Premises; or 9.1.1.4 that contains gasoline, diesel fuel or other petroleum hydrocarbons; or   16 -------------------------------------------------------------------------------- 9.1.1.5 that contains polychlorinated bipheynols (PCBs), asbestos or urea formaldehyde foam insulation; or 9.1.1.6 radon gas. 9.1.2 Environmental Requirements. Environmental Requirements means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises, and similar items, of all governmental agencies, departments, commissions, boards, bureaus, or instrumentalities of the United States, states and political subdivisions thereof having jurisdiction over the Demised Premises and all applicable judicial, administrative, and regulatory decrees, judgments, and orders relating to the protection of human health or the environment. 9.1.3 Environmental Damages. Environmental Damages means all claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses of investigation and defense of any claim, whether or not such claim is ultimately defeated, and of any good faith settlement or judgment, of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable attorneys’ fees and disbursements and consultants’ and witnesses’ fees, any of which are incurred at any time as a result of the existence of Hazardous Material upon, about, beneath the Demised Premises or migrating or threatening to migrate to or from the Demised Premises, or the existence of a violation of Environmental Requirements pertaining to the Demised Premises. 9.2 Tenant’s Obligation to Indemnify, Defend and Hold Harmless. Tenant, its successors, assigns and guarantors, agree to indemnify, defend, reimburse and hold harmless the following persons from and against any and all Environmental Damages arising from activities of Tenant or its employees, agents, contractors, subcontractors, or guests, licensees, or invitees that (1) result in the release of Hazardous Materials upon, about or beneath the Demised Premises or migrating to or from the Demised Premises, or (2) result in the violation of any Environmental Requirements pertaining to the Demised Premises and the activities thereon: 9.2.1 Landlord; 9.2.2 any other person who acquires an interest in the Demised Premises in any manner, including but not limited to purchase at a foreclosure sale or otherwise; and 9.2.3 the directors, officers, shareholders, employees, partners, agents, contractors, subcontractors, experts, licensees, affiliates, lessees, mortgagees, trustees, heirs, devisees, successors, assigns, guests and invitees of such persons. This obligation shall include, but not be limited to, the burden and expense of investigating and defending all claims, suits and administrative proceedings (with counsel reasonably approved by the indemnified parties), including attorneys’ fees and expert witness and consulting fees, even if such claims, suits or proceedings are groundless, false or fraudulent, and conducting all negotiations of any description, and paying and discharging, when and as the same become due, any and all judgments, penalties or other sums due against such indemnified persons, and all such expenses incurred in enforcing the obligation to indemnify. Tenant, at its sole expense, may employ additional counsel of its choice to associate with counsel representing the indemnified parties.   17 -------------------------------------------------------------------------------- 9.3 Tenant’s Obligation to Remediate. Notwithstanding the obligation of Tenant to indemnify Landlord pursuant to this agreement, Tenant shall, upon demand of Landlord, and at its sole cost and expense, promptly take all actions to remediate the Demised Premises, Building, and Land that are reasonably necessary to mitigate Environmental Damages or to allow full economic use of the Building and Land, or are required by Environmental Requirements, which remediation is necessitated by the 1) release of a Hazardous Material upon, about or beneath the Demised Premises or 2) a violation of Environmental Requirements, either of which is caused by the actions of Tenant, its employees, agents, contractors, subcontractors, guests, invitees or licensees. Tenant shall promptly provide to Landlord copies of testing results and reports that are generated in connection with the above activities, and copies of any correspondence with any governmental entity related to such activities. 9.4 Notification. If Tenant shall become aware of or receive notice or other communication concerning any actual, alleged, suspected or threatened violation of Environmental Requirements, or liability of Tenant for Environmental Damages in connection with the Demised Premises or past or present activities of any person thereon, or that any representation set forth in this agreement is not or is no longer accurate, then Tenant shall deliver to Landlord, within ten days of the receipt of such notice or communication by Landlord, a written description of said violation, liability, correcting information, or actual or threatened event or condition, together with copies of any such notice or communication. Receipt of such notice shall not be deemed to create any obligation on the part of Landlord to defend or otherwise respond to any such notification or communication. 9.5 Negative Covenants. 9.5.1 No Hazardous Material on Demised Premises. Except in strict compliance with all Environmental Requirements, Tenant shall not cause, permit or suffer any Hazardous Material to be brought upon, treated, kept, stored, disposed of, discharged, released, produced, manufactured, generated, refined or used upon, about or beneath the Demised Premises by Tenant, its agents, employees, contractors, subcontractors, guests, licensees or invitees, or any other person. Tenant shall deliver to Landlord copies of all documents that Tenant provides to any governmental body in connection with compliance with Environmental Requirements with respect to the Demised Premises, such delivery to be contemporaneous with provision of the documents to the governmental agency. 9.5.2 No Violations of Environmental Requirements. Tenant shall not cause, permit or suffer the existence or the commission by Tenant, its agents, employees, contractors, subcontractors or guests, licensees or invitees, or by any other person (excepting Landlord, its employees, agents, or contractors) of a violation of any Environmental Requirements upon, about or beneath the Demised Premises or any portion of the Building or Land. 9.6 Landlord’s Right to Inspect and to Audit Tenant’s Records. Landlord shall have the right in its sole and absolute discretion, but not the duty, to enter and conduct an inspection of the Demised Premises and to inspect and audit Tenant’s records concerning Hazardous Materials at any reasonable time to determine whether Tenant is complying with the terms of the Lease, including but not limited to the compliance of the Demised Premises and the activities thereon with Environmental Requirements and the existence of Environmental Damages. Tenant hereby grants to Landlord the right to enter the Demised Premises and to perform, at Landlord’s cost, such tests on the Demised Premises as are reasonably necessary in the opinion of Landlord to assist in such audits and investigations. Landlord shall use reasonably diligent efforts to minimize interference with the business of Tenant by such tests inspections and audits, but Landlord shall not be liable for any interference caused thereby.   18 -------------------------------------------------------------------------------- 9.7 Landlord’s Right to Remediate. Should Tenant fail to perform or observe any of its obligations or agreements pertaining to Hazardous Materials or Environmental Requirements, then, thirty (30) days following written notice to Tenant of its failure and Tenant’s failure to cure within that period (except that such notice and cure opportunity is not necessary in an emergency situation), Landlord shall have the right, but not the duty, without limitation upon any of the rights of Landlord pursuant to this Lease, to enter the Demised Premises personally or through its agents, consultants or contractors and perform the same. Tenant agrees to indemnify Landlord for the costs thereof and liabilities therefrom as set forth in Section 9.2. 9.8 Survival of Environmental Obligations. The obligations of Landlord and Tenant as set forth in this Article 9 and all of its sections shall survive expiration and termination of this Lease. If Tenant has provided a certificate as required by Section 9.9 below which indicates no Environmental Damages or adverse environmental condition (excluding Hazardous Material migrating onto the Property from off-site or caused by Landlord, its agents, employees or contractors) not indicated by same as of the October 2005 investigation and certification, this Section 9.8 will expire two (2) years following the expiration or earlier termination of the Lease. 9.9 Environmental Certifications. Landlord and Tenant have been provided the certification of an environmental engineer, Altus Environmental Consulting, Inc., dated October 2005, that the Demised Premises and Property are safe for human occupancy as of the Commencement Date. Upon expiration or earlier termination of this Lease, Tenant, at its cost, shall have the tests and investigations indicated on Exhibit H performed and must provide to Landlord, a similar certification by a licensed environmental engineer, noting any qualifications to such certification. If Tenant does not timely perform such investigation and provide such certification, Landlord may, at Tenant’s cost, perform such investigation and obtain the opinion of a licensed environmental engineer regarding whether the Demised Premises and Property are safe for human occupancy, including the identification of any conditions which should be remedied to make it safe for human occupancy. If the investigation or certification indicates Environmental Damages or adverse environmental condition (excluding Hazardous Material migrating onto the Property from off-site or caused by Landlord, its agents, employees or contractors) not indicated by same as of the October 2005 investigation and certification, then Tenant shall promptly take any remedial actions necessary to remedy the Environmental Damages or environmental condition so identified. ARTICLE 10 DAMAGE OR DESTRUCTION 10.1 Damage to Demised Premises. If any portion of the Demised Premises shall be damaged or destroyed by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord (“Tenant’s Notice of Damage”). 10.2 Options to Terminate if Damage to Demised Premises is Substantial. Upon receipt of Tenant’s Notice of Damage, Landlord shall promptly proceed to determine the nature and extent of the damage or destruction and to estimate the time necessary to repair or restore the Demised Premises. As soon as reasonably possible, Landlord shall give written notice to Tenant stating Landlord’s estimate of the time necessary to repair or restore the Demised Premises (“Landlord’s Notice of Repair Time”). If Landlord reasonably estimates that repair or restoration of the Demised Premises cannot be completed within two hundred forty (240) days from the time of Landlord’s Notice of Repair Time, Landlord and Tenant shall each have the option to terminate this Lease. If, however, the damage or destruction was caused by the act or omission of Tenant or Tenant’s officers, employees, agents, guests or invitees or of anyone claiming by, through or under Tenant and for any reason the casualty is not insured (except failure   19 -------------------------------------------------------------------------------- by Landlord to have policy in force), Landlord shall have the option to terminate this Lease if Landlord reasonably estimates that the repair or restoration cannot reasonably be completed within two hundred forty (240) days from the time of Tenant’s Notice of Damage, but Tenant shall not have the option to terminate this Lease. Any option granted hereunder shall be exercised by written notice to the other party given within ten (10) days after Landlord’s Notice of Repair Time. If either Landlord or Tenant exercises its option to terminate this Lease, the Lease Term shall expire thirty (30) days after the notice by either Landlord or Tenant exercising such party’s option to terminate this Lease. Following termination of this Lease under the provisions hereof, Landlord shall refund to Tenant such amounts of Basic Rent and Additional Rent theretofore paid by Tenant as may be applicable to the period subsequent to the time of Tenant’s Notice of Damage less the reasonable value of any use or occupation of the Demised Premises by Tenant subsequent to the time of Tenant’s Notice of Damage. 10.3 Damage to Building. If the Building shall be damaged or destroyed by fire or other casualty (whether or not the Demised Premises are affected) to the extent of fifty percent (50%) or more of the replacement value of the Building, and within thirty (30) days after the happening of such damage Landlord shall decide not to reconstruct or rebuild the Building, then upon written notice to Tenant within such thirty (30) days, this Lease shall terminate and Landlord shall refund to Tenant such amounts of Basic Rent and Additional Rent paid by Tenant for the period after such damage less the reasonable value of any use or occupation of the Demised Premises by Tenant during such period. 10.4 Obligations to Repair and Restore. If repair and restoration of the Demised Premises can be completed within the period specified in Section 10.2, in Landlord’s reasonable estimation, or if neither Landlord nor Tenant terminate this Lease as provided in Sections 10.2 or 10.3, this Lease shall continue in full force and effect and Landlord shall proceed forthwith to cause the Demised Premises to be repaired and restored with reasonable diligence and there shall be an abatement of Basic Rent and Additional Rent proportionate to the extent of the space and period of time that Tenant is unable to use and enjoy the Demised Premises. Landlord may, at its option, require Tenant to arrange for and supervise the repair and restoration of the Demised Premises, in which case Landlord shall furnish Tenant with the insurance proceeds for such repair and restoration at the time or times such funds are needed, provided that such proceeds are sufficient to cover the costs of repair or restoration. 10.5 Application of Insurance Proceeds. The proceeds of any Casualty Insurance maintained on the Demised Premises, other than casualty insurance maintained by Tenant on fixtures and personal property of Tenant, shall be paid to and become the property of Landlord, subject to any obligation of Landlord to cause the Demised Premises to be repaired and restored and further subject to any rights of a holder of a mortgage or deed of trust encumbering the Property to such proceeds. Landlord’s obligation to repair and restore the Demised Premises provided in this Article 10 is limited to the repair and restoration that can be accomplished with the proceeds of any Casualty Insurance maintained or to be maintained on the Demised Premises; provided, that, if Landlord fails to repair and restore the Improvements, including the Demised Premises, for any reason, including the foregoing limitation, then Tenant shall have the right to terminate this lease upon written notice to Landlord, in which case Landlord shall refund to Tenant such amounts of Basic Rent and Additional Rent theretofore paid by Tenant as may be applicable to the period subsequent to the time of termination less the reasonable value of any use or occupation of the Demised Premises by Tenant subsequent to the date of casualty. Landlord will be responsible for any deductible on the Building casualty insurance maintained by Landlord; provided, however, that if the casualty results from an act or omission of Tenant, or Tenant’s officers, employees, agents, guests, or invitees or of anyone claiming by, through or under Tenant, then Tenant shall pay such deductible. The amount of any such insurance proceeds is subject to any right of a holder of a mortgage or deed of trust encumbering the Property to apply such proceeds to its secured debt.   20 -------------------------------------------------------------------------------- ARTICLE 11 CONDEMNATION 11.1 Taking — Substantial Taking — Insubstantial Taking. A “Taking” shall mean the taking of all or any portion of the Demised Premises as a result of the exercise of the power of eminent domain or condemnation for public or quasi-public use or the sale of all or part of the Demised Premises under the threat of condemnation. A “Substantial Taking” shall mean a Taking of twenty five percent (25%) or more of the area (in square feet) of either the Demised Premises or the Building. An “Insubstantial Taking” shall mean a Taking that does not constitute a Substantial Taking. 11.2 Termination on Substantial Taking. If there is a Substantial Taking with respect to the Demised Premises or the Building, the Lease Term shall expire on the date of vesting of title pursuant to such Taking. In the event of termination of this Lease under the provisions hereof, Landlord shall refund to Tenant such amounts of Basic Rent and Additional Rent theretofore paid by Tenant as may be applicable to the period subsequent to the time of termination of this Lease. 11.3 Restoration on Insubstantial Taking. In the event of an Insubstantial Taking, this Lease shall continue in full force and effect, Landlord shall proceed forthwith to cause the Demised Premises, less such Taking, to be restored as near as may be to the original condition thereof and there shall be abatement of Basic Rent and Additional Rent proportionate to the extent of the space so taken. Landlord may, at its option, require Tenant to arrange for and handle the restoration of the Demised Premises, in which case Landlord shall furnish Tenant with sufficient funds for such restoration at the time or times such funds are needed. 11.4 Right to Award. The total award, compensation, damages or consideration received or receivable as a result of a Taking (“Award”) shall be paid to and be the property of Landlord, including, without limitation, any part of the Award made as compensation for diminution of the value of the leasehold or the fee of the Demised Premises. Tenant hereby assigns to Landlord, all of Tenant’s right, title and interest in and to any such Award. Tenant covenants and agrees to execute, immediately upon demand by Landlord, such documents as may be necessary to facilitate collection by Landlord of any such Award. Notwithstanding Landlord’s right to the entire Award, Tenant shall be entitled to any separate award, if any, for the loss of Tenant’s personal property, Tenant’s relocation expenses, or the loss of Tenant’s business and profits. ARTICLE 12 DEFAULTS BY TENANT The occurrence of any one or more of the following events shall constitute a “Default by Tenant” of this Lease: 12.1 Failure to Pay Rent or Other Amounts. A Default by Tenant shall exist if Tenant fails to pay Monthly Rental (or any portion thereof), Basic Rent, Additional Rent, Monthly Deposits, or any other amounts payable by Tenant under the terms of this Lease, within five (5) days after (i) such rental or amount is due or (ii) notice that payment is due by Landlord to Tenant, whichever is later. 12.2 Nonoccupancy of Demised Premises. A Default by Tenant shall exist if Tenant shall fail to occupy and use the Demised Premises within thirty (30) days after commencement of the Lease Term or shall leave the Demised Premises continuously unoccupied and shall vacate and abandon the Demised Premises without providing for ongoing maintenance, heating and other utility service to the Demised Premises while vacated.   21 -------------------------------------------------------------------------------- 12.3 Transfer of Interest Without Consent. A Default by Tenant shall exist if Tenant’s interest under this Lease or in the Demised Premises shall be transferred to or pass to or devolve upon any other party without Landlord’s prior written consent; provided, however, that this Section 12.3 shall not apply to assignments or subleases for which prior written consent is not required pursuant to Section 8.16 above. 12.4 Execution and Attachment Against. A Default by Tenant shall exist if Tenant’s interest under this Lease or in the Demised Premises shall be taken upon execution or by other process of law directed against Tenant (other than by condemnation), or shall be subject to any attachment at the instance of any creditor or claimant against Tenant and said attachment shall not be discharged or disposed of within thirty (30) days after the levy thereof. 12.5 Bankruptcy or Related Proceedings. A Default by Tenant shall exist if Tenant shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any similar act of any state, or shall voluntarily take advantage of any such law or act by answer or otherwise, or shall be dissolved or shall make an assignment for the benefit of creditors or if involuntary proceedings under any such bankruptcy or insolvency law or for the dissolution of Tenant shall be instituted against Tenant or a receiver or trustee shall be appointed for the Demised Premises or for all or substantially all of the property of Tenant, and such proceedings shall not be dismissed or such receivership or trustee-ship vacated within sixty (60) days after such institution or appointment. 12.6 Violation of Lease Terms. A Default by Tenant shall exist if Tenant breaches or fails to comply with any agreement, term, covenant or condition in this Lease applicable to Tenant (other than those referred to in Sections 12.1 through 12.5 above), and Tenant does not cure such breach or failure within thirty (30) days after notice thereof by Landlord to Tenant, or, if such breach or failure to comply cannot be reasonably cured within such 30-day period, if Tenant shall not in good faith commence to cure such breach or failure to comply with such 30-day period or shall not diligently proceed therewith to completion with one hundred twenty (120) days following the occurrence of the breach or failure. 12.7 Reserved. ARTICLE 13 LANDLORD’S REMEDIES 13.1 Remedies Generally. Upon the occurrence of any Default by Tenant, Landlord shall have the right, at Landlord’s election, then or at anytime thereafter, to exercise any one or more of the following remedies: 13.1.1 Cure by Landlord. In the event of a Default by Tenant, Landlord may, at Landlord’s option, but without obligation to do so, and without releasing Tenant from any obligations under this Lease, make any payment or take any action as Landlord may reasonably deem necessary or desirable to cure any such Default by Tenant in such manner and to such extent as Landlord may reasonably deem necessary or desirable. Landlord may do so without demand on, or written notice to, Tenant and without giving Tenant any opportunity to cure such Default by Tenant. Tenant covenants and agrees to pay to Landlord, within ten (10) days after demand, all advances, costs and expenses of Landlord in connection with the making of any such payment or the taking of any such action, including reasonable attorneys’ fees, together with interest as hereinafter provided from the day of payment of any such reasonable advances,   22 -------------------------------------------------------------------------------- costs and expenses by Landlord. Action taken by Landlord may include commencing, appearing in, defending or otherwise participating in any action or proceedings and paying, purchasing, contesting or compromising any claim, right, encumbrance, charge or lien with respect to the Demised Premises that is reasonably necessary or desirable to protect its interest in the Demised Premises and under this Lease. 13.1.2 Termination of Lease and Damages. In the event of a Default by Tenant, Landlord may terminate this Lease, effective at such time as may be specified by written notice to Tenant, and demand (and, if such demand is refused, recover) possession of the Demised Premises from Tenant. Tenant shall remain liable to Landlord for damages in an amount equal to the Basic Rent, Additional Rent and other sums that would have been owing by Tenant hereunder for the balance of the term, had this Lease not been terminated, less the net proceeds, if any, of reletting of the Demised Premises by Landlord subsequent to such termination, after deducting all Landlord’s reasonable expenses in connection with such recovery of possession or reletting. Landlord shall be entitled to collect and receive such damages from Tenant on the days on which the Basic Rent, Additional Rent and other amounts would have been payable if this Lease had not been terminated. Alternatively, at the option of Landlord, Landlord shall be entitled to recover forthwith from Tenant, as damages for loss of the bargain and not as a penalty, an aggregate sum that, at the time of such termination of this Lease, represents the excess, if any, of (a) the aggregate of the Basic Rent, Additional Rent and all other sums payable by Tenant hereunder that would have accrued for the balance of the Lease Term, over (b) the aggregate rental value of the Demised Premises for the balance of the Lease Term, both discounted to present worth at the then applicable federal rate. 13.1.3 Repossession and Reletting. In the event of Default by Tenant, Landlord may reenter and take possession of the Demised Premises or any part thereof, without demand or notice, and repossess the same and expel Tenant and any party claiming by, under or through Tenant, and remove the effects of both, without breach of the peace, without being liable for prosecution on account thereof or being deemed guilty of any manner of trespass, and without prejudice to any remedies for arrears of rent or right to bring any proceeding for breach of covenants or conditions. No such reentry or taking possession of the Demised Premises by Landlord shall be construed as an election by Landlord to terminate this Lease unless a written notice of such intention is given to Tenant. No notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right, following any reentry or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which even the Lease will terminate as specified in said notice. After recovering possession of the Demised Premises, Landlord may, from time to time, but shall not be obligated to, relet the Demised Premises, or any part thereof, for the account of Tenant, for such term or terms and on such conditions and upon such other terms as Landlord, in its uncontrolled discretion, may determine. Landlord may make such repairs, alterations or improvements as Landlord may consider appropriate to accomplish such reletting, and Tenant shall reimburse Landlord upon demand for all costs and expenses, including brokers’ commissions and attorneys’ fees, that Landlord may incur in connection with such reletting. Landlord may collect and receive the rents for such reletting but Landlord shall in no way be responsible or liable for any failure to relet the Demised Premises, or any part thereof, or for any failure to collect any rent due upon such reletting. Notwithstanding Landlord’s recovery of possession of the Demised Premises, Tenant shall continue to pay on the dates herein specified, the Basic Rent, Additional Rent and other amounts that would be payable hereunder if such repossession had not occurred. Upon the expiration or earlier termination of this Lease, Landlord shall refund to Tenant any amount, without interest, by which the amounts paid by Tenant, when added to the net amount, if any, recovered by Landlord through any reletting of the Demised Premises, exceeds the amounts payable by Tenant under this Lease. If, in connection with any reletting, the new lease term extends beyond the existing term, or the premises covered thereby include other premises not part of the Demised Premises, a fair apportionment of the rent received from such reletting and the expenses incurred in connection therewith will be made in determining the net amount recovered from such reletting.   23 -------------------------------------------------------------------------------- 13.1.4 Waiver of Landlord Liens. Landlord hereby waives any and all statutory and/or common law landlord lien which now exists or hereafter arises in connection with this Lease. 13.1.5 Suits by Landlord. Actions or suits for the recovery of amounts and damages payable under this Lease may be brought by Landlord from time to time, at Landlord’s election, and Landlord shall not be required to await the date upon which the Lease Term would have expired to bring any such action or suit. 13.1.6 Recovery of Landlord Enforcement Costs. All reasonable costs and expenses incurred by Landlord in connection with collecting any amounts and damages owing by Tenant pursuant to the provisions of this Lease or to enforce any provision of this Lease, including reasonable attorneys’ fees, whether or not any action is commenced by Landlord, shall be paid by Tenant to Landlord upon demand. 13.1.7 Administrative Late Charge. Other remedies for nonpayment of rent notwithstanding, if the Monthly Rental, Monthly Deposit or Additional Rent is not received by Landlord on or before the tenth day of the month for which such rental or deposit is due, or if any other payment due Landlord by Tenant is not received by Landlord on or before the last day of the month next following the month in which Tenant was invoiced, a one-time administrative late charge of five percent (5%) of such past due amount shall become immediately due and payable in addition to such amounts owed under this Lease to help defray the additional cost to Landlord for processing such late payments. 13.1.8 Interest on Past-Due Payments and Advances. Tenant covenants and agrees to pay to Landlord interest at the rate of fifteen percent (15%) per annum, compounded on a monthly basis, on the amount of any Basic Rent, Monthly Deposit, Additional Rent or other charges not paid when due, from the date due and payable, and on the amount of any payment made by Landlord required to have been made by Tenant under this Lease and on the amount of any costs and expenses, including reasonable attorneys’ fees, paid by Landlord in connection with the taking of any action to cure any Default by Tenant, from the date of making any such payment or the advancement of such costs and expenses by Landlord. 13.1.9 Landlord’s Bankruptcy Remedies. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding, an amount equal to the maximum allowable by any statute or rule of law governing such proceeding in effect at the time when such damages are to be proved, whether or not such amount be greater, equal or less than the amounts recoverable, either as damages or rent, under this Lease. 13.2 Remedies Cumulative. Exercise of any of the remedies of Landlord under this Lease shall not prevent the concurrent or subsequent exercise of any other remedy provided for in this Lease or otherwise available to Landlord at law or in equity. ARTICLE 14 SURRENDER AND HOLDING OVER 14.1 Surrender upon Lease. Upon the expiration or earlier termination of this Lease, or on the date specified in any demand for possession by Landlord after any Default by Tenant, Tenant covenants and agrees to surrender possession of the Demised Premises to Landlord broom clean, with all lighting, doors,   24 -------------------------------------------------------------------------------- and electrical and mechanical systems (including, without limitation, all HVAC facilities) in good working order and condition, all walls in clean condition and holes or punctures in the walls repaired, and otherwise in the same condition as specified in Exhibit I attached hereto, casualty, condemnation and ordinary wear and tear excepted (such exceptions shall not limit Tenant’s obligation under Section 14.3. 14.2 Holding Over. If Tenant shall hold over after the expiration of the Lease Term, without written agreement providing otherwise, Tenant shall be deemed to be a Tenant at sufferance, at a Monthly Rental (except as provided in the last sentence of this Section 14.2), payable in advance, equal to one hundred fifty percent (150%) of the Monthly Rental, and Tenant shall be bound by all of the other terms, covenants and agreements of this Lease, including without limitation the obligation to pay Additional Rent. Nothing contained herein shall be construed to give Tenant the right to hold over at any time, and Landlord may exercise any and all remedies at law or in equity to recover possession of the Demised Premises, as well as any damages incurred by Landlord, due to Tenant’s failure to vacate the Demised Premises and deliver possession to Landlord as herein provided. If Tenant has not delivered the certificate of substantial completion and certificate of occupancy for Tenant’s Restoration Obligations as required by Section 14.3 below on or before the expiration of the Lease Term, Tenant shall be deemed to be a Tenant at sufferance, at a monthly rental, payable in advance, equal to the Monthly Rental, and Tenant shall be bound by all of the other terms, covenants and agreements of this Lease, including without limitation the obligation to pay Additional Rent. 14.3 Restoration Obligations. Upon the expiration or earlier termination of this Lease, or upon the date specified in any written demand for possession by Landlord after any Default by Tenant which date may not be less than six (6) months from the date of such notice), Tenant shall have completed all work associated with the removal of Tenant’s Equipment, fixtures, systems, and tenant improvements, whether by Tenant or Baxter, and restoration and reconstruction of the Demised Premises to the conditions described in Exhibit I attached hereto (referred to herein as Tenant’s “Restoration Obligations”). All such work shall be completed in a good and workmanlike manner by Quinlan Construction or other general contractor reasonably acceptable to Landlord. Repairing damage from casualty, the repair of which is subject to Articel 10 hereof, is not part of the Restoration Obligations. Tenant is responsible for all permits, fees, and costs associated with the work and must deliver to Landlord: (i) a certificate of substantial completion signed by the general contractor performing the work, and (ii), if required by the City, a certificate of occupancy from the City of Boulder for the Demised Premises following substantial completion of the restoration work. Prior to the commencement of the Tenant’s Restoration Obligations described and defined by this Section 14.3 and Exhibit I, Tenant must give Landlord written notice that Tenant intends to commence such work. Landlord may, at its sole option, reduce or eliminate any of Tenant’s Restoration Obligations by written notice to Tenant within fifteen (15) days from Tenant’s notice to Landlord, or, if earlier, with any written demand by Landlord for possession; provided, however, Landlord may not alter Tenant’s Restoration Obligations in any manner that increases Tenant’s cost of performance or prevents Tenant from recovering Tenant’s Equipment. If Tenant has not delivered the certificate of substantial completion and certificate of occupancy by the applicable deadline set forth in this Section 14.3, then Tenant will be deemed in default of this Section 14.3. ARTICLE 15 MISCELLANEOUS 15.1 No Implied Waiver. No failure by Landlord to insist upon the strict performance of any term, covenant or agreement contained in this Lease, no failure by Landlord to exercise any right or remedy under this Lease, and no acceptance of full or partial payment during the continuance of any Default by Tenant, shall constitute a waiver of any such term, covenant or agreement, or a waiver of any such right or   25 -------------------------------------------------------------------------------- remedy, or a waiver of any such Default by Tenant. Similarly, no failure by Tenant to insist upon the strict performance of any term, covenant or agreement contained in this Lease and no failure by Tenant to exercise any right or remedy under this Lease shall constitute a waiver of any such term, covenant or agreement or a waiver of any such right or remedy, or a waiver of any default by Landlord. 15.2 Survival of Provisions. Notwithstanding any termination of this Lease, the same shall continue in force and effect as to any provisions hereof that require observance or performance by Landlord or Tenant subsequent to termination. 15.3 Covenants Independent. This Lease shall be construed as if the Covenants herein between Landlord and Tenant are independent, and not dependent, and Tenant shall not be entitled to any offset against Landlord if Landlord fails to perform its obligations under this Lease. 15.4 Covenants as Conditions. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition. 15.5 Tenant’s Remedies. Tenant may bring a separate action against Landlord for any claim Tenant may have against Landlord under this Lease, provided that Tenant shall first give written notice thereof to Landlord and shall afford Landlord a reasonable opportunity to cure any such default. In addition, Tenant shall send notice of such default by certified or registered mail, postage prepaid, to the holder of any mortgage or deed of trust covering the Demised Premises, the Property or any portion thereof of whose address Tenant has been notified in writing, and shall afford such holder a reasonable opportunity to cure any default on Landlord’s behalf. In no event will Landlord be responsible for any incidental, consequential or special damages incurred by Tenant, including, but not limited to, loss of profits or interruption of business as a result of any default by Landlord hereunder. In no event will Tenant be responsible for any incidental, consequential or special damages incurred by Landlord, including, but not limited to, loss of profits or interruption of business as a result of any default by Tenant hereunder, except as may be specifically provided under the terms of this Lease 15.6 Binding Effect. This Lease shall extend to and be binding upon the heirs, executors, legal representatives, successors and assigns of the respective parties hereto. The terms, covenants, agreements and conditions in this Lease shall be construed as covenants running with the Land. 15.7 Short Form Lease. This Lease shall not be recorded, but Tenant agrees, at the request of Landlord, to execute a short form lease for recording, containing the names of the parties, a description of the Demised Premises and the Lease Term prepared and recorded at Landlord’s cost. 15.8 Notices and Demands. All notices, demands or billings under this Lease shall be in writing, signed by the party giving the same and shall be deemed properly given and received: (i) when actually given and received; (ii) when actually given by confirmed facsimile transmission, (iii) the date of confirmed delivery when delivery is by delivery service; or (iv) or three (3) business days after mailing, if sent by registered or certified United States mail, postage prepaid, addressed to the party to receive the notice all at the address or facsimile number set forth for such party in the first paragraph of this Lease or at such other address as either party may notify the other of in writing. Any notice by Tenant to Landlord shall not be effective until a copy thereof shall have been received by or transmitted in the same manner to Landlord’s counsel at the address set forth in the Summary of Basic Lease Terms or such other address as Landlord may from time to time notify Tenant in writing.   26 -------------------------------------------------------------------------------- 15.9 Force Majeure. In the event that Landlord shall be delayed or hindered in, or prevented from, the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power or unavailability of utilities, riots, insurrection, war or other reason of like nature not the fault of Landlord, or not within its reasonable control, the performance of such acts shall be excused for the period of delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay (including extension of both the commencement and expiration dates of this Lease); provided, however, that if Tenant is not in any way responsible for the delay and does not have use or occupancy of the Demised Premises during the period of delay, the rent and other charges payable hereunder shall be abated for such period of delay. In the event that Tenant shall be delayed or hindered in, or prevented from, the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power or unavailability of utilities, riots, insurrection, war or other reason of like nature not the fault of Tenant, or not within its reasonable control, the performance of such acts shall be excused for the period of delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay (including extension of the expiration date of this Lease); provided, however, that if the delay results in extension of the Lease Term, Tenant will continue to pay the rent and other charges payable hereunder for such period of extension. 15.10 Time of the Essence. Time is of the essence under this Lease, and all provisions herein relating thereto shall be strictly construed. 15.11 Captions for Convenience. The headings and captions hereof are for convenience only and shall not be considered in interpreting the provisions hereof. 15.12 Severability. If any provision of this Lease shall be held invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and there shall be deemed substituted for the affected provision a valid and enforceable provision as similar as possible to the affected provision. 15.13 Governing Law and Venue. This Lease shall be interpreted and enforced according to the laws of the State of Colorado. Any action or proceeding arising out of this Lease, its modification or termination, or the performance or breach of either party hereto, shall be brought exclusively in courts of the state and county in which the Property is located. The parties agree that such courts are a convenient forum and waive any right to alter or change venue, including removal. 15.14 Entire Agreement/Further Assurances. This Lease and any exhibits and addenda referred to herein, constitute the final and complete expression of the parties’ agreement with respect to the Demised Premises and Tenant’s occupancy thereof. Each party agrees that it has not relied upon or regarded as binding any prior agreements, negotiations, representations, or understandings, whether oral or written, except as expressly set forth herein. The parties agree that if there should be any clerical or typographical errors in this Lease, the Summary of Basic Lease Terms, any exhibit or addendum hereto, the party requested to do so will use its reasonable, good faith efforts to execute such corrective instruments or do all things necessary or appropriate to correct such errors. Further, the parties agree that if it becomes necessary or desirable to execute further instruments or to make other assurances, the party requested to do so will use its reasonable, good faith efforts to provide such executed instruments or do all things reasonably necessary or appropriate to carry out this Lease. 15.15 No Oral Amendment or Modifications. No amendment or modification of this Lease, and no approvals, consents or waivers by Landlord under this Lease, shall be valid and binding unless in writing and executed by the party to be bound.   27 -------------------------------------------------------------------------------- 15.16 Real Estate Brokers. Tenant covenants to pay, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions, charges or claims by any broker or other agent with respect to this Lease between Insumed and 2545 or the negotiation thereof other than the broker(s) listed as the Broker(s), if any, on the Summary of Basic Lease Terms. 15.17 Relationship of Landlord and Tenant. Nothing contained herein shall be deemed or construed as creating the relationship of principal and agent or of partnership, or of joint venture by the parties hereto, it being understood and agreed that no provision contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship other than the relationship of Landlord and Tenant. 15.18 Authority of Tenant. Each individual executing this Lease on behalf of a party represents and warrants that he is duly authorized to deliver this Lease on behalf of that party and that this Lease is binding upon that party in accordance with its terms. [Signature page follows] *                *                *   28 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed the day and year first above written.   LANDLORD:     TENANT: 2545 Central, LLC     Insmed Incorporated By:   /s/ Richard L. Hedges     /s/ Ronald D. Gunn   Richard L. Hedges     Name:    Ronald D. Gunn   Vice President     Title:    EVP & COO   Authorized Agent for Landlord        STATE OF COLORADO   COUNTY OF BOULDER     ) )ss )    LOGO [g42233gra.jpg]               The foregoing instrument was acknowledged before me this 23rd day of December, 2005 by Richard L. Hedges, as Vice President and Authorized Agent of 2545 Central, LLC. Witness my hand and official seal My commission expires: 4/11/09   Kimberly S. King Notary Public   STATE OF VIRGINIA     )     )ss COUNTY OF “ILLEGIBLE”     ) The foregoing instrument was acknowledged before me this 22 day of December, 2005 by Ronald D. Gunn, as EVP & COO of Insmed Incorporated. Witness my hand and official seal. My commission expires: 7/31/08   “ILLEGIBLE” Notary Public   29 -------------------------------------------------------------------------------- EXHIBIT A LEGAL DESCRIPTION OF LAND Flatiron Industrial Park, Filing 4, Lot 2 -------------------------------------------------------------------------------- EXHIBIT B LOCATION OF DEMISED PREMISES WITHIN BUILDING Entire Building -------------------------------------------------------------------------------- EXHIBIT C NOTICE OF NON-LIABILITY FOR MECHANICS’ LIENS Pursuant to C.R.S. § 38-22-105, [Landlord], the owner of these premises, located at [Building address], Boulder, Colorado, hereby gives notice to all persons performing labor or furnishing skill, materials, machinery, or other fixtures in connection with any construction, alteration, removal, addition, repair or other improvement on or to these premises, that the owner shall not be liable therefor and the interests of said owner shall not be subject to any lien for the same.

EXHIBIT E SUBSIDIARY GUARANTEE SUBSIDIARY GUARANTEE, dated as of November 21, 2005, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, (the “Guarantors”), in favor of the Purchasers signatory (the "Purchasers") to that certain Securities Purchase Agreement, dated as of the date hereof, between Amerex Companies, Inc., an Oklahoma corporation (the “Company”) and the Purchasers. W I T N E S S E T H: Whereas, pursuant to that certain Securities Purchase Agreement, dated as of the date hereof, by and between the Company and the Purchasers (the “Purchase Agreement”), the Company has agreed to sell and issue to the Purchasers, and the Purchasers has agreed to purchase from the Company the Company’s 10% Senior Secured Convertible Notes, due November 21, 2007 (the “Notes”), subject to the terms and conditions set forth therein; and Whereas, each Guarantor will directly benefit from the extension of credit to the Company represented by the issuance of the Notes; and          NOW, THEREFORE, in consideration of the premises and to induce the Purchasers to enter into the Purchase Agreement and to carry out the transactions contemplated thereby, each Guarantor hereby agrees with the Purchasers as follows:   1. Definitions. Unless otherwise defined herein, terms defined in the Purchase Agreement and used herein shall have the meanings given to them in the Purchase Agreement. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The following terms shall have the following meanings: “Guarantee” means this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise modified from time to time.              “Obligations” means the collective reference to all obligations and undertakings of the Company of whatever nature, monetary or otherwise, under the Notes, the Purchase Agreement, the Security Agreement, the Warrants, the Registration Rights Agreement or any other future agreement or obligations undertaken by the Company to the Purchasers, together with all reasonable attorneys’ fees, disbursements and all other costs and expenses of collection incurred by Purchasers in enforcing any of such Obligations and/or this Guarantee.   2. Guarantee. (a) Guarantee.   (i) The Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantee to the Purchasers and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.   (ii) Anything herein or in any other Transaction Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Transaction Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws, including laws relating to the insolvency of debtors, fraudulent conveyance or transfer or laws affecting the rights of creditors generally (after giving effect to the right of contribution established in Section 2(b)). (iii) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Purchasers hereunder. (iv) The guarantee contained in this Section 2 shall remain in full force and effect until all the Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full. (v) No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Purchasers from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full. (vi) Notwithstanding anything to the contrary in this Agreement, with respect to any defaulted non-monetary Obligations the specific performance of which by the Guarantors is not reasonably possible (e.g. the issuance of the Company's Common Stock), the Guarantors shall only be liable for making the Purchasers whole on a monetary basis for the Company's failure to perform such Obligations in accordance with the Transaction Documents. (a) Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2(c). The provisions of this Section 2(b) shall in no respect limit the obligations and liabilities of any Guarantor to the Purchasers, and each Guarantor shall remain liable to the Purchasers for the full amount guaranteed by such Guarantor hereunder.   (b) No Subrogation.  Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Purchasers, no Guarantor shall be entitled to be subrogated to any of the rights of the Purchasers against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Purchasers for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Purchasers by the Company on account of the Obligations are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Purchasers, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Purchasers in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Purchasers, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Purchasers may determine.   (c) Amendments, Etc. With Respect to the Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Purchasers may be rescinded by the Purchasers and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Purchasers, and the Purchase Agreement and the other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Purchasers may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Purchasers for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Purchasers shall have no obligation to protect, secure, perfect or insure any Lien at any time held by them as security for the Obligations or for the guarantee contained in this Section 2 or any property subject thereto.     (d) Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Purchasers upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Company and any of the Guarantors, on the one hand, and the Purchasers, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives to the extent permitted by law diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Purchase Agreement or any other Transaction Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Purchasers, (b) any defense, set-off or counterclaim (other than a defense of payment or performance or fraud or misconduct by Purchasers) which may at any time be available to or be asserted by the Company or any other Person against the Purchasers, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Purchasers may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Purchasers to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Purchasers against any Guarantor. For the purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings.   (e) Reinstatement. The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Purchasers upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. (f) Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Purchasers without set-off or counterclaim in U.S. dollars at the address set forth or referred to in the Purchase Agreement. 1. Representations and Warranties. Each Guarantor hereby makes the following representations and warranties to Purchasers as of the date hereof:   (a) Organization and Qualification. The Guarantor is a corporation or limited liability company, duly incorporated, validly existing and in good standing under the laws of the applicable jurisdiction set forth on Schedule 1, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Guarantor has no subsidiaries other than those identified as such on the Disclosure Schedules to the Purchase Agreement. The Guarantor is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of any of this Guaranty in any material respect, (y) have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Guarantor or (z) adversely impair in any material respect the Guarantor's ability to perform fully on a timely basis its obligations under this Guaranty (a "Material Adverse Effect").   (b) Authorization; Enforcement.  The Guarantor has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Guaranty, and otherwise to carry out its obligations hereunder. The execution and delivery of this Guaranty by the Guarantor and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Guarantor. This Guaranty has been duly executed and delivered by the Guarantor and constitutes the valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) No Conflicts. The execution, delivery and performance of this Guaranty by the Guarantor and the consummation by the Guarantor of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or By-laws or (ii) conflict with, constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Guarantor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Guarantor is subject (including Federal and state securities laws and regulations), or by which any material property or asset of the Guarantor is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as could not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Guarantor is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate, do not have a Material Adverse Effect.   (d) Consents and Approvals. The Guarantor is not required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other person in connection with the execution, delivery and performance by the Guarantor of this Guaranty. (e) Purchase Agreement. The representations and warranties of the Company set forth in the Purchase Agreement as they relate to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct as of each time such representations are deemed to be made pursuant to such Purchase Agreement, and the Purchasers shall be entitled to rely on each of them as if they were fully set forth herein, provided, that each reference in each such representation and warranty to the Company's knowledge shall, for the purposes of this Section 3, be deemed to be a reference to such Guarantor's knowledge. (f) Foreign Law.  Each Guarantor has consulted with appropriate foreign legal counsel with respect to any of the above representations for which non-U.S. law is applicable. Such foreign counsel have advised each applicable Guarantor that such counsel knows of no reason why any of the above representations would not be true and accurate. Such foreign counsel were provided with copies of this Subsidiary Guarantee and the Transaction Documents prior to rendering their advice. 1. Covenants.  Each Guarantor covenants and agrees with the Purchasers that, from and after the date of this Guarantee until the Obligations shall have been paid in full, such Guarantor shall take, and/or shall refrain from taking, as the case may be, each commercially reasonable action (including complying with all of its obligations in Section 7 of the Note) that is necessary to be taken or not taken, as the case may be, so that no Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor.   2. Miscellaneous. (a) Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except in writing by the majority in interest (based on the then-outstanding principal amount of the Notes at the time of such determination) of the Purchasers.   (b) Notices. All notices, requests and demands to or upon the Purchasers or any Guarantor hereunder shall be effected in the manner provided for in the Purchase Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 5(b). (c) No Waiver By Course Of Conduct; Cumulative Remedies. The Purchasers shall not by any act (except by a written instrument pursuant to Section 5(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Transaction Documents or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Purchasers, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Purchasers of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Purchasers would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. (d) Enforcement Expenses; Indemnification. (i) Each Guarantor agrees to pay, or reimburse the Purchasers for, all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Guarantee and the other Transaction Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Purchasers.   (ii) Each Guarantor agrees to pay, and to save the Purchasers harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable in connection with any of the transactions contemplated by this Guarantee. (iii) Each Guarantor agrees to pay, and to save the Purchasers harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guarantee to the extent the Company would be required to do so pursuant to the Purchase Agreement. (iv) The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Purchase Agreement and the other Transaction Documents. (a) Successor and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Purchasers and their respective successors and assigns; provided that no Guarantor may assign, transfer or delegate any of its rights or obligations under this Guarantee without the prior written consent of the Purchasers.   (b) Set-Off. Each Guarantor hereby irrevocably authorizes the Purchasers at any time and from time to time while an Event of Default under any of the Transaction Documents shall have occurred and be continuing, without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Purchasers to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Purchasers may elect, against and on account of the obligations and liabilities of such Guarantor to the Purchasers hereunder and claims of every nature and description of the Purchasers against such Guarantor, in any currency, whether arising hereunder, under the Purchase Agreement, any other Transaction Document or otherwise, as the Purchasers may elect, whether or not the Purchasers have made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Purchasers shall notify such Guarantor promptly of any such set-off and the application made by the Purchasers of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Purchasers under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Purchasers may have.   (c) Counterparts. This Guarantee may be executed by one or more of the parties to this Guarantee on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (d) Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (e) Section Headings. The Section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. (f) Integration. This Guarantee and the other Transaction Documents represent the agreement of the Guarantors and the Purchasers with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Purchasers relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Transaction Documents. (g) Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS. (h) Submission to Jurisdictional; Waiver. Each Guarantor hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Guarantee and the other Transaction Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, located in New York County, New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;   (ii) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address referred to in the Purchase Agreement or at such other address of which the Purchasers shall have been notified pursuant thereto; (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (v) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. (a) Acknowledgements.  Each Guarantor hereby acknowledges that: (i) it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Transaction Documents to which it is a party;   (ii) the Purchasers have no fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Guarantee or any of the other Transaction Documents, and the relationship between the Guarantors, on the one hand, and the Purchasers, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (iii) no joint venture is created hereby or by the other Transaction Documents or otherwise exists by virtue of the transactions contemplated hereby among the Guarantors and the Purchasers. (a) Additional Guarantors.  The Company shall cause each of its subsidiaries formed or acquired on or subsequent to the date hereof to become a Guarantor for all purposes of this Guarantee by executing and delivering an Assumption Agreement in the form of Annex 1 hereto.   (b) Release of Guarantors. Subject to Section 2(f), each Guarantor will be released from all liability hereunder concurrently with the repayment in full of all amounts owed under the Purchase Agreement, the Notes and the other Transaction Documents. (c) Seniority. The Obligations of each of the Guarantors hereunder rank senior in priority to any other debt of such Guarantor.   (d) Waiver of Jury Trial.  EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN. #   IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written. Envirosolve L.L.C.                                             By:_________________________________                               Name:                               Title:    # IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written. Waste Express, Inc.                                             By:_________________________________                               Name:                               Title:    # IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written. NES Technology, LLC                                             By:_________________________________                               Name:                               Title:                               # SCHEDULE 1 GUARANTORS                   The following are the names, notice addresses and jurisdiction of organization of each Guarantor. NAME ADDRESS JURISDICTION OF INCORPORATION COMPANY OWNED BY PERCENTAGE                #                                                              Annex 1 to SUBSIDIARY GUARANTEE ASSUMPTION AGREEMENT, dated as of ____ __, ______ made by ______________________________, a ______________ corporation (the "Additional Guarantor"), in favor of the Purchasers pursuant to the Purchase Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Purchase Agreement.   W I T N E S S E T H :   WHEREAS, Amerex Companies, Inc., an Oklahoma corporation (the "Company") and the Purchasers have entered into a Securities Purchase Agreement, dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement");   WHEREAS, in connection with the Purchase Agreement, the Company and its Subsidiaries (other than the Additional Guarantor) have entered into the Subsidiary Guarantee, dated as of November 21, 2005 (as amended, supplemented or otherwise modified from time to time, the "Guarantee") in favor of the Purchasers;   WHEREAS, the Purchase Agreement requires the Additional Guarantor to become a party to the Guarantee; and          WHEREAS, the Additional Guarantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee;   NOW, THEREFORE, IT IS AGREED: 1. Guarantee. By executing and delivering this Assumption Agreement, the Additional Guarantor, as provided in Section 5(n) of the Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedule 1 to the Guarantee. The Additional Guarantor hereby represents and warrants that each of the representations and warranties contained in Section 3 of the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor (after giving effect to this Assumption Agreement) as if made on and as of such date.   2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. #                   IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.                                            [ADDITIONALGUARANTOR]                                            By:                                             Name:                                            Title: #

  EXHIBIT 10.5 SECURITY AGREEMENT      THIS SECURITY AGREEMENT (as amended, modified, supplemented, renewed or restated from time to time, this “Security Agreement”) is made as of July 25, 2006, by and among JOHN B. SANFILIPPO & SON, INC., a Delaware corporation (“Borrower”) and U.S. BANK NATIONAL ASSOCIATION, a national banking association (“U.S. Bank”), in its capacity as agent (in such capacity, the “Agent”) for itself, as agent for the Lenders under the Amended and Restated Credit Agreement with Borrower dated July 25, 2006 (as amended, supplemented, restated or otherwise modified and in effect from time to time, the “Credit Agreement”) and for the holders of the JOHN B. SANFILIPPO & SON, INC., 4.67% Senior Notes due December 1, 2014, in the original aggregate principal amount of $65,000,000 (the “Holders”), issued under the Note Purchase Agreement, Dated December 16, 2004 (as amended, supplemented, restated or otherwise modified and in effect from time to time, the “Note Purchase Agreement”). RECITAL      The Lenders and the Holders have made and will make loans, advances, extensions of credit and/or other financial accommodations to or for the benefit of Borrower. This Security Agreement is subject to that certain Intercreditor and Collateral Agency Agreement, by and among the parties to this Security Agreement, of even date herewith (the “Intercreditor Agreement”).      NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions contained in this Security Agreement, and of any loans or extensions of credit or other financial accommodations at any time made to or for the benefit of Borrower by the Secured Parties, Borrower and the Agent agree as follows:      1 DEFINITIONS.      1.1 General Definitions. When used herein, the following capitalized terms shall have the meanings indicated, whether used in the singular or the plural:      “Accounts” shall mean all present and future rights (including without limitation, rights under any Margin Accounts) of Borrower to payment for Inventory or other Goods sold or leased or for services rendered, which rights are not evidenced by Instruments or Chattel Paper, regardless of whether such rights have been earned by performance and any other “accounts” (as defined in the Code).      “Account Debtor” shall mean any Person that is obligated on or under an Account or a General Intangible.      “Agent” has the meaning set forth in the introduction and shall include any successor to the Agent that has been appointed in accordance with Section 4.9.   --------------------------------------------------------------------------------        “Bank Products” means any of the following services or facilities extended to Borrower by the Agent, any Secured Party or any of their affiliates: (a) credit cards; (b) cash management, including controlled disbursement services, automatic clearing house transfer of funds and overdrafts; and (c) facilities and services extended under Rate Protection Agreements.      “Bank Products Agreements” means all documents and agreements relating to Bank Products.      “Bank Products Obligations” means all obligations and liabilities of Borrower under any Bank Products Agreements.      “Business Day” shall mean any day of the year on which commercial banks in New York, New York are not required or authorized to close.      “Collateral” shall mean any and all real or personal property in which the Agent may at any time have a lien or security interest under or pursuant to Section 2.1 or otherwise to secure the Obligations. The parties acknowledge that under the Credit Agreement, the Issuer of the Bainbridge Letter holds collateral under the Bainbridge Loan Documents (as those terms are defined in the Credit Agreement), and while that collateral might result in proceeds payable to the Agent under the Credit Agreement, it is not collateral for purposes of this Security Agreement unless, until and only to the extent that the Issuer of the Bainbridge Letter delivers proceeds of that collateral to the Agent, and is subject to the Intercreditor Agreement if and only to the extent that the Issuer of the Bainbridge Letter delivers proceeds of that collateral to the Agent. The parties acknowledge that under the Credit Agreement, the Lenders have the obligation to turnover to the Agent certain payments and other amounts received (e.g. proceeds of a setoff) and while that might result in amounts payable to the Agent under the Credit Agreement, these amounts are not collateral for purposes of this Security Agreement unless, until and only to the extent that a Lender delivers such amounts to the Agent and are subject to the Intercreditor Agreement if and only to the extent that a Lender delivers such amounts to the Agent.      “Deed of Trust” shall mean Borrower’s deed of trust referred to in Section 2.1.      “Default” shall mean the occurrence or existence of a Matured Default under the Credit Agreement or an Event of Default under the Note Purchase Agreement.      “Default Period” shall mean the period of time commencing at the beginning of the first Business Day after the commencement of a Sharing Period under the Intercreditor Agreement and continuing until such time, if ever, the Sharing Period described therein has ended, in accordance with the terms of the Intercreditor Agreement.      “Deposit Accounts” shall mean, (a) all deposit accounts (as defined in the Code) of Borrower now or hereafter maintained with the Agent, (b) all deposit accounts (as defined in the Code) of Borrower now or hereafter maintained with the Agent under the Credit Agreement so long as the Agent under the Credit Agreement is also the Agent under this Security Agreement, and (c) deposit accounts (as defined in the Code) of Borrower now or hereafter maintained at other banks or financial institutions as identified or described in any control agreement (which may include deposit accounts maintained 2 --------------------------------------------------------------------------------   with the Agent under the Credit Agreement if the Agent under the Credit Agreement is not the Agent under this Security Agreement).      “Documents” shall mean any and all warehouse receipts, bills of lading or similar Documents of title relating to Goods in which Borrower at any time has an interest and any other “documents” (as defined in the Code).      “Dollars” and “$” shall mean lawful currency of the United States of America.      “Equipment” shall mean any and all Goods, other than Inventory (including without limitation, equipment, machinery, motor vehicles, implements, tools, parts and accessories) that are at any time owned by Borrower, together with any and all accessions, parts and appurtenances and any other “equipment” (as defined in the Code).      “Financing Agreements” shall mean all agreements, instruments and documents, including without limitation, loan agreements, notes, letter of credit applications, letters of credit, guarantees, mortgages, deeds of trust, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, notices, leases, financing statements and all other written matter at any time executed by, on behalf of or for the benefit of Borrower and delivered to the Secured Parties pursuant to the Credit Agreement or the Note Purchase Agreement, together with all amendments and all agreements and documents referred to therein or contemplated thereby and all Bank Products Agreements. Without limitation Financing Agreements include this Security Agreement, the Mortgage, the Deed of Trust and the Intercreditor Agreement.      “Farm Products” shall mean all personal property of Borrower used or for use in farming or livestock operations, including without limitation, seed and harvested or un-harvested crops of all types and descriptions, whether annual or perennial and including trees, vines and the crops growing thereon, native grass, grain, feed, feed additives, feed ingredients, feed supplements, fertilizer, hay, silage, supplies (including without limitation, chemicals, veterinary supplies and related Goods), livestock of all types and descriptions (including without limitation, the offspring of such livestock and livestock in gestation) and any other “farm products” (as defined in the Code).      “General Intangibles” shall mean all of Borrower’s present and future right, title and interest in and to any customer deposit accounts, deposits, rights related to prepaid expenses, chose in action, causes of action and all other intangible personal property of every kind and nature (other than Accounts), including without limitation, Payment Intangibles, beneficial interests in trusts, corporate or other business records, inventions, designs, patents, patent applications, trademarks, trade names, trade secrets, goodwill, registrations, copyrights, licenses, franchises, customer lists, tax refunds, tax refund claims, customs claims, guarantee claims, contract rights membership interests, partnership interests, cooperative memberships or patronage benefits, obligations payable to Borrower for capital stock or other claims against any Owners, rights to any government subsidy, set aside, diversion, deficiency or disaster payment or payment in kind, milk bases, brands and brand registrations, water rights relating to the property covered by the Mortgage and the Deed of Trust (including without limitation, water stock, ditch rights, well permits, water permits, applications and the like), Commodity Credit Corporation storage agreements or contracts, leasehold interests in real and personal property and any security 3 --------------------------------------------------------------------------------   interests or other security held by or granted to Borrower to secure payment by any Account Debtor of any of the Accounts, and any other “general intangibles” (as defined in the Code).      “Inventory” shall mean any and all Goods which shall at any time constitute “inventory” (as defined in the Code) or Farm Products of Borrower, wherever located (including without limitation, Goods in transit and Goods in the possession of third parties), or which from time to time are held for sale, lease or consumption in Borrower’s business, furnished under any contract of service or held as raw materials, work in process, finished inventory or supplies (including without limitation, packaging and/or shipping materials).      “LC Obligations” shall mean, at any time, an amount equal to the aggregate un-drawn and un-expired amount of the outstanding Letters.      “Letter” or “Letters” shall mean a documentary or standby letter of credit Issued for the account of Borrower pursuant to the Credit Agreement.      “Mortgage” shall mean Borrower’s mortgage referred to in Section 2.1.      “Obligations” shall mean any and all liabilities, obligations and indebtedness of Borrower to any of the Secured Parties of any and every kind and nature, at any time owing, arising, due or payable and howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise (including without limitation LC Obligations, Bank Products Obligations, fees, charges and obligations of performance) and arising or existing under the Credit Agreement, the Note Purchase Agreement, this Security Agreement, the Mortgage, the Deed of Trust or any of the other Financing Agreements and any other Senior Indebtedness, as defined in the Intercreditor Agreement.      “Owner” shall mean any Person who is a holder of Borrower’s capital stock.      “Person” shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, provincial, county, city, municipal or otherwise, including without limitation, any instrumentality, division, agency, body or department thereof).      “Producer Payables” shall mean all amounts at any time payable by Borrower for the purchase of Inventory that could in the reasonable determination of the Agent result in a security interest, lien, claim or encumbrance in or upon any Collateral.      “Rate Protection Agreement” means, collectively, any currency or interest rate swap, cap, collar or similar agreement or arrangements designed to protect against fluctuations in interest rates or currency exchange rates entered into by Borrower under which the counterparty to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Secured Party or an affiliate of a Secured Party.      “Secured Parties” shall mean U.S. Bank, or any successor agent under the Credit Agreement, for the ratable benefit of the Lenders under the Credit Agreement that are or may hereafter become a 4 --------------------------------------------------------------------------------   party thereto in accordance with the provisions thereof, all such Lenders and the Holders from time to time, and, in each case, their permitted successors and assigns by operation of law.      “Secured Party” shall mean each of the Secured Parties.      1.2 Others Defined in Colorado Uniform Commercial Code. All other terms contained in this Security Agreement (which are not specifically defined in this Security Agreement) shall have the meanings set forth in the Uniform Commercial Code of Colorado (“Code”) to the extent the same are used or defined therein, specifically including, but not limited to the following: Chattel Paper, Commercial Tort Claims, Commodity Accounts, Commodity Contracts, Electronic Chattel Paper, Goods, Instruments, Investment Property, Letter of Credit Rights, Payment Intangibles, Securities Accounts and Tangible Chattel Paper.      2 SECURITY.      2.1 Security Interests and Liens. To secure the payment and performance of the Obligations, Borrower hereby grants to the Agent for the ratable benefit of the Secured Parties a continuing security interest in and to the following property and interests in property of Borrower, whether now owned or existing or hereafter acquired or arising and wherever located: all Accounts, Inventory, Equipment, Farm Products, Goods, General Intangibles, Payment Intangibles, Commercial Tort Claims (specifically described as those Commercial Tort Claims which are proceeds of any of the other herein described collateral), Deposit Accounts, Commodity Accounts, Commodity Contracts, Securities Accounts, Investment Property, Instruments, Letter of Credit Rights, Documents, Chattel Paper, Electronic Chattel Paper, Tangible Chattel Paper, all accessions to, substitutions for, and all replacements, products and proceeds of the foregoing (including without limitation, proceeds of insurance policies insuring any of the foregoing), all books and records pertaining to any of the foregoing (including without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records), and all insurance policies insuring any of the foregoing. Borrower agrees to grant to the Agent for the ratable benefit of the Secured Parties, liens against of Borrower’s interests in the real property known as the Panasonic Property in Kane County, Illinois, which liens shall be evidenced by Borrower’s mortgage (which may be hereafter amended). Borrower agrees to grant to the Agent for the ratable benefit of the Secured Parties, liens against of Borrower’s interests in the real property known as Crane Walnut Sheller Property in Merced County, California, which liens shall be evidenced by Borrower’s deed of trust (which may be hereafter amended).      2.2 Endorsement by the Agent. Borrower authorizes the Agent to endorse, in Borrower’s name, any item, however received by the Agent, representing payment on or other proceeds of any of the Collateral.      2.3 Delivery of Documents to the Agent. In the event that any Inventory becomes the subject of a warehouse receipt or bill of lading, said warehouse receipt or bill of lading shall, upon the request of the Agent, be promptly delivered to the Agent with such endorsements and assignments as are necessary to vest title and possession in the Agent. Provided that a Default does not then exist and would not be created thereby, the Agent shall return such Documents to Borrower within two (2) Business Days of Borrower’s request, but only for purposes of negotiation, delivery or exchange in the 5 --------------------------------------------------------------------------------   ordinary course of Borrower’s business, and provided, however, that Borrower shall comply with such terms and conditions deemed appropriate by the Agent to secure the return to the Agent of the proceeds of such Documents, where such return of proceeds would be required in accordance with Borrower’s obligations under the Financing Agreements.      2.4 Preservation of Collateral and Perfection of Security Interests. The Agent is authorized to file UCC-1 financing statements and amendments thereto in accordance with the Code. Borrower shall execute and deliver to the Agent, concurrently with the execution of this Security Agreement and at any time hereafter, all other financing statements (such as fixture filings or effective financing statements or other documents, as the Agent may reasonably request, in a form satisfactory to the Agent, to perfect and keep perfected the security interest in the Collateral granted by Borrower to the Agent and otherwise to protect and preserve the Collateral and the Agent’s security interests. In each case Borrower shall be obligated to pay the cost of filing or recording the same in all public offices deemed necessary by the Agent. Should Borrower fail to do so, the Agent is authorized to sign any such financing statements (that may require a signature) as Borrower’s agent. Borrower further agrees that a carbon, photographic, photostatic or other reproduction of this Security Agreement or of a financing statement is sufficient as a financing statement.      2.5 Loss of Value of Collateral. Borrower shall immediately notify the Agent of any material loss or decrease in the value of the Collateral.      2.6 Collection of Accounts; Power of Attorney. Borrower shall continue to maintain a lockbox with LaSalle Bank National Association and a related Deposit Account with U.S. Bank into which Account Debtors shall make payments to be applied (i) while a Sharing Period under the Intercreditor Agreement is not in effect, to the Liabilities under the Credit Agreement, and (ii) while a Sharing Period under the Intercreditor Agreement is in effect, to the Obligations in accordance with the Intercreditor Agreement. Upon and during the continuation of a Default, Borrower designates, makes, constitutes and appoints the Agent (and all Persons designated by the Agent) as Borrower’s true and lawful attorney-in-fact, with power, in Borrower’s or the Agent’s name, to: (a) demand payment of Accounts; (b) enforce payment of Accounts by legal proceedings or otherwise; (c) exercise all of Borrower’s rights and remedies with respect to proceedings brought to collect an Account; (d) sell or assign any Account upon such terms, for such amount and at such time or times as the Agent deems advisable; (e) settle, adjust, compromise, extend or renew any Account; (f) discharge and release any Account; (g) take control in any manner of any item of payment or proceeds of any Account; (h) prepare, file and sign Borrower’s name upon any items of payment or proceeds and deposit the same to the Agent’s account on account of the Obligations; (i) endorse Borrower’s name upon any Chattel Paper, Document, Instrument, invoice, warehouse receipt, bill of lading, or similar Document or agreement relating to any Account or any other Collateral; (j) sign Borrower’s name on any verification of Accounts and notices to Account Debtors; (k) prepare, file and sign Borrower’s name on any proof of claim in bankruptcy or similar proceeding against any Account Debtor; and (l) do all acts and things which are necessary, in the Agent’s reasonable discretion, to sell, transfer or otherwise obtain the proceeds of any Collateral or otherwise to fulfill Borrower’s obligations under this Security Agreement. The foregoing power of attorney is coupled with an interest and is therefore irrevocable. Borrower shall not permit to exist any other depository account for the deposit of proceeds Collateral of any type 6 --------------------------------------------------------------------------------   whatsoever, except the accounts referred to in this Section 2.6 or such other Deposit Account as may from time to time be approved in advance in writing by the Agent.      2.7 Account Covenants. Borrower shall: (a) promptly upon Borrower’s learning thereof, inform the Agent, in writing, of any material delay in Borrower’s performance of any of Borrower’s obligations to any Account Debtor or of any assertion of any material claims, offsets or counterclaims by any Account Debtor; (b) not permit or agree to any extension, compromise or settlement or make any change or modification of any kind or nature in excess of $250,000 with respect to any Account without the prior written consent of the Agent; and (c) promptly upon an officer of Borrower learning thereof, furnish to and inform the Agent of all material adverse information relating to the financial condition of any Account Debtor if Accounts attributable to such Account Debtor aggregate in excess of $250,000 or if such information would render such Account no longer an Eligible Account.      2.8 Account Records and Verification Rights. Borrower represents and warrants to and covenants with the Secured Parties that Borrower now keeps and at all times shall keep correct and accurate records relating to the Accounts and the financial and payment records of the Account Debtors, all of which records shall be available upon demand during Borrower’s usual business hours to any of the Agent’s officers, employees or agents. Any of the Agent’s officers, employees or agents shall have the right at any time, in the name of Borrower, to verify the validity, amount or any other matter relating to any Accounts, by mail, telephone, telegraph or otherwise. Borrower shall promptly notify the Agent of any amounts that are in dispute for any reason in excess of $250,000 which are due and owing from an Account Debtor.      2.9 Notice to Account Debtors. The Agent shall (subject to the terms of the Intercreditor Agreement), at any time or times upon and during the continuation of a Default, and without prior notice to Borrower, notify any or all Account Debtors that the Accounts have been assigned to the Agent and that the Agent has been granted a security interest therein and may direct any or all Account Debtors to make all payments upon the Accounts directly to the Agent or to the lockbox established pursuant to Section 2.6. The Agent shall furnish Borrower with a copy of such notice.      2.10 Inventory Records. Borrower represents and warrants to and covenants with the Secured Parties that Borrower now keeps and at all times shall keep correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s costs and selling prices of Inventory and daily withdrawals and additions of Inventory, all of which records shall be available on demand during Borrower’s usual business hours to any of the Agent’s officers, employees or agents.      2.11 Special Collateral. Upon request by the Agent, Borrower shall (except as provided for in Section 2.3 with regard to warehouse receipts) deliver or cause to be delivered to the Agent, with such endorsements and assignments as are necessary to vest title and possession in the Agent, all Chattel Paper, Instruments and Documents which Borrower now owns or which Borrower may at any time acquire. Borrower shall promptly mark all copies of such Chattel Paper, Instruments and Documents to show that they are subject to the Agent’s security interest. 7 --------------------------------------------------------------------------------        2.12 Remittance of Proceeds to the Agent. In the event any proceeds of any Collateral shall come into the possession of Borrower (or any of Borrower’s Owners, directors, officers, managers, employees, agents or any Persons acting for or in concert with Borrower), Borrower or such Person shall receive, as the sole and exclusive property of the Agent, and as trustee for the Agent, all monies, checks, notes, drafts and all other payments for and/or other proceeds of Collateral, and no later than the first Business Day following receipt, Borrower shall remit the same (or cause the same to be remitted), in kind, to the Agent or to such agent or agents (at such agent’s or agents’ designated address or addresses) as are appointed by the Agent for that purpose, to be applied (i) while a Sharing Period under the Intercreditor Agreement is not in effect, to the Liabilities under the Credit Agreement, and (ii) while a Sharing Period under the Intercreditor Agreement is in effect, to the Obligations in accordance with the Intercreditor Agreement.      2.13 Safekeeping of Collateral. Except to the extent the Agent is required by law to handle or dispose of Collateral in a commercially reasonable manner, the Agent shall not be responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency or any other Person relating to the Collateral. All risk of loss, damage, destruction or diminution in value of the Collateral shall be borne by Borrower.      2.14 Sales and Use of Collateral. Except as set forth in this Section, Borrower shall not sell, lease, transfer or otherwise dispose of any Collateral. So long as there shall not have occurred and be continuing a Default, Inventory may be sold by Borrower in the ordinary course of Borrower’s business, but shall not otherwise be taken or removed from Borrower’s premises or approved third party locations, except in the ordinary course of business. Upon and during the occurrence of a Default and if the Agent so notifies Borrower in writing, neither Inventory nor any other Collateral shall be sold or taken or removed from Borrower’s premises or approved third party locations, except with the prior written consent of the Agent and upon payment of an amount equivalent to the value of the Collateral to be sold or removed, such amounts to be paid to the Agent to be applied upon the Obligations. So long as there shall not have occurred and be continuing a Default, Collateral may be used by Borrower in the ordinary course of Borrower’s business, subject to the Agent’s continuing security interest. Upon and during the continuation of a Default and if the Agent so notifies Borrower in writing, Collateral shall not be used except with the prior written consent of the Agent.      2.15 Borrower’s Property Insurance. Borrower shall bear the full risk of loss from any cause of any nature whatsoever in respect to the Collateral. At Borrower’s own cost and expense, Borrower shall keep all Collateral insured, with carriers, and in amounts acceptable to the Agent, against the hazards of fire, theft, collision, spoilage, hail, those covered by extended or all risk coverage insurance and such others as may be reasonably required by the Agent. Borrower shall cause to be delivered to the Agent the insurance policies or proper certificates evidencing the same. Such policies shall provide, in a manner reasonably satisfactory to the Agent, that any losses under such policies shall be payable first to the Agent, for the ratable benefit of the Secured Parties, as the Agent’s interest may appear. Each such policy shall include a provision for written notice to the Agent not less than thirty (30) days prior to any cancellation or expiration and show the Agent, as agent for the benefit of the Secured Parties, as mortgagee and loss payee as provided in a form of loss payable endorsement in form and substance reasonably satisfactory to the Agent. In the event of any loss covered by any such policy, 8 --------------------------------------------------------------------------------   the carrier named in such policy is directed by Borrower to make payment for such loss to the Agent, for the ratable benefit of the Secured Parties, and not to Borrower. Borrower makes, constitutes and appoints the Agent (and all Persons designated by the Agent) as Borrower’s true and lawful agent and attorney-in-fact, with power to make, settle or adjust claims under such policies of insurance (provided, however, that so long as there shall not have occurred and be continuing a Default, the Agent shall consult with Borrower prior to finally making, settling or adjusting claims under such policies of insurance and will not settle such claims without Borrower’s consent, which consent will not be unreasonably withheld). The foregoing power of attorney is coupled with an interest and is therefore irrevocable. If payment as a result of any insurance losses shall be paid by check, draft or other Instrument payable to Borrower, or to Borrower and the Agent jointly, the Agent may endorse the name of Borrower on such check, draft or other Instrument, and may do such other things as the Agent may reasonably deem necessary to reduce the same to cash. Subject to the provisions of the Mortgage and Deed of Trust all loss recoveries received by the Agent on account of any such insurance may be applied and credited by the Agent (i) while a Sharing Period under the Intercreditor Agreement is not in effect, to the Liabilities under the Credit Agreement, and (ii) while a Sharing Period under the Intercreditor Agreement is in effect, to the Obligations in accordance with the Intercreditor Agreement. The Agent shall pay to Borrower any unapplied surplus of insurance proceeds. Borrower shall promptly pay to the Agent, the amount of any deficiency in the Collateral reasonably determined by the Agent to exist after the application of insurance proceeds as aforesaid. If Borrower fails to procure insurance as provided in this Security Agreement, or to keep the same in force, or fails to perform any of Borrower’s other obligations hereunder, then the Agent may, at the option of the Agent, and without obligation to do so, obtain such insurance and pay the premium thereon for the account of Borrower, or make whatever other payments the Agent may reasonably deem appropriate to protect the Secured Parties’ security for the Obligations. Any such payments shall be additional Obligations of Borrower to the Secured Parties, payable on demand and secured by the Collateral. To the extent the provisions relating to insurance in the Mortgage and Deed of Trust are different from the provisions relating to insurance in this Section 2.15, the provisions relating to insurance in the Mortgage and Deed of Trust shall be controlling with respect to the Property covered thereby.      2.16 Real Property Recording. Borrower shall pay all costs associated with the recording of the Mortgage and Deed of Trust, together with any subsequent amendments thereto, with the appropriate authorities, and shall take all other actions reasonably requested by the Agent in order to vest in the Agent a perfected lien on each such parcel of real property described therein, subject to no other liens, claims or encumbrances, except those expressly acknowledged thereby or otherwise permitted by the Financing Agreements.      2.17 Title Insurance. Borrower shall cooperate with the Agent to obtain delivery to the Agent of a policy of title insurance, insuring the Agent’s mortgagee’s interest, in accordance with the title insurance commitment delivered to the Agent, which cooperation shall be deemed to include without limitation, doing all things necessary to satisfy the requirements set forth in said title insurance commitment or other requirements of the issuer thereof (including without limitation, the payment of premiums). The Agent shall have the right to request such title insurance commitment updates at such times as the Agent, in its reasonably discretion, shall deem appropriate, and shall have the right to instruct the issuer of the title insurance commitment to set forth as added requirements such things as would be necessary to eliminate added exceptions to coverage. 9 --------------------------------------------------------------------------------        2.18 Encumbrances. Except for those liens, security interests and encumbrances described in Part 2 of Exhibit 3A, and those created by this Security Agreement, the Mortgage and the Deed of Trust, Borrower, shall not create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, capitalized lease, levy, assessment, attachment, seizure, writ, distress warrant, or other encumbrance of any nature whatsoever on or with regard to any of the Collateral (and, for this purpose, the Company’s “priced as sold” arrangements with respect to its purchases of almonds and walnuts from growers in the ordinary course of business as customarily conducted in the past shall not be considered an assignment or a conveyance of a right to receive income or profits) other than: (a) liens securing the payment of taxes, either not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which Borrower shall, if appropriate under GAAP, have set aside on Borrower’s books and records adequate reserves; (b) liens securing deposits with insurance carriers or under workmen’s compensation, unemployment insurance, social security and other similar laws, or securing the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or securing indemnity, performance or other similar bonds for the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or securing statutory obligations (including obligations to landlords, warehousemen and mechanics) or surety bonds, or securing indemnity, performance or other similar bonds in the ordinary course of Borrower’s business, which are not past due; (c) liens securing appeal bonds securing judgments not in excess of $1,000,000; (d) liens and security interests in favor of the Agent for the ratable benefit of the Secured Parties; (e) liens securing the interests of Broker in any Margin Account; (f) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Borrower’s real property, and other liens, security interests and encumbrances on property which do not, in the Agent’s reasonable determination: (i) materially impair the use of such property, or (ii) materially lessen the value of such property for the purposes for which the same is held by Borrower; and (g) purchase money security interests securing amounts not exceeding $1,500,000 in the aggregate during any fiscal year of Borrower; and (h) liens and encumbrances as described as part of the Project (as defined in the Credit Agreement).      2.19 Use of Names or Trademarks. Borrower shall not use any trademarks or trade names other than those referred to in Section 3.1. Borrower shall not use any trademarks or trade names on any packaging of any material quantity of Inventory except for such trademarks or trade names as have been properly licensed to the Agent for the ratable benefit of the Secured Parties.      3 WARRANTIES.      Borrower represents and warrants to the Secured Parties that:      3.1 Licenses, Patents, Copyrights, Trademarks and Trade Names. Part 1 of Exhibit 3A sets forth all of Borrower’s (a) federal, state and foreign patents, (b) registered or material unregistered copyrights, trademarks and trade names, (c) applications for any registrations of patents, copyrights, trademarks and trade names, and (d) written license agreements authorizing Borrower to use intellectual property owned by others (other than click through, shrink wrap or similar license agreements), as updated from time to time by Borrower. Except as set forth on Part 1 of Exhibit 3A, there is no action, proceeding, claim or complaint pending or, to Borrower’s knowledge, threatened to be brought against Borrower by any Person which could reasonably be expected to jeopardize any of Borrower’s interest in 10 --------------------------------------------------------------------------------   any of the foregoing patents, copyrights, trademarks, trade names, applications or licenses, except those which are not, in the aggregate, material to Borrower’s financial condition, results of operations or business.      3.2 Collateral. No Goods held by Borrower on consignment or under sale or return contracts have been represented to be Inventory and no amounts receivable by Borrower in respect of the sale of such Goods (except markups or commissions which have been fully earned by Borrower) have been represented to be Accounts. All Producer Payables which are owing to suppliers of any of the Collateral have been paid when due, other than those being contested in good faith by Borrower, and no Person to whom such Producer Payables are owed has demanded turnover of any Collateral or proceeds thereof. Borrower has adequate procedures in place to insure that Collateral purchased by Borrower is free of security interests in favor of Persons other than the Agent in accordance with the Federal Food Security Act.      3.3 Location of Assets; Chief Executive Office. The chief executive office of Borrower is located at 2299 Busse Road, Elk Grove Village, IL 60007 and Borrower’s assets (including without limitation, Inventory and Equipment) are all located in the locations set forth on Part 2 of Exhibit 3A as updated from time to time by Borrower. As of the execution of this Security Agreement, the books and records of Borrower, and all of Borrower’s Chattel Paper and records of account are located at the chief executive office of Borrower. Prior to Borrower making any change in any of such locations, Borrower shall notify the Agent 30 days prior to such change.      3.4 Existence. Borrower is a corporation duly organized and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in all states where such qualification is necessary, except for those jurisdictions in which the failure so to qualify would not, in the aggregate, reasonably be expected to have a material adverse effect on Borrower’s financial condition, results of operations or business.      3.5 Authority. The execution and delivery by Borrower of this Security Agreement, the Mortgage and the Deed of Trust and the performance of Borrower’s obligations hereunder and thereunder: (a) are within Borrower’s powers; (b) are duly authorized by Borrower’s board of directors or board of managers (as applicable); (c) are not in contravention of the terms of Borrower’s articles of incorporation or bylaws; (d) are not in contravention of any law or laws, or of the terms of any material indenture, agreement or undertaking to which Borrower is a party or by which Borrower or any of Borrower’s property is bound; (e) do not require any consent, registration or approval of any Governmental Authority or of any other Person, except such consents or approvals as have been obtained; (f) do not contravene any contractual restriction or Governmental Requirement binding upon Borrower; and (g) will not, except as contemplated or permitted by this Security Agreement, result in the imposition of any lien, charge, security interest or encumbrance upon any property of Borrower under any existing indenture, mortgage, deed of trust, loan or credit agreement or other material agreement or instrument to which Borrower is a party or by which Borrower or any of Borrower’s property may be bound or affected. Borrower shall deliver to the Agent, upon the Agent’s request, a written opinion of counsel as to the matters described in the foregoing clauses (a) through (g). 11 --------------------------------------------------------------------------------        3.6 Binding Effect. This Security Agreement, the Mortgage and the Deed of Trust set forth the legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally, and except as such enforcement may be limited by general principles of equity.      3.7 Account Warranties. (a) the Accounts have not been pledged, sold or assigned to any Person other than the Agent; and (b) except as disclosed to the Agent from time to time in writing, Borrower has no knowledge of any fact or circumstance which would impair the validity or collection of any of the Accounts that in the aggregate are material in amount.      3.8 Inventory Warranties. (a) Except for Goods covered by Documents which have been delivered to the Agent, and except as promptly disclosed to the Agent from time to time in writing, all Inventory is located on the premises described in Section 3.3 or is in transit; and (b) except as promptly disclosed to the Agent from time to time in writing, all Inventory shall be of good and merchantable quality, free from any defects which might affect the market value of such Inventory.      3.9 Survival of Warranties. All representations and warranties contained in this Security Agreement shall survive the execution and delivery of this Security Agreement and shall continue to be true and correct (subject to the qualifications set forth therein) from the date of this Security Agreement until the Obligations shall be paid in full.      4 DEFAULT AND RIGHTS AND REMEDIES; THE AGENT.      4.1 Rights and Remedies. Upon the occurrence and during the continuance of any Default, the Agent, shall in accordance with the terms of the Intercreditor Agreement, proceed to protect and enforce the rights of the Secured Parties as set forth in this Section 4.1.      (a) Rights and Remedies Generally. The Agent may proceed by suit in equity, by action at law or both, whether for the specific performance of any covenant or agreement contained in this Security Agreement or in the Mortgage and Deed of Trust or in aid of the exercise of any power granted in this Security Agreement or in the Mortgage and Deed of Trust, to foreclose upon any liens, claims, security interests and/or encumbrances granted pursuant to this Security Agreement or in the Mortgage and Deed of Trust in the manner set forth; it being intended that no remedy conferred herein or in any of the other Financing Agreements is to be exclusive of any other remedy, and each and every remedy contained herein or in any other Financing Agreement shall be cumulative and shall be in addition to every other remedy given hereunder and under the other Financing Agreements, or at any time existing at law or in equity or by statute or otherwise. The Agent shall have, in addition to any other rights and remedies contained in this Security Agreement or in the Mortgage and Deed of Trust, all of the rights and remedies of a secured party under the Code or other applicable laws. In addition to all such rights and remedies, the sale, lease or other disposition of all or any part of the Collateral by the Agent after a Default, may be for cash, credit or both, and the Agent may purchase all or any part of the Collateral at public or, if permitted by law, private sale, and in lieu of actual payment of such purchase price, may setoff the amount of such purchase price against the Obligations then owing. Any sales of the Collateral may involve the sale of portions of the Collateral at different times, and at different locations, and may, 12 --------------------------------------------------------------------------------   at the Agent’s option, be held at a site or sites different from the site at which all or any part of the Collateral is located. Any such sales, at the Agent’s option, may be in conjunction with or separate from the foreclosure of the Mortgage or the Deed of Trust, and may be adjourned from time to time with or without notice. The Agent may, in its sole discretion, cause the Collateral to remain on Borrower’s premises, at Borrower’s expense, pending sale or other disposition of the Collateral. The Agent shall have the right to conduct such sales on Borrower’s premises, at Borrower’s expense, or elsewhere, on such occasion or occasions as the Agent may see fit.      (b) Entry upon Premises. The Agent shall have the right to enter upon the premises of Borrower at which any of the Collateral is located (or is believed to be located) without incurring any obligation to pay rent to Borrower, or any other place or places where the Collateral is located (or is believed to be located) and kept, and remove the Collateral therefrom to the premises of the Agent or any agent of the Agent, for such time as the Agent may desire, in order to effectively collect or liquidate the Collateral, or the Agent may require Borrower to assemble the Collateral and make it available to the Agent at a place or places to be designated by the Agent which is reasonably convenient to both parties. Borrower expressly agrees that the Agent may, if necessary to gain occupancy to the premises at which Collateral is located (or is believed to be located), without further notice to Borrower: (a) hire Borrower’s employees to assist in the loading and transportation of such Collateral; (b) utilize Borrower’s equipment for use in such operation; (c) cut or otherwise temporarily move or remove any barbed wire or other fencing or similar boundary-maintenance devices; and (d) pick or otherwise render inoperative any locks on any property not customarily inhabited by people. Borrower agrees that any such actions authorized by this Section shall be authorized and not a breach of the peace if the Agent takes reasonable efforts to safeguard all of Borrower’s property.      (c) Sale or Other Disposition of Collateral by the Agent. Any notice required to be given by the Agent of a sale, lease or other disposition or other intended action by the Agent with respect to any of the Collateral which is deposited in the United States mail, postage prepaid and duly addressed to Borrower at the address specified in Section 5.16, at least ten (10) Business Days prior to such proposed action, shall constitute fair and commercially reasonable notice to Borrower of any such action. The net proceeds realized by the Agent upon any such sale or other disposition, after deduction for the expense of retaking, holding, preparing for sale, selling or the like, and the reasonable legal fees and expenses and other proper fees and expenses incurred by the Agent in connection therewith, shall be applied toward satisfaction of the Obligations. The Agent shall account to Borrower for any surplus realized upon such sale or other disposition, and Borrower shall remain liable for any deficiency. The commencement of any action, legal or equitable, or the rendering of any judgment or decree for any deficiency, shall not affect the Agent’s security interest in the Collateral until the Obligations shall have been paid in full.      4.2 Waiver of Demand. Borrower expressly waives demand, presentment, protest, and notice of nonpayment, notice of intent to accelerate and notice of acceleration. Borrower also waives the benefit of all valuation, appraisal and exemption laws.      4.3 Waiver of Notice. Upon the occurrence and during the continuance of any Default, Borrower waives, to the fullest extent permitted by applicable law, all rights to notice and hearing of any 13 --------------------------------------------------------------------------------   kind prior to the exercise by the Agent of the Agent’s rights to repossess the Collateral without judicial process or to replevy, attach or levy upon the Collateral.      4.4 Authorization and Action. It is acknowledged that in accordance with the terms of the Intercreditor Agreement each Secured Party has appointed the Agent as its Agent hereunder, and has authorized the Agent, subject to the terms of the Intercreditor Agreement, to take such action on its behalf and to exercise such powers under this Security Agreement or the Mortgage and Deed of Trust as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto.      4.5 Agent’s Reliance, Etc. It is acknowledged that in accordance with the terms of the Intercreditor Agreement neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Secured Party for any action taken or omitted to be taken by it or them, except for its or their own gross negligence or willful misconduct.      4.6 The Agent as a Secured Party, Affiliates. It is acknowledged that in accordance with the terms of the Intercreditor Agreement, the Agent shall have the same rights and powers under this Security Agreement as any other Secured Party.      4.7 Non-Reliance on Agent and Other Secured Parties. It is acknowledged that in accordance with the terms of the Intercreditor Agreement, each Secured Party has agreed that it has, independently and without reliance on the Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and its decision to enter into the transactions contemplated by the Financing Agreements and that it will, independently and without reliance upon the Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under any Financing Agreement.      4.8 Indemnification. Notwithstanding anything to the contrary herein contained, the Agent shall be fully justified in failing or refusing to take any action unless it shall first be indemnified to its satisfaction by the Secured Parties against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of its taking or continuing to take any action. It is acknowledged that each Secured Party has agreed to indemnify the Agent (to the extent not reimbursed by Borrower), as set forth in the Intercreditor Agreement.      4.9 Successor Agent. The Agent may resign and may be removed by the Secured Parties in accordance with the terms of the Intercreditor Agreement. Upon the acceptance of any appointment as Agent by a successor Agent in accordance with the terms of the Intercreditor Agreement, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Security Agreement and the Mortgage and Deed of Trust. After the retiring Agent’s resignation or removal as Agent, the provisions of Section 4.8 shall inure to its benefit as to any actions taken or 14 --------------------------------------------------------------------------------   omitted to be taken by it while it was Agent under this Security Agreement and the Mortgage and Deed of Trust.      5 MISCELLANEOUS.      5.1 Attorneys’ Fees and Costs. If at any time the Agent employs counsel in connection with protecting or perfecting the Agent’s security interest in the Collateral or in connection with any matters contemplated by or arising out of this Security Agreement, whether: (a) to commence, defend, or intervene in any litigation or to file a petition, complaint, answer, motion or other pleading; (b) to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise); (c) to consult with officers of the Agent to advise the Agent or to draft documents for the Agent in connection with any of the foregoing or in connection with any release of the Agent’s claims or security interests or any proposed extension, amendment or refinancing of the Obligations; (d) to protect, collect, lease, sell, take possession of, or liquidate any of the Collateral; or (e) to attempt to enforce or to enforce any security interest in any of the Collateral, or to enforce any rights of the Agent to collect any of the Obligations; then in any of such events, all of the reasonable attorneys’ fees arising from such services, and any related expenses, costs and charges, including without limitation, all reasonable fees of all paralegals, legal assistants and other staff employed by such attorneys, together with interest at the highest interest rate then payable by Borrower under any Financing Agreement, shall constitute additional Obligations, payable on demand and secured by the Collateral.      This Section 5.1 shall survive the termination of this Security Agreement.      5.2 Expenditures by the Agent. In the event that Borrower shall fail to pay taxes, insurance, assessments, costs or expenses which Borrower is, under any of the terms hereof or of any of the other Financing Agreements, required to pay, or fails to keep the Collateral free from other security interests, liens or encumbrances, except as permitted herein or by the other Financing Agreements, the Agent may, in the Agent’s sole discretion and without obligation to do so, make expenditures for any or all of such purposes, and the amount so expended, together with interest at the highest interest rate then payable by Borrower under any Financing Agreement, shall constitute additional Obligations, payable on demand and secured by the Collateral.      5.3 The Agent’s Costs and Expenses as Additional Obligations. Borrower shall reimburse the Agent for all reasonable expenses and fees paid or incurred in connection with the documentation, negotiation and closing of this Security Agreement and the Mortgage and Deed of Trust (including without limitation, filing fees, recording fees, document or recording taxes, search fees, appraisal fees and expenses, and the reasonable fees and expenses of the Agent’s attorneys, paralegals, and legal assistants, and whether such expenses and fees are incurred prior to or after the date of this Security Agreement). Borrower further agrees to reimburse the Agent for all reasonable expenses and fees paid or incurred in connection with the documentation of any amendments to this Security Agreement and the Mortgage and Deed of Trust. All reasonable costs and expenses incurred by the Agent with respect to such negotiation and documentation, together with interest at the highest interest rate then payable by Borrower under any Financing Agreement, shall constitute additional Obligations, payable on demand and secured by the Collateral. 15 --------------------------------------------------------------------------------        5.4 Claims and Taxes. Borrower agrees to indemnify and hold the Agent and the Secured Parties harmless from and against any and all claims, demands, liabilities, losses, damages, penalties, costs, obligations, actions, judgments, suits, disbursements and expenses (including without limitation, reasonable attorneys’ fees) relating to or in any way arising out of the possession, use, operation or control of any of Borrower’s assets, or in any way arising out of or related to this Security Agreement or the other Financing Agreements, except for those resulting from the gross negligence or willful misconduct of the Agent or the Secured Parties, which agreement to indemnify and hold the Agent and the Secured Parties harmless shall survive the termination of this Security Agreement. Borrower shall pay or cause to be paid all license fees, bonding premiums and related taxes and charges, and shall pay or cause to be paid all of Borrower’s real and personal property taxes, assessments and charges and all of Borrower’s franchise, income, unemployment, use, excise, old age benefit, withholding, sales and other taxes and other governmental charges assessed against Borrower, or payable by Borrower, at such times and in such manner as to prevent any penalty from accruing or any lien or charge from attaching to the Collateral, provided, however, that Borrower shall have the right to contest in good faith, by an appropriate proceeding promptly initiated and diligently conducted, the validity, amount or imposition of any such tax, and upon such good faith contest to delay or refuse payment thereof, if: (a) Borrower establishes adequate reserves to cover such contested taxes; and (b) such contest does not have a material adverse effect on the financial condition of Borrower, the ability of Borrower to pay any of the Obligations, or the priority or value of the Secured Party’s security interests in the Collateral.      5.5 Custody and Preservation of Collateral. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in the Agent’s possession if the Agent takes such action for that purpose as Borrower shall request in writing, but failure by the Agent to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure by the Agent or any Secured Party to preserve or protect any right with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by Borrower, shall of itself be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral.      5.6 Inspection. The Agent (by and through its officers and employees), or any Person designated by the Agent in writing (including officers and employees of the other Secured Parties), shall have the right from time to time, to call at Borrower’s place or places of business (or any other place where Collateral or any information as to Collateral is kept or located) during reasonable business hours, and, without hindrance or delay, to: (a) inspect, audit, check and make copies of and extracts from Borrower’s books, records, journals, orders, receipts and any correspondence and other data relating to Borrower’s business or to any transactions between the parties to this Security Agreement; (b) make such verification concerning the Collateral as the Agent may consider reasonable under the circumstances; and (c) review operating procedures, review maintenance of property and discuss the affairs, finances and business of Borrower with Borrower’s officers, employees or directors.      5.7 Reliance by the Agent and the Secured Parties. All covenants, agreements, representations and warranties made herein by Borrower shall, notwithstanding any investigation by the Agent or any of the Secured Parties, be deemed to be material to and to have been relied upon by the Agent and the Secured Parties. 16 --------------------------------------------------------------------------------        5.8 Parties. Whenever in this Security Agreement there is reference made to any of the parties, such reference shall be deemed to include, wherever applicable, a reference to the respective successors and assigns of Borrower, the Agent and the Secured Parties. Borrower shall not assign any of it rights or delegate any of its duties under this Security Agreement or any of the other Financing Agreements without the prior written consent of the Secured Parties.      5.9 Applicable Law; Severability. This Security Agreement shall be construed in all respects in accordance with, and governed by, the laws and decisions of the State of Colorado and the laws, regulations and decisions of the United States applicable to national banks. Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Security Agreement.      5.10 SUBMISSION TO JURISDICTION; WAIVER OF BOND AND TRIAL BY JURY. WITH RESPECT TO ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS, DEBTS, DAMAGES, COSTS AND EXPENSES, WHATSOEVER, WHETHER BASED ON STATUTE, COMMON LAW, PRINCIPLES OF EQUITY OR OTHERWISE, ARISING OUT OF ANY MATTER, THING OR EVENT WHICH IS DIRECTLY OR INDIRECTLY RELATED TO THIS SECURITY AGREEMENT, BORROWER CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN THE CITY AND COUNTY OF DENVER, COLORADO AND WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 5.16. SERVICE, SO MADE, SHALL BE DEEMED TO BE COMPLETE UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED. AT THE OPTION OF THE AGENT, BORROWER WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE AGENT.      5.11 Application of Payments; Waiver. Except as set forth below, proceeds of Collateral shall generally be applied (i) while a Sharing Period under the Intercreditor Agreement is not in effect, to the Liabilities under the Credit Agreement, and (ii) while a Sharing Period under the Intercreditor Agreement is in effect, to the Obligations in accordance with the Intercreditor Agreement. Notwithstanding the foregoing, other than during a Default Period, Bank Products Obligations may be paid, and all transfers, setoffs, adjustments, credits and debits may be made in the ordinary course of business in accordance with the terms of the related Bank Products Agreements. During a Default Period, payments and proceeds of Collateral securing the Bank Products Obligations shall be applied first to Obligations other than Bank Products Obligations and after all such other Obligations have been paid in full shall be applied second to Bank Products Obligations on a pro rata basis. Notwithstanding the terms of this Section 5.11, any other terms of this Security Agreement or any terms of any other 17 --------------------------------------------------------------------------------   Financing Agreement, the Agent shall first apply payments and proceeds of Collateral to any charge-backs, payments pursuant to any avoidance claims or any other loss, overdraft, or shortfall with respect to deposit accounts maintained with the Agent or any other Secured Party, to the extent that the funds that are the subject of such charge-backs, payments pursuant to any avoidance claims or any other loss, overdraft, or shortfall have been previously paid or applied by the Agent to the Obligations other than Bank Products Obligations. In the event that such payments and proceeds of Collateral are insufficient to cover such charge-backs, payments pursuant to any avoidance claims or any other loss, overdraft, or shortfall, then the Agent or any other Secured Party shall be indemnified for the resulting loss in the manner provided for in Section 4.8.      5.12 Marshaling; Payments Set Aside. The Agent shall be under no obligation to marshal any assets in favor of Borrower or against or in payment of any or all of the Obligations. To the extent that Borrower makes a payment or payments to the Agent or the Agent receives any payment or proceeds of the Collateral for Borrower’s benefit or enforces the Agent’s security interests or exercises the Agent’s rights of setoff, and such payment or payments or the proceeds of such Collateral, enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.      5.13 Section Titles. The section titles contained in this Security Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties.      5.14 Continuing Effect. This Security Agreement, the Agent’s security interests in the Collateral, and all of the other Financing Agreements shall continue in full force and effect so long as any Obligations (except for contingent Obligations which have not been asserted by the Agent and/or any of the Secured Parties) shall be owed to the Agent and/or any of the Secured Parties and (even if there shall be no Obligations outstanding) so long as the Agent and/or any of the Secured Parties remains committed to make loans or issue letters of credit under this any Financing Agreement. With respect to unasserted contingent Obligations, including those that arise from an obligation of indemnification or arise as a result of any receipt by the Agent and/or any of the Secured Parties of any payment or any proceeds of collateral, of which any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrower, Borrower’s estate, trustee, receiver or any other person, under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such obligation of indemnification, payment or repayment or other unasserted contingent Obligations, as the case may be, this Security Agreement, the Agent’s security interests in the Collateral, and all of the other Financing Agreements shall be reinstated and continued in full force and effect as of the date of such initial payment, reduction or satisfaction occurred or such obligation of indemnification or other unasserted contingent Obligations first accrued, as the case may be. 18 --------------------------------------------------------------------------------        5.15 No Waiver. The Agent’s or the Secured Parties’ failure, at any time or times hereafter, to require strict performance by Borrower of any provision of this Security Agreement or the other Financing Agreements shall not waive, affect or diminish any right of the Agent or the Secured Parties thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Agent or the Secured Parties of any Default under this Security Agreement or any of the other Financing Agreements, shall not suspend, waive or affect any other Default under this Security Agreement or any of the other Financing Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in this Security Agreement or any of the other Financing Agreements and no Default under this Security Agreement or any of the other Financing Agreements, shall be deemed to have been suspended or waived by the Agent or the Secured Parties unless such suspension or waiver is in writing signed by an officer of the Agent or each of the Secured Parties (as applicable) and is directed to Borrower specifying such suspension or waiver.      5.16 Notices. Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered pursuant to this Security Agreement or the Mortgage and Deed of Trust shall be in writing, and shall be sent by manual delivery, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to the party to be notified as follows:      (a) If to the Agent at: U.S. Bank National Association 950 Seventeenth Street, Suite 350 Denver, Colorado 80202 Attn: Jason Lueders with a copy to: Campbell Bohn Killin Brittan & Ray, LLC 270 St. Paul Street, Suite 200 Denver, Colorado 80206 Attn: Michael D. Killin      (b) If to Borrower at: John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007 Attn: Michael Valentine with a copy to: Jenner & Block LLP One IBM Plaza Chicago, IL 60611 Attn: Teri Lindquist 19 --------------------------------------------------------------------------------        (c) If to the Holders at their address of record with the Agent or, as to each party, addressed to such other address as shall be designated by such party in a written notice to the other parties. All such notices shall be deemed given on the date of delivery if manually delivered, on the date of sending if sent by facsimile transmission, on the first Business Day after the date of sending if sent by overnight courier, or three (3) days after the date of mailing if mailed.      5.17 Independence of Covenants. All covenants under this Security Agreement and the other Financing Agreements shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists.      5.18 Amendments and Waivers. Any term, covenant, agreement or condition of this Security Agreement may be amended only by a written amendment executed by the parties hereto in accordance with the terms of the Intercreditor Agreement and any other Financing Agreement, and, if the rights or duties of the Agent are affected thereby, the Agent.      5.19 Counterparts and Facsimile Signatures. This Security Agreement, any other Financing Agreement and any subsequent amendment to any of them may be executed in several counterparts, each of which shall be construed together as one original. Facsimile signatures on this Security Agreement, any other Financing Agreement and any subsequent amendment to any of them shall be considered as original signatures.      5.20 Set-off. Subject to the terms of the Intercreditor Agreement each Secured Party shall have a right of set-off of all moneys, securities and other property of Borrower (whether special, general or limited) and the proceeds thereof, at any time delivered to remain with or in transit in any manner to such Secured Party, its correspondent or its agents from or for Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise or coming into possession of such Secured Party in any way, and also, any balance of any deposit accounts and credits of Borrower with, and any and all claims of security for the payment of the Obligations owed by Borrower to such Secured Party, contracted with or acquired by the Secured Party, whether such liabilities and obligations be joint, several, absolute, contingent, secured, unsecured, matured or unmatured, and Borrower authorizes such Secured Party at any time or times, without prior notice, to apply such money, securities, other property, proceeds, balances, credits of claims, or any part of the foregoing, to such liabilities in such amounts as it may select, whether such Obligations be contingent, unmatured or otherwise, and whether any collateral security in support thereof is deemed adequate or not.      5.21 FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 20 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, this Security Agreement has been duly executed as of the day and year first above written.                   JOHN B. SANFILIPPO & SON, INC., a Delaware corporation                       By   /s/ Michael J. Valentine                           Its Chief Financial Officer           U.S. BANK NATIONAL ASSOCIATION                       By   /s/ Jason Lueders                       Its Vice President     21 --------------------------------------------------------------------------------   Exhibit 3A to Security Agreement Disclosure Schedule Part 1: Licenses, Patents, Copyrights, Trademarks, Trade Names and Applications Part 2: Security Interests, Liens, Claims and Encumbrances                                   Original                     File         Jurisdiction Searched   Debtor Name and Address   Secured Party Name and Address   Number   File Date   Description of Collateral DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Material Handling Services, Inc. 1800 W. Hawthorne Lane, Suite M West Chicago, IL 60185   2016987 4   12/20/2001   Equipment.                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Material Handling Services, Inc. 1800 W. Hawthorne Lane, Suite M West Chicago, IL 60185   2102717 0   04/03/2002   One New Clark, Model TMG-17, S/N: 248-0971-9570 and One New Battery Builders Battery, Model 18-125-17, S/N: W3549                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Material Handling Services, Inc. 1800 W. Hawthorne Lane, Suite M West Chicago, IL 60185   2199601 0   07/26/2002   One New Clark, Model PWD-30, S/N: 567-1269-6891                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Material Handling Services, Inc. 1800 W. Hawthorne Lane, Suite M West Chicago, IL 60185   2237224 5   09/20/2002   One New Clark, Model TMG-17, S/N: 248-0744-9570 and One New Battery Builders Battery, Model 18-125-17, S/N: X4273                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Material Handling Services, Inc. 1800 W. Hawthorne Lane, Suite M West Chicago, IL 60185   2290091 2   11/19/2002   Equipment 22 --------------------------------------------------------------------------------                                     Original                     File         Jurisdiction Searched   Debtor Name and Address   Secured Party Name and Address   Number   File Date   Description of Collateral DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Toyota Motor Credit Corporation P. O. Box 3457, MS R307 Torrance, CA 90510   5075837 6   03/01/2005   This financing statement is for informational purposes only, the Secured Party is the owner of the described property. One New 2004 Toyota Forklift Model:                     7FBCU25, Serial: 65504. Specs: Side Shifter, 48” forks, 218” FSV mast, 1 Battery model:                     24D85-19, S/N: 4562GN, 1 Charger model:                     XPT24-750B, S/N:                     AH85640011                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Toyota Motor Credit Corporation P. O. Box 3457, MS R307 Torrance, CA 90510   5117637 0   04/12/2005   This financing statement is for informational purposes only, the Secured Party is the owner of the described property. One New 2005 Toyota Forklift Model:                     7FGU25, Serial: 76269. Specs: Side Shifter, 42” forks, 189” FSV mast, LP tank, solid pneumatic tires                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Greater Bay Bank N.A. 100 Tri-State International, Suite 140 Lincolnshire, IL 60069   5210046 0   07/08/2005   The equipment described below and all equipment parts, accessories, substitutions, additions, accessions and replacements thereto and thereof, now or hereafter installed in, affixed to, or used in conjunction therewith and the proceeds thereof, together with all installment payments, insurance proceeds, other proceeds and payments due and to become due arising from or relating to said equipment. 1-JLG Scissor Lift 3246ES S/N 02001.                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   M.E.M Leasing, Ltd. 11201 S. Grant Hwy. Marengo, IL 60152 Assigned to: West Suburban Bank 711 S. Westmore-Meyers Rd. Lombard, IL 60148   5223828 6 Assigned by: 5253651 5   07/12/2005 Filed: 08/09/2005   All collateral under lease agreement between M.E.M Leasing, Ltd. as Lessor and Debtor as Lessee as further described on Exhibit “A” attached hereto and made part thereof. This financing statement is filed to give notice of a lease between the parties named above covering the collateral described per Exhibit “A” attached hereto and made a part hereof. Lessee is not authorized and has no right to sell, transfer or otherwise convey any of the foregoing, including proceeds of insurance and collateral thereof. 23 --------------------------------------------------------------------------------                                     Original                     File         Jurisdiction Searched   Debtor Name and Address   Secured Party Name and Address   Number   File Date   Description of Collateral DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   M.E.M Leasing, Ltd. 11201 S. Grant Hwy. Marengo, IL 60152 Assigned to: West Suburban Bank 711 S. Westmore-Meyers Rd. Lombard, IL 60148   5223838 5 Assigned by: 5253647 3   07/12/2005 Filed: 08/09/2005   All collateral under lease agreement between M.E.M Leasing, Ltd. as Lessor and Debtor as Lessee as further described on Exhibit “A” attached hereto and made part thereof. This financing statement is filed to give notice of a lease between the parties named above covering the collateral described per Exhibit “A” attached hereto and made a part hereof. Lessee is not authorized and has no right to sell, transfer or otherwise convey any of the foregoing, including proceeds of insurance and collateral thereof.                       DE Secretary of State   John B. Sanfilippo & Son, Inc. 2299 Busse Road Elk Grove Village, IL 60007   Greater Bay Bank N.A. 100 Tri-State International, Suite 140 Lincolnshire, IL 60069   5380736 0   12/09/2005   The equipment described below and all equipment parts, accessories, substitutions, additions, accessions and replacements thereto and thereof, now or hereafter installed in, affixed to, or used in conjunction therewith and the proceeds thereof, together with all installment payments, insurance proceeds, other proceeds and payments due and to become due arising from or relating to said equipment. 1-JLG Scissor Lift 3246ES S/N 0200141215. Part 3: Locations of Borrower’s Assets Facility Locations:   •   Corporate Headquarters: 2299 Busse Rd., Elk Grove Village, IL 60007-6057 Elgin Headquarters: 1703 N. Randall Rd., Elgin, IL 60123-7820     •   1851 Arthur, Elk Grove Village (“Z” Building)     •   Coach & Car — 1951 Arthur, Elk Grove Village     •   3001 Malmo Drive, Arlington Heights, IL 60005-4727 24 --------------------------------------------------------------------------------     •   29241 W. Cottonwood Rd., Gustine, CA 95322-9574     •   8060 NC 46 Highway, Garysburg, NC 27831-9704     •   Highway 27 North, 1251 Colquitt Highway, Bainbridge, GA 39817-7548     •   16435 IH 35 North, Selma, TX 78154-1200     •   Home Economist Stores/Fisher Chicago’s Hometown Nut Stores:   o   Church Point Plaza, 9163 Gross Point Road, Skokie, IL 60077-1613     o   Cass Harbor Center, 6832 Cass Ave., Westmont, IL 60559-3207     o   906 S. Northwest Highway, Barrington, IL 60010-4624 As of June 29, 2006, the Company has Inventory stored in the following warehouses:   •   Good Foods Cold Storage, W. Main Street, Honeybrook, PA 19344     •   Durafeight, 515 S. Lemon, Walnut, CA 91789     •   SCS Refrigerated Services, 502 10th Ave. North, Algona, WA 98801     •   Tri-State, 6147 Western Row, Mason, OH 45040     •   C. Steinweg-Handlesveem BV, Parmentier Plein, Rotterdam, NL 3088     •   Geodis Logistics Nord, 7 Ave. de la Rotonde, F-59462 LOMME, FR     •   Unipro-Ozburn Hessey, 234 Kohlman Rd., Fond Du Lac, WI 54937     •   Patterson Nut, 142 Bartch Rd., Patterson, CA 95363     •   Hughson Nut/Livingston, 11173 W. Mercedes, Livingston, CA 95334     •   Hughson Nut, 6049 Leedom Rd., Hughson, CA 95326     •   CHR/Stockton Storage, 1320 W. Weber, Stockton, CA 95203     •   Thiele Technologies, 315 27th Ave, Minneapolis, MN 55418     •   Woodham Peanut, 3673 Highway 2, Graceville, FL 32440     •   Universal Blanchers, 1255 Magnolia St., Blakely, GA 31723     •   Universal Blanchers, 1033 County Rd. 343, Dublin, TX 76446     •   Gold Hills Nut, PO Box 50, Ballico, CA 95303 25 --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 1                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   BAKING CLASSICS   3159511553B/   76/977077           2909153   Registered             United States of America   11-May-2001   11-Dec-2001   07-Dec-2004   07-Dec-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   Shelled nuts and flaked and prepared coconut.                                     BAYOU BLEND           3159511308/   75/11 5602           2145318   Registered             United States of America   07-Jun-1996   24-Jun-1997   17-Mar-1998   17-Mar-2008     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   Snack mix consisting primarily of sesame sticks, cajun-seasoned sesame sticks and toffee-coated peanuts, and also containing processed peanuts.                                     CHEF’S NATURALS           3159511278/   75/106271           2148221   Registered             United States of America   20-May-1996   18-Mar-1997   31-Mar-1998   31-Mar-2008     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   Shelled nuts.                       --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 2                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   CHICAGO’S HOMETOWN NUT   3159511618/   78/259471           2826758   Registered             United States of America   06-Jun-2003           23-Mar-2004   23-Mar-2014     Class(es):   29, 30, 31       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   29/Shelled and roasted nuts; snack mixes consisting primarily of processed nuts; candied nuts; processed flavored nuts. 30/Chocolate covered nuts. 31/Unprocessed and unshelled nuts and seeds.                                     Design of Three Trees           3159510360/   74/088841           1683893   Registered             United States of America   17-Aug-1990           21 -Apr- 1992   21-Apr-2012     Class(es):   29, 30, 31       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies, and granola based snack foods.             31/Unprocessed seeds.                                     EVON’S           3159510271/   796912           505515   Registered             Canada   08-Nov-l995           15-Dec-l998   15-Dec-2013     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Scott & Aylen       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159510220       Resp. Office:        IL         Goods:   Processed nuts and dried fruits: candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies and granola-based snack foods. Processed nuts and dried fruits; candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies and granola-based snack foods: unprocessed seeds.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 3                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   EVON’S   3159510271/3   485-10           935   Registered             Ecuador   23-Jun-1994           14-Jul-1995   14-Jul-2015     Class(es):   31       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Cavelier Abogados       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159510190C       Resp. Office:        IL         Goods:   All the products of class 31 international including unprocessed seeds.                                     EVON’S           3159510271/1   485-11           937   Registered             Ecuador   23-Jun-1994           14-Jul-1995   14-Jul-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Cavelier Abogados       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159510190A       Resp. Office:        IL         Goods:   All the products of class 29 including processed nuts and dried fruits.                                     EVON’S           3159510271/2   485-09           936   Registered             Ecuador   23-Jun-1994           14-Jul-1995   14-Jul-2015     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510190B       Resp. Office:         IL         Goods:   All products in international class 30, mainly candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies and granola-based snack foods and all the products of the class.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 4                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   EVON’S           3159510271/   65335/94           3340279   Registered             Japan   30-Jun-1994   19-Mar-1997   15-Aug-1997   15-Aug-2007     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Asamura Patent Office       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No,   3159510174       Resp. Office:        IL         Goods:   Processed vegetables and processed fruit.                                     EVON’S           3159510271/1   74/088869   07-Apr-1992   1697799   Registered             United States of America   17-Aug-1990           30-Jun-l992   30-Jun-2012     Class(es):   29, 30, 31       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies, and granola-based snack foods.             31/Unprocessed seeds.                                     EVON’S (with 3 Trees) Design   3159510263/   74/088864           1697798   Registered             United States of America   17-Aug-1990   07- Apr- 1992   30-Jun-1992   30-Jun-2012     Class(es):   29, 30, 31       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                     Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate Covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies, and granola based snack foods.             31/Unprocessed seeds.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 5                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/               3099   Registered             Antigua and Barbuda               28-Dec-1988   27-Dec-2016     Class(es):   42       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Christian, Lovell, Walwyn & Co.   Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511316       Resp. Office:        IL         Goods:   Nuts (shelled, roasted or otherwise processed).                                     FISHER           3159510867/   37796           37796   Registered             Austria   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Benelux   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 6                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   20125           B20125   Registered             Bermuda   28-Jun-1988           07-May-1990   28-Jun-2009     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Hallett, Whitney & Patton   Agent Ref:             Owner Name:   The Procter & Gamble Company                     Related Case No.   3159510697       Resp. Office:        IL         Goods:   Snack mix containing primarily of processed fruits and processed nuts.                                     FISHER           3159510735/   3613           3611   Registered             Cambodia   14-Sep-1993           23-Nov-1993   14-Sep-2013     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Domnern Somgian & Boonma   Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159510735       Resp. Office:        II.         Goods:   Meat, fish, poultry and game: meat extracts; preserved, dried and cooked fruits and vegetables; jellies; jams, fruit sauces; eggs, milk and milk products; edible oils an fats.                                     FISHER           3159510867/   810018           511757   Registered             Canada   16-Apr-1996           12-May-l999   12-May-2014     Class(es):           Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Scott & Aylen       Agent Ref:   TM 40650-1         Owner Name:   John R. Sanfilippo & Son, Inc.                     Related Case No.   3159511120       Resp. Office:        IL         Goods:   Snack mix consisting primarily of processed fruits and processed nuts; snack mixes consisting primarily of wheat or rice and also containing processed nuts.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 7                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Cyprus, Republic of   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Czech Republic   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Denmark   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:         IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 8                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/               49810   Registered             Dominican Republic   25-Jul-1990           16-Oct-1990   16-Oct-2010     Class(es):   55       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:             Agent Name:   Jorge Mera & Villegas       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159510760       Resp. Office:       IL         Goods:   Assorted nuts.                                                     FISHER           3159510867/   37796           37796   Registered             Estonia   01-Apr-1996   25-Jul-1998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:         IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             European Community   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:         IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 9                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Finland   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103/       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             France   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           31595108677/   37796           37796   Registered             Germany   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.   Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511103       Resp. Office:        IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------   Thursday, July 13, 2006   Trademark List   Page: 10                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Greece   0l-Apr-1996   25-Jul-1998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                                         FISHER           3159510867/   2167           80728   Registered             Guatemala   06-Apr-1994           23-Jun-l996   23-Jun-20l6     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Saravia y Munoz - Guatemala       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510948       Resp. Office:   IL         Goods:   Meat, fish, poultry and game; meat extracts: preserved, dried and cooked fruits and vegetables; jellies, jams; eggs, milk and milk products; edible oils and fats; salad dressings; preserves; specially shelled, roasted or otherwise processed nuts or peanuts.                                     FISHER           3159510867/   37796           37796   Registered             Hungary   0l-Apr-1996   25-Jul-1998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                       --------------------------------------------------------------------------------   Thursday, July 13, 2006   Trademark List   Page: 11                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Ireland   01-Apr-1996   25-Jul-l998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                                         FISHER           3159511286/   105254           105254   Registered             Israel   15-May-1996           05-Jun-1998   15-May-2017     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Wolff. Bregman and Goller       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   Snack mixes consisting primarily of processed fruits and processed nuts.                                     FISHER           3159511294/   105255           105255   Registered             Israel   15-May-1996           08-Jun-l998   15-May-20l7     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Wolff. Bregman and Goller       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   Snack mixes consisting primarily of wheat-based or rice-based snack foods and also containing processed nuts.   --------------------------------------------------------------------------------   Thursday, July 13, 2006   Trademark List   Page: 12                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Italy   01-Apr-1996   25-Jul-1998   22-Apr-l999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                                         FISHER           3159510980/X   88-13628     89-5358     171012   Registered             Korea. Republic of   31-May-1989           31-May-1989   3l-May-2009     Class(es):   Int. C1. 29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Kim & Chang       Agent Ref:   TR-885170/HMS         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 1       Resp. Office:   IL         Goods:   29/Shelled, roasted or otherwise processed peanuts, cashews, walnuts, filberts, pecans, almonds, Brazil nuts, sunflower seeds, pistachios, and any mixture thereof.                                     FISHER           3159510867/   2433           2348   Registered             Laos   27-Aug-l993           31-May-1994   27-Aug-20l3     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Deacons       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510999       Resp. Office:   IL         Goods:   All goods in International Class 29.                       --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 13                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Latvia   01-Apr-1996   25-Jul-l998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Lithuania   01-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Malta   01-Apr-1996   25-Jul-1998   22-Apr-l999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 14                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/4   701449           908858   Registered             Mexico   10-Feb-2005           22-Nov-2005   10-Feb-20I5     Class(es):   31       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Olivares & Cia.       Agent Ref:   05M0307         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511685       Resp. Office:   IL         Goods:   Unprocessed and unshelled nuts (fruits) and seeds (cereal seeds).                                     FISHER           3159510867/3   701448           909417   Registered             Mexico   10-Feb-2005           23-Nov-2005   10-Feb-2015     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Olivares & Cia.       Agent Ref:   05M0306         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511669       Resp. Office:   IL         Goods:   Chocolate covered nuts.                                                         FISHER           3159510867/2   701450           909418   Registered             Mexico   10-Feb-2005           23-Nov-2005   10-Feb-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Olivares & Cia.       Agent Ref:   05M0305         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511677       Resp. Office:   IL         Goods:   Shelled and roasted nuts; snack mixes consisting primarily of processed nuts; processed flavored nuts.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 15                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Poland   01-Apr-1996   25-Jul-1998   22-Apr-l999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered         Portugal   01-Apr-1996   25-Jul-l998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   315951 1103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           3159510867/   37796           37796   Registered             Slovakia   01-Apr-1996   25-Jul-l998   22-Apr-1999   0l-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 16                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   37796           37796   Registered             Slovenia   01-Apr-1996   25-Jul-l998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           31595108677   37796           37796   Registered             Spain   01-Apr-1996   25-Jul-1998   22-Apr-l999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                     FISHER           31595108677   37796           37796   Registered             Sweden   0l-Apr-1996   25-Jul-1998   22-Apr-1999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.   --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 17                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/2   31761           24852   Registered             United Arab Emirates   09-Jun-1999           20-Jan-2003   09-Jun-2009     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Saba & Co. - UAE       Agent Ref:             Owner Name:   John B. Sanfilippo & Son. Inc.                         Related Case No.   3159511332B       Resp. Office:   IL                                         FISHER           3159510867/   37796           37796   Registered             United Kingdom   01-Apr-1996   25-Jul-l998   22-Apr-l999   01-Apr-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Gevers & Partners       Agent Ref:   L092166-V611111         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511103       Resp. Office:   IL         Goods:   Snack mixes containing nuts and fruits.                                             FISHER           3159510867/   74/657578           2066173   Registered             United States of America   17-Mar-1995   11-Mar-1997   03-Jun-1997   03-Jun-2007     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   29/Snack mix containing primarily of processed fruits and processed nuts. 30/Snack mixes consisting primarily of wheat-based or rice-based snak foods and also containing processed nuts.   --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 18                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER           3159510867/   118202003               Published             Venezuela   27-Aug-2003   13-Feb-2004             Class(es):   29       Attomey(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Hoet Pelaez Castillo & Duque       Agent Ref:   01-130678         Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511634       Resp. Office:   IL         Goods:   Shelled or roasted nuts: candied flavored and chocolate-covered nuts; snack mix consisting primarily of processed fruits and processed nuts; snack mixes consisting primarily of wheat-based or rice-based snack foods and also containing processed nuts.                                     FISHER and Design           3159510670/               81/3419   Registered             Barbados   05-May-1989           25-Jun-1992   25-Jun-20l2     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Carrington & Sealy       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510670       Resp. Office:   IL         Goods:   Nuts (shelled, roasted or otherwise processed).                                             FISHER add Design           3159510670/   667037           400851   Registered             Benelux   03-Jul-1984           17-Jan-l985   03-Jul-2014     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Novagraaf Nederland B.V.       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510689       Resf. Office:   IL         Goods:   29/Roasted nuts, snacks.                                 30/Confectionery items, snacks, candy.           --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 19                                               Case Number/Subcase   Application   Publication   Registration   Status Trademark           Country Name   Number/Date   Number/Date   Number/Date   Next Renewal   FISHER and Design           3159510670/   707921           1277980   Registered             France   04-Jul-1984           04-Jul-1984   3l-Jul-2014     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Cabinet Lavoix       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510786       Resp. Office:   IL         Goods:   Coffee, tea, cocoa, sugar, rice, tapioca, sago, coffee substitutes, flours and preparations made from cereals, bread, pastry and confectionery, edible ices: honey, molasses; yeast, baking powder; salt, mustard, vinegar, sauces (except salad dressing): spices: ice: nuts and roasted nuts, confectionery products, snacks, candy.                                     FISHER and Design           3159510670/   B74890/30W7           1076622   Registered             Germany   05-Jul-1984           03-May-1985   31-Jul-20l4     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Boden Oppenhoff       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510921       Resp. Office:   IL         Goods:   Confectionery, snack foods for immediate consumption, namely corn snacks, popcorn (glazed, carmel or candy-coated), mixtures of popcorn                                     FISHER and Design           3159510670/2   H4HC0101764           355990   Registered             Indonesia   16-Jan-l995           16-Dec-1996   16-Jan-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   George Widjojo & Partners       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510956B       Resp. Office:   IL         Goods:   Meat, fish, poultry and game; meat extracts; preserved, dried and cooked fruits and vegetables; jellies, jams; eggs, milk and other dairy products; preserves, pickles.   --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 20                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER and Design           3159510670/               22320   Registered             Jordan               3l-Oct-1984   31-Oct-20l5     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Saba & Co. - Jordan       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510972       Resp. Office:   IL         Goods:   Nuts (shelled, roasted or otherwise processed).                                             FISHER and Design           3159510670/1   44434           81889   Registered             Lebanon   08-Dec-1999           08-Dec-1999   08-Dec-20l4     Class(es):   29.30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Saba & Co. - Lebanon       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511006B       Resp. Office:   IL         Goods:   29/ Meat, fish, poultry and game: meat extracts; preserved, dried and cooked fruits and vegetables; jellies, jams, eggs, milk and other dairy products: edible oils and fats: preserves pickets, roasted nuts. 30/Confectionery items, snack foods, candy.                                     FISHER and Design           3159510670/   4663           4663   Registered             Qatar   08-Dec-1984           14-May-l99l   08-Dec-20l4     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Saba & Co. - Qatar       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510808       Resp. Office:   IL         Goods:   29/Nuts (shelled, roasted or otherwise processed). 30/Confectionary items, snack foods, candy.   --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 21                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER and Design           3159510670/               14450   Registered             Saudi Arabia   25-Feb-1985           24-Jun-l986   05-Apr-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   APA - Associated Patent Attorneys       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510816       Resp. Office:   IL         Goods:   Nuts (shelled, roasted or otherwise processed).                                             FISHER and Squirrel Design           3159510840/   269694           269694   Registered             Uruguay   26-Apr-l994           06-Dec-1996   06-Dec-2016     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Fox. Fox & Lapenne       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510840       Resp. Office:   IL         Goods:   Meat, fish, poulty and game; meat extracts, preserved dried and cooked fruits and vegetables, jellies, jams, eggs, milk and other dairy.                                     FISHER CRUNCHY BAKED PEANUTS           3159510719/   818353716           818353716   Registered             Brazil   13-Mar-1995   18-Feb-2003   2-Aug-2003   12-Aug-20l3     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Trench. Rossi E Watanabe Advogados       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510719       Resp. Office:   IL         Goods:   Shelled, roasted or otherwise processed nuts and snack food.       --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 22                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER FAVORITES           3159510883/   818353724               Suspended             Brazil   13-Mar-1995   19-Dec-1995             Class(es):   29,30,29,40       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Trench. Rossi E Watanabe Advogados       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510727       Resp. Office:   IL         Goods:   Fruits, greens, vegetables, and cerels (Cl 29.30); fats and edible oils; special protection for shelled, roasted or otherwise processed                                     FISHER FAVORITES           3159510883/   74/280735           1813891   Registered             United States of America   29-May-1992   05-Oct-l993   28-Dec-1993   28-Dec-2013     Class(es):   29,30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   29/Shelled, roasted or otherwise processed nuts.                 30/Candied, flavored nuts.                                                         FISHER FUSIONS(Stylized)           3159511715/   78/831201               Pending             United States of America   07-Mar-2006                     Class(es):   29,30       Attorney(s):   DJS BPO         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   29/Snack mixes consisting primarily of processed nuts and processed fruits.             30/Snack mixes consisting primarily f wheat-based or rice-based snack foods and also containing processed nuts.   --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 23                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER NUT           3159511030/               035708   Registered             Panama   11-May-1984           10-Jan-1985   10-Jan-2015     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Arias. Fabrega & Fabrega       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511030       Resp. Office:   IL         Goods:   Foods, salt, spices, sugar.                                             FISHER NUTS           3159510700/   022775           62214-C   Registered             Bolivia   09-Nov-l994           18-Oct-1996   18-Oct-2006     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Rojas. C R & F       Agent Ref:             Owner Name:   The Procter & Gamble Company                         Related Case No.   3159510700       Resp. Office:   IL         Goods:   All wares in the Class, especially food and food ingredients, particularly shelled and/or baked nuts and nuts processed in any other way.                                     FISHER NUTS           3159510700/   93392964           160090   Registered             Colombia   24-Jun-1993           30-Mar-1994   30-Mar-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Castillo Grau & Associates       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510751       Resp. Office:   IL         Goods:   Meat fish, poultry and game: meat extracts; preserved, dried and cooked fruits and vegetabes; jellies, jams: eggs, milk and milk products.   --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 24                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER NUTS           3159510700/   50523           3984-95   Registered             Ecuador   27-Sep-1994           30-NOV-1995   30-Nov-20l5     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Bermeo & Bermeo       Agent Ref:             Owner Name:   The Procter & Gamble Company                         Related Case No.   3159510778       Resp. Office:   IL         Goods:   All good in the class, especially toasted nuts.                                             FISHER NUTS           3159510700/   12848-93           275668   Registered             Paraguay   10-Aug-1993           14-Jun-1994   14-Jun-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Berkemeyer       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511049       Resp. Office:   IL         Goods:   Meat, fish, poultry and game: meat extracts: preserved, dried and cooked fruits and vegetabes: jellies, jams: eggs, milk and milk products.                                     FISHER NUTS           3159510700/   251199           012079   Registered             Peru   22-Sep-I994           29-Dec-1994   29-Dec-20l4     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   BFUDA       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510794       Resp. Office:   IL         Goods:   All wares in the Class, and its ingredients, shelled roasted nuts and all kind of processed nuts.   --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 25                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER NUTS           3159510700/   264525           264525   Registered             Uruguay   09-Aug-1993           07- Apr- 1995   07-Apr-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Fox. Fox & Lapenne       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510859       Resp. Office:   IL         Goods:   Meat, fish, poultry and game: meat etracts: preserved, dried and cooked fruits and vegetabes: jellies, jams: eggs, milk and milk                                     FISHER NUTS           3159510700/   1438593               Published             Venezuela   04-Aug-1993   09-Jan-1995             Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   DESPH       Agent Ref:             Owner Name:   The Procter & Gamble Company                         Related Case No.   3159510891       Resp. Office:   IL         Goods:   Meat, fish, poultry and game: meat extracts: preserved, dried and cooked fruits and vegetables: jellies, jams: compotes: eggs, milk and milk products: edible oils and fats.                                     fisher,el (Domain Name)           3159510743B/                   Registered             Chile   10-Jul-2002           10-Jul-2002   10-Jul-2008     Class(es):           Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:   Harnecker, Estudio       Agent Ref:   338/HRL         Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL       --------------------------------------------------------------------------------   Thursday, July 13,2006   Trademark List   Page: 26                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FISHER’S           3159510743 A/X               546917   Registered             Chile               27-Aug-1999   27-Aug-2009     Class(es):   Int, Cl, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 1       Resp. Office:   IL         Goods:   Products of the class.                                             FISHER’S           3159510875/   73/122398           1100900   Registered             United States of America   11-Apr-1977   06-Jun-1978   29-Aug-1978   29-Aug-2008     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   Shelled or roasted nuts.                                                         FLAVOR TREE           3159510522/X   314568           167908   Registered             Canada   09-Jul-1968           27-Feb-1970   27-Feb-20l5     Class(es):           Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Osier, Hoskin & Harcourt LLP-Toronto       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 1       Resp. Office:   IL         Goods:   Flour based flavoured snack sticks.   --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 27                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FLAVOR TREE           3159510514/   643655           1217070   Registered             France   27-Oct-1982           27-Oct-1982   27-Oct-2012     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                                                           Resp. Office:   IL         Goods:   30/(Description of goods listed in French, no English translation)                                             FLAVOR TREE           3159510506/X   36513/87           2155405   Registered             Japan   02-Apr-l987           3l-Jul-1989   31-Jul-2009     Class(es):   Int. Cl. 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Asamura Patent Office       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 1       Resp. Office:   IL         Goods:   Confectionery, bread and buns.                                                         FLAVOR TREE           3159510549/2   1271613           B1271613   Registered             United Kingdom   18-Jul-1986           10-May-l989   18-Jul-2007     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510476       Resp. Office:   IL         Goods:   Snack foods included in Class 29 in the roll form and made from fruits.           --------------------------------------------------------------------------------                   Thursday, July 13, 2006   Trademark List   Page: 28                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   FLAVOR TREE           3159510549/1   1001008           B1001008   Registered             United Kingdom   Ol-Nov-1972           13-Feb-1974   01-Nov-2007     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510484       Resp. Office:   IL         Goods:   Processed soya beans: foodstuffs in the form of sticks or chips, all made principally of flour and all being flavoured; all prepared                                     FLAVOR TREE           3159510549/   72/287904           862481   Registered             United States of America   02-Jan-1968   30-Apr-1968   24-Dec-1968   24-Dec-2008     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   Sesame flavored snack sticks containing wheat flour.                                     FLAVOR TREE and Design           3159510530/   73/338734           1236611   Registered             United States of America   24-Nov-1981   08-Feb-1983   03-May-l983   03-May-2013     Class(es):   30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:   IL         Goods:   A baked snack food product made primarily from wheat flour, vegetable oil, sesame seeds, and other flavorings and coloring ingredients.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 29                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   GOLDEN ROAST           3159510905/   72/183500           780014   Registered             United States of America   24-Dec-1963   25-Aug-1964   10-Nov-1964   10-Nov-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:        IL         Goods:   Shelled edible nuts.                                       GOOD FOR U and Design           3159511561A/2   76/976112           2841385   Registered             United States of America   14-Aug-2001   06-Aug-2002   11-May-2004   11-May-2014     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511561B       Resp. Office:        IL         Goods:   Shelled and roasted nuts; snack mix consisting primarily of processed nuts; dried fruits; candied nuts; processed flavored nuts.                                       Miscellaneous Design           3159510930/   3141/84           B3141/84   Registered             Malaysia   13-Jul-1984           13-Jul-1984   13-Jul-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Drew & Napier LLC — Singapore       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511014       Resp. Office:        IL         Goods:   Nuts (shelled, roasted or otherwise processed).   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 30                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   Miscellaneous Design           3159510930/               B3564/84   Registered             Singapore   07-Jul-1984           07-Jul-1984   07-Jul-2011     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Drew & Napier LLC — Singapore       Agent Ref:             Owner Name:   The Procter & Gamble Company                         Related Case No.   3159510824       Resp. Office:        IL         Goods:   Nuts being shelled, roasted or processed.                                       Miscellaneous Design           3159510930/               B1221372   Registered             United Kingdom   22-Jun-1984           15-May-1987   22-Jun-2015     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   HallMark IP Limited       Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159510930       Resp. Office:        IL         Goods:   Nuts being shelled, roasted or processed.                                       NATURE’S NUT MIX           3159511570/1   76/975151           2774066   Registered             United States of America   14-Aug-2001   19-Feb-2002   14-Oct-2003   14-Oct-2013     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   11570-B       Resp. Office:        IL         Goods:   Shelled and roasted nuts; snack mix consisting primarily of process nuts; dried fruits; candied nuts; processed flavored nuts.   --------------------------------------------------------------------------------          Thursday, July 13, 2006   Trademark List   Page: 31                                   Case Number/Subcase   Application   Publication   Registration   Status Trademark       Country Name   Number/Date   Number/Date   Number/Date   Next Renewal   SALAD BUDDIES       3159511650/   78/366824       3002851   Registered         United States of America   12-Feb-2004   l6-Nov-2004   27-Sep-2005   27-Sep-20l5     Class(es):    29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                 Resp. Offlce:   IL         Goods:   Snack mixes consisting primarily of processed nuts, processed fruits and/or raisins.                                 SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Austria   24-Dec-l998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29. 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Offlce:   IL         Goods:   29/Processed nuts and dried fruits.                         30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                             SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Benelux   24-Dec-1998   l5-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Offlce:   IL         Goods:   29/Processed nuts and dried fruits.                         30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------   c        Thursday, July 13, 2006   Trademark List   Page: 32                                   Case Number/Subcase   Application   Publication   Registration   Status Trademark       Country Name   Number/Date   Number/Date   Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL       3159511448A/   890747       552435   Registered         Canada   18-Sep-1998   03-Nov-1999   16-Oct-2001   16-Oct-20l6     Class(es):           Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:   Osler, Hoskin & Harcourt LLP-Toronto   Agent Ref:    8933238         Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511430       Resp. Office:   IL         Goods:   Processed nuts and dried fruits, candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzels, cookies and granola-based snack foods.                             SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Cyprus, Republic of   24-Dec-l998   15-Nov-l999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.    3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, com puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                             SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Czech Republic   24-Dec-1998   15-Nov-l999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Office:   IL         Gods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------          Thursday, July 13, 2006   Trademark List   Page: 33                                       Case Number/Subcase   Application   Publication   Registration   Status Trademark       Country Name   Number/Date   Number/Date   Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356       Registered         Denmark   24-Dec-l998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29. 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:                 Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                               SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356       Registered         Estonia   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. CI. 29. 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:                 Owner Name:   lohn B. Sanfilippo & Son, Inc.                         Related Case No.    3159511480       Resp. Office:   IL         Goods:   29/Processcd nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                               SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356       Registered         European Community   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29. 30       Attorney (s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:                 Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------          Thursday, July 13, 2006   Trademark List   Page: 34                                   Case Number/Subcase   Application   Publication   Registration   Status Trademark       Country Name   Number/Date   Number/Date   Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Finland   24-Dec-1998   l5-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                           SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         France   24-Dec-l998   15-Nov-1999   20-Feb-200l   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                           SNACK ‘N SERVE NUT BOWL       3159511448A/   1028356       1028356   Registered         Germany   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                     Related Case No.   3159511480       Resp. Office:   IL         Goods:   29/Processed nuts and dried fruits.             30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 35                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Greece   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based             snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Hungary   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based             snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Ireland   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based             snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 36                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Italy   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Latvia   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Lithuania   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 37                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Malta   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Poland   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Portugal   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 38                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Slovakia   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Slovenia   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Spain   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 39                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             Sweden   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   1028356           1028356   Registered             United Kingdom   24-Dec-1998   15-Nov-1999   20-Feb-2001   24-Dec-2008     Class(es):   Int. Cl. 29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511480       Resp. Office:        IL         Goods:   29/Processed nuts and dried fruits.                                 30/Candies, candied and chocolate covered nuts, candied fruits, cheese puffs, corn puffs, popped popcorn, pretzles, granola-based snack foods, excluding biscuits, wafers and shortbread.                                   SNACK ‘N SERVE NUT BOWL           3159511448A/   76/372223           2662957   Registered             United States of America   19-Feb-2002   24-Sep-2002   17-Dec-2002   17-Dec-2012     Class(es):   29, 30       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:   Pocket 1         Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   3159511448B       Resp. Office:        IL         Goods:   29/Processed nuts; dried fruits; candied nuts.             30/Candies, chocolate covered nuts, candied fruits, puffed corn snacks, puffed cheese flavored snacks, popped popcorn, pretzels, cookies and granola based snack bars.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 40                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   SUNSHINE COUNTRY           3159511502/X   73/268559           1195301   Registered             United States of America   30-Jun-1980   08-Sep-1981   11-May-1982   11-May-2012     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 1       Resp. Office:        IL         Goods:   Processed nuts and processed seeds.                                                         TEXAS PRIDE           3159510018/   74/366189           1802211   Registered             United States of America   09-Mar-1993   10-Aug-1993   02-Nov-1993   02-Nov-2013     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   Pocket 15       Resp. Office:        IL         Goods:   Processed nuts and processed edible seeds.                                     THE HOME ECONOMIST           3159510433/2   73/733047           1523990   Registered             United States of America   07-Jun-1988   15-Nov-1988   07-Feb-1989   07-Feb-2009     Class(es):   42       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                         Related Case No.   10433 B       Resp. Office:        IL         Goods:   Retail grocery store services featuring bulk sales.   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Trademark List   Page: 41                                               Case Number/Subcase   Application   Publication     Registration   Status Trademark           Country Name   Number/Date   Number/Date     Number/Date   Next Renewal   TOM SCOTT           3159510913/   73/362715           1258719   Registered             United States of America   03-May-1982   30-Aug-1983   11-May-1982   22-Nov-2013     Class(es):   29       Attorney(s):   DJS         Client:   John B. Sanfilippo & Son, Inc.       Client Ref:             Agent Name:           Agent Ref:             Owner Name:   John B. Sanfilippo & Son, Inc.                                         Resp. Office:        IL         Goods:   Roasted nuts.                       --------------------------------------------------------------------------------         Thursday, July 13, 2006   Master List   Page: 1 Case Number: 3159510638                 Title:   Continuous Preparation Of Non-Aggregated Edible Cores With   Inventor(s):         Crisp Farinaceous Coatings       Lanner Client:   John B. Sanfilippo & Son, Inc.       Romanach Owner:   John Sanfilippo & Company       Hsieh Disclosure Status:   Filed       Mishkin Disclosure Date:             Attorney(s):   MPV                                                           Country   Sub Case   Case Type   Status     Application Number   Filing Date     Patent Number   Issue Date   Expiration Date     Related Case No.   Canada       PCT   Granted     2155676     10-Feb-1994     2155676     0l-Dec-1998   10-Feb-2014     3159511170   Mexico       ORD   Granted     941219     16-Feb-1994     186094     24-Sep-1997   16-Feb-2014     3159511200     United States of America       ORD   Granted     08/017551     16-Feb-1993     5433961     18-Jul-1995   16-Feb-2013             --------------------------------------------------------------------------------         Thursday, July 13, 2006   Master List   Page: 2 Case Number: 3159510646                 Title:   Producing Translucent Amorphous Sugar Coated Edible Nuts And   Inventor(s):         Seeds       Hsieh Client:   John B. Sanfilippo & Son, Inc.       Richards Owner:   John Sanfilippo & Company       Hinkemeyer Disclosure Status:   Filed       Romanach Disclosure Date:             Attorney(s):   MPV                                                             Country   Sub Case   Case Type   Status     Application Number   Filing Date     Patent Number   Issue Date   Expiration Date     Related Case No.   United States of America   1   CIP   Granted     08/305248     13-Sep-1994     5424085     l3-Jun-1995   13-Sep-2014     10646 B   --------------------------------------------------------------------------------         Thursday, July 13, 2006   Master List   Page: 3 Case Number: 3159510654                 Title:   Process Of Making Low Fat Nuts   Inventor(s):     Client:   John B. Sanfilippo & Son, Inc.       Wong Owner:   John Sanfilippo & Company       Sackenheim Disclosure Status:   Filed       Disclosure Date:             Attorney(s):   MPV                                                             Country   Sub Case   Case Type   Status     Application Number   Filing Date     Patent Number   Issue Date   Expiration Date     Related Case No.   United States of America     ORD   Granted     07/733508     22-July-1991     5164217     17-Nov-1992   22-Jul-2011           --------------------------------------------------------------------------------         Thursday, July 13, 2006   Master List   Page: 4 Case Number: 3159511243                 Title:   Coating Unblanched, Raw Nuts   Inventor(s):     Client:   John B. Sanfilippo & Son, Inc.       Hsieh Owner:   John Sanfilippo & Company       Richards Disclosure Status:   Filed       Alvarado Disclosure Date:           Romanach Attorney(s):   MPV                                                           Country   Sub Case   Case Type   Status     Application Number   Filing Date     Patent Number   Issue Date   Expiration Date   Related Case No.   United States of America   1   CIP   Granted     08/131810     05-Oct-1993     5362505     08-Nov-1994   10-Nov-2012   11243 A       --------------------------------------------------------------------------------               Thursday, July 13, 2006   Master List   Page: 5 Case Number: 3159511472                 Title:   Des : Snack Food jar   Inventor(s):     Client:   John B. Sanfilippo & Son, Inc.       Arlinghaus Owner:           Meisner Disclosure Status:   Filed       Charriez Disclosure Date:           Millisor Attorney(s):   MPV       Moreno                                             Country   Sub Case     Case Type   Status   Application Number   Filing Date   Patent Number   Issue Date   Expiration Date   Related Case No.   United States of America           DES   Granted   07/710900   31-May-1991   Des 333268   16-Feb-1993   16-Feb-2007        

Exhibit 10.1 HE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE APPLICABLE SECURITIES LAWS OF ANY STATE. SECURED PROMISSORY NOTE $900,000.00   April 13, 2006   Clearwater, Florida For value received, Digital Lightwave, Inc., a Delaware corporation (the “Company”), promises to pay to Optel Capital, LLC, a Delaware limited liability company (the “Holder”), or its registered assigns, the principal sum of Nine Hundred Thousand Dollars ($900,000.00). Interest shall accrue from the date of this Note on the unpaid principal amount at a rate equal to 10.0% per annum, compounded annually. The interest rate shall be computed on the basis of the actual number of days elapsed and a year of 360 days. This Note is subject to the following terms and conditions. 1. Maturity. (a) Principal and any accrued but unpaid interest under this Note shall be due and payable upon demand by the Holder at any time after May 31, 2006. (b) Notwithstanding the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest thereon, shall become immediately due and payable upon demand by the Holder at any time on or following the occurrence of any of the following events: (i) the sale of all or substantially all of the Company’s assets, or any merger or consolidation of the Company with or into another corporation; other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such surviving entity, outstanding immediately after such transaction; (ii) the inability of the Company to pay its debts as they become due; -------------------------------------------------------------------------------- (iii) the dissolution, termination of existence, or appointment of a receiver, trustee or custodian, for all or any material part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; (iv) the execution by the Company of a general assignment for the benefit of creditors; (v) the commencement of any proceeding against the Company under any reorganization, bankruptcy, arrangement, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within ninety (90) days after the date commenced; or (vi) the appointment of a receiver or trustee to take possession of the property or assets of the Company. 2. Payment; Prepayment. All payments shall be made in lawful money of the United States of America at such place as the Holder hereof may from time to time designate in writing to the Company. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal. Prepayment of this Note may be made at any time without penalty. 3. Transfer; Successors and Assigns. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. This Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and accrued interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note. 4. Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Florida, without giving effect to principles of conflicts of law. 5. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice. 6. Amendments and Waivers. Any term of this Note may be amended only with the written consent of the Company and the Holder. Any amendment or waiver effected in accordance with this Section 6 shall be binding upon the Company, each Holder and each transferee of this Note.   -2- -------------------------------------------------------------------------------- 7. Officers and Directors Not Liable. In no event shall any officer or director of the Company be liable for any amounts due or payable pursuant to this Note. 8. Security Interest. This Note is secured by all of the assets of the Company in accordance with the Twenty Second Amended and Restated Security Agreement by and between the Company and the Holder dated as of September 16, 2004 (the “Security Agreement”). In case of an Event of Default (as defined in the Security Agreement), the Holder shall have the rights set forth in the Security Agreement. 9. Counterparts. This Note may be executed in any number of counterparts, each of which will be deemed to be an original and all of which together will constitute a single agreement. 10. Action to Collect on Note. If action is instituted to collect on this Note, the Company promises to pay all costs and expenses, including reasonable attorney’s fees, incurred in connection with such action. 11. Loss of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor. [Remainder of this page intentionally left blank.]   -3- -------------------------------------------------------------------------------- This Note was entered into as of the date set forth above.   COMPANY: DIGITAL LIGHTWAVE, INC. By:   /s/ Kenneth T. Myers   Kenneth T. Myers   President and Chief Executive Officer   AGREED TO AND ACCEPTED: OPTEL CAPITAL, LLC By:   /s/ Paul Ragaini Name:   Paul Ragaini        (print) Title:   Chief Financial Officer

Exhibit 10.1 CREDIT AGREEMENT dated as of July 26, 2006 by and among COX RADIO, INC., The Lenders Party Hereto and JPMORGAN CHASE BANK, N.A. as Administrative Agent for the Lenders   -------------------------------------------------------------------------------- LEHMAN COMMERCIAL PAPER INC. and CITIBANK, N.A. Syndication Agents   -------------------------------------------------------------------------------- WACHOVIA CAPITAL MARKETS, LLC and BANK OF TOKYO-MITSUBISHI UFJ TRUST COMPANY Documentation Agents   --------------------------------------------------------------------------------   J.P. MORGAN SECURITIES INC.   LEHMAN BROTHERS INC.   CITIGROUP GLOBAL MARKETS INC. Joint Lead Arrangers and Joint Bookrunners -------------------------------------------------------------------------------- COX RADIO, INC. Table of Contents   ARTICLE I. DEFINITIONS    1         Section 1.01   Defined Terms    1         Section 1.02   Terms Generally    13         Section 1.03   Accounting Terms; GAAP    13 ARTICLE II. THE LOANS    13         Section 2.01   Conventional Revolving Loans    13         Section 2.02   Delivery of Proceeds; Recordation of Loans; Interest    15         Section 2.03   Setoff, Counterclaims and Taxes    21         Section 2.04   Withholding Tax Exemption    22         Section 2.05   Discretionary Revolving Loans    22         Section 2.06   [RESERVED]    23         Section 2.07   [RESERVED]    23         Section 2.08   Interest Election    23         Section 2.09   Obligations Several, Not Joint    24         Section 2.10   Replacement of Lenders    24         Section 2.11   Letters of Credit    25         Section 2.12   Evidence of Debt    28         Section 2.13   Termination Date Extension    29 ARTICLE III. OPTIONAL AND REQUIRED PREPAYMENTS; INTEREST PAYMENT DATE AND COMMITMENT REDUCTION DATE PAYMENTS; OTHER PAYMENTS    30         Section 3.01   Optional Prepayments    30         Section 3.02   Required Prepayments    30         Section 3.03   Place, etc. of Payments and Prepayments    31 ARTICLE IV. REDUCTION OF COMMITMENTS; FEES    32         Section 4.01   Optional Reduction or Termination of Commitments    32         Section 4.02   Mandatory Termination of Commitments    32         Section 4.03   Commitment Fees    32         Section 4.04   LC Participation Fees    32         Section 4.05   Administrative Agent’s Fee    33 ARTICLE V. APPLICATION OF PROCEEDS    33 ARTICLE VI. REPRESENTATIONS AND WARRANTIES    33         Section 6.01   Organization; Qualification; Subsidiaries    33         Section 6.02   Financial Statements    33         Section 6.03   Actions Pending    33         Section 6.04   Default    34         Section 6.05   Title to Assets    34         Section 6.06   Payment of Taxes    34         Section 6.07   Conflicting or Adverse Agreements or Restrictions    34         Section 6.08   Purpose of Loans    34         Section 6.09   Authority; Validity; Enforceability    34         Section 6.10   Consents or Approvals    34   i --------------------------------------------------------------------------------         Section 6.11   Compliance with Law and Contractual Obligations    35         Section 6.12   ERISA    35         Section 6.13   Investment Company Act    35         Section 6.14   Disclosure    35 ARTICLE VII. CONDITIONS    35         Section 7.01   Conditions Precedent to the Initial Extension of Credit    35         Section 7.02   Conditions Precedent to Each Extension of Credit    36 ARTICLE VIII. AFFIRMATIVE COVENANTS    37         Section 8.01   Certain Financial Covenants    37         Section 8.02   Financial Statements and Information    37         Section 8.03   Existence; Compliance with Laws; Licenses, Franchises, Agreements and Other Obligations    38         Section 8.04   Notice of Litigation and Other Matters    39         Section 8.05   Books and Records    39         Section 8.06   Inspection of Property and Records    39         Section 8.07   Maintenance of Property; Insurance    39         Section 8.08   ERISA    39 ARTICLE IX. NEGATIVE COVENANTS    40         Section 9.01   Liens.    40         Section 9.02   Merger; Consolidation; Disposition of Assets    41         Section 9.03   Restricted Payments    41         Section 9.04   Limitation on Margin Stock    42         Section 9.05   Loans and Advances to and Investments in Unrestricted Subsidiaries    42         Section 9.06   Subsidiary Debt    42         Section 9.07   Transactions with Affiliates    42 ARTICLE X. EVENTS OF DEFAULT    43         Section 10.01   Failure to Pay Principal or Interest    43         Section 10.02   Failure to Pay Other Sums    43         Section 10.03   Failure to Pay or Acceleration of Other Debt    43         Section 10.04   Misrepresentation or Breach of Warranty    44         Section 10.05   Violation of Certain Covenants    44         Section 10.06   Violation of Other Covenants, etc    44         Section 10.07   Undischarged Judgment    44         Section 10.08   Change of Control    44         Section 10.09   Assignment for Benefit of Creditors or Nonpayment of Debts    44         Section 10.10   Voluntary Bankruptcy    44         Section 10.11   Involuntary Bankruptcy    45         Section 10.12   Dissolution    45 ARTICLE XI. MODIFICATIONS, AMENDMENTS OR WAIVERS    45 ARTICLE XII. THE ADMINISTRATIVE AGENT    46         Section 12.01   Appointment of Administrative Agent    46         Section 12.02   Indemnification of Administrative Agent    46         Section 12.03   Limitation of Liability    46         Section 12.04   Independent Credit Decision    47         Section 12.05   Rights of JPMCB    47   ii --------------------------------------------------------------------------------         Section 12.06   Successor to the Administrative Agent    47         Section 12.07   Other Agents and Sub-Agents    48 ARTICLE XIII. MISCELLANEOUS    48         Section 13.01   Payment of Expenses    48         Section 13.02   Notices    48         Section 13.03   Setoff    49         Section 13.04   Indemnity and Judgments    50         Section 13.05   Interest    50         Section 13.06   Governing Law; Submission to Jurisdiction; Venue    51         Section 13.07   Survival of Representations and Warranties; Binding Effect; Assignment    51         Section 13.08   Counterparts    54         Section 13.09   Severability    55         Section 13.10   Descriptive Headings    55         Section 13.11   Representation of the Lenders    55         Section 13.12   Final Agreement of the Parties    55         Section 13.13   Waiver of Jury Trial    55         Section 13.14   Confidentiality    55         Section 13.15   USA PATRIOT Act    56   iii -------------------------------------------------------------------------------- List of Exhibits   Exhibit 2.01(a)    -      Revolving Commitments       Exhibit 2.02(f)(iv)    -      Eurocurrency Liabilities (Regulation D)    Exhibit 6.01    -      List of Unrestricted Subsidiaries    Exhibit 6.03    -      List of Actions Pending       Exhibit 7.01(a)    -      Opinion of the Company’s Counsel addressed to the Lenders    Exhibit 7.01(b)    -      Officer’s Certificate       Exhibit 9.01(d)    -      List of Liens and Security Interests    Exhibit 13.07(c)    -      Assignment and Assumption         iv -------------------------------------------------------------------------------- THIS CREDIT AGREEMENT, made as of the 26th day of July, 2006, is among COX RADIO, INC. (the “Company”), the LENDERS party hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent for the Lenders (hereinafter in such capacity called the “Administrative Agent”). The Company has requested the Lenders to extend Commitments (such term and each other capitalized term used and not otherwise defined herein having the meaning assigned to it in Article I) under which the Company may obtain extensions of credit in an aggregate principal or face amount at any time outstanding not greater than $600,000,000, as such amount may be increased or decreased pursuant to this Agreement (of which up to $50,000,000 may be in the form of letters of credit). The proceeds of the Borrowings made and the letters of credit issued hereunder will be used by the Company as provided in Article V. The Lenders are willing to establish the credit facility referred to in the preceding paragraph upon the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I. DEFINITIONS Section 1.01 Defined Terms. As used in this Agreement, the following words and terms shall have the respective meanings indicated opposite each of them: “Administrative Questionnaire” shall mean an Administrative Questionnaire in a form supplied by the Administrative Agent. “Affiliate” shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Agreement” shall mean this Credit Agreement, as the same may be amended from time to time. “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greater of (a) the Floating Rate in effect on such day; or (b) the Federal Funds Borrowing Rate in effect for such day plus  1/2 of 1%. For purposes of this Agreement, any change in the Alternate Base Rate due to a change in the Floating Rate or the Federal Funds Borrowing Rate shall be effective on the effective date of such change in the Floating Rate or the Federal Funds Borrowing Rate. “Alternate Base Rate Loans” shall mean those Loans which may be made under this Agreement and which are described in Section 2.02(c)(i) on which the Company shall pay interest at a rate based on the Alternate Base Rate. “Alternate Base Rate Margin” for any date shall be zero unless the Margin Percentage with respect to the Eurodollar Rate for such date exceeds 1.00%; and if the Margin Percentage with respect to the Eurodollar Rate for such date exceeds 1.00%, the Alternate Base Rate Margin for such date will be the Margin Percentage with respect to the Eurodollar Rate for such date less 1.00%. “Applicable Revolver Percentage” shall mean, with respect to any Lender at any time, the percentage of the aggregate amount of the Revolving Commitments represented by such Lender’s Revolving Commitment at such time. If the Revolving Commitments have terminated or expired, the Applicable Revolver Percentage shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. -------------------------------------------------------------------------------- “Approved Fund” shall mean (a) any entity (whether a corporation, partnership, trust or otherwise) that is primarily engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is Controlled by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is Controlled by the same investment advisor as such Lender or by an Affiliate of such investment advisor. “Arrangers” shall mean J.P. Morgan Securities Inc., Lehman Brothers Inc. and Citigroup Global Markets Inc. “Assignment and Assumption” shall have the meaning specified in Section 13.07(c). “Borrowing” shall mean a Conventional Revolving Borrowing. “Borrowing Date” shall mean a date upon which a Borrowing or Discretionary Revolving Loan is to be made under Article II. “Borrowing Pro Rata Share” shall mean, with respect to any Lender as to any Borrowing of Conventional Revolving Loans, a fraction (expressed as a percentage rounded upward, if necessary, to the nearest whole multiple of 0.000000001%) (A) the numerator of which shall be the amount of such Lender’s Commitment for such Loans and (B) the denominator of which shall be the aggregate amount of all Lenders’ Commitments for such Loans. “Business Day” shall mean a day when the Administrative Agent is open for business; provided that if the applicable Business Day relates to Eurodollar Loans, it shall mean a day when the Administrative Agent is open for business and banks are open for dealings in Dollar deposits in the London interbank market. “Closing Date” shall mean July 26, 2006. “Code” shall mean the Internal Revenue Code of 1986, as amended. “Commitments” shall mean the Revolving Commitments, as such Commitments may be increased or reduced from time to time pursuant to the terms of this Agreement. “Commitment Fees” shall have the meaning specified in Section 4.03. “Commitment Fee Rate” shall have the meaning specified in the definition of “Margin Percentage”. “Consolidated Debt” shall mean, without duplication, all Debt of the Company and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, and including guaranties of indebtedness for borrowed money or for the deferred purchase price of Property and obligations under or with respect to standby letters of credit of the Company and the Restricted Subsidiaries, but only to the extent such liabilities for guaranties or standby letters of credit in the aggregate exceed $25,000,000; provided, however, that for purposes of this definition, Consolidated Debt shall not include (a) guaranties by the Company or any Restricted Subsidiary of overdrafts of any   2 -------------------------------------------------------------------------------- Restricted Subsidiary, which occur in the ordinary course of business and remain outstanding for a period not to exceed seven Business Days; (b) Debt of a FIN 46 Entity that (i) would not be shown as a liability on a consolidated balance sheet of the Company and its Restricted Subsidiaries prepared in accordance with GAAP except for the application of FIN 46(R) and (ii) is not guaranteed by, and does not otherwise constitute Debt of, the Company or any of its Restricted Subsidiaries (provided that if such Debt of a FIN 46 Entity is guaranteed by or otherwise constitutes Debt of the Company or any of its Restricted Subsidiaries, only that portion so guaranteed or that constitutes such Debt shall be included in Consolidated Debt); (c) liabilities in respect of Hybrid Equity Securities for amounts reflecting the Hybrid Equity Attribution (if any); and (d) any purchase accounting adjustments that do not include any monetary obligation of the Company or any Restricted Subsidiary. For purposes of computing the Leverage Ratio, such computation shall exclude any effect on the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities in respect of the accounting for all derivative financial instruments in accordance with GAAP, including derivative financial instruments that may be embedded in the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities and freestanding derivative financial instruments used by the Company or any Restricted Subsidiary for hedging purposes, but such computation shall in any event include the original principal amount and any accreted principal amount of such debt securities and Indexed Securities. The effect on the computation of the Leverage Ratio pursuant to the prior sentence that may be excluded in respect of the accounting for all derivative financial instruments in accordance with GAAP includes: (i) entries associated with the mark-to-market of all freestanding and embedded derivative financial instruments classified as a component of the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities in the consolidated balance sheet of the Company and (ii) entries to record and accrete additional debt discount that may arise from the bifurcation of derivative financial instruments embedded in the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities. “Consolidated Interest Expense” shall mean, as of the last day of any fiscal quarter of the Company for the period of four fiscal quarters then ended, the sum of (i) interest expense, after giving effect to any net payments made or received by the Company and its Restricted Subsidiaries with respect to interest rate swaps, caps and floors or other similar agreements, and (ii) capitalized interest expense, in each case of the Company and its Restricted Subsidiaries, all on a consolidated basis determined in accordance with GAAP (but in any event including all interest and dividends paid in such period in respect of any Hybrid Equity Securities and excluding any interest expense and dividends of a FIN 46 Entity); provided that for purposes of this definition, interest expense shall exclude any effect on interest expense in respect of the accounting for all derivative financial instruments in accordance with GAAP, including derivative financial instruments that may be embedded in the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities and freestanding derivative financial instruments that may be used by the Company or any Restricted Subsidiary for hedging purposes. The effect on interest expense that may be excluded in respect of the accounting for all derivative financial instruments in accordance with GAAP includes: (i) entries to record noncash interest expense (or income) associated with the mark-to-market of freestanding and embedded derivative financial instruments, (ii) noncash interest expense associated with the accretion of additional debt discount that may arise from the bifurcation of derivative financial instruments embedded in the Company’s or any Restricted Subsidiary’s debt securities or Indexed Securities, and (iii) noncash interest expense (or income) that may arise if the Company’s or any Restricted Subsidiary’s hedging strategies become ineffective, as determined in accordance with GAAP. “Consolidated Net Worth” shall mean total assets of the Company and all Restricted Subsidiaries less all liabilities of the Company and all Restricted Subsidiaries, as determined in accordance with GAAP (but in any event including all liabilities in respect of Hybrid Equity Securities); provided, that (a) liabilities in respect of Hybrid Equity Securities shall exclude amounts reflecting the Hybrid Equity Attribution (if any), (b) liabilities in respect of any defined benefit pension plan and other post-retirement benefits shall be determined in accordance with GAAP as in effect on the date of this Agreement and (c) assets and liabilities of any FIN 46 Entity shall be excluded.   3 -------------------------------------------------------------------------------- “Consolidated Operating Cash Flow” shall mean, as of the last day of any fiscal quarter of the Company for the period of four fiscal quarters then ended, the sum of (i) operating income of the Company and its Restricted Subsidiaries except operating income attributable to FIN 46 Entities (less actual cash payments for broadcast program rights and cash dividends and other cash distributions to the holders of minority interests in the Company’s Restricted Subsidiaries except FIN 46 Entities), to the extent otherwise reflected in operating income before giving effect to depreciation, amortization (including amortization in respect of broadcast program rights), other non-cash charges and equity in earnings (losses) of unconsolidated investees on a consolidated basis and non-recurring one-time charges, all calculated as if any Restricted Subsidiary or business that has been presented as discontinued operations in the Company’s consolidated financial statements but that has not been sold or disposed of as of the last day of such four fiscal quarter period had been presented as part of continuing operations, and (ii) cash dividends and cash distributions, other than extraordinary distributions, for such period from FIN 46 Entities and from unconsolidated investees of the Company and its Restricted Subsidiaries, on a consolidated basis, minus, without duplication, (iii) the amount of cash payments in respect of items that were originally reflected in operating income (whether in such period or any earlier period) as non-cash charges; provided that Incentive Compensation Plan Expense shall not be included in the calculation of Consolidated Operating Cash Flow. “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto. “Conventional Revolving Borrowing” shall mean a Borrowing of Conventional Revolving Loans made by the Company under Section 2.01(a), as converted or continued under Section 2.08. “Conventional Revolving Loans” shall have the meaning specified in Section 2.01(a). “Counsel for the Company” shall mean Dow Lohnes PLLC. “Cox Family” shall include those certain trusts commonly referred to as the Dayton-Cox Trust A, the Barbara Cox Anthony Atlanta Trust, the Anne Cox Chambers Atlanta Trust, Barbara Cox Anthony, Garner Anthony, Anne Cox Chambers, and the estates, executors and administrators, and lineal descendants of the above-named individuals, any private foundation or other charitable entity of which the above-described individuals constitute a majority of the trustees, directors or managers, and any corporation, partnership, limited liability company, trust or other entity in which the above-named trusts or above-described individuals and the estates, executors and administrators, and lineal descendants of the above-named individuals in the aggregate have a direct or indirect beneficial interest or voting control of greater than 50%. “Debt” shall mean with respect to any Person and without duplication (i) indebtedness for borrowed money or for the deferred purchase price of Property in respect of which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which such Person directly or indirectly assures a creditor against loss, and (ii) the capitalized portions of obligations under leases which shall have been or should have been, in accordance with GAAP, recorded as capital leases. “Declining Lender” shall have the meaning specified in Section 2.13.   4 -------------------------------------------------------------------------------- “Default Rate” shall mean a rate per annum (for the actual number of days elapsed, based on a year of 365 or 366 days, as the case may be) which shall be equal to the lesser of (i) in the case of a Conventional Revolving Loan, the Alternate Base Rate plus the Alternate Base Rate Margin plus 1% or the Highest Lawful Rate, (ii) in the case of a Discretionary Revolving Loan, the Negotiated Rate plus 1% or the Highest Lawful Rate, and (iii) in the case of LC Disbursements, the Alternate Base Rate plus the Alternate Base Rate Margin plus 1% or the Highest Lawful Rate. “Depositary” shall have the meaning specified in Section 13.03. “Discretionary Revolving Loan Interest Period” shall mean the period which shall commence on the Borrowing Date with respect to a Discretionary Revolving Loan and shall end on a date which shall be agreed to by the Company and the Lender, by telephone (to be promptly confirmed in writing by the Company); provided that no Discretionary Revolving Loan Interest Period shall extend beyond the Revolving Credit Termination Date. “Discretionary Revolving Loans” shall have the meaning specified in Section 2.05(a). “Documentation Agents” shall mean Wachovia Capital Markets, LLC and Bank of Tokyo-Mitsubishi UFJ Trust Company. “Dollars” and “$” shall mean lawful currency of the United States of America. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended. “Eurodollar Event” shall have the meaning specified in Section 2.02(d)(i). “Eurodollar Loans” shall mean those Loans which may be made under this Agreement and which are described in Section 2.02(c)(ii) on which the Company shall pay interest at a rate based on the Eurodollar Rate. “Eurodollar Rate” for any Interest Period shall mean, for each Eurodollar Loan comprising part of a Borrowing, an interest rate per annum equal to the per annum rate appearing on Moneyline Telerate Markets Page 3750 (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “Eurodollar Rate” with respect to such Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. “Event of Default” shall mean any of the events specified in Article X; provided that there has been satisfied any requirement in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and “Default” shall mean any of such events, whether or not any such requirement has been satisfied.   5 -------------------------------------------------------------------------------- “Excluded Taxes” shall mean, with respect to the Administrative Agent, any Issuing Lender, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Company hereunder: (a) taxes that are imposed on or measured by its overall net income by the United States; (b) taxes that are imposed on or measured by its overall net income or profits (and franchise taxes imposed on or measured by income, earnings or retained earnings) by (i) the state or foreign jurisdiction in or under the laws of which it is organized or any political subdivision thereof, (ii) the state or foreign jurisdiction of its principal office or Lending Office, or (iii) any state or foreign jurisdiction solely as a result of a current or former connection between it and such jurisdiction (other than any such connection arising solely from its having executed, delivered or performed its obligations or received payment under, or enforced, this Agreement, the Loans or the Letters of Credit) or any political subdivision thereof; (c) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which it is located, or any political subdivision thereof; and (d) in the case of a Foreign Lender, any U.S. withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office, but only to the extent greater than the amount of any Indemnified Taxes to which such Foreign Lender would be entitled at the time of such designation) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.04. “Existing Credit Agreement” shall mean the Five-Year Credit Agreement dated as of June 4, 2004, as amended pursuant to the First Amendment to the Five-Year Credit Agreement dated as of March 17, 2006, by and among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Wachovia Bank, National Association, as co-syndication agent, Bank of America, N.A., as co-syndication agent, J.P. Morgan Securities Inc., as co-lead arranger and joint bookrunner, and Wachovia Capital Markets, LLC, as co-lead arranger and joint bookrunner. “Federal Funds Borrowing Rate” shall mean, for any day, a fluctuating interest rate per annum equal to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. “Federal Funds Rate Loans” shall mean those Loans which may be made under this Agreement and which are described in Section 2.02(c)(iii) on which the Company shall pay interest at a rate based on the Federal Funds Borrowing Rate. “Financial Institution” shall mean an entity which regularly engages in one or more of the following activities: making loans, issuing letters of credit or purchasing loans or loan commitments or interests in loans, loan commitments or letters of credit. “FIN 46 Entity” shall mean any entity that is required to be consolidated with the Company for financial reporting purposes pursuant to FIN 46(R).   6 -------------------------------------------------------------------------------- “FIN 46(R)” shall mean FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” published January 2003 by the Financial Accounting Standards Board, as the same may be amended from time to time. “Floating Rate” shall mean, as of a particular date, the prime rate most recently determined by JPMCB. Without notice to the Company or any other Person, the Floating Rate shall change automatically from time to time as and in the amount by which said prime rate shall fluctuate, with each such change to be effective as of the date of each change in such prime rate. The Floating Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. JPMCB may make commercial loans or other loans at rates of interest at, above or below the Floating Rate. “Foreign Lender” shall mean any Lender that is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code). “GAAP” shall mean generally accepted accounting principles in the United States of America. “Highest Lawful Rate” shall mean the maximum nonusurious interest rate, if any, that at any applicable time may be contracted for, taken, reserved, charged or received on any Loan, LC Disbursement or on the other amounts which may be owing to any Lender pursuant to this Agreement (including, without limitation, pursuant to Section 2.05) under the laws applicable to such Lender and this transaction. “Hybrid Equity Attribution” shall mean, on any day in respect of all Hybrid Equity Securities then outstanding, the lesser of (a) the higher equity attribution for such Hybrid Equity Securities as determined by either S&P or Moody’s and (b) 15% of the aggregate amount of all Debt, Hybrid Equity Securities and consolidated shareholders’ equity of the Company and its Restricted Subsidiaries determined (without double-counting) on a consolidated basis in accordance with GAAP (but eliminating the effect of FIN 46(R)). “Hybrid Equity Securities” shall mean securities issued by the Company or by a special purpose entity which was formed for the purpose of issuing such securities and which has no other business or operating assets that (i) are classified at the time of issuance as possessing a minimum of “intermediate equity content” by S&P and “Basket C equity content” by Moody’s (or, in each case, any subsequent, substantially comparable classification), (ii) require no repayments or prepayments and no mandatory redemptions or repurchases, in each case, prior to at least 180 days after the date that is, at the time of issuance of such securities, the scheduled termination date of the Commitments and final maturity date for the Loans (whichever is later) and (iii) are not guaranteed by, and do not otherwise constitute Debt of, any Restricted Subsidiary of the Company other than any such special purpose entity. “Incentive Compensation Plan Expense” shall mean charges for expenses, whether accrued or paid, under long-term incentive compensation plans and unit appreciation plans in effect on July 1, 2006, as amended thereafter from time to time. “Indemnified Taxes” shall mean Taxes other than Excluded Taxes. “Index Debt” shall mean senior, unsecured, long-term indebtedness for borrowed money of the Company that is not guaranteed by any other Person or subject to any other credit enhancement.   7 -------------------------------------------------------------------------------- “Indexed Securities” shall mean securities or financial contracts of the Company issued and outstanding from time to time whose fair value is derived from an index, such as the trading price of another referenced security. “Interest Election Request” shall mean a request by the Company to convert or continue a Borrowing in accordance with Section 2.08. “Interest Payment Date” shall mean the last day of each Interest Period. “Interest Period” shall mean, with respect to each Eurodollar Loan hereunder, the period commencing on the Borrowing Date of such Loan or the date such Borrowing is continued or converted from another type of Borrowing and ending one, two, three or six months or, if available to all Lenders, one or two weeks thereafter, as the Company may select in the Notice of Conventional Revolving Borrowing or Interest Election Request; provided that (i) no Interest Period with respect to Conventional Revolving Loans shall extend beyond the Revolving Credit Termination Date, (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided that with respect to Eurodollar Loans, any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day only if such Business Day does not fall in another month, and in the event the next succeeding Business Day falls in another month, the Interest Period for such Eurodollar Loan shall be accelerated so that such Interest Period shall end on the next preceding Business Day and (iii) any Interest Period of one month or more that begins on a day for which there is no numerically corresponding day in the last month of such Interest Period shall end on the last Business Day of the last month of such Interest Period. In no event shall there be more than 10 Interest Periods in effect at any one time. “Investment” shall have the meaning specified in Section 9.05. “Issuing Lender” shall mean, with respect to any Letter of Credit, JPMCB or a bank or other legally authorized Person selected by or acceptable to the Administrative Agent and the Company, in its capacity as issuer of such Letter of Credit, and its successors in such capacity as provided in Section 2.11(i). Each Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Lender, in which case the term “Issuing Lender” shall include any such Affiliate executing this Agreement as Issuing Lender, in its capacity as issuer of Letters of Credit hereunder. “JPMCB” shall mean JPMorgan Chase Bank, N.A., a national banking association having its principal offices located at 270 Park Avenue, New York, New York 10017. “LC Disbursement” shall mean a payment made by an Issuing Lender pursuant to a Letter of Credit. “LC Exposure” shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (ii) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Company at such time. The LC Exposure of any Lender at any time shall be its Applicable Revolver Percentage of the total LC Exposure at such time. “LC Participation Fee” shall have the meaning specified in Section 4.04. “Lender Affiliate” shall mean, with respect to any Lender, an Affiliate of such Lender or an Approved Fund.   8 -------------------------------------------------------------------------------- “Lenders” shall mean the Persons listed on Exhibit 2.01(a), each such Lender’s respective successors (which successors shall include any entity resulting from a merger or consolidation) and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. “Lending Office” shall mean, with respect to any Lender, as to a Conventional Revolving Loan, its principal office in the city identified with such Lender, in Section 13.02, or such other office or branch of such Lender as it shall designate in writing from time to time to the Company. “Letter of Credit” shall mean a letter of credit issued by an Issuing Lender pursuant to Section 2.11. “Leverage Ratio” shall mean, at any time, the ratio of (a) Consolidated Debt (less the aggregate amount of cash and cash equivalents of the Company and its Restricted Subsidiaries representing the unused proceeds of securities issued after the date hereof to refinance Debt obligations scheduled to mature within 90 days) as of the last day of the fiscal quarter most recently ended for which financial statements shall have been delivered to the Lenders pursuant to Section 8.02 to (b) Pro Forma Consolidated Operating Cash Flow for the period ending on such day. “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sales agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset. “Loans” shall mean Conventional Revolving Loans (in each case whether Federal Funds Rate Loans, Alternate Base Rate Loans or Eurodollar Loans) and Discretionary Revolving Loans. “Majority Lenders” shall mean (a) until expiration or termination of the Revolving Commitments, Lenders having more than 50% of the Revolving Commitments and (b) after expiration or termination of the Revolving Commitments, Lenders having more than 50% of the aggregate outstanding Loans and LC Exposure. “Margin Percentage” shall mean at any date that percentage (a) to be added to the Eurodollar Rate or the Federal Funds Borrowing Rate, as appropriate, pursuant to Section 2.02(c)(ii) or Section 2.02(c)(iii) for purposes of determining the per annum rate of interest applicable from time to time to Federal Funds Rate Loans and Eurodollar Loans and (b) to be used in computing the Commitment Fee Rate pursuant to Section 4.03, set forth under the appropriate column below opposite the Category corresponding to the Company’s corporate credit ratings by S&P or Moody’s, respectively, on such date: Margin Percentage   Category    Ratings    Eurodollar Rate     Federal Funds Borrowing Rate     Commitment Fee Rate   1    >A-/A3    0.350 %   0.475 %   0.070 % 2    BBB+/Baa1    0.450 %   0.575 %   0.080 % 3    BBB/Baa2    0.500 %   0.625 %   0.100 % 4    BBB-/Baa3    0.625 %   0.750 %   0.125 % 5    BB+/Ba1    0.875 %   1.000 %   0.175 % 6    <BB+/Ba1    1.250 %   1.375 %   0.225 %   9 -------------------------------------------------------------------------------- For purposes of the foregoing, (i) if either S&P or Moody’s shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then the Margin Percentage shall be based upon the rating of the other rating agency; (ii) if the ratings established or deemed to have been established by S&P and Moody’s for the Company shall fall within different Categories from one another and such difference shall be one ratings level, the Margin Percentage shall be based on the Category corresponding to the higher of the two ratings; (iii) if the ratings established or deemed to have been established by S&P and Moody’s for the Company shall fall within different Categories from one another and such difference shall be two ratings levels or more, the Margin Percentage shall be based on the Category corresponding to the rating at midpoint or, if there is no midpoint rating, the rating which is one level lower than the higher rating, and (iv) if the ratings established or deemed to have been established by S&P or Moody’s for the Company shall be changed (other than as a result of a change in the rating system of S&P or Moody’s), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Margin Percentage shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of S&P or Moody’s shall change, or if any such rating agency shall cease to be in the credit rating business, the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Margin Percentage shall be determined by reference to the rating most recently in effect prior to such change or cessation. “Margin Stock” shall mean “margin stock” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System. “Material Adverse Effect” shall mean a material adverse effect on the business, properties or financial condition of the Company and its Restricted Subsidiaries on a consolidated basis or on the ability of the Company to perform its obligations under this Agreement. “Maximum Permissible Rate” shall have the meaning specified in Section 13.05. “Moody’s” shall mean Moody’s Investors Service, Inc. “Negotiated Rate” shall mean, in the case of any Discretionary Revolving Loan, the rate of interest per annum quoted by the applicable Lender to, and accepted by, the Company at the time of the applicable borrowing request hereunder as the rate such Discretionary Revolving Loan shall bear for the requested Discretionary Revolving Loan Interest Period. “Notice of Conventional Revolving Borrowing” shall have the meaning specified in Section 2.01(c).   10 -------------------------------------------------------------------------------- “Officer’s Certificate” shall mean a certificate signed in the name of the Company by either its Chief Executive Officer, its President, one of its Vice Presidents or its Treasurer. “Other Taxes” shall mean all present or future stamp, registration or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, registration or enforcement of, or otherwise with respect to, this Agreement, the Loans or the Letters of Credit. “PBGC” shall have the meaning specified in Section 6.12. “Permitted Lien” shall mean any Lien permitted pursuant to Section 9.01. “Person” shall mean an individual, partnership, joint venture, corporation, limited liability company, bank, trust, unincorporated organization, government or any department or agency thereof or other entity. “Plan” shall mean any employee pension benefit plan within the meaning of Title IV of ERISA which is either (i) maintained for employees of the Company, of any Subsidiary, or of any member of a “controlled group of corporations” or “combined group of trades or businesses under common control” as such terms are defined, respectively, in Sections 1563 and 414 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder, of which the Company or any Subsidiary is a party, or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Company, any Subsidiary or any member of a “controlled group of corporations” or “combined group of trades or businesses under common control” defined as aforesaid, is at the time in question making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. “Prepayment Pro Rata Share” shall mean, with respect to any Lender as to any prepayment of Conventional Revolving Loans, a fraction (expressed as a percentage rounded upward, if necessary, to the nearest whole multiple of 0.000000001%) (A) the numerator of which shall be the principal amount of such Loans outstanding to such Lender at such time and (B) the denominator of which shall be the aggregate principal amount of such Loans outstanding to all Lenders at such time. “Principal Office” shall mean the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017. “Pro Forma Consolidated Operating Cash Flow” shall mean Consolidated Operating Cash Flow, excluding therefrom all Consolidated Operating Cash Flow attributable to any Restricted Subsidiary or business sold or otherwise disposed of other than in the ordinary course of business during any four fiscal quarter period in question as if such Restricted Subsidiary or business were not owned at any time during such four fiscal quarter period and including therein all Consolidated Operating Cash Flow attributable to any Restricted Subsidiary or business acquired other than in the ordinary course of business during any four fiscal quarter period in question as if such Restricted Subsidiary or business were at all times owned during such four fiscal quarter period. “Property” shall mean all types of real and personal property, whether tangible, intangible or mixed. “Quarterly Date” shall mean the last day of each March, June, September and December, beginning with September 30, 2006, or if any such date is not a Business Day, the respective Quarterly Date shall be the next succeeding Business Day.   11 -------------------------------------------------------------------------------- “Register” shall have the meaning specified in Section 13.07(f). “Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System. “Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates. “Required Prepayment Date” shall have the meaning specified in Section 2.02(d)(i). “Restricted Payment” shall have the meaning specified in Section 9.03. “Restricted Subsidiary” shall mean each Subsidiary other than those identified as Unrestricted Subsidiaries in Exhibit 6.01; provided that a Restricted Subsidiary may be designated by the Company as an Unrestricted Subsidiary or an Unrestricted Subsidiary may be redesignated by the Company as a Restricted Subsidiary if immediately after giving effect to such designation no Default or Event of Default shall have occurred and be continuing and the Company shall promptly deliver to the Administrative Agent notice of any such designation or redesignation; provided further that after the initial designation of an Unrestricted Subsidiary by the Company at any time, only three further redesignations of such Subsidiary shall be permitted. “Revolving Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Conventional Revolving Loans hereunder up to the principal amount set forth as to such Lender on Exhibit 2.01(a). The initial aggregate amount of the Revolving Commitments is $600,000,000. “Revolving Credit Termination Date” shall mean the fifth anniversary of the Closing Date as such date may be extended pursuant to Section 2.13. “S&P” shall mean Standard and Poor’s Ratings Group. “Significant Subsidiary” shall mean, as of any date of determination, any Restricted Subsidiary whose contribution to Consolidated Operating Cash Flow exceeded 10% of Consolidated Operating Cash Flow for each of the two fiscal quarters most recently ended or whose assets comprised more than 10% of the total assets of the Company and the Restricted Subsidiaries, on a consolidated basis, as of the last day of the fiscal quarter most recently ended. “SPC” shall have the meaning specified in Section 13.07(d). “Subsidiary” shall mean any Person of which more than 50% of the outstanding shares, having voting power under ordinary circumstances to elect a majority of the Board of Directors or other governing body of such Person, shall at the time be owned, directly or indirectly, by the Company, by any one or more Subsidiaries, or by the Company and one or more Subsidiaries. Notwithstanding the foregoing, any entity that is not a Subsidiary but would be required to be consolidated with the Company for financial reporting purposes as a result of the application of FIN 46(R) shall not be considered a “Subsidiary” for purposes of this Agreement. “Syndication Agents” shall mean Lehman Commercial Paper Inc. and Citibank, N.A.   12 -------------------------------------------------------------------------------- “Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto. “Unrestricted Subsidiary” shall mean any Subsidiary so designated in accordance with the terms of this Agreement and shall include any subsidiary of any Subsidiary so designated. “Wholly Owned”, when used with respect to a Subsidiary, shall mean the beneficial ownership by the Company of 100% of the equity securities of such Subsidiary. Section 1.02 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections and Exhibits shall be construed to refer to Articles and Sections of, and Exhibits to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including real and personal property, cash, securities, accounts and contract rights. Section 1.03 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II. THE LOANS Section 2.01 Conventional Revolving Loans. (a) Revolving Commitments. Subject to and upon the terms and conditions set forth in this Agreement, each Lender severally agrees to make revolving loans (collectively, the “Conventional Revolving Loans”) to the Company on any one or more Business Days on or after the date hereof and prior to the Revolving Credit Termination Date, up to an aggregate principal amount not exceeding at any one time outstanding an amount equal to (i) such Lender’s Revolving Commitment less (ii) the principal amount of all Discretionary Revolving Loans outstanding to such Lender and the LC Exposure of such Lender at such time, if any; provided that in no event shall the aggregate outstanding principal amount of Conventional Revolving Loans, Discretionary Revolving Loans and the aggregate LC Exposure ever   13 -------------------------------------------------------------------------------- exceed $600,000,000, as such amount may be increased or reduced pursuant to the terms of this Agreement. Each Conventional Revolving Borrowing shall be in an aggregate amount of not less than $2,000,000 and an integral multiple of $250,000. Subject to the foregoing, each Conventional Revolving Borrowing shall be made simultaneously from the Lenders according to their Borrowing Pro Rata Shares of the principal amount requested for each Conventional Revolving Borrowing and shall consist of Conventional Revolving Loans of the same type (e.g., Alternate Base Rate Loans, Federal Funds Rate Loans or Eurodollar Loans) with the same Interest Period from each Lender. Within such limits and during such period, the Company may borrow, repay and reborrow under this Section 2.01(a). (b) Repayment of Conventional Revolving Loans. The Company hereby unconditionally promises to pay to the Administrative Agent (i) on the Revolving Credit Termination Date, all outstanding Conventional Revolving Loans for account of the Lenders holding Conventional Revolving Loans and (ii) all outstanding Conventional Revolving Loans for account of a Declining Lender as provided in Section 2.13. (c) Conventional Revolving Loan Borrowing Procedures. Each Conventional Revolving Borrowing under Section 2.01(a) shall be made on at least (A) in the case of a Conventional Revolving Borrowing consisting of Alternate Base Rate Loans or Federal Funds Rate Loans, prior oral or written notice from the Company to the Administrative Agent by 10:00 a.m. (New York, New York time) on the same day as the requested borrowing (and the Administrative Agent shall prior to 12:00 noon (New York, New York time) provide oral or written notice of the requested borrowing to the Lenders and (B) in the case of a Conventional Revolving Borrowing consisting of Eurodollar Loans, three Business Days’ prior written or oral notice from the Company to the Administrative Agent by 10:00 a.m. (New York, New York time) (and the Administrative Agent shall, in the case of (B) above, upon receipt of such notice provide to each Lender prior oral or written notice by 11:30 a.m. (New York, New York time) on the date such notice is received by the Administrative Agent) (each such notice, a “Notice of Conventional Revolving Borrowing”); provided that with respect to each oral Notice of Conventional Revolving Borrowing, the Company shall deliver promptly to the Administrative Agent a confirmatory written Notice of Conventional Revolving Borrowing, and upon receipt of such notice, the Administrative Agent shall promptly notify each Lender of such notice in writing. Each Notice of Conventional Revolving Borrowing shall be irrevocable and shall (A) specify (v) the total principal amount of the proposed Conventional Revolving Borrowing, (w) whether the Conventional Revolving Borrowing will be comprised of Alternate Base Rate Loans, Federal Funds Rate Loans or Eurodollar Loans, (x) the applicable Interest Period (if any) for such Loans (which may not extend beyond the Revolving Credit Termination Date), (y) the Borrowing Date and (z) the bank account into which the funds with respect to such Conventional Revolving Borrowing shall be deposited, and (B) certify to the calculations demonstrating that the sum of the aggregate outstanding principal amount of Conventional Revolving Loans and the aggregate LC Exposure, after giving effect to such Conventional Revolving Borrowing, does not exceed the Revolving Commitments. If no election as to the type of Conventional Revolving Borrowing is specified, then the requested Conventional Revolving Borrowing shall consist of Alternate Base Rate Loans. If no Interest Period is specified with respect to any Conventional Revolving Borrowing consisting of Eurodollar Loans, then the Company shall be deemed to have selected the shortest permitted Interest Period. The Administrative Agent shall promptly give like notice to the other Lenders, and on the Borrowing Date each Lender shall make its share of the Conventional Revolving Borrowing available to the Administrative Agent at its Principal Office no later than 2:00 p.m. (New York, New York time) in immediately available funds. (d) Increase in Revolving Commitments. The Company from time to time may, by written notice to the Administrative Agent, request an increase in the aggregate Revolving Commitments on the following terms: (i) The aggregate amount of all such increases shall not exceed $100,000,000 (each of which shall be in a minimum amount of $25,000,000 or increments of $5,000,000 in excess thereof);   14 -------------------------------------------------------------------------------- (ii) No Lender will be obligated to provide or commit for any such increase; (iii) If one or more of the Lenders or other Persons reasonably satisfactory to the Administrative Agent and the Company are willing to commit to provide such increase, such increase will be effective on the date the Administrative Agent receives an amendment to this Agreement executed by the Company, the Administrative Agent and such Lender or other Person, adding, in the case of an existing Lender, such commitment to Exhibit 2.01(a) and, in the case of a Person not then already a Lender, confirming that such Person has become a Lender for all purposes of this Agreement; (iv) On the effective date of such amendment, each Lender or other Person committing to provide such increase shall fund Conventional Revolving Loans in an amount equal to its Applicable Revolver Percentage (after giving effect to such amendment) of the aggregate Conventional Revolving Loans outstanding immediately before giving effect to such amendment, and the proceeds of such funding shall be applied to repay on a pro rata basis the Conventional Revolving Loans outstanding before giving effect to such amendment (and Section 2.02(e) shall apply to such repayment); and (v) In connection with any such increase, the Company shall deliver to the Administrative Agent such documents as the Administrative Agent may reasonably require, including a favorable written opinion (addressed to the Administrative Agent and the Lenders) and other certificates and documents similar to those delivered on the Closing Date. Section 2.02 Delivery of Proceeds; Recordation of Loans; Interest. (a) Delivery; Records. The Administrative Agent shall pay or deliver the proceeds of each Borrowing to or upon the order of the Company. Each Lender shall keep accurate records as to the Loans made by it, including (A) the date and principal amount of each Loan, (B) the rate of interest applicable to such Loan and (C) each payment of principal thereon; provided that the failure of such Lender to record such amounts, dates and rates shall not diminish or impair the Company’s obligation to repay all principal advanced and to pay all interest accruing under its Loans in accordance with the terms hereof. (b) Substitute Rate. Anything in this Agreement to the contrary notwithstanding, if at any time prior to the determination of the rate with respect to any proposed Loan the Majority Lenders in their discretion shall determine with respect to Eurodollar Loans to be made or continued by them on the applicable Borrowing Date or continuation date or, with respect to Loans to be converted to Eurodollar Loans, on the applicable conversion date, that there is a reasonable probability that Dollar deposits will not be offered to such Lenders in the interbank eurodollar market for a period of time equal to the applicable Interest Period in amounts equal to the amount of each such Lender’s Eurodollar Loan in Dollars or that the Eurodollar Rate does not reflect the cost of funding by the Lenders or that adequate and fair means do not exist to be able to determine the Eurodollar Rate, then: (A) the Majority Lenders (acting through the Administrative Agent) or the Administrative Agent, as the case may be, shall give the Company notice thereof; and   15 -------------------------------------------------------------------------------- (B) Alternate Base Rate Loans or Federal Funds Rate Loans, as selected by the Company in accordance with Section 2.01(c) (or, if the Company does not provide timely notice of its selection, Alternate Base Rate Loans) shall be made in lieu of any Eurodollar Loans that were to have been made at such time. (c) Interest. The Conventional Revolving Loans shall bear interest as follows: (i) Each Alternate Base Rate Loan shall be made in Dollars and shall bear interest on the unpaid principal amount thereof from time to time outstanding at a rate per annum (for the actual number of days elapsed, based on a year of 365 or 366 days, as the case may be) which shall be equal to the lesser of (A) the Alternate Base Rate plus the Alternate Base Rate Margin, or (B) the Highest Lawful Rate. (ii) Each Eurodollar Loan shall be made in Dollars and shall bear interest on the unpaid principal amount thereof from time to time outstanding at a rate per annum (for the actual number of days elapsed, based on a year of 360 days) which shall be equal to the lesser of (A) the Eurodollar Rate plus the applicable Margin Percentage, or (B) the Highest Lawful Rate. (iii) Each Federal Funds Rate Loan shall be made in Dollars and shall bear interest on the unpaid principal amount thereof from time to time outstanding at a rate per annum (for the actual number of days elapsed, based on a year of 360 days) which shall be equal to the lesser of (A) the Federal Funds Borrowing Rate plus the applicable Margin Percentage, or (B) the Highest Lawful Rate. (iv) Interest on the outstanding principal of each Loan shall accrue from and including the Borrowing Date for such Loan to but excluding the date such Loan is paid in full and shall be due and payable (A) on the Interest Payment Date for each Eurodollar Loan and on each Quarterly Date for each Alternate Base Rate Loan or Federal Funds Rate Loan, (B) as to any Eurodollar Loan having an Interest Period greater than three months, at the end of the third month of the Interest Period for such Loan, and (C) as to all Loans, at maturity, whether by acceleration or otherwise, or after notice of prepayment in accordance with Section 2.02(d)(i) or Section 3.01(c) hereof, on and after the Required Prepayment Date or the applicable prepayment date, as the case may be, as specified in such notice. (v) Past due principal, pursuant to acceleration, the Company’s failure to make a prepayment on the date specified in the applicable prepayment notice or otherwise, and to the extent permitted by applicable law, past due interest and (after the occurrence of an Event of Default) past due fees, pursuant to acceleration or otherwise, shall bear interest from their respective due dates, until paid, at the Default Rate. (d) Change of Law. (i) Anything in this Agreement to the contrary notwithstanding, if at any time any Lender in good faith determines (which determination shall be conclusive absent manifest error) that any change after the date hereof in any applicable law, rule or regulation or in the interpretation or administration thereof makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful (any of the above being described as a “Eurodollar Event”), for such Lender or its foreign branch or branches to maintain or fund any Loan by means of Dollar deposits obtained in the interbank eurodollar market, then, at the option of such Lender (to the extent practicable, after consultation with the Company as to its preference   16 -------------------------------------------------------------------------------- and after making a reasonable effort to give effect to such preference), the aggregate principal amount of each of such Lender’s Eurodollar Loans then outstanding, which Loans are directly affected by such Eurodollar Event, shall either (x) be prepaid or (y) be converted to a Loan of another type that is not so directly affected by such Eurodollar Event. Any remaining obligation of such Lender hereunder to make Eurodollar Loans (but not Federal Funds Rate Loans or Alternate Base Rate Loans), shall be suspended for so long as such Eurodollar Event shall continue. Upon the occurrence of any Eurodollar Event, and at any time thereafter so long as such Eurodollar Event shall continue, such Lender may exercise its aforesaid option by giving written notice thereof to the Administrative Agent and the Company. Any prepayment of any Eurodollar Loan which is required under this Section 2.02(d) shall be made, together with accrued and unpaid interest and all other amounts payable to such Lender under this Agreement with respect to such prepaid Loan (including, without limitation, amounts payable pursuant to Section 2.02(e)), on the date stated in the notice to the Company referred to above, which date (“Required Prepayment Date”) shall be not less than 15 days (or such earlier date as shall be necessary to comply with the relevant law, rule or regulation) from the date of such notice. If any Eurodollar Loan is required to be prepaid under this Section 2.02(d), the Lenders agree that at the written request of the Company, the Lender that has made such Eurodollar Loan shall make a Loan of another type, as selected by the Company, that, in each case, is not so directly affected by such Eurodollar Event on the Required Prepayment Date to the Company in the same principal amount as the Eurodollar Loan of such Lender being so prepaid. Any such written request by the Company for Alternate Base Rate Loans under this Section 2.02(d) shall be irrevocable and, in order to be effective, must be delivered to the Administrative Agent not less than one Business Day prior to the Required Prepayment Date. (ii) Notwithstanding the foregoing, in the event the Company is required to pay to any Lender amounts with respect to any Borrowing pursuant to Section 2.02(d)(i) (not including a borrowing of Discretionary Revolving Loans), the Company may give notice to such Lender (with copies to the Administrative Agent) that it wishes to seek one or more assignees (which may be one or more of the Lenders) to assume the Commitment of such Lender and to purchase its outstanding Loans and the Administrative Agent will use its best efforts to assist the Company in obtaining an assignee; provided that if more than one Lender requests that the Company pay substantially and proportionately equal additional amounts under Section 2.02(d)(i) and the Company elects to seek an assignee to assume the Commitments of any of such affected Lenders, the Company must seek an assignee or assignees to assume the Commitments of all of such affected Lenders. Each Lender requesting compensation pursuant to Section 2.02(d)(i) agrees to sell its Commitment, Loans and interest in this Agreement in accordance with Section 13.07 to any such assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans, plus all other fees and amounts (including, without limitation, any compensation claimed by such Lender under Section 2.02(d)(i) and Section 2.02(e)) due such Lender hereunder calculated, in each case, to the date such Commitment, Loans and interest are purchased. Upon such sale or prepayment, each such Lender shall have no further Commitment or other obligation to the Company hereunder. (e) Fundings and Exchange Losses. In the event of (i) any payment or prepayment (whether authorized or required hereunder pursuant to acceleration or otherwise) or conversion of all or a portion of any Eurodollar Loan on a day other than the last day of the Interest Period therefor, (ii) any failure to make, prepay, continue or convert a Borrowing consisting of any Eurodollar Loan after the delivery of the Notice of Conventional Revolving Borrowing, Interest Election Request or notice of prepayment, as the case may be, for such Eurodollar Loan on the applicable Borrowing Date or continuation, conversion or prepayment date therefor, (iii) the failure of any Loan to be made by any Lender due to any condition precedent to a Loan not being satisfied or as a result of this Section 2.02 or   17 -------------------------------------------------------------------------------- due to any other action or inaction of the Company or (iv) the assignment of any Eurodollar Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Company, the Company shall pay to each affected Lender upon its request made on or before 45 days after the occurrence of any such event, acting through the Administrative Agent, such amount or amounts (to the extent such amount or amounts would not be usurious under applicable law) as may be necessary to compensate such Lender for any direct costs and losses incurred by such Lender (including, without limitation, such amount or amounts as will compensate it for the amount by which the rate of interest that would have accrued on such Loan had such event not occurred, at the Eurodollar Rate for the period from the date of such prepayment to the end of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have begun on the date of such failure), exceeds the rate of interest that would accrue for such period at the interest rate which such Lender would bid, at the beginning of such period, for deposits of a comparable amount and period from lenders in the relevant eurodollar or domestic certificate of deposit market, all as determined by such Lender in its good faith discretion), but otherwise without penalty. Any such claim by a Lender for compensation shall be made through the Administrative Agent and shall be accompanied by a certificate signed by an officer of such Lender authorized to so act on behalf of such Lender, setting forth in reasonable detail the computation upon which such claim is based. The obligations of the Company under this Section 2.02(e) shall survive the termination of this Agreement. (f) Increased Costs - Taxes, Reserve Requirements, Etc. (i) The Company for and on behalf of each Lender (including, without limitation, the Issuing Lenders) shall pay or cause to be paid directly to the appropriate governmental authority or shall reimburse or compensate each Lender upon demand by such Lender in good faith, acting through the Administrative Agent, for all costs incurred, losses suffered or payments made, as determined by such Lender, by reason of any and all present or future Taxes (including, without limitation, any interest equalization tax or any similar tax on the acquisition of debt obligations), whether or not such Taxes were correctly or legally asserted, on or with regard to any aspect of the transactions with respect to this Agreement, the Loans and the Letters of Credit (except for (i) Excluded Taxes and (ii) Indemnified Taxes or Other Taxes paid pursuant to Section 2.02(f)(ii), Section 2.03 or Section 2.04). (ii) The Company shall pay immediately upon demand by any Lender (including without limitation the Issuing Lenders), acting through the Administrative Agent, any Other Taxes in connection with any Loans, Letters of Credit or this Agreement or in connection with the enforcement hereof or thereof; provided that the Company shall not be required to pay any such Other Taxes on behalf of any Lender that (i) becomes a party to this Agreement by assignment pursuant to Section 13.07 or (ii) designates a new Lending Office, in each case to the extent such Other Taxes are imposed at the time such Lender becomes a party to this Agreement or designates a new Lending Office in an amount greater than the amount the assignor or such Lender was entitled to at the time of the assignment or designation. (iii) If any Lender or the Administrative Agent receives a refund in respect of Taxes for which such Lender or the Administrative Agent has received payment from the Company hereunder, it shall promptly notify the Company of such refund and shall, within 30 days after receipt of such refund, if no Event of Default has occurred and is continuing, repay such refund to the Company with interest if any interest is received thereon by such Lender or the Administrative Agent; provided that if an Event of Default has occurred and is continuing, such refund shall be applied to the outstanding Loans or paid to the Company once such Event of Default no longer exists; provided further, that the Company, upon the request of such Lender or the Administrative Agent, agrees to return such refund (plus penalties, interest or other charges) to such Lender or the Administrative Agent in the event such Lender or the Administrative Agent is required to repay such refund.   18 -------------------------------------------------------------------------------- (iv) (A) The Company shall reimburse or compensate each Lender upon demand by such Lender, acting through the Administrative Agent, for all costs incurred, losses suffered or payments made in connection with any Eurodollar Loans or any part thereof which costs, losses or payments are a result of any future reserve, special deposit or similar requirement against assets of, liabilities of, deposits with or for the account of, or Loans by such Lender imposed on such Lender, its foreign lending branch or the interbank eurodollar market by any regulatory authority, central bank or other governmental authority, whether or not having the force of law, including, without limitation, Regulation D. (B) If as a result of (y) the introduction of or any change in or in the interpretation or administration of any law or regulation after the date hereof or (z) the compliance with any request made after the date hereof from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Loans, or issuing Letters of Credit or acquiring or holding participations in Letters of Credit, for which such Lender shall not have been reimbursed pursuant to the provisions of clause (A) above (other than any such increase in costs resulting from Taxes, as to which Sections 2.02(f)(i)-(ii) and 2.03 shall govern), then the Company shall from time to time, upon demand by such Lender, acting through the Administrative Agent, pay to such Lender additional amounts sufficient to indemnify such Lender against the full amount of such increased cost. (C) Any Lender claiming reimbursement or compensation under this Section 2.02(f)(iv) shall make its demand on or before 45 days after the end of each Interest Period during which any such cost is incurred, loss is suffered or payment is made and shall provide the Administrative Agent, which in turn shall provide the Company, with a written statement showing in reasonable detail the calculation of the amount and basis of its request, which statement, subject to Section 2.02(g), shall be conclusive absent manifest error; provided that in the event any reimbursement or compensation demanded by a Lender under this Section 2.02(f) is a result of reserves actually maintained pursuant to the requirements imposed by Regulation D with respect to “Eurocurrency liabilities” (as defined or within the meaning of such Regulation), such demand shall be accompanied by a statement of such Lender in the form of Exhibit 2.02(f)(iv) attached hereto, which statement shall be conclusive and binding on the Company, subject to Section 2.02(g), except in the case of manifest error. No Lender may request reimbursement or compensation under this Section 2.02(f)(iv) for any period prior to the period for which demand has been made in accordance with the foregoing sentence. In preparing any statement delivered under this Section 2.02(f)(iv), such Lender may employ such assumptions and allocation of costs and expenses as it shall in good faith deem reasonable and may be determined by any reasonable averaging and attribution method. So long as any notice requirement provided for herein has been satisfied, any decision by the Administrative Agent or any Lender not to require payment of any interest, cost or other amount payable under this Section 2.02(f)(iv), or to calculate any amount payable by a particular method, on any occasion, shall in no way limit or be deemed a waiver of the Administrative Agent’s or such Lender’s right to require full payment of any interest, cost or other amount payable hereunder, or to calculate any amount payable by another method, on any other or subsequent occasion for a subsequent Interest Period.   19 -------------------------------------------------------------------------------- (v) If any Lender shall have determined in good faith that any applicable law, rule, regulation or guideline regarding capital adequacy (each, a “Capital Adequacy Pronouncement”) adopted after the date hereof, or any change after the date hereof in any Capital Adequacy Pronouncement now or hereafter in effect, or any change after the date hereof in the interpretation or administration of any Capital Adequacy Pronouncement now or hereafter in effect by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any Lending Office of such Lender) with any request or directive regarding capital adequacy (whether or not having the force of law) made after the date hereof of any such governmental authority, central bank or comparable agency has the effect of reducing the rate of return on such Lender’s capital or the capital of any Person controlling such Lender as a consequence of its obligations hereunder to a level below that which such Lender would have achieved as a consequence of its obligations hereunder but for such adoption, change or compliance (taking into consideration such Lender’s policies with respect to capital adequacy) by an amount deemed in good faith by such Lender to be material, then from time to time, upon notice by the Lender requesting (through the Administrative Agent) compensation, under this Section 2.02(f)(v) within 90 days after such Lender has obtained knowledge of such event, the Company shall pay to the Administrative Agent for the account of such Lender such additional amount or amounts as will compensate such Lender for such reduction. Any such claim by a Lender for compensation shall be made through the Administrative Agent and shall be accompanied by a certificate signed by an officer of such Lender authorized to so act on behalf of such Lender setting forth in reasonable detail the calculation upon which such claim is based. (vi) Notwithstanding the foregoing, in the event the Company is required to pay to any Lender amounts pursuant to Section 2.02(f)(i)-(ii), 2.02(f)(iv)-(v) or Section 2.03, the Company may give notice to such Lender (with copies to the Administrative Agent) that it wishes to seek one or more assignees (which may be one or more of the Lenders) to assume the Commitment of such Lender and to purchase its outstanding Loans and participations in Letters of Credit and the Administrative Agent will use its best efforts to assist the Company in obtaining an assignee; provided that if more than one Lender requests that the Company pay substantially and proportionately equal additional amounts under Section 2.02(f) or Section 2.03 and the Company elects to seek an assignee to assume the Commitments of any of such affected Lenders, the Company must seek an assignee or assignees to assume the Commitments of all of such affected Lenders. Each Lender requesting compensation pursuant to Section 2.02(f)(i), Section 2.02(f)(ii), Section 2.02(f)(iv), Section 2.02(f)(v) or Section 2.03 agrees to sell its Commitment, its outstanding Loans and participations in Letters of Credit and interest in this Agreement in accordance with Section 13.07 to any such assignee for an amount equal to the sum of the outstanding unpaid principal of and accrued interest on such Loans, plus all other fees and amounts (including, without limitation, any compensation claimed by such Lender under Section 2.02(e) or Section 2.03) due such Lender hereunder calculated, in each case, to the date such Commitment, Loans and interest are purchased. Upon such sale or prepayment, each such Lender shall have no further Commitment or other obligation to the Company hereunder. (vii) Any Lender claiming any amounts pursuant to this Section 2.02(f) or Section 2.03 shall use its reasonable good faith efforts (consistent with its internal policies and legal and regulatory restrictions) to avoid or minimize the payment by the Company of any amounts under this Section 2.02(f) or Section 2.03, including changing the jurisdiction of its Lending Office; provided that no such change or action shall be required to be made or taken if, in the reasonable judgment of such Lender, such change would be materially disadvantageous to such Lender.   20 -------------------------------------------------------------------------------- (viii) The obligations of the Company under this Section 2.02(f) created in accordance with this Section 2.02(f) shall survive the termination of the Commitments and this Agreement. (g) Calculation Errors. Each calculation by the Administrative Agent or any Lender with respect to amounts owing or to be owing by the Company pursuant to this Agreement or any Loan or Letter of Credit shall be conclusive except in the case of error. In the event the Administrative Agent determines in good faith within a reasonable time that any such error shall have occurred in connection with the determination of the applicable interest rate for any Loan or Letter of Credit which results in the Company paying either more or less than the amount which would have been due and payable but for such error, then (i) any Lender that received an overpayment shall promptly refund such overpayment to the Company and (ii) if any Lender received an underpayment, the Company shall promptly pay to such Lender the amount of such underpayment. In the event it is determined within a reasonable time that any Lender, acting through the Administrative Agent, has miscalculated any amount for which it has demanded reimbursement or compensation from the Company in respect of amounts owing by the Company other than interest which results in the Company paying more or less than the amount which would have been due and payable but for such error, such Lender or the Company, as the case may be, shall promptly refund or pay, as the case may be, to the other the full amount of such overpayment or underpayment. In the event it is determined within a reasonable time that the Company has miscalculated the Commitment Fees due under Section 4.03, which results in the Company paying more or less than the amount which would have been due and payable but for such error, (x) any Lender that received an overpayment shall promptly refund such overpayment to the Company and (y) if any Lender received an underpayment, the Company shall promptly pay to such Lender the amount of such underpayment. Any party making a request for payment pursuant to this Section 2.02(g) shall provide with such request a statement in reasonable detail showing the calculation of the amount requested. Section 2.03 Setoff, Counterclaims and Taxes. All payments (whether of principal, interest, fees, reimbursements or otherwise) under this Agreement shall be made by the Company without setoff or counterclaim and shall be made free and clear of and without deduction (except as specifically provided in Section 2.04) for any Taxes now or hereafter imposed, other than for Excluded Taxes. Except as specifically provided in Section 2.04, if the Company shall be required by applicable law to deduct or withhold from any such payment any such Taxes (other than Excluded Taxes), then the Company shall (i) notwithstanding anything to the contrary in this Agreement, deduct or withhold an amount equal to such Tax from the amounts payable under this Agreement, (ii) make such Tax payment as so required to the relevant governmental authority in accordance with applicable law, and (iii) provided that such Lender has complied with the requirements of Section 2.04, pay to the Administrative Agent for the account of such Lender, on the date of each such payment, such additional amount as may be necessary in order that the net amount received by such Lender after such deduction or withholding (including any deduction or withholding applicable to additional amounts payable under this Section 2.03) shall equal the amount which would have been received if such deduction or withholding were not required. The Company shall confirm that all applicable Taxes (other than Excluded Taxes), if any, imposed on this Agreement or transactions hereunder shall have been properly and legally paid by it to the appropriate taxing authorities by sending official Tax receipts or notarized copies of such receipts to the Administrative Agent within 30 calendar days after payment of any applicable Tax, to the extent such receipts are issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent. Upon request of any Lender, the Administrative Agent shall forward to such Lender a copy of such official receipt or a copy of such notarized copy of such receipt or other written proof of payment.   21 -------------------------------------------------------------------------------- Section 2.04 Withholding Tax Exemption. (a) To the extent not previously delivered, at least five Business Days prior to the first date on which interest or fees are payable hereunder to the Lenders in the case of each Lender that is listed on the signature pages of this Agreement, and on the later of such date and the date of the assignment pursuant to Section 13.07 pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as reasonably requested in writing by the Company (but only so long thereafter as such Lender remains lawfully able to do so): (i) each Lender that is a “United States person” that is not a “domestic” corporation (as such terms are defined in Section 7701(a)(30) of the Code) shall provide each of the Administrative Agent and the Company with an original Internal Revenue Service Form W-9, or any successor or other form prescribed by the Internal Revenue Service, properly completed and duly executed under penalties of perjury; and (ii) each Lender that is a Foreign Lender shall provide each of the Administrative Agent and the Company with either: (A) an original Internal Revenue Service Form W-8BEN, W-8IMY or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, properly completed and duly executed under penalties of perjury, certifying that such Lender is exempt or entitled to a zero (0) rate of United States withholding tax on payments pursuant to this Agreement, or (B) a certificate, duly executed under penalties of perjury, that it is not (I) a “bank” (within the meaning of Section 881(c)(3)(A)of the Code), (II) a “ten-percent shareholder” (within the meaning of Section 871(h)(3)(B) of the Code) of the Company, or (III) a “controlled foreign corporation” related to the Company (within the meaning of Section 864(d)(4) of the Code), and an original Internal Revenue Service Form W-8BEN or Form W-8IMY, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, properly completed and duly executed under penalties of perjury, certifying that such Lender is exempt from United States withholding tax on payments pursuant to this Agreement. (b) Each Lender shall deliver such new forms and documents prescribed by the Internal Revenue Service upon the expiration or obsolescence of any previously delivered forms or other documents referred to in Section 2.04(a), or after the occurrence of any event requiring a change in the most recent forms or other documents delivered by such Lender. Such Lender shall promptly provide written notice to each of the Administrative Agent and the Company at any time it determines that it is no longer in a position to provide any previously delivered form or other document (or any other form of certification adopted by the Internal Revenue Service for such purpose). (c) In no event will any withholding by the Company on any interest payable to any Lender as contemplated by this Section 2.04 give rise to a Default under Section 10.01 with respect to payments of interest. Section 2.05 Discretionary Revolving Loans. (a) Each Lender may, in its sole discretion and on terms and conditions satisfactory to it and the Company that are not inconsistent with the provisions of this Agreement, make additional Loans to the Company under its Revolving Commitment in Dollars on any one or more Business Days on   22 -------------------------------------------------------------------------------- or after the date hereof and prior to the Revolving Credit Termination Date (“Discretionary Revolving Loans”), which Loans will be payable to the appropriate Lender upon such terms and conditions; provided that the Company will not permit to remain outstanding any Discretionary Revolving Loans from any Lender, and no Lender will make any Discretionary Revolving Loans to the Company, if the aggregate principal amount of the Discretionary Revolving Loans and Conventional Revolving Loans payable to such Lender, together with such Lender’s LC Exposure at such time, exceeds such Lender’s Revolving Commitment. Should any Discretionary Revolving Loan be outstanding from any Lender on a date on which a Conventional Revolving Borrowing is to be made, such Conventional Revolving Borrowing shall be made available only if the Company has paid or shall simultaneously with the making of such Conventional Revolving Loan, pay such portions of Discretionary Revolving Loans (including, without limitation, the payment of the amount of any losses payable pursuant to Section 2.02(e) actually incurred by such Lender as a result of such prepayment) as shall be necessary to make available a portion of each Lender’s Revolving Commitment at least equal to such Lender’s share of such Conventional Revolving Borrowing. No Discretionary Revolving Loan shall have a maturity, final payment date or interest period that extends beyond the Revolving Credit Termination Date. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Discretionary Revolving Loan made by such Lender. The entries made in the accounts maintained pursuant to this Section 2.05(a) shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided that the failure of any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Discretionary Revolving Loans in accordance with their terms. The Company hereby unconditionally promises to pay to each Lender the then unpaid principal amount of each Discretionary Revolving Loan made by such Lender on the earlier of the Revolving Credit Termination Date and the date on which such principal amount is due pursuant to the terms of such Discretionary Revolving Loan. (b) Promptly upon written request of the Administrative Agent, each Lender will certify in writing the Borrowing Date, principal amount and maturity date of any Discretionary Revolving Loans made during any period for which the Commitment Fee under Section 4.03 is to be calculated. The Company agrees to certify to the Administrative Agent on or before each Quarterly Date the Borrowing Date, principal amount, maturity date and lending Lender for all Discretionary Revolving Loans made during any period for which the Commitment Fee under Section 4.03 is to be calculated. Section 2.06 [RESERVED] Section 2.07 [RESERVED] Section 2.08 Interest Election. (a) Each Conventional Revolving Borrowing initially shall be of the type specified in the applicable notice of borrowing and, in the case of a Conventional Revolving Borrowing consisting of Eurodollar Loans shall have an initial Interest Period as specified in such notice. Thereafter, the Company may elect to convert such Conventional Revolving Borrowing to a different type or to continue such Conventional Revolving Borrowing and, in the case of a Conventional Revolving Borrowing consisting of Eurodollar Loans, may elect Interest Periods therefor, all as provided in this Section 2.08. The Company may elect different options with respect to different portions of the affected Conventional Revolving Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Conventional Revolving Borrowing, and the Loans comprising each such portion shall be considered a separate Conventional Revolving Borrowing. This Section 2.08 shall not apply to Discretionary Revolving Loans. (b) To make an election pursuant to this Section 2.08 the Company shall notify the Administrative Agent of such election by telephone by the time that a notice of borrowing would be required under the applicable provisions of Section 2.01 if the Company were requesting the advancement   23 -------------------------------------------------------------------------------- of new funds of the same type resulting from such election to be made on the effective date of such election. Each such telephonic election shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Company. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.01: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an Alternate Base Rate Loan, a Federal Funds Rate Loan or a Eurodollar Loan; and (iv) if the resulting Borrowing is a Eurodollar Loan, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period.” If any such Interest Election Request requests a Eurodollar Loan but does not specify an Interest Period, or if the Company fails to deliver a timely Interest Election Request with respect to such a Borrowing prior to the end of the Interest Period applicable thereto, then, unless in the case of such failure to deliver an Interest Rate Election the applicable Loans are repaid, the Company shall be deemed to have selected the shortest possible Interest Period. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing. (e) Notwithstanding any contrary provision hereof, if an Event of Default exists and the Administrative Agent, at the request of the Majority Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Loan may be converted to or continued as a Eurodollar Loan and (ii) unless repaid, each Eurodollar Loan shall be converted, at the Company’s option either to a Federal Funds Rate Loan or to an Alternate Base Rate Loan at the end of the Interest Period applicable thereto. The foregoing is without prejudice to the other rights and remedies available hereunder upon an Event of Default. Section 2.09 Obligations Several, Not Joint. The obligations of the Lenders hereunder are several and not joint. The failure of any Lender to make the Loan to be made by it as part of any borrowing shall not relieve any other Lender of its obligation to make its Loan on the date of such borrowing, and no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any borrowing. Section 2.10 Replacement of Lenders. If any Lender requests compensation under Section 2.03, or if the Company is required to pay any additional amount to any Lender or any governmental authority for the account of any Lender pursuant to Section 2.03, or if any Lender defaults in its obligation to fund Loans or issue Letters of Credit hereunder, or as set forth in Section 2.13 if any   24 -------------------------------------------------------------------------------- Lender becomes a Declining Lender, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 13.07), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee or the Company. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply. Section 2.11 Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Company may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Lender, at any time and from time to time prior to the date five Business Days prior to the Revolving Credit Termination Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Company to, or entered into by the Company with, any Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Company shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Lender) to the applicable Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by any Issuing Lender, the Company also shall submit a letter of credit application on the applicable Issuing Lender’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Company shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $50,000,000 and (ii) the aggregate outstanding principal amount of all Loans and LC Exposure, shall not exceed the aggregate Revolving Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the earlier of (i) close of business on the date that is five Business Days prior to the Revolving Credit Termination Date and (ii) the first anniversary of the date of the issuance (or the most recent extension or renewal) of such Letter of Credit. It is understood that any Letter of Credit may provide for the renewal thereof for additional periods, which shall in no event extend beyond the date referred to in clause (i) above. (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Lender or the Lenders, the applicable Issuing Lender hereby grants to each Lender, and each such Lender hereby acquires from such Issuing Lender, a participation in such Letter of Credit equal to such   25 -------------------------------------------------------------------------------- Lender’s Applicable Revolver Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Lender, such Lender’s Applicable Revolver Percentage of each LC Disbursement made by such Issuing Lender and not reimbursed by the Company on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Company for any reason. Each such Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If any Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Company shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than (i) 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Company shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or (ii) if such notice has not been received by the Company prior to 10:00 a.m., New York City time, on the date that such LC Disbursement is made, then not later than 12:00 noon, New York City time, on the Business Day immediately following the day that the Company receives such notice; provided that, if such LC Disbursement is not less than the minimum borrowing amount, the Company may, subject to the conditions to borrowing set forth herein, request that such payment be financed with an Alternate Base Rate Loan or Federal Funds Rate Loan in an equivalent amount and, to the extent so financed, the Company’s obligation to make such payment shall be discharged and replaced by the resulting Alternate Base Rate Loan or Federal Funds Rate Loan. If the Company fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Company in respect thereof and such Lender’s Applicable Revolver Percentage thereof. Promptly following receipt of such notice, each such Lender shall pay to the Administrative Agent its Applicable Revolver Percentage of the LC Disbursement not reimbursed by the Company, in the same manner as provided in Section 2.01 with respect to Conventional Revolving Loans made by such Lender (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of such Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Lender the amounts so received by it from such Lenders. Promptly following receipt by the Administrative Agent of any payment from the Company pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Lender or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Lenders and such Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Lender for any LC Disbursement (other than the funding of Alternate Base Rate Loans or Federal Funds Rate Loans as contemplated above) shall not constitute a Loan and shall not relieve the Company of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The Company’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a   26 -------------------------------------------------------------------------------- right of setoff against, the Company’s obligations hereunder. Neither the Administrative Agent, the Lenders, the Issuing Lenders, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the applicable Issuing Lender; provided that the foregoing shall not be construed to excuse the applicable Issuing Lender from liability to the Company to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Company to the extent permitted by applicable law) suffered by the Company that are caused by such Issuing Lender’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the applicable Issuing Lender (as finally determined by a court of competent jurisdiction), such Issuing Lender shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, each Issuing Lender may, at its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. Each Issuing Lender shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The applicable Issuing Lender shall promptly notify the Administrative Agent and the Company by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Company of its obligation to reimburse the applicable Issuing Lender and the Lenders with respect to any such LC Disbursement. (h) Interim Interest. If an Issuing Lender shall make any LC Disbursement, then, unless the Company shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Company reimburses such LC Disbursement, (i) at the Alternate Base Rate until the date on which the Company is obligated to reimburse the Issuing Lender for such LC Disbursement pursuant to Section 2.11(e), and (ii) at the Default Rate thereafter. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse any Issuing Lender shall be for the account of such Lender to the extent of such payment. (i) Replacement of any Issuing Lender, Indemnity. Any Issuing Lender may be replaced at any time by written agreement among the Company, the Administrative Agent, the applicable Issuing Lender and the successor Issuing Lender. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Lender. At the time any such replacement shall become effective, the Company shall pay all unpaid fees accrued for the account of the replaced Issuing Lender. From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the replaced Issuing Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Lender” shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the   27 -------------------------------------------------------------------------------- context shall require. After the replacement of any Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. The Lenders severally agree to indemnify each Issuing Lender (to the extent not reimbursed by the Company), ratably according to the respective amounts of the LC Exposure then held by each of them (or if no LC Exposure is at the time outstanding, ratably according to the respective amount of their Revolving Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against such Issuing Lender in its capacity as such in any way relating to or arising out of this Agreement, or any action taken or omitted by the Administrative Agent under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Lender’s gross negligence or willful misconduct. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Company receives notice from the Administrative Agent or the Majority Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Company shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Company described in Sections 10.09, 10.10, 10.11 or 10.12. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Company under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Company’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the applicable Issuing Lender for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Company for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Company under this Agreement. If the Company is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Company within three Business Days after all Events of Default have been cured or waived. Section 2.12 Evidence of Debt. Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Company shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and the Company. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 13.07) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).   28 -------------------------------------------------------------------------------- Section 2.13 Termination Date Extension. Effective on any anniversary of the Closing Date (but on not more than two occasions), the Company, with the approval of Majority Lenders, may extend the Revolving Credit Termination Date with respect to consenting Lenders by one year (a “Termination Date Extension”). No Lender will be obligated to provide or commit for any such Termination Date Extension. The Company, to effect such Termination Date Extension, shall provide written notice to the Administrative Agent (which shall promptly deliver a copy to each of the Lenders) not less than 30 days and not more than 120 days prior to any anniversary of the Closing Date. Each Lender shall, by notice to the Company and the Administrative Agent given not later than the 20th day after the date of the Administrative Agent’s receipt of the Company’s extension request, advise the Company whether or not it agrees to the requested extension (each Lender agreeing to a requested extension being called a “Consenting Lender” and each Lender declining to agree to a requested extension being called a “Declining Lender”). Any Lender that has not so advised the Company and the Administrative Agent by such day shall be deemed to have declined to agree to such extension and shall be a Declining Lender. If Lenders constituting the Majority Lenders shall have agreed to an extension request, then the Revolving Credit Termination Date shall, as to the Consenting Lenders, be extended to the first anniversary of the Revolving Credit Termination Date theretofore in effect. The decision to agree or withhold agreement to any Revolving Credit Termination Date extension shall be at the sole discretion of each Lender. The Revolving Commitment of any Declining Lender shall terminate on the Revolving Credit Termination Date in effect as to such Lender prior to giving effect to any such extension (such Revolving Credit Termination Date being called the “Existing Termination Date”). The principal amount of any outstanding Loans made by Declining Lenders, together with any accrued interest thereon and any accrued fees and other amounts payable to or for the accounts of such Declining Lenders hereunder, shall be due and payable on the Existing Termination Date, and on the Existing Termination Date the Company shall also make such other prepayments of its Loans as shall be required in order that, after giving effect to the termination of the Revolving Commitments of, and all payments to, Declining Lenders pursuant to this sentence, the aggregate outstanding Loans and LC Exposure shall not exceed the total Revolving Commitments. Notwithstanding the foregoing provisions of this paragraph, the Company shall have the right, pursuant to Section 2.10, at any time prior to the Existing Termination Date, to replace a Declining Lender with a Lender or other financial institution that will agree to a request for the extension of the Revolving Credit Termination Date, and any such replacement Lender shall for all purposes constitute a Consenting Lender. Notwithstanding the foregoing, no extension of the Revolving Credit Termination Date pursuant to this Section 2.13 shall become effective unless (a) on the anniversary of the Closing Date that immediately follows the date on which the Company delivers the applicable request for extension of the Revolving Credit Termination Date, (i) the representations and warranties contained in Article VI shall be true in all material respects as though made on and as of the date of such anniversary (except, in the case of any exhibit referred to in Article VI, to the extent such exhibit expressly relates to a prior date) and (ii) no Default shall have occurred and be continuing and (b) the Administrative Agent shall have received an Officer’s Certificate to the effects set forth in clause (a) of this sentence, dated such date.   29 -------------------------------------------------------------------------------- ARTICLE III. OPTIONAL AND REQUIRED PREPAYMENTS; INTEREST PAYMENT DATE AND COMMITMENT REDUCTION DATE PAYMENTS; OTHER PAYMENTS Section 3.01 Optional Prepayments. Loans may be prepaid in whole or from time to time in part at the option of the Company on any Business Day, without premium or penalty, notwithstanding that such Business Day is not an Interest Payment Date; provided that: (a) losses, if any, incurred by any Lender under Section 2.02(e) shall be payable with respect to each such prepayment of any Eurodollar Loan; (b) all partial prepayments shall be in an aggregate principal amount of at least $2,000,000 and an integral multiple of $100,000; (c) the Company shall give the Administrative Agent not less than one full Business Day’s prior oral or written notice of each prepayment of any Eurodollar Loans, or any portion thereof, and notice to the Administrative Agent not later than 10:00 a.m. (New York, New York time) on the same day of the prepayment of Federal Funds Rate Loans or Alternate Base Rate Loans, or any portion thereof, proposed to be made pursuant to this Section 3.01, specifying the aggregate principal amount to be prepaid and the prepayment date; provided that with respect to each oral notice of a prepayment, the Company shall deliver promptly to the Administrative Agent a confirmatory written notice of such proposed prepayment; and (d) so long as no Event of Default is continuing, prepayments may be allocated, at the option of the Company, to (i) all outstanding Conventional Revolving Loans for payment ratably to the holders thereof and (ii) any or all outstanding Discretionary Revolving Loans. The Administrative Agent shall promptly notify the affected Lenders of the principal amount to be prepaid and the prepayment date. Notice of such prepayment shall be irrevocable and having been given as aforesaid, the principal amount specified in such notice, together with accrued and unpaid interest thereon to the date of prepayment, shall become due and payable on such prepayment date, and the provisions of Section 2.02(e) shall be applicable. The Company shall have no optional right to prepay the principal amount of any Loan (other than a Discretionary Revolving Loan) other than as provided in this Section 3.01. Section 3.02 Required Prepayments. (a) If the Company shall reduce or terminate the respective Revolving Commitments of the Lenders pursuant to Section 4.01, it will prepay to each Lender on the effective date of any such reduction or termination: (i) in the case of a reduction of the Revolving Commitments, that part of the unpaid principal amount outstanding of the Conventional Revolving Loans and Discretionary Revolving Loans held by such Lender that, when added to such Lender’s LC Exposure, exceeds the amount of the Revolving Commitment of such Lender immediately after such reduction, and (ii) in the case of termination of the Revolving Commitments, the entire unpaid principal amount of the Conventional Revolving Loans and Discretionary Revolving Loans; together, in each case, with accrued and unpaid interest on the amount being so prepaid and all other amounts accrued and owing under this Agreement on such date.   30 -------------------------------------------------------------------------------- (b) If on any Borrowing Date the aggregate principal amount of Conventional Revolving Loans, Discretionary Revolving Loans and LC Exposure outstanding to any Lender shall exceed the Revolving Commitment of such Lender, the Company shall promptly pay to such Lender an amount equal to such excess, together with accrued and unpaid interest on the amount so prepaid and all other amounts accrued and owing under this Agreement on such date. (c) Notwithstanding the foregoing, in the event any prepayment required by Section 3.02(a) or Section 3.02(b) with respect to any Conventional Revolving Loan would become due on a date that is not an Interest Payment Date and as a result thereof the Company would incur liabilities under Section 2.02(e), the Company shall make such prepayment to the Administrative Agent on the due date; provided that, if the Company so elects, interest shall continue to accrue on any Loan so prepaid and shall be paid by the Company to the Administrative Agent on the applicable Interest Payment Date. So long as no Default or Event of Default shall have occurred and be continuing, the Administrative Agent shall hold the proceeds of such prepayment for the benefit of the Lenders holding outstanding Conventional Revolving Loans in an interest bearing account, until such time as such proceeds can be applied towards payment of the Conventional Revolving Loans in accordance with the provisions of this Agreement without resulting in any liability of the Company under Section 2.02(e). All interest which may accrue on such amounts so held in escrow shall be held by the Administrative Agent for the benefit of the Company. (d) All prepayments made pursuant to the provisions of this Section 3.02 shall be applied, in the case of Conventional Revolving Loans, first, towards payment of all Federal Funds Rate Loans and Alternate Base Rate Loans, as the Company directs, and secondly, and subject to the provisions of Section 2.02(e), towards payment of the appropriate amount of Eurodollar Loans, as the Company directs. The Company shall have no right to reborrow any amount prepaid under Section 3.02(a). Section 3.03 Place, etc. of Payments and Prepayments. All payments and prepayments made in accordance with the provisions of this Agreement (other than with respect to Discretionary Revolving Loans) in respect of the Commitment Fees and the Administrative Agent’s fee and of principal of and interest on the Loans (other than Discretionary Revolving Loans) and of LC Disbursements and interest thereon shall be made to the Administrative Agent in Dollars at its Principal Office, in immediately available funds for the account of the Lenders. The Administrative Agent will promptly distribute to the Lenders, in accordance with each Lender’s Prepayment Pro Rata Share as to the Loans being paid or prepaid (other than Discretionary Revolving Loans), in immediately available funds, the amount of principal, interest, LC Disbursements, Commitment Fees and LC Participation Fees received by the Administrative Agent for the account of such Lenders; provided that if interest shall accrue on any Loan (other than Discretionary Revolving Loans) at a rate different from the rate applicable to any other such Loan, payment and distribution of interest shall be based on the respective accrual rates applicable to such Loans. Any payment to the Administrative Agent for the account of a Lender under this Agreement shall constitute payment by the Company to such Lender of the amounts so paid to the Administrative Agent, and any Loans (other than Discretionary Revolving Loans) or portions thereof so paid shall not be considered outstanding for any purpose after the date of such payment to the Administrative Agent.   31 -------------------------------------------------------------------------------- ARTICLE IV. REDUCTION OF COMMITMENTS; FEES Section 4.01 Optional Reduction or Termination of Commitments. The Company may at any time or from time to time reduce ratably in proportion to their respective Revolving Commitments or terminate in whole, the respective Commitments of the Lenders hereunder by giving not less than three full Business Days’ prior written notice to such effect to the Administrative Agent; provided that any partial reduction shall be in an aggregate amount of not less than $2,000,000 and an integral multiple of $250,000; provided further that the Revolving Commitments may not be reduced to an amount less than the aggregate principal amount of Conventional Revolving Loans, Discretionary Revolving Loans and LC Exposure outstanding at such time, unless simultaneously therewith the Company shall make a prepayment in accordance with Section 3.02(a) hereof. The Administrative Agent shall promptly notify each Lender of its proportionate share of and of the date of each such reduction. After each such reduction, the Commitment Fees owing to each Lender shall be calculated upon the Commitment of such Lender as so reduced. In the event of acceleration of the maturity date of any Loan (other than Discretionary Revolving Loans), the Commitments hereunder of the Lenders shall thereupon automatically terminate without notice. Each such reduction or any termination of the Commitments hereunder shall be irrevocable. Section 4.02 Mandatory Termination of Commitments. The Revolving Commitments shall automatically terminate on the Revolving Credit Termination Date and, in the case of a Declining Lender, as provided in Section 2.13. Section 4.03 Commitment Fees. (a) The Company agrees to pay to the Administrative Agent for the account of each Lender, in Dollars, commitment fees (“Commitment Fees”), computed on a daily basis of a year of 365 or 366 days, as the case may be, at a rate per annum equal to the applicable Commitment Fee Rate from time to time in effect from the Closing Date until the Revolving Credit Termination Date, on the daily average unused amount of the Revolving Commitment of such Lender (taking into account all Conventional Revolving Loans and Discretionary Revolving Loans of such Lender outstanding on the dates covered by such calculation). Each such Commitment Fee shall be payable on or before the 15th day following each Quarterly Date and on the Revolving Credit Termination Date or on such earlier date as the Commitment of such Lender shall terminate pursuant to the terms of this Agreement. (b) For purposes of computing Commitment Fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the LC Exposure of such Lender. Section 4.04 LC Participation Fees. The Company agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee (“LC Participation Fee”) with respect to its participations in Letters of Credit, which shall accrue at the Margin Percentage used to determine the interest rate applicable to Conventional Revolving Loans that are Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Closing Date to but excluding the date on which such Lender ceases to have any Revolving Commitment or LC Exposure and (ii) to the Issuing Lenders a fronting fee, which shall accrue at the rate or rates per annum separately agreed upon by the Company and the applicable Issuing Lender on the average daily stated amount of the Letters of Credit issued by such Issuing Lender during the period from and including the Closing Date to but excluding the date on which there ceases to be any LC Exposure, as well as the applicable Issuing   32 -------------------------------------------------------------------------------- Lender’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued participation fees and fronting fees shall be payable on or before the fifteenth day following each Quarterly Date and on the Revolving Credit Termination Date or on such earlier date as the Revolving Commitments shall terminate pursuant to the terms of this Agreement; and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lenders pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). Section 4.05 Administrative Agent’s Fee. Until payment in full of the Loans and termination of the Commitments, the Company agrees to pay to the Administrative Agent, for its own account, the annual administration fee provided for in the fee letter executed by them. ARTICLE V. APPLICATION OF PROCEEDS The Company agrees that the proceeds of the Conventional Revolving Loans and Discretionary Revolving Loans and Letters of Credit shall be used to retire and repay the Company’s existing credit facilities and thereafter may be used for any general corporate purposes. ARTICLE VI. REPRESENTATIONS AND WARRANTIES The Company represents and warrants that: Section 6.01 Organization; Qualification; Subsidiaries. The Company and each Subsidiary (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, (ii) has the corporate or organizational power to own its properties and to carry on its business as now conducted, and (iii) is duly qualified to do business and is in good standing in every jurisdiction where failure to be duly qualified would have a Material Adverse Effect. Attached hereto as Exhibit 6.01 is a list setting forth, as of the date of this Agreement, the name of each Unrestricted Subsidiary. All shares of capital stock of Restricted Subsidiaries owned by the Company or any Restricted Subsidiary are owned thereby free and clear of all Liens other than Permitted Liens. Section 6.02 Financial Statements. The Company has furnished (either in hard copy or electronically) each Lender with the consolidated financial statements for the Company and its Subsidiaries as at and for its fiscal year ended December 31, 2005, accompanied by the opinion of Deloitte & Touche, and quarterly consolidated financial statements as at and for the period ended March 31, 2006. Such statements have been prepared in conformity with GAAP consistently applied throughout the period involved, except as may be explained in such opinion and except, in the case of interim statements, for year-end audit adjustments and the absence of footnotes. Such statements fairly present in all material respects the financial condition of the Company and its Subsidiaries on a consolidated basis and the results of its and their operations as at the dates and for the periods indicated. There has been no material adverse change in the financial condition or the business or properties of the Company and its Restricted Subsidiaries on a consolidated basis since December 31, 2005. Section 6.03 Actions Pending. Except as disclosed in Exhibit 6.03 attached hereto, there is no action, suit or proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary before any court or administrative agency or other governmental authority which would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.   33 -------------------------------------------------------------------------------- Section 6.04 Default. Neither the Company nor any Subsidiary is (i) in default under the provisions of any instrument evidencing any Debt or any other liability, contingent or otherwise, or of any agreement relating thereto or (ii) in default under or in violation of any order, writ, injunction or decree of any court, or in default under or in violation of any order, regulation or demand of any governmental instrumentality, other than for such defaults or violations under clauses (i) and (ii) above which taken in the aggregate do not have a Material Adverse Effect. Section 6.05 Title to Assets. Except as would not have a Material Adverse Effect, the Company and each Restricted Subsidiary have good and marketable title to their respective assets, subject to no Liens except Permitted Liens. Section 6.06 Payment of Taxes. The Company and each Subsidiary have filed all Federal and material state income and franchise tax returns, or extensions therefor, which, to the knowledge of the officers thereof, are required to be filed and have paid all material taxes shown on said returns and all material assessments which are due (other than those the amount or validity of which are currently being contested in good faith by appropriate proceedings). The Company and its officers know of no claims by any governmental authority for any unpaid taxes which claims in the aggregate would reasonably be expected to have a Material Adverse Effect. Section 6.07 Conflicting or Adverse Agreements or Restrictions. Neither the Company nor any Subsidiary is a party to any contract or agreement or subject to any restriction which has a Material Adverse Effect. Neither the execution nor delivery of this Agreement nor compliance with the terms and provisions hereof or of any instruments required hereby will be contrary to the provisions of, or constitute a default under, (i) the charter or by-laws of the Company or any Subsidiary or (ii) any law or any regulation, order, writ, injunction or decree of any court or governmental authority or any material agreement to which the Company or any Subsidiary is a party or by which it is bound or to which it is subject, except for such noncompliance or defaults referred to in this clause (ii) which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Section 6.08 Purpose of Loans. Neither the Company nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. This Agreement and the transactions contemplated hereby comply in all respects with Regulations U, T and X of the Board of Governors of the Federal Reserve System. Neither the Company nor any agent acting on its behalf has taken any action which might cause this Agreement to violate Regulations U, T or X or to violate the Securities Exchange Act of 1934, in each case as in effect now or as the same may hereafter be in effect on the date of any Loan. Section 6.09 Authority; Validity; Enforceability. The Company has the corporate power and authority to make and carry out this Agreement and the transactions contemplated herein, to make the borrowings provided for herein and to perform its obligations hereunder; and all such action has been duly authorized by all necessary corporate proceedings on its part. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights and general principles of equity. Section 6.10 Consents or Approvals. No material order, consent, approval, license, authorization or validation of any governmental authority and no material registration or filing with or   34 -------------------------------------------------------------------------------- notice to any governmental authority is necessary to authorize or permit, or is required in connection with, the execution and delivery of this Agreement, the making of borrowings pursuant hereto or the performance of the obligations of the Company hereunder. Section 6.11 Compliance with Law and Contractual Obligations. Neither the Company nor any of its Subsidiaries is in violation of any Federal, state or local laws or orders affecting the Company or any Subsidiary or any of their businesses and operations which taken alone or in the aggregate, would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary (i) has failed to obtain any license, permit, franchise, consent or authorization of any governmental authority or (ii) is in non-compliance with any contractual obligation, in each case necessary to the ownership of its properties or the operation of its business, which failure or non-compliance would reasonably be expected to have a Material Adverse Effect. Section 6.12 ERISA. The Company and its Subsidiaries are in compliance in all material respects with the applicable provisions of ERISA. Neither the Company nor any Subsidiary, taken individually or in the aggregate, is obligated to pay any material accumulated funding deficiency within the meaning of ERISA or Section 4971 of the Internal Revenue Code of 1986, as amended, or is obligated to pay any material liability to the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto under ERISA (the “PBGC”) (other than the payment of premiums to the PBGC as required by ERISA), in connection with any Plan. Section 6.13 Investment Company Act. Neither the Company nor any Subsidiary (i) is an investment company as that term is defined in the Investment Company Act of 1940, as amended, (ii) directly or indirectly controls or is controlled by a company which is an investment company as that term is defined in the Investment Company Act of 1940, as amended, or (iii) is otherwise subject to regulation under the Investment Company Act of 1940, as amended. Section 6.14 Disclosure. All material information furnished by or on behalf of the Company in writing to the Administrative Agent or any Lender pursuant to the terms of this Agreement after the date hereof and concerning the historical operations of the Company, will not, when made, include any untrue statement of a fact that, individually or in the aggregate with any other such untrue statement, has a Material Adverse Effect. ARTICLE VII. CONDITIONS Section 7.01 Conditions Precedent to the Initial Extension of Credit. The obligation of the Lenders to fund the initial Borrowing is subject to satisfaction of the following conditions on or before the Closing Date: (a) The Administrative Agent shall have received on behalf of the Lenders from Counsel for the Company their opinion in the form attached hereto as Exhibit 7.01(a), with such changes therein as may be agreed upon by the Company and the Administrative Agent. (b) The Administrative Agent shall have received on behalf of the Lenders an Officer’s Certificate substantially in the form attached hereto as Exhibit 7.01(b). (c) The Administrative Agent and Arrangers shall have received all fees and other amounts payable in connection with this Agreement on or prior to the date hereof, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Company hereunder.   35 -------------------------------------------------------------------------------- (d) The Existing Credit Agreement shall have been, or shall simultaneously be, terminated and all amounts outstanding thereunder paid in full. (e) The Company shall have delivered to the Administrative Agent and each Lender such other documentation as the Administrative Agent may reasonably request. Following the satisfaction of the conditions set forth in this Section 7.01, the Administrative Agent shall inform the Company and the Lenders in writing thereof. Section 7.02 Conditions Precedent to Each Extension of Credit. The obligation of the Lenders to fund each Borrowing (including, without limitation, the initial Borrowings) or any borrowing of Discretionary Revolving Loans and of the Issuing Lenders to issue, amend, renew or extend Letters of Credit (but, in the case of any amendment, only if such amendment has the effect of increasing the LC Exposure of any Lender holding Revolving Commitments or extending the maturity of the applicable Letter of Credit) is subject to satisfaction of the following additional conditions (in the case of a Discretionary Revolving Loan, unless otherwise agreed by the relevant Lender): (a) The Administrative Agent shall have received by telecopy or otherwise, the Notice of Conventional Revolving Borrowing required by Section 2.01(c) or notice of issuance, amendment, renewal or extension required by Section 2.11(b), or the Company and the relevant Lender shall have agreed on terms and conditions for such Discretionary Revolving Loan satisfactory to such Lender and the Company that are not inconsistent with the provisions of this Agreement. (b) After giving effect to such extension of credit, and to the application of the proceeds (if any) thereof, the representations and warranties contained in Article VI, other than the representations and warranties made by the Company in the last sentence of Section 6.02 and Sections 6.03 and 6.04, shall be true in all material respects on and as of the particular date of extension of credit as though made on and as of such date (except, in the case of any exhibit referred to in Article VI, to the extent such exhibit expressly relates to a prior date) and each such extension of credit shall be deemed to constitute a representation and warranty by the Company on the applicable date (except, in the case of any exhibit referred to in Article VI, to the extent such exhibit expressly relates to an earlier date) as to the matters set forth in Article VI (other than the representations and warranties made by the Company in the last sentence of Section 6.02 and in Sections 6.03 and 6.04). (c) No Default shall have occurred and be continuing or shall occur after giving effect to such extension of credit and the application of the proceeds (if any) thereof, and each such extension of credit shall be deemed to constitute a representation and warranty by the Company on the applicable date to such effect. (d) After giving effect to such extension of credit, and the application of the proceeds (if any) thereof, the sum of the aggregate outstanding principal amount of Conventional Revolving Loans, Discretionary Revolving Loans and the aggregate LC Exposure shall not exceed the Revolving Commitments. Each such extension of credit shall be deemed to constitute a representation and warranty by the Company on the applicable date to such effect.   36 -------------------------------------------------------------------------------- ARTICLE VIII. AFFIRMATIVE COVENANTS The Company covenants and agrees that, so long as the Company may borrow hereunder and until payment in full of the Loans (including any Discretionary Revolving Loan, unless otherwise agreed by the Lender making such Loan) and until all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Company will: Section 8.01 Certain Financial Covenants. Maintain at all times: (a) a Leverage Ratio of not more than 5.0 to 1.0 and (b) a ratio of Consolidated Operating Cash Flow to Consolidated Interest Expense of not less than 2.0 to 1.0; provided that compliance with this Section 8.01(b) will not be required if and so long as the Index Debt of the Company is rated Baa2 (stable or positive) or better by Moody’s and BBB (stable or positive) or better by S&P. Section 8.02 Financial Statements and Information. Deliver to each of the Lenders (either in hard copy or electronically): (a) as soon as available, and in any event within 90 days, after the end of each fiscal year (i) a copy of the consolidated annual audited financial statements of the Company and its Subsidiaries for such fiscal year containing a balance sheet, an income statement, a statement of shareholders’ equity and a consolidated statement of cash flows, all in reasonable detail, together with the unqualified opinion of Deloitte & Touche or another independent certified public accountant of recognized national standing, that such statements have been prepared in accordance with GAAP, consistently applied, except as may be explained in such opinion, and fairly present in all material respects the financial condition of the Company and its Subsidiaries on a consolidated basis and the results of its and their operations as at the dates and for the periods indicated and (ii) a copy of the reconciliation sheet, certified by a financial officer of the Company, setting forth the adjustments required to the consolidated audited financial statements of the Company and its Subsidiaries referred to above in this paragraph (a) in order to arrive at the consolidated financial statements of the Company and its Restricted Subsidiaries; (b) as soon as available, and in any event within 60 days, after the end of each of the first three quarterly accounting periods in each fiscal year (i) a copy of the consolidated unaudited financial statements of the Company and its Subsidiaries as at the end of such quarter and for the period then ended, containing a balance sheet, an income statement, a statement of shareholders’ equity and a consolidated statement of cash flows, all in reasonable detail and certified by a financial officer of the Company to have been prepared in accordance with GAAP, consistently applied, except as may be explained in such certificate and except, in the case of interim statements, for year end audit adjustments and the absence of footnotes, and as fairly presenting in all material respects the financial condition of the Company and its Subsidiaries on a consolidated basis and the results of its and their operations as at the dates and for the periods indicated and (ii) a copy of the reconciliation sheet, certified by the Company, setting forth the adjustments required to the consolidated quarterly financial statements of the Company and its Subsidiaries referred to above in this paragraph (b) in order to arrive at the consolidated financial statements of the Company and its Restricted Subsidiaries;   37 -------------------------------------------------------------------------------- (c) promptly after the filing thereof, copies of all statements and reports filed with the Securities and Exchange Commission, other than Form S-8 registration statements and other reports relating to employee benefit plans, supplements to registration statements relating solely to the pricing of securities offerings for which registration statements were previously filed and Forms D; (d) promptly, and in any case within five Business Days, after any officer of the Company obtains knowledge that an Event of Default or Default has occurred, an Officer’s Certificate specifying the nature of such Event of Default or Default, the period of existence thereof, and what action the Company has taken and proposes to take with respect thereto; and (e) promptly after request, such additional financial or other information as the Administrative Agent or any Lender acting through the Administrative Agent may reasonably request from time to time. All financial statements specified in clauses (a) and (b) above shall be furnished with comparative consolidated figures for the corresponding period in the preceding year. Together with each delivery of financial statements required by clauses (a) and (b) above, the Company will deliver to each Lender (i) such schedules, computations and other information as may be required to demonstrate that the Company is in compliance with its covenants in Sections 8.01, 9.01(j), 9.03, 9.05 and 9.06 or reflecting any noncompliance therewith as at the applicable date, and (ii) an Officer’s Certificate stating that, to the knowledge of such officer, there exists no Default or Event of Default or if, to the knowledge of such officer any such Default or Event of Default exists, stating the nature thereof, the period of existence thereof, and what action the Company has taken and proposes to take with respect thereto. Each Lender is authorized to deliver a copy of any financial statement delivered to it to any regulatory body having jurisdiction over it and to any other Person as may be required by applicable law, rules and regulations. Financial statements required to be delivered pursuant to Section 8.02(a)(i) or (b)(i) or statements and reports required to be delivered pursuant to Section 8.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) shall be deemed to have been delivered on the date on which notice is received by the Administrative Agent that such information has been posted on the Company’s website on the Internet at www.coxradio.com, at sec.gov/edgar/searchdgar/webusers.htm or at another website identified in such notice and accessible by the Lenders without charge (except in the case of statements of beneficial ownership of securities on Form 3, 4, or 5 which shall be deemed to have been delivered when so posted regardless of whether such notice is received). The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. Section 8.03 Existence; Compliance with Laws; Licenses, Franchises, Agreements and Other Obligations. Maintain its corporate existence, comply and cause its Subsidiaries to comply, in all respects material to the financial condition, business and properties of the Company and its Restricted Subsidiaries on a consolidated basis, with all applicable laws, regulations, licenses, permits, privileges, franchises and agreements and pay and cause its Subsidiaries to pay all Taxes, assessments, governmental charges and other obligations which if unpaid might become a Lien (other than a Permitted Lien) against the Property of the Company or a Restricted Subsidiary, except obligations being contested in good faith by appropriate proceedings.   38 -------------------------------------------------------------------------------- Section 8.04 Notice of Litigation and Other Matters. Promptly notify the Administrative Agent in writing of (i) any action, suit or proceeding pending or to the knowledge of the Company threatened, before any governmental authority (including, without limitation, any bankruptcy or similar proceeding by or against the Company or any Subsidiary) which, in the view of the Company, would reasonably be expected to have a Material Adverse Effect, (ii) the failure of any Unrestricted Subsidiary to pay when due (after giving effect to any grace period permitted from time to time) any Debt of such Unrestricted Subsidiary, the outstanding amount of which exceeds, singularly or in the aggregate, $50,000,000, or the holder of such Debt declares, or may declare, such Debt due prior to its stated maturity because of the occurrence of a default or other event thereunder or with respect thereto, if such failure, declaration or right to declare would reasonably be expected to have a Material Adverse Effect, (iii) any revocation, suspension or expiration (other than expiration at maturity in accordance with their terms) of Federal Communications Commission licenses or operating franchises which revocation, suspension or expiration would reasonably be expected to have a Material Adverse Effect and (iv) the designation by the Company of a Subsidiary as an Unrestricted Subsidiary pursuant to the terms hereof, which notice shall (A) set forth the calculations evidencing compliance with Section 8.01 after giving effect to such designation, determined in accordance with the most recent financial statements delivered to the Lenders pursuant to Section 6.02 or Section 8.02, as the case may be, and (B) be deemed to be a representation and warranty of the Company that at the time of such designation and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing. Promptly after the receipt by the Administrative Agent of any notice provided for in this Section 8.04, the Administrative Agent will provide the Lenders with a copy of such notice. Section 8.05 Books and Records. Maintain, and cause its Subsidiaries to maintain, proper books of record and account in accordance with GAAP and in accordance, in all material respects, with applicable corporate, securities and financial reporting laws. Section 8.06 Inspection of Property and Records. Permit any Person designated in writing by the Administrative Agent or any Lender acting through the Administrative Agent (i) to visit and inspect any of the properties of the Company and any Restricted Subsidiary and discuss its and their respective affairs and finances with its and their respective principal officers and to inspect any of the corporate books and financial records of the Company and any Restricted Subsidiary and (ii) from and after the occurrence of an Event of Default, to make copies of and abstracts from the books and records of account of the Company and its Restricted Subsidiaries, in each case all upon reasonable prior notice and at such times as the Administrative Agent or any Lender acting through the Administrative Agent may reasonably request. Notwithstanding Section 13.01, but without prejudice to any other provision contained herein, unless any such visit or inspection is conducted after the occurrence and during the continuance of a Default or an Event of Default, the Company shall not be required to pay any costs or expenses incurred by the Administrative Agent, any Lender or any other Person in connection with any such visit or inspection. Section 8.07 Maintenance of Property; Insurance. Except as would not reasonably be expected to have a Material Adverse Effect, cause its Property and the Property of its Subsidiaries to be maintained, preserved and protected and kept in good repair, working order and condition and maintain, and cause its Subsidiaries to maintain, insurance with responsible companies in such amounts and against such risks as is reasonably deemed appropriate by the Company. Section 8.08 ERISA. Except as would not reasonably be expected to have a Material Adverse Effect, comply with the applicable provisions of ERISA and furnish to the Administrative Agent (i) as soon as possible, and in any event within 30 days after the Company or a duly appointed administrator of a Plan knows that any “reportable event” (as such term is defined in Section 4043 of ERISA), other than a reportable event for which the notice requirement has been waived by the PBGC   39 -------------------------------------------------------------------------------- under Sections 4043.22, 4043.23, 4043.27 through 4043.32 (inclusive) and 4043.34 of the PBGC regulations) with respect to any Plan has occurred, a statement of the chief financial officer of the Company setting forth details as to such reportable event and the action which the Company proposes to take with respect thereto, together with a copy of any notice of such reportable event given to the PBGC (provided that if such notice has not been submitted to the PBGC as of the date of the required notice to the Administrative Agent under this Section 8.08, a copy of such notice to the PBGC shall be provided to the Administrative Agent as of the date provided to the PBGC) and (ii) promptly after receipt thereof, a copy of any notice the Company, any Subsidiary or any member of the controlled group of corporations may receive from the PBGC relating to the intention of the PBGC to terminate any Plan. ARTICLE IX. NEGATIVE COVENANTS The Company covenants and agrees that, so long as the Company may borrow hereunder and until payment in full of the Loans (including any Discretionary Revolving Loan, unless otherwise agreed by the Lender making such Loan), and until all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed: Section 9.01 Liens. The Company will not and will not permit any Restricted Subsidiary to create or permit to exist any Lien upon any of its assets, whether now owned or hereafter acquired, or assign or otherwise convey any right to receive income, except (a) Liens for Taxes, assessments, governmental charges and other similar obligations not yet due or which are being contested in good faith by appropriate proceedings; (b) other Liens incidental to the conduct of its business or the ownership of its assets which were not incurred in connection with the borrowing of money, and which do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (c) Liens on assets of a Restricted Subsidiary to secure obligations of such Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; (d) (i) Liens existing on the date hereof which are described in Exhibit 9.01(d) attached hereto or which secure Debt reflected in the consolidated financial statements of the Company referred to in Section 6.02 and (ii) Liens on Property that were existing at the time of the acquisition thereof by the Company or any Restricted Subsidiary or placed thereon to secure a portion of the purchase price thereof; (e) Liens on Property acquired after the date hereof, existing at the time of acquisition thereof by the Company or any Restricted Subsidiary or placed thereon within one year of such acquisition to secure a portion of the purchase price thereof; provided that no such Lien may encumber or cover any other Property of such Restricted Subsidiary, of the Company or of any other Restricted Subsidiary; (f) Liens on the stock of Unrestricted Subsidiaries;   40 -------------------------------------------------------------------------------- (g) to the extent not covered by clause (b) above, Liens of attachment, judgments or awards in respect of which adequate reserves have been established in accordance with GAAP and which do not constitute an Event of Default; (h) Liens securing interest rate and currency hedging arrangements in a notional amount which, when taken together with the notional amounts of all other outstanding hedging arrangements secured in accordance with this clause (h), does not at the time incurred exceed $100,000,000, so long as (i) the related Debt is permitted to be incurred in accordance with the terms hereof and (ii) such arrangements are entered into by the Company or any Subsidiary solely for risk management purposes; (i) Liens on property subject to sale and leaseback transactions, and any renewals or extensions thereof, so long as the Debt secured thereby does not exceed $50,000,000 in the aggregate at any one time; and (j) other Liens on Property of the Company and its Restricted Subsidiaries having an aggregate value of not more than the greater of $100,000,000 or 15% of Consolidated Net Worth as of the end of each fiscal quarter. Section 9.02 Merger; Consolidation; Disposition of Assets. The Company will not merge or consolidate with any other corporation or sell or dispose of all or substantially all of its assets unless the Company shall be the continuing or surviving corporation and both before and after giving effect to such merger or consolidation no Default or Event of Default shall exist; provided that nothing in this Section 9.02 shall be construed to prohibit the Company from reincorporating in another U.S. jurisdiction or changing its form of organization within the United States, if such reincorporation or change would not reasonably be expected to be materially adverse to the Lenders. The Company will not and will not permit any Restricted Subsidiary to sell, lease or transfer or otherwise dispose of (whether in one transaction or a series of transactions), its assets that are material to the business, operations or financial condition of the Company and its Restricted Subsidiaries, taken as a whole, other than inventory in the ordinary course of business and stock of Unrestricted Subsidiaries, unless both before and after giving effect to such disposition no Default or Event of Default shall exist. Section 9.03 Restricted Payments. The Company will not, and will not permit any Restricted Subsidiary to, pay or declare any dividend (exclusive of stock dividends and cash dividends paid by the Subsidiaries to the Company or to Restricted Subsidiaries) or redeem or acquire, directly or indirectly, any of the stock of the Company or such Subsidiary (other than, in the case of a Subsidiary, stock held directly or indirectly by the Company) or any warrant or option to purchase any of such stock (any of the foregoing, a “Restricted Payment”) in excess of $50,000,000 in aggregate Restricted Payments in any calendar year, if (a) the Leverage Ratio would have exceeded 5.0 to 1.0 as of the end of the four fiscal quarter period most recently ended on a pro forma basis as if such Restricted Payment had occurred and all Consolidated Debt incurred in connection therewith had been incurred on the last day of such four fiscal quarter period, or (b) the Company is not in compliance with its obligations under clauses (a) and (b) (and the related provisions of the second to last paragraph) of Section 8.02. Notwithstanding the foregoing, there shall not be included in the foregoing limitations or computations (A) exchanges of stock for other stock, (B) retirements of stock out of the proceeds of the sale of other stock after the date hereof, (C) net acquisitions after giving effect to stock issuances to employees by the Company of its stock from certain employees of the Company pursuant to the Company’s stock repurchase agreements in an aggregate amount not to exceed $10,000,000 in any one calendar year, or (D) purchases or other acquisitions in arm’s-length transactions of the capital stock of any Subsidiary not Wholly Owned by the Company from stockholders of such Subsidiary that are not members of the Cox Family.   41 -------------------------------------------------------------------------------- Section 9.04 Limitation on Margin Stock. The Company will not and will not permit any Subsidiary to own or acquire Margin Stock such that at any time any extension of credit under this Agreement shall be in violation of Regulation U of the Federal Reserve System. Section 9.05 Loans and Advances to and Investments in Unrestricted Subsidiaries. The Company will not and will not permit any Restricted Subsidiary to make any loan or advance to, or any capital contribution to or other investment in (any of the foregoing, an “Investment”) any Unrestricted Subsidiary, if at the time of such Investment, and after giving effect thereto, (a) the Leverage Ratio would have exceeded 5.0 to 1.0 as of the end of the four fiscal quarter period most recently ended on a pro forma basis as if such Investment had occurred on the first day of such four fiscal quarter period, unless such Investment is on terms which are no less favorable to the Company or Restricted Subsidiary, as the case may be, than would obtain in a comparable arm’s-length transaction with an unaffiliated Person, or (b) a Default or Event of Default shall have occurred and be continuing; provided that so long as no Event of Default shall have occurred and be continuing, the Company and its Restricted Subsidiaries may (i) make Investments in an aggregate amount not to exceed $50,000,000 per calendar year and (ii) continue to make Investments consisting of obligations of Unrestricted Subsidiaries to the Company and its Restricted Subsidiaries arising in the ordinary course of business as a result of short-term advances and/or pooling of cash in connection with cash management programs. Section 9.06 Subsidiary Debt. The Company will not permit any Restricted Subsidiary to create, incur or suffer to exist any Debt except: (a) Debt outstanding on the date hereof which is reflected in the consolidated financial statements of the Company referred to in Section 6.02; and (b) additional Debt in an amount which, when taken together with all other outstanding Debt incurred in reliance on this clause (b) and, without duplication, all outstanding Debt of the Company and its Restricted Subsidiaries secured by Liens incurred in reliance on Section 9.01(j), does not at the time it is incurred exceed the greater of $100,000,000 or 15% of Consolidated Net Worth. For the purposes of this Section 9.06, liabilities in respect of Hybrid Equity Securities, issued by a Restricted Subsidiary that is a special purpose entity which was formed for the purpose of issuing Hybrid Equity Securities and which has no other business or operating assets, for amounts reflecting the Hybrid Equity Attribution (if any) allocable to such Hybrid Equity Securities will not be counted as Debt of such Restricted Subsidiary. Section 9.07 Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate of the Company other than (a) with the Company or one or more Restricted Subsidiaries, (b) transactions that are otherwise permitted by Section 9.03, (c) transactions with one or more Unrestricted Subsidiaries that are otherwise permitted by Section 9.05, (d) transactions on terms and conditions substantially as favorable to the Company or such Restricted Subsidiary, taken as a whole, as would be obtainable by the Company or such Restricted Subsidiary at the time in comparable arm’s length transactions with Persons other than Affiliates of the Company, (e) transactions involving the Company and its Restricted Subsidiaries exclusively, (f) cash management arrangements in the normal course of business, (g) any executive or employee incentive or compensation plan, contract or other arrangement (including any loans or extensions of credit in connection therewith) if such plan, contract or arrangement is approved either by the stockholders of the Company (in accordance with such voting requirements as may be applicable) or by the Board of Directors (or similar governing body) of the Company (or any committee thereof) by   42 -------------------------------------------------------------------------------- unanimous consent or at a meeting at which a quorum of disinterested directors is present or by any person designated by such Board of Directors (or similar governing body) or committee thereof by unanimous consent or at such a meeting to approve such agreements on behalf of the Company, (h) any tax sharing agreement with the Company’s Affiliates; provided that any such tax sharing agreement shall apportion tax liabilities between or among the parties based on factors customarily used in similar agreements to determine such apportionment, and (i) transactions having a value, in the aggregate for all such transactions in any fiscal year, not greater than $25,000,000. ARTICLE X. EVENTS OF DEFAULT If any of the following events shall occur and be continuing, then the Administrative Agent may, with the consent of the Majority Lenders, and shall, upon the direction of the Majority Lenders, upon notice to the Company (i) terminate the Commitments and the obligation of the Issuing Lenders to issue any Letter of Credit and declare all Loans then outstanding hereunder (together with all interest accrued and unpaid thereon and all other amounts owing or payable hereunder) to be immediately due and payable, and thereupon the Commitments shall immediately be terminated and all Loans (together with such interest and other amounts) shall become and be immediately due and payable without presentment, demand, protest, notice of intent to accelerate or other notice of any kind to the Company, all of which are hereby expressly waived; provided that, in the case of an event described in Sections 10.09 through 10.12, inclusive, with respect to the Company, the Commitments and the obligation of the Issuing Lenders to issue Letters of Credit shall automatically terminate and all Loans then outstanding hereunder (together with such interest and other amounts) shall automatically become immediately due and payable without any required action or notice by the Administrative Agent or Lenders and without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind to the Company, all of which are hereby expressly waived: Section 10.01 Failure to Pay Principal or Interest. The Company does not pay or prepay any principal of any Loan or any LC Disbursement within five days after the date due or the Company does not pay or prepay any interest on any Loan or any LC Disbursement (i) on or before five days after actual receipt of oral or written notice from the Administrative Agent as to the amount of interest due, but in no event shall the Company be required to pay or prepay any such interest prior to the date due, or (ii) within 10 days after the due date thereof if no notice is actually received by the Company from the Administrative Agent with respect to the amount of interest due; or Section 10.02 Failure to Pay Other Sums. The Company does not pay any sums (other than payments of principal and interest on the Loans or of LC Disbursements or interest thereon, in each case covered by Section 10.01) payable to the Administrative Agent or any Lender under the terms of this Agreement (including, without limitation, amounts due and payable under Section 3.02(a)) within 10 days after the date due (or, in the case of the Commitment Fees or LC Participation Fees payable to the Administrative Agent for the account of each Lender pursuant to Section 4.03 or 4.04, 10 days after written notice of nonpayment has been received by the Company from the Administrative Agent or any Lender); or Section 10.03 Failure to Pay or Acceleration of Other Debt. (i) The Company or any Restricted Subsidiary does not pay when due any other Debt of the Company or any Restricted Subsidiary, the outstanding amount of which exceeds, singularly or in the aggregate, $25,000,000, in respect of which any applicable grace period has expired, provided that a default under other Debt of the Company or any Restricted Subsidiary as described in this clause (i) shall not constitute an Event of Default under this Agreement if such default is the result of a failure to pay caused by an error or   43 -------------------------------------------------------------------------------- omission of an administrative or operational nature and funds were available to enable the Company or such Restricted Subsidiary to make the payment when due, unless either (x) the Company or such Restricted Subsidiary is aware of such default and, if no grace period of at least 3 days is provided for under the other Debt, 3 days have passed since the Company or Restricted Subsidiary became aware of such default without the curing of the default, or (y) such other Debt has become due prior to the maturity thereof; and provided further that, during the continuance of any applicable grace period or such 3 day period, any such failure to pay such other Debt when due shall constitute a Default (but not an Event of Default) hereunder; or (ii) the Company or any Restricted Subsidiary shall otherwise default under any other Debt of the Company or any Restricted Subsidiary, the outstanding amount of which exceeds, singularly or in the aggregate, $25,000,000, in respect of which any applicable notice has been given and such Debt has been declared due prior to any maturity thereof; provided that during the continuance of any applicable grace period with respect thereto, such event shall constitute a Default (but not an Event of Default) hereunder; or Section 10.04 Misrepresentation or Breach of Warranty. (i) Any representation or warranty made or deemed made by the Company herein or (ii) any other written or formally presented information provided by the Company pursuant to this Agreement after the date hereof concerning the historical operations of the Company, when made or deemed made, shall be incorrect in any material respect; or Section 10.05 Violation of Certain Covenants. The Company violates any covenant, agreement or condition contained in Article V or Section 8.01 or Article IX; or Section 10.06 Violation of Other Covenants, etc. The Company violates any other covenant, agreement or condition contained herein and such violation shall not have been remedied within 30 days after written notice has been received by the Company from the Administrative Agent or any Lender; or Section 10.07 Undischarged Judgment. Final judgment for the payment of money in excess of $25,000,000 (excluding any amount as to which an insurer having an A.M. Best rating of “A” or better and being in a financial size category of XII or better (as such category is defined as of the date hereof) has acknowledged liability) shall be rendered against the Company or any Significant Subsidiary and the same shall remain undischarged for a period of 30 days during which period execution shall not be effectively stayed; or Section 10.08 Change of Control. The Cox Family shall cease at any time to Control the Company; or Section 10.09 Assignment for Benefit of Creditors or Nonpayment of Debts. The Company or any Significant Subsidiary makes an assignment for the benefit of creditors or is generally not paying its debts as such debts become due; or Section 10.10 Voluntary Bankruptcy. The Company or any Significant Subsidiary petitions or applies to any tribunal for or consents to the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of the Company or any Significant Subsidiary, or of any substantial part of the assets of the Company or any Significant Subsidiary, or commences any case or proceedings relating to the Company or any Significant Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or other liquidation law of any jurisdiction; or   44 -------------------------------------------------------------------------------- Section 10.11 Involuntary Bankruptcy. Any such petition or application is filed, or any such case or proceedings are commenced, against the Company or any Significant Subsidiary, and (a) the Company or such Significant Subsidiary by any act indicates its approval thereof, consent thereto or acquiescence therein, or (b) an order for relief is entered in an involuntary case under the bankruptcy law of the United States of America, or (c) an order, judgment or decree is entered appointing such trustee, receiver, custodian, liquidator or similar official or adjudicating the Company or any Significant Subsidiary bankrupt or insolvent, or approving the petition in any such case or proceedings, or (d) such petition, application, case or proceeding continues for 60 days without having been dismissed or discharged; or Section 10.12 Dissolution. Any order is entered in any proceeding against the Company or any Significant Subsidiary decreeing the dissolution or split-up of the Company or such Significant Subsidiary, and such order remains unstayed and in effect for 60 days. ARTICLE XI. MODIFICATIONS, AMENDMENTS OR WAIVERS Any of the provisions of this Agreement may from time to time be modified or amended by, or waived with the written consent of the Majority Lenders; provided that no such waiver, modification or amendment may be made which will: (a) increase the amount or extend the term of the Commitment of any Lender hereunder, without the prior written consent of such Lender; or (b) extend the time for payment of principal of or interest on any Loan or of any LC Disbursement or interest thereon, or the time for payment of any Commitment Fee or LC Participation Fee, or waive an Event of Default with respect to payment of any LC Disbursement, principal, interest or fee, or reduce the principal amount of or the rate of interest on any Loan or any LC Disbursement, or otherwise affect the terms of payment of the principal of or interest (other than to increase the interest rate or the Commitment Fees or LC Participation Fees, which may be effected with the written consent of the Majority Lenders) on any Loan or any LC Disbursement, or reduce the amount of the Commitment Fees or LC Participation Fees, or otherwise affect the terms of payment of any such fee, without the prior written consent of the affected Lender; or (c) change the definition of Majority Lenders without the prior written consent of all the Lenders; or (d) waive, modify or amend the provisions of Article V or this Article XI or any other provision of this Agreement that requires the consent of all of the Lenders without the prior written consent of all the Lenders; or (e) waive, modify or amend the provisions of Article XII or amend, modify or otherwise affect the rights or duties of the Administrative Agent, without the prior written consent of the Administrative Agent; or (f) amend, modify or otherwise affect the rights or duties of the Issuing Lenders hereunder without the prior written consent of the Issuing Lenders.   45 -------------------------------------------------------------------------------- No failure or delay on the part of the Administrative Agent or any Lender in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy or any abandonment or discontinuance of steps to enforce such a power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy hereunder. The remedies provided for in this Agreement are cumulative and not exclusive of any remedies provided by law or in equity. No modification or waiver of any provision of this Agreement nor consent to any departure by the Company therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. ARTICLE XII. THE ADMINISTRATIVE AGENT Section 12.01 Appointment of Administrative Agent. Each of the Lenders irrevocably appoints and authorizes the Administrative Agent to act on its behalf under this Agreement, and to exercise such powers hereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof, together with such powers as may be reasonably incidental thereto. As to any matters not expressly provided for by this Agreement, the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders; provided that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. Section 12.02 Indemnification of Administrative Agent. The Administrative Agent shall not be required to take any action hereunder or to prosecute or defend any suit in respect of this Agreement, unless indemnified to its satisfaction by the Lenders against loss, cost, liability and expense. If any indemnity furnished to the Administrative Agent shall become impaired, it may call for additional indemnity and cease to do the acts indemnified against until such additional indemnity is given. In addition, the Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Company), ratably according to the respective principal amounts of the Loans and the LC Exposure then held by each of them (or if no LC Exposure and Loans are at the time outstanding, ratably according to the respective amount of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, or any action taken or omitted by the Administrative Agent under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct. Section 12.03 Limitation of Liability. Neither the Administrative Agent nor any of its directors, officers, employees, attorneys or agents shall be liable for any action taken or omitted by it or them hereunder, or in connection herewith, (i) with the consent or at the request of the Majority Lenders, or (ii) in the absence of its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (t) except as expressly set forth herein, shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity, (u) may treat the payee with respect to any Loan as the proper payee thereof until the Administrative Agent receives written notice of the assignment   46 -------------------------------------------------------------------------------- or transfer thereof signed by such payee and in form satisfactory to the Administrative Agent; (v) may consult with legal counsel (including Counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (w) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement; (x) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, or to inspect the Property (including the books and records) of the Company; (y) shall not be responsible to any Lender for the due execution, legality, validity, enforceability and genuineness of this Agreement, or any other instrument or document furnished pursuant hereto; and (z) shall incur no liability under or in respect of this Agreement by acting upon any notice or consent (whether oral or written and whether by telephone, telegram, cable or telex), certificate or other instrument or writing (which may be by telegram, cable or telex) believed by it to be genuine and communicated, signed or sent by the proper Person or Persons. Section 12.04 Independent Credit Decision. Each Lender agrees that it has relied solely upon its independent review of the financial statements of the Company and all other representations and warranties made by the Company herein or otherwise in making the credit decisions preliminary to entering into this Agreement and agrees that it will continue to rely solely upon its independent review of the facts and circumstances of the Company in making future decisions with respect to this Agreement and the Loans and the LC Exposure. Each Lender agrees that it has not relied and will not rely upon the Administrative Agent or any other Lender respecting the ability of the Company to perform its obligations pursuant to this Agreement. Section 12.05 Rights of JPMCB. With respect to its Commitment, its participation in Letters of Credit, the Letters of Credit issued by it and the Loans made by it, JPMCB shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include JPMCB in its individual capacity. JPMCB and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Company, any of the Subsidiaries and any Person or entity who may do business with or own securities of any of them or of their subsidiaries, all as if JPMCB were not the Administrative Agent and without any duty to account therefor to the Lenders. Section 12.06 Successor to the Administrative Agent. The Administrative Agent may resign at any time as Administrative Agent under this Agreement, by giving 30 days’ prior written notice thereof to the Lenders and the Company and may be removed as Administrative Agent under this Agreement, at any time with or without cause by the Company and the Majority Lenders. Upon any such resignation or removal, the Company (with the consent of the Majority Lenders, which shall not be unreasonably withheld) shall have the right to appoint a successor Administrative Agent thereunder. If no successor Administrative Agent shall have been so appointed by the Company (with the consent of the Majority Lenders), and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Majority Lenders’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent under this Agreement by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent’s resignation or removal as Administrative Agent under this Agreement, the provisions of this Article XII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.   47 -------------------------------------------------------------------------------- Section 12.07 Other Agents and Sub-Agents. None of the Arrangers, Syndication Agents or Documentation Agents shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such and the rights herein specifically granted to the Arrangers. Without limiting the foregoing, none of the Arrangers, Syndication Agents or Documentation Agents shall have or be deemed to have any fiduciary relationship with any Lenders. Each Lender acknowledges that it has not relied, and will not rely, on the Administrative Agent or any of the Arrangers, Syndication Agents or Documentation Agents or any representative, co-agent or sub-agent acting with or for any of them in deciding to enter into this Agreement or in taking or not taking action hereunder. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding Sections of this Article XII shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facility provided for herein as well as activities as Administrative Agent. ARTICLE XIII. MISCELLANEOUS Section 13.01 Payment of Expenses. Any provision hereof to the contrary notwithstanding (other than the last sentence of Section 8.06), and whether or not the transactions contemplated by this Agreement shall be consummated, the Company agrees to pay on demand (i) all reasonable costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Agreement and all amendments hereto (including, without limitation, waivers hereunder and workouts with respect to Loans hereunder), and the other instruments and documents to be delivered hereunder or with respect to any amendment hereto, including, without limitation, the reasonable fees and out-of-pocket expenses of any counsel for the Administrative Agent with respect thereto, (ii) all reasonable increases in costs and expenses of the Administrative Agent and the Lenders or any Lender (including reasonable counsel fees and expenses, including reasonable allocated costs of in-house legal counsel to the Administrative Agent or any Lender), if any, in connection with the administration of this Agreement after the occurrence of a Default (in the case of the Administrative Agent only) or Event of Default (in the case of the Administrative Agent and the Lenders or any Lender) and so long as the same is continuing, and (iii) all reasonable costs and expenses of the Administrative Agent and the Lenders or any Lender (including reasonable counsel fees and expenses, including reasonable allocated costs of in-house legal counsel to the Administrative Agent or any Lender), if any, in connection with the enforcement of this Agreement and the other instruments and documents to be delivered hereunder. The obligations of the Company under this Section 13.01 shall survive the termination of this Agreement and the payment of the Loans. It is understood that except as set forth in Section 2.10 the Company shall not be responsible for any costs, fees or expenses related to any assignment or participation by any Lender of any of its rights hereunder (including its Commitment, the Loans made by it or its participation in any Letters or Credit). Section 13.02 Notices. The Administrative Agent or any Lender giving consent or notice to the Company provided for hereunder shall notify each Lender and the Administrative Agent thereof; provided that consents and notices by a Lender with respect to Discretionary Revolving Loans need only be given to the Administrative Agent. In the event that any Lender shall transfer any Loan in accordance with Section 13.07(c), it shall immediately so advise the Administrative Agent which shall be   48 -------------------------------------------------------------------------------- entitled to assume conclusively that no transfer of any Loan has been made by any Lender unless and until the Administrative Agent receives written notice to the contrary. Except as otherwise specifically permitted by this Agreement with respect to oral Notices of Borrowing, notices and other communications provided for herein shall be in writing (including facsimile or electronic communication) and shall be delivered, mailed, or transmitted addressed to the addresses set forth on the Administrative Questionnaires (or, as to the Company or the Administrative Agent, at such other address as shall be designated by such party to the other parties in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Administrative Agent). The Administrative Agent will provide copies of the addresses set forth on the Administrative Questionnaires to the Company upon request. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given upon receipt. The Administrative Agent and the Lenders may at any time waive any requirement for notice hereunder. Section 13.03 Setoff. If one or more Events of Default as defined herein shall occur and be continuing, any Lender which is owed any obligation hereunder (“Depositary”) shall have the right, in addition to all other rights and remedies available to it, and is hereby authorized, to the extent permitted by applicable law, at any time and from time to time, without notice to the Company (any such notice being hereby expressly waived by the Company), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness (whether or not then due and payable) at any time owing by the Depositary to or for the credit or the account of the Company, against any and all of the obligations of the Company now or hereafter existing under this Agreement, irrespective of whether or not the Depositary shall have made any demand for satisfaction of such obligations and although such obligations may be unmatured. Each Depositary agrees to notify the Company and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Depositary under this Section 13.03 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Depositary may have hereunder or under any applicable law. Each Depositary agrees that (i) if it shall exercise any such right of banker’s lien, setoff, counterclaim or similar right pursuant hereto, it will apply the proceeds thereof first to the payment of Loans (other than Discretionary Revolving Loans) and LC Disbursements outstanding hereunder and thereafter to the payment of Discretionary Revolving Loans which may be owing to it and (ii) if it shall through the exercise of a right of banker’s lien, setoff, counterclaim or otherwise obtain payment of a proportion of the Loans (other than Discretionary Revolving Loans) and participations in LC Disbursements held by it in excess of the proportion of the Loans (other than Discretionary Revolving Loans) and participations in LC Disbursements of each of the other Depositaries being paid simultaneously, it shall be deemed to have simultaneously purchased from each other Depositary a participation in the Loans (other than Discretionary Revolving Loans) and participations in LC Disbursements owed to such other Depositaries so that the amount of unpaid Loans (other than Discretionary Revolving Loans) and participations therein and participations in LC Disbursements held by all Depositaries shall be proportionate to the original principal amount of the Loans (other than Discretionary Revolving Loans) and participations in LC Disbursements held by them; and in each case it shall promptly remit to each such Depositary the amount of the participation thus deemed to have been purchased. The Company expressly consents to the foregoing arrangements, and in furtherance thereof, agrees that at such time as an Event of Default hereunder has occurred, the Administrative Agent shall provide to each Lender a schedule setting forth the Commitment of each Lender hereunder to permit each Lender to correctly determine the portion which its Commitment hereunder bears to the aggregate of all Commitments hereunder. If all or any portion of any such excess payment is thereafter recovered from the Depositary which received the same, the purchase provided for herein shall be deemed to have been rescinded to the extent of such recovery, without interest.   49 -------------------------------------------------------------------------------- Section 13.04 Indemnity and Judgment. (a) The Company agrees to indemnify each of the Administrative Agent, Arrangers, Syndication Agents, Documentation Agents, Lenders and Issuing Lenders and each of their respective directors, officers, employees, agents, attorneys, controlling persons and Affiliates from and hold each harmless against any and all losses, costs, liabilities, claims, damages and expenses incurred by any of the foregoing Persons (collectively, the “indemnified liabilities”), including, without limitation, attorneys’ fees, settlement costs, court costs and other legal expenses, arising out of or by reason of any participation in, or any action or omission in connection with, this Agreement or any Loan (including any Discretionary Revolving Loan) hereunder or any Letter of Credit issued hereunder (including any refusal by an Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit) or any investigation, litigation or other proceedings brought or threatened relating thereto, or to any use or proposed use to be made by the Company or any Subsidiary of the Loans or Letters of Credit, but, in the case only of Lenders or Issuing Lenders other than the Administrative Agent, Arrangers, Syndication Agents and Documentation Agents, only to the extent that the indemnified liabilities arise out of or by reason of claims made by Persons other than the Administrative Agent, Arrangers, Syndication Agents, Documentation Agents or Lenders; provided that no such Person shall be entitled to be indemnified and held harmless against any such indemnified liabilities arising out of or by reason of the gross negligence or willful misconduct of such Person. To the fullest extent permitted by applicable law, the Company shall not assert, and hereby waives, any claim against any of the Lenders, Administrative Agent, Arrangers, Syndication Agents and Documentation Agents or any of their respective directors, officers, employees, agents, attorneys, controlling persons and Affiliates, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, as a result of, or in any way related to, this Agreement or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Company hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. (b) The obligations of the Company under this Section 13.04 shall survive the termination of this Agreement and the payment of all Loans and other amounts owing hereunder. Section 13.05 Interest. Anything in this Agreement to the contrary notwithstanding, the Company shall never be required to pay unearned interest on any Loan and shall never be required to pay interest on any Loan at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest which would otherwise be payable under this Agreement would exceed the Highest Lawful Rate, or if any Lender shall receive any unearned interest or shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable under this Agreement to a rate in excess of the Highest Lawful Rate, then (i) in lieu of the amount of interest which would otherwise be payable under this Agreement, the Company shall pay the Highest Lawful Rate, and (ii) any unearned interest paid by the Company or any interest paid by the Company in excess of the Highest Lawful Rate shall be credited on the principal of such Loan, and, thereafter, refunded to the Company. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received by any Lender under this Agreement, that are made for the purpose of determining whether such rate exceeds the Highest Lawful Rate applicable to such Lender (such Highest Lawful Rate being such Lender’s “Maximum Permissible Rate”), shall be made, to the extent permitted by usury laws applicable to such Lender (now or hereafter enacted), by amortizing, prorating and spreading in equal parts during the period of the full stated term of the Loans all interest at any time contracted for, charged or received by such Lender in connection therewith. If at any time and from time to time (y) the amount of interest payable to any Lender on any date shall be computed at such Lender’s Maximum Permissible Rate pursuant to this   50 -------------------------------------------------------------------------------- Section 13.05 and (z) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at such Lender’s Maximum Permissible Rate, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at such Lender’s Maximum Permissible Rate until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section. Section 13.06 Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH SHALL BE DEEMED TO BE CONTRACTS AND AGREEMENTS EXECUTED BY THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS UNDER THE LAWS OF THE STATE OF NEW YORK AND OF THE UNITED STATES AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF SAID STATE AND OF THE UNITED STATES. Without limitation of the foregoing, nothing in this Agreement shall be deemed to constitute a waiver of any rights which any Lender may have under applicable Federal law relating to the amount of interest which such Lender may contract for, take, receive or charge in respect of any Loans, including any right to take, receive, reserve and charge interest at the rate allowed by the laws of the state where such Lender is located. Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York sitting in New York City or of the United States for the Southern District of New York, and by execution and delivery of this Agreement, the Company hereby irrevocably accepts for itself and in respect of its Property, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company at its address for notices pursuant to Section 13.02, such service to become effective 15 days after such mailing. Nothing herein shall affect the right of the Administrative Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. (b) The Company irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Section 13.07 Survival of Representations and Warranties; Binding Effect; Assignment. (a) All representations, warranties and covenants contained herein or made in writing by the Company in connection herewith shall survive the execution and delivery of this Agreement and will bind and inure to the benefit of the respective successors and assigns of the parties hereto, whether so expressed or not. This Agreement shall become effective when it shall have been executed by the Company, the Administrative Agent and each of the Lenders, and thereafter shall be binding upon and inure to the benefit of the Company, the Administrative Agent and the Lenders, and their respective successors and assigns, except that the Company shall not have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of each Lender. (b) Each Lender may grant participations to one or more Financial Institutions in or to all or any part of its rights and obligations under this Agreement (including, without limitation, all or a   51 -------------------------------------------------------------------------------- portion of its Commitment) pursuant to such participation agreements and certificates as are customary in the banking industry; provided that (i) such Lender’s obligations under this Agreement (including, without limitation its Commitment to the Company hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Company, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, including without limitation, such Lender’s rights under Article XI hereof. In connection with any such participation, each Lender may deliver such financial information concerning the Company and its Subsidiaries to permit such participant to make an informed and independent credit decision concerning such participation; provided that each such Lender shall obtain from each such participant an agreement to the effect that all such information delivered to it in connection with such participation shall be treated in accordance with the provisions of Section 13.14. Upon request of the Company, each Lender shall give prompt notice to the Company of each such participation to Financial Institutions that are not Affiliates of such Lender, identifying each such participant and the interest acquired by each such participant. This Agreement shall not be construed so as to confer any right or benefit upon any Person, including, without limitation, any Financial Institution acquiring a participation in any Loan, other than the parties to this Agreement, except that any Financial Institution acquiring a participation shall be entitled to the benefits conferred upon the Lenders by Sections 2.02(e)-(f) and 2.03, as limited or modified by Sections 2.02(g) and 2.04 (provided that the cost to the Company is not in excess of what such cost would have been had such participation not been granted). (c) Subject to the prior written consent of the Company, the Administrative Agent and each Issuing Lender (which consents shall not be unreasonably withheld or delayed), each Lender may assign to a bank or other Person all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, Loans or Letters of Credit); provided that (i) each such assignment shall be in an amount equal to or greater than $5,000,000, with respect to assignments of a Lender’s Revolving Commitment or Conventional Revolving Loans (in each case, except in the case of assignments to Lenders or Lender Affiliates, assignment of the assigning Lender’s entire remaining commitment or unless otherwise agreed by the Company), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one class of Commitments or Loans, (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Assumption in substantially the form of Exhibit 13.07(c) attached hereto (the “Assignment and Assumption”), together with a processing and recordation fee of $3,500; provided that (y) such recordation fee shall not be payable if such transfer is made pursuant to Sections 2.02(d) or (f)(vi) and (z) under no circumstances will such recordation fee be payable by the Company, and provided, further, that any consent of the Company required under this paragraph shall not be required for assignments to Lenders, Lender Affiliates or an Approved Fund, or in the event an Event of Default has occurred and is continuing, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Company and its related parties or its securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Assumption, which effective date shall be the date on which such Assignment and Assumption is accepted by the Administrative Agent, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been   52 -------------------------------------------------------------------------------- assigned by it pursuant to such Assignment and Assumption, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (d) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Company, the option to provide to the Company all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Company pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof, and such Granting Lender shall be liable hereunder generally for all acts and omissions of such SPC as if such acts and omissions were committed by such Granting Lender; (iii) the SPC shall have no rights or benefits under this Agreement or any Note or any other related documents (its rights against such Granting Lender being as set forth in any agreements between such SPC and such Granting Lender), and shall not constitute a “Lender” hereunder; (iv) all amounts payable by the Company to the Granting Lender shall be determined as if such Granting Lender had not granted such option, and as if such Granting Lender were funding each of its Loans and its share of the Commitments in the same way that it is funding the portion of such Loans and its share of the Loan Commitments in which no such option has been granted; and (v) in no event shall a Granting Lender agree with an SPC to take or refrain from taking any action hereunder or under any Note or any other related document, except that such Granting Lender may agree with the SPC that it will not, without the consent of the SPC, agree to any modification, supplement or waiver of this Section 13.07(d). The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that (i) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender), (ii) no SPC shall be entitled to the benefits of Sections 2.02(d), (e) or (f) (or any other increased costs protection provision) other than as contemplated by clause (iv) of the second preceding sentence and (iii) the Granting Lender shall for all purposes, including, without limitation, the approval of any amendment or waiver of any provision of this Agreement or any related document, remain the Lender of record hereunder. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States of any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 13.07(d) any SPC may (i) with notice to, but without the prior written consent of, the Company and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loan to the Granting Lender or to any Financial Institutions (consented to by the Company and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC, provided that prior to any such disclosure, such rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement shall undertake in writing to preserve the confidentiality of such information. This Section may not be amended without the written consent of the SPC. (e) By executing and delivering an Assignment and Assumption, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Assumption, such assigning Lender makes   53 -------------------------------------------------------------------------------- no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any other instrument or document furnished pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its respective obligations under this Agreement; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Sections 6.02 and 8.02 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Assumption; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with its terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (f) The Administrative Agent shall maintain at its address referred to in Section 13.02 a copy of each Assignment and Assumption delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans, including Discretionary Revolving Loans, if any, owing to, each Lender, and participations in LC Disbursements held by each Lender, in each case from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Company, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. (g) Upon its receipt of an Assignment and Assumption executed by an assigning Lender, the Administrative Agent shall, if such Assignment and Assumption has been completed and is in substantially the form of Exhibit 13.07(c) attached hereto, (i) accept such Assignment and Assumption, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Company. (h) Notwithstanding any other provision in this Agreement, any Lender may at any time, without the consent of the Company, the Administrative Agent or any Issuing Lender, assign or pledge all or any portion of its rights under this Agreement (including, without limitation, the Loans) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such Federal Reserve Bank for such Lender as a party hereto. In order to facilitate such an assignment to a Federal Reserve Bank, the Company shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Company by the assigning Lender hereunder. Section 13.08 Counterparts. This Agreement may be executed in several counterparts, and by the parties hereto on separate counterparts. When counterparts executed by all the parties shall have been delivered to the Administrative Agent, this Agreement shall become effective, and at such time the Administrative Agent shall notify the Company and each Lender. Each counterpart, when so executed and delivered, shall constitute an original instrument, and all such separate counterparts shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.   54 -------------------------------------------------------------------------------- Section 13.09 Severability. Should any clause, sentence, paragraph or section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom and the remainder will have the same force and effectiveness as if such part or parts had never been included herein. Section 13.10 Descriptive Headings. The section headings in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatever in construing the terms and provisions of this Agreement. Section 13.11 Representation of the Lenders. Each Lender hereby represents and warrants that it is not relying upon any Margin Stock as collateral in extending or maintaining the credit to the Company represented by this Agreement. Section 13.12 Final Agreement of the Parties. This Agreement (including the Exhibits hereto) represents the final agreement of the parties with respect to the subject mater hereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no oral agreements between the parties. Section 13.13 Waiver of Jury Trial. THE COMPANY, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. Section 13.14 Confidentiality. Each of the Administrative Agent, the Issuing Lenders and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 13.14, to (A) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Company and its obligations, (vii) with the consent of the Company or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, any Issuing Lender or any Lender on a nonconfidential basis from a source other than the Company or any of its agents. For the purposes of this Section 13.14, “Information” means all information received from or on behalf of the Company or any of its Subsidiaries relating to the Company, any of its Subsidiaries, or any of their respective businesses. Any Person required to maintain the confidentiality of Information as provided in this Section 13.14 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.   55 -------------------------------------------------------------------------------- Section 13.15 USA PATRIOT Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies the Company that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Company, which information includes the name and address of the Company and other information that will allow such Lender to identify the Company in accordance with the Act. [Intentionally left blank]   56 -------------------------------------------------------------------------------- IN WITNESS WHEREOF this Agreement has been executed by the duly authorized signatories of the parties hereto in several counterparts all as of the day and year first above written.   COX RADIO, INC. By   /s/ Richard J. Jacobson Name:   Richard J. Jacobson Title:   Treasurer JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent By   /s/ John Kowalczuk Name:   John Kowalczuk Title:   Vice President CITIBANK, N.A. By   /s/ Robert Parr Name:   Robert Parr Title:   Managing Director   Global Media & Communication LEHMAN BROTHERS BANK, FSB By   /s/ Gary T. Taylor Name:   Gary T. Taylor Title:   Senior Vice President WACHOVIA BANK, NATIONAL ASSOCIATION By   /s/ John D. Brady Name:   John D. Brady Title:   Director BARCLAYS BANK PLC By   /s/ David Barton Name:   David Barton Title:   Associate Director BANK OF TOKYO-MITSUBISHI UFJ TRUST COMPANY By   /s/ K. Ossolinski Name:   K. Ossolinski Title:   Vice President BANK OF AMERICA, N.A. By   /s/ Christopher T. Ray Name:   Christopher T. Ray Title:   Vice President THE BANK OF NOVA SCOTIA By   /s/ Jose B. Carlos Name:   Jose B. Carlos Title:   Authorized Signatory Credit Agreement – Cox Radio, Inc. -------------------------------------------------------------------------------- CALYON, NEW YORK BRANCH By   /s/ W. Michael George Name:   W. Michael George Title:   Managing Director By   /s/ John McCloskey Name:   John McCloskey Title:   Managing Director DEUTSCHE BANK AG NEW YORK BRANCH By   /s/ Yvonne Tilden Name:   Yvonne Tilden Title:   Vice President By   /s/ Stefan Freckmann Name:   Stefan Freckmann Title:   Assistant Vice President MIZUHO CORPORATE BANK (USA) By   /s/ Raymond Ventura Name:   Raymond Ventura Title:   Senior Vice President THE ROYAL BANK OF SCOTLAND plc By   /s/ Andrew Wynn Name:   Andrew Wynn Title:   Managing Director SUMITOMO MUTSUI BANKING CORPORATION By   /s/ Yoshihiro Hyakutome Name:   Yoshihiro Hyakutome Title:   Joint General Manager SUNTRUST BANK By   /s/ Thomas C. Palmer Name:   Thomas C. Palmer Title:   Managing Director THE BANK OF NEW YORK By   /s/ Laura Neenan Name:   Laura Neenan Title:   Vice President Credit Agreement – Cox Radio, Inc. -------------------------------------------------------------------------------- UBS LOAN FINANCE LLC By   /s/ Richard L. Tavrow Name:   Richard L. Tavrow Title:   Director   Banking Products Services, US By   /s/ Irja R. Otsa Name:   Irja R. Otsa Title:   Associate Director   Banking Products Services, US BAYERISCHE LANDESBANK, CAYMAN ISLANDS BRANCH By   /s/ Nikolai von Mengden Name:   Nikolai von Mengden Title:   Senior Vice President By   /s/ Norman McClave Name:   Norman McClave Title:   First Vice President COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By   /s/ Illegible Name:   Illegible Title:   Senior Vice President & Manager By   /s/ Nivedita Persaud Name:   Nivedita Persaud Title:   Vice President CREDIT SUISSE, CAYMAN ISLANDS BRANCH By   /s/ Doreen Barr Name:   Doreen Barr Title:   Vice President By   /s/ Shaheen Malik Name:   Shaheen Malik Title:   Associate MERRILL LYNCH BANK USA By   /s/ Louis Alder Name:   Louis Alder Title:   Director MORGAN STANLEY BANK By   /s/ Daniel Twenge Name:   Daniel Twenge Title:   Authorized Signatory WILLIAM STREET COMMITMENT CORPORATION By   /s/ Mark Walton Name:   Mark Walton Title:   Assistant Vice President Credit Agreement - Cox Radio, Inc. -------------------------------------------------------------------------------- U.S. BANK NATIONAL ASSOCIATION By   /s/ Gail F. Scannell Name:   Gail F. Scannell Title:   Vice President REGIONS BANK By   /s/ Steven L. Hipsman Name:   Steven L. Hipsman Title:   Vice President COMERICA BANK By   /s/ Richard C. Hampson Name:   Richard C. Hampson Title:   Vice President FIFTH THIRD BANK By   /s/ Brian J. Blomeke Name:   Brian J. Blomeke Title:   Assistant Vice President FIRST HAWAIIAN BANK By   /s/ Jeffrey N. Higashi Name:   Jeffrey N. Higashi Title:   Vice President CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH By   /s/ Jim C.Y. Chen Name:   Jim C.Y. Chen Title:   Vice President & General Manager THE NORINCHUKIN BANK, NEW YORK BRANCH By   /s/ Massanori Shoji Name:   Massanori Shoji Title:   General Manager Credit Agreement - Cox Radio, Inc. -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 2.01(a) Revolving Commitments   Lender    Commitment    Pro Rata Share   JPMorgan Chase Bank, N.A.    $ 40,000,000    6.667 % Citibank, N.A.    $ 35,000,000    5.833 % Lehman Brothers Bank, FSB    $ 35,000,000    5.833 % Wachovia Bank, National Association    $ 35,000,000    5.833 % Bank of Tokyo-Mitsubishi UFJ Trust Company    $ 30,000,000    5.000 % Barclays Bank PLC    $ 30,000,000    5.000 % Bank of America, N.A.    $ 25,000,000    4.167 % The Bank of Nova Scotia    $ 25,000,000    4.167 % Calyon, New York Branch    $ 25,000,000    4.167 % Deutsche Bank AG New York Branch    $ 25,000,000    4.167 % Mizuho Corporate Bank (USA)    $ 25,000,000    4.167 % The Royal Bank of Scotland plc    $ 25,000,000    4.167 % Sumitomo Mitsui Banking Corporation    $ 25,000,000    4.167 % SunTrust Bank    $ 25,000,000    4.167 % The Bank of New York    $ 15,000,000    2.500 % Bayerische Landesbank, Cayman Islands Branch    $ 15,000,000    2.500 % Commerzbank AG, New York and Grand Cayman Branches    $ 15,000,000    2.500 % Credit Suisse, Cayman Islands Branch    $ 15,000,000    2.500 % Merrill Lynch Bank USA    $ 15,000,000    2.500 % Morgan Stanley Bank    $ 15,000,000    2.500 % Regions Bank    $ 15,000,000    2.500 % UBS Loan Finance LLC    $ 15,000,000    2.500 % U.S. Bank National Association    $ 15,000,000    2.500 % Comerica Bank    $ 10,000,000    1.667 % Chang Hwa Commercial Bank, Ltd., New York Branch    $ 10,000,000    1.667 % Fifth Third Bank    $ 10,000,000    1.667 % First Hawaiian Bank    $ 10,000,000    1.667 % The Norinchukin Bank, New York Branch    $ 10,000,000    1.667 % William Street Commitment Corporation    $ 10,000,000    1.667 %               Total    $ 600,000,000    100.00 %                 -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 2.02(f)(iv) [LENDER LETTERHEAD] JPMorgan Chase Bank, N.A. 270 Park Avenue New York, New York 10017 Pursuant to Section 2.02(f)(iv) of the Credit Agreement dated as of July 26, 2006, among Cox Radio, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto, this letter is submitted as a request for reimbursement for the reserves actually maintained by the undersigned pursuant to Regulation D of the Board of Governors of the Federal Reserve System against “Eurocurrency Liabilities” during the [Interest Period] for the $             Eurodollar Loan advanced by the Lender on              for an Interest Period of              days. This letter will also serve to certify that such reserves were in fact maintained by the undersigned with respect to such Eurodollar Loan during such Interest Period. The reimbursement for the required reserves maintained has been calculated according to Section 2.02(f) of the Credit Agreement as set forth below: 1. $                      Eurodollar Rate Loan outstanding for              days from                      to              2. Reserve Adjusted Base Rate = Actual Quoted Base Rate/(1—Actual Reserve Requirement Rate Incurred)                     /(1-                     ) =              3. Additional Spread due to Reserves = Reserve Adjusted Base Rate—Actual Quoted Base Rate                     -                     =                      4. Annualization Fraction = # of Days Outstanding/# of Eurodollar Days Per Year                     /360 =                        Reimbursement    =    (1) x ((3)/100) x (4)    =                      x                     x                        = $                     -------------------------------------------------------------------------------- [NAME OF LENDER], by     Name:   Title:     cc: Cox Radio, Inc. 6205 Peachtree Dunwoody Road Atlanta, Georgia 30328 Attention: Treasurer Telecopy No.: 678-645-1977 -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 6.01 List of Unrestricted Subsidiaries NONE -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 6.03 List of Actions Pending NONE -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 7.01(a) Opinion of the Company’s Counsel addressed to the Lenders To each of the Lenders party to the Credit Agreement hereinafter referred to and to JPMorgan Chase Bank, N.A., as Administrative Agent thereunder, and to J.P. Morgan Securities Inc., Lehman Brothers Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners thereunder Ladies and Gentlemen: We have acted as special counsel for Cox Radio, Inc., a Delaware corporation (the “Company”), in connection with the Credit Agreement, dated as of the date hereof, among the Company, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Securities Inc., Lehman Brothers Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners, and the Lenders (the “Credit Agreement”). As such counsel, we participated in the preparation of the Credit Agreement, and this opinion is rendered pursuant to Section 7.01(a) thereof. Terms used in this opinion that are defined in the Credit Agreement and are not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. In connection herewith, we have examined only (i) the Credit Agreement, (ii) the Certificate of Incorporation and the By-laws of the Company certified by the Company as being true and complete and in full force and effect on the date of this opinion (collectively, the “Organizational Documents”), (iii) the orders, writs, injunctions and decrees of courts and governmental authorities and the agreements relating to the incurrence by the Company or any Subsidiary of indebtedness for borrowed money, listed on Schedule A attached hereto (the “Listed Orders and Contracts”), which the Company has informed us are the only orders, writs, injunctions, decrees and agreements relating to the incurrence by the Company or any Subsidiary of indebtedness for borrowed money, the breach, violation or contravention of which would reasonably be expected to have a material adverse effect upon the business, properties or financial condition of the Company and its Restricted Subsidiaries on a consolidated basis, (iv) a Certificate of Good Standing issued by the Secretary of State of the State of Delaware regarding the status of the Company (the “Good Standing Certificate”) and (v) the FCC Records, as defined below. We have assumed the genuineness of signatures on original documents. Except as expressly stated herein, we have not reviewed for purposes of this opinion any other documents, agreements, or instruments, and we have assumed that there are no other documents, agreements, or instruments that are relevant to, or that would affect, any of our opinions -------------------------------------------------------------------------------- contained herein. We have assumed the conformity to authentic original documents of all copies submitted to us as certified, conformed, photographic or facsimile copies, and as to certificates, telegrams and telephonic confirmations issued or given by public officials, we have assumed the same to have been properly given and to be accurate as to the factual matters contained therein. We have assumed, without inquiry or investigation, that the Credit Agreement has been executed and delivered by you pursuant to due authorization and constitutes your valid, legally binding and enforceable obligation. With respect to questions of fact material to the opinions expressed herein, we have relied solely upon the following information, in each case without any inquiry or verification by us: (a) written and oral statements of management of the Company, (b) the representations and warranties of the Company in the Credit Agreement and in the various closing certificates and other documents delivered pursuant thereto, (c) certificates of public officials and (d) the FCC Records. Furthermore, we have assumed, without inquiry or investigation, that the only interest, fees (including, without limitation, standby fees, origination fees, discount points and facility fees, which, together with any and all other fees, are hereinafter referred to collectively as “fees”) or other charges of any kind contracted for or previously collected or to be hereafter collected by any of the Lenders in connection with the Loans are described or referred to in the Credit Agreement, the Commitment Letter dated June 20, 2006 (the “Commitment Letter”), and the Fee Letters (as defined in the Commitment Letter), and all such interest, fees or other charges have been or will be applied for the purposes described in the Credit Agreement. Whenever a statement herein is qualified by “known to us,” “to our knowledge,” or a similar phrase, it means that none of the attorneys in this firm who have been involved in the preparation of this opinion has current actual knowledge of the inaccuracy of such statement. However, we have not undertaken any investigation to determine the accuracy of such statement, and any limited inquiry undertaken by us during the preparation of this opinion should not be regarded as such an investigation; no inference as to our current actual knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of the Company. Our opinions in numbered paragraphs 2, 6 and 8 (the “FCC Opinions”) are strictly limited to matters arising under the Communications Act of 1934, as amended, and the published rules, regulations and policies of the Federal Communications Commission (the “FCC”) (collectively, the “Communications Act”) relating to the Company’s radio broadcast stations identified on Schedule B attached hereto (the “Stations”). We do not purport to express opinions in the FCC Opinions concerning any laws other than the Communications Act. We express no opinions regarding technical or engineering matters, or matters relating to the FCC’s ownership regulations and policies. Except for a review of certain publicly available records of and inquiries to the FCC as described below, we have not made any independent review or investigation of the Company or of any of its Subsidiaries, their operations or their businesses or of the operations or businesses of any other person or entity in connection with the FCC Opinions. In addition, we have not conducted an inspection of any of the Stations, their work product, records or operations. Other than our review as of June 30 through July 10, 2006, of the publicly available records including publicly available databases of the FCC in Washington, D.C., pertaining to the Stations, and responses from the FCC’s Enforcement Bureau on July 10, 2006, and the Policy Division of the FCC’s Media Bureau on July 5 and July 6, 2006, to our inquiries concerning current FCC investigations and pending complaints with respect to the -------------------------------------------------------------------------------- Stations (the “FCC Records”), we have not undertaken any inquiry to determine the existence or absence of any facts. We have assumed without independent inquiry that the FCC Records were accurate and complete at the time of examination and inquiries by us and remain accurate and complete as of the date hereof. We have not searched the docket files of any court. Our opinions, to the extent they address authorizations issued by the FCC, are limited to the main radio broadcast license for the Stations identified in Schedule B attached hereto. Our opinions exclude auxiliary licenses issued under Part 74 of the FCC’s rules and other ancillary authorizations that do not authorize full service radio broadcast operations. Except as specifically noted herein, the opinions stated herein relating to the Stations are limited strictly to such areas of compliance as can be demonstrated by a review of the FCC Records. Based upon the foregoing, and subject to the assumptions, qualifications and limitations contained herein, we are of the opinion that: 1. Based solely on our review of the Organizational Documents and the Good Standing Certificate, the Company is a corporation validly existing and in good standing under the laws of the State of Delaware. 2. Except with respect to rulemakings and matters relating generally to the radio broadcast industry, and except as may be noted on Schedule C hereto, to our knowledge, based solely upon our review of the FCC Records, there is (a) no adverse FCC judgment, decree or order that has been issued specifically against any of the Stations or against the Company or any Subsidiary with respect to any of the Stations that would reasonably be expected to have a Material Adverse Effect and (b) no FCC action, proceeding or investigation pending before the FCC against any Station, the Company or any Subsidiary that would reasonably be expected to have a Material Adverse Effect. It is possible that there may be matters pending before the FCC relating to the Stations, the Company or its Subsidiaries of which we do not have knowledge because such matters are not publicly available as a matter of law or are not publicly available as a matter of fact because they are not contained within the publicly available files or the publicly available databases of the FCC, which have been reviewed by us. 3. Neither the execution nor delivery by the Company of the Credit Agreement, nor the borrowing and repayment of the Loans pursuant thereto, will be contrary to the provisions of, or constitute a default under, (a) the Organizational Documents or any Applicable Law (as hereinafter defined) or, (b) to our knowledge, any of the Listed Orders and Contracts. 4. Assuming the accuracy of the Company’s representations and warranties regarding Regulations T, U and X in the Credit Agreement, and that the Company complies with the covenants of the Credit Agreement applicable to Regulations T, U and X, the extension, arranging and obtaining of the credit represented by the Credit Agreement do not involve a violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 5. The Company has the corporate power and authority under Applicable Law and the Organizational Documents to execute and deliver the Credit Agreement and to perform its obligations thereunder, and all such actions have been duly authorized by all necessary corporate proceedings on its part. The Credit Agreement has been duly and validly executed and delivered -------------------------------------------------------------------------------- by the Company. A state or federal court of competent jurisdiction in the State of Georgia in a properly presented case applying Georgia’s choice of law principles should give effect to the selection, in the first sentence of Section 13.06 of the Credit Agreement, of the laws of the State of New York as the governing law of the Credit Agreement, assuming that (i) the State of New York has a reasonable relation to the parties to or the transactions contemplated by the Credit Agreement, and (ii) the results obtained from applying the laws of the State of New York would not be contrary to the public policies of the State of Georgia. Because choice of law issues are decided on a case-by-case basis, depending upon the facts of the particular transaction, we are unable to conclude with absolute certainty that a state or federal court in the State of Georgia would give effect to the provisions of the Credit Agreement and must, therefore, make the aforesaid assumptions. If, notwithstanding the provisions of the Credit Agreement, the Credit Agreement were governed by the laws of the State of Georgia (and not by the laws of the State of New York), the Credit Agreement would constitute the valid and legally binding obligations of the Company, enforceable in accordance with its terms. 6. The execution, delivery and performance by the Company of the Credit Agreement do not violate the Communications Act, and no other order, consent, approval, license, authorization or validation of the FCC and no other filing with or notice to the FCC under the Communications Act is necessary to authorize or permit, or is required in connection with, the execution and delivery by the Company of the Credit Agreement or the making of Borrowings pursuant to the Credit Agreement or the performance of the obligations of the Company under the Credit Agreement. 7. The Company (a) is not an “investment company,” as that term is defined in the Investment Company Act of 1940, as amended (the “Act”), (b) does not directly or indirectly control or is not controlled by a company which is an “investment company” as that term is defined in the Act or (c) is not otherwise subject to regulation under the Act. 8. Based upon our above-described review of the FCC Records, the Company and its Subsidiaries hold the authorizations issued by the FCC listed on Schedule B hereto (the “Licenses”) identified on Schedule B as held by such entity. To our knowledge, based solely upon our above-described review of the FCC Records, except as set forth on Schedule B, each of the Licenses is currently valid, has not been revoked by the FCC and authorizes radio broadcast operations by the holder thereof identified on Schedule B using the frequency assignment and serving the community of license that is identified on Schedule B for each of the Licenses. The opinions set forth above are subject to the following qualifications and assumptions: a. The enforceability of the Credit Agreement is subject to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether enforcement is sought in a proceeding in equity or at law, and to the effect of bankruptcy, reorganization, insolvency, fraudulent conveyance or transfer, moratorium and other laws affecting creditors’ rights or the relief of debtors generally. b. We express no opinion concerning the enforceability of (i) waivers of notice or of any other constitutional, statutory or common law rights, including, without limitation, the right to a trial by jury, to the extent such rights cannot, as a matter of law, be -------------------------------------------------------------------------------- effectively waived, (ii) rights of set-off otherwise than in accordance with applicable laws and other provisions regarding the exercise of rights without appropriate notice and hearing, (iii) indemnification or contribution provisions to the extent such provisions are deemed to violate public policy or to indemnify or protect a Person against the consequences of its own negligence, recklessness, or misconduct, (iv) submissions to the personal jurisdiction of any particular court or provisions relating to selection of venue, (v) provisions purporting to alter principles governing the interpretation of contracts and (vi) any provision requiring the payment of attorneys’ fees, except to the extent that a court determines such fees to be reasonable. c. We express no opinion with respect to any order, consent, approval, license, authorization or validation of any governmental authority and no filing with or notice to any governmental authority or any other Person that may be required in connection with, the exercise by the Administrative Agent or any Lender or any other Person of any remedies under the Credit Agreement. d. We advise you that the exercise of any right or remedy by the Administrative Agent or the Lenders that constitutes an assignment of any License or other authorization issued by the FCC, and transfers of control thereof, may require the prior consent of the FCC, and we express no opinion as to the likelihood of obtaining any such consent of the FCC. e. We render no opinion as to any financial or accounting determinations by the Company or compliance by the Company with any financial covenants in the Credit Agreement or in any agreement included in the Listed Orders and Contracts. The foregoing opinion is limited in all respects to the laws of the State of Georgia, the General Corporation Law of the State of Delaware and applicable federal law (collectively, “Applicable Law”). However, the term “Applicable Law” is limited to those laws and regulations that a lawyer exercising customary professional diligence would reasonably recognize as being directly applicable to the transactions contemplated by the Credit Agreement and does not include laws and regulations of any county, municipal and special political subdivision, whether state, regional or otherwise, and those set forth in Section 19 of the Legal Opinion Accord of the Section of Business Law of the American Bar Association (1991). We note that the Credit Agreement by its terms is governed by the law of the State of New York. Our opinion is given as if the Credit Agreement were to be governed by the laws of the State of Georgia, rather than the laws of the State of New York or the laws of any other state. In addition, except as expressly set forth in paragraph 5 above, no opinion is rendered hereunder with respect to any choice of law or conflict of laws provisions set forth in the Credit Agreement. This opinion is as of the date hereof, and we expressly disclaim any duty to update this opinion in the future in the event there are any changes in fact or law that may affect any matter addressed herein. This opinion is being furnished to you for your use and the use of any future assignee or participant in any Loan pursuant to an assignment or a participation that is made and consented to in accordance with the express provisions of Section 13.07 of the Credit Agreement, on the condition and understanding that (i) this opinion is as of the date hereof, (ii) we expressly -------------------------------------------------------------------------------- disclaim any duty to update this opinion in the future, to consider its applicability or correctness to other than its addressees, or to take into account changes in fact or law that may affect any matter addressed herein, and (iii) any such reliance by a future assignee or participant must be actual and reasonable under the circumstances existing at the time of assignment or participation, including any changes in fact or law known to or reasonably knowable by the assignee or participant at such time. This opinion is not to be quoted in whole or in part or otherwise referred to in any documents, nor may it be delivered to, filed with or relied upon by any governmental agency or other person without our prior written consent. -------------------------------------------------------------------------------- Schedule A Listed Orders and Contracts Orders, Writs, Injunctions and Decrees of Courts and Governmental Authorities: None Agreements:   1. Indenture dated as of May 26, 1998 between Cox Radio, Inc., The Bank of New York Trust Company, N.A. (as successor to The Bank of New York), WSB, Inc., and WHIO, Inc., as supplemented by the Supplemental Indenture dated as of February 1, 1999, by and among The Bank of New York Trust Company, N.A. (as successor to The Bank of New York), Cox Radio, Inc. and CXR Holdings, Inc. -------------------------------------------------------------------------------- Schedule B Stations   Licensee    Station      Frequency      Community of License Cox Radio, Inc.    WSRV(FM)1      97.1 MHz      Gainesville, GA    WFYV-FM      104.5 MHz      Atlantic Beach, FL    WAPE-FM      95.1 MHz      Jacksonville, FL    WJGL(FM)      96.9 MHz      Jacksonville, FL    WMXQ(FM)      102.9 MHz      Jacksonville, FL    WOKV(AM)      690 kHz      Jacksonville, FL    WFLC(FM)      97.3 MHz      Miami, FL    WEDR(FM)      99.1 MHz      Miami, FL    WHQT(FM)      105.1 MHz      Coral Gables, FL    WPLR(FM)      99.1 MHz      New Haven, CT    WCFB(FM)      94.5 MHz      Daytona Beach, FL    WHTQ(FM)      96.5 MHz      Orlando, FL    WMMO(FM)      98.9 MHz      Orlando, FL    WDBO(AM)      580 kHz      Orlando, FL    WWKA(FM)      92.3 MHz      Orlando, FL    WMXB(FM)      103.7 MHz      Richmond, VA    WKHK(FM)      95.3 MHz      Colonial Heights, VA    WKLR(FM)      96.5 MHz      Fort Lee, VA    WNLK(AM)      1350 kHz      Norwalk, CT    WFOX(FM)2      95.9 MHz      Norwalk, CT    WSTC(AM)      1400 kHz      Stamford, CT    WCTZ(FM)3      96.7 MHz      Stamford, CT    WSUN-FM      97.1 MHz      Holiday, FL    WXGL(FM)      107.3 MHz      St. Petersburg, FL    WWRM(FM)      94.9 MHz      Tampa, FL Cox Radio-Miami, LLC    WHDR(FM)      93.1 MHz      Miami, FL CXR Holdings, L.L.C.    WSB(AM)      750 kHz      Atlanta, GA    WSB-FM      98.5 MHz      Atlanta, GA    WBTS(FM)      95.5 MHz      Doraville, GA    WALR-FM      104.1 MHz      La Grange, GA -------------------------------------------------------------------------------- 1 A renewal of license application is pending at the FCC (FCC File No. BRH-20031205ACS). 2 A renewal of license application is pending at the FCC (FCC File No. BRH-20051201BZR). 3 A renewal of license application is pending at the FCC (FCC File No. BRH-20051201BVT). -------------------------------------------------------------------------------- Licensee    Station      Frequency      Community of License    WZZK-FM      104.7 MHz      Birmingham, AL    WBPT(FM)      106.9 MHz      Homewood, AL    WNCB(FM)      97.3 MHz      Gardendale, AL    WAGG(AM)      610 kHz      Birmingham, AL    WBHJ(FM)      95.7 MHz      Midfield, AL    WBHK(FM)      98.7 MHz      Warrior, AL    WPSB(AM)4      1320 kHz      Birmingham, AL    WHIO(AM)5      1290 kHz      Dayton, OH    WHKO(FM)6      99.1 MHz      Dayton, OH    WDPT(FM)      95.7 MHz      Piqua, OH    WZLR(FM)      95.3 MHz      Xenia, OH    WJMZ-FM      107.3 MHz      Anderson, SC    WHZT(FM)      98.1 MHz      Seneca, SC    KCCN-FM      100.3 MHz      Honolulu, HI    KINE-FM      105.1 MHz      Honolulu, HI    KPHW(FM)      104.3 MHz      Kaneohe, HI    KRTR-FM      96.3 MHz      Kailua, HI    KLDE(FM)      107.5 MHz      Lake Jackson, TX    KTHT(FM)      97.1 MHz      Cleveland, TX    KKBQ-FM      92.9 MHz      Pasadena, TX    KHPT(FM)      106.9 MHz      Conroe, TX    WBLI(FM)7      106.1 MHz      Patchogue, NY    WBAB(FM)      102.3 MHz      Babylon, NY CXR Holdings, L.L.C.    WHFM(FM)      95.3 MHz      Southampton, NY (continued)    WRKA(FM)      103.1 MHz      St. Matthews, KY    WVEZ(FM)      106.9 MHz      Louisville, KY    WSFR(FM)      107.7 MHz      Corydon, IN    WPTI(FM)      103.9 MHz      Louisville, KY    WEZN-FM      99.9 MHz      Bridgeport, CT    WPYO(FM)      95.3 MHz      Maitland, FL    WDYL(FM)      101.1 MHz      Chester, VA -------------------------------------------------------------------------------- 4 An application for construction permit was filed with the FCC in Auction 84 requesting a change in the community of license (FCC File No. BMJP-20040130BCA). 5 A renewal of license application is pending at the FCC (FCC File No. BR-20040601BNU). 6 A renewal of license application is pending at the FCC (FCC File No. BRH-20040601BNZ). 7 A renewal of license application is pending at the FCC (FCC File No. BRH-20060201BAH). -------------------------------------------------------------------------------- Licensee    Station      Frequency      Community of License    KKYX(AM)      680 kHz      San Antonio, TX    KCYY(FM)      100.3 MHz      San Antonio, TX    KELZ-FM      106.7 MHz      Terrell Hills, TX    KONO(AM)      860 kHz      San Antonio, TX    KONO-FM      101.1 MHz      Helotes, TX    KISS-FM      99.5 MHz      San Antonio, TX    KSMG(FM)      105.3 MHz      Seguin, TX    WHPT(FM)      102.5 MHz      Sarasota, FL    WPOI(FM)      101.5 MHz      St. Petersburg, FL    WDUV(FM)      105.5 MHz      New Port Richey, FL    KRAV-FM      96.5 MHz      Tulsa, OK    KRMG(AM)      740 kHz      Tulsa, OK    KWEN(FM)      95.5 MHz      Tulsa, OK    KJSR(FM)      103.3 MHz      Tulsa, OK    KKCM(FM)      102.3 MHz      Sand Springs, OK    KRTR(AM)      650 kHz      Honolulu, HI    KKNE(AM)      940 kHz      Waipahu, HI   -------------------------------------------------------------------------------- Schedule C Proceedings The FCC’s Enforcement Bureau, in response to an inquiry on behalf of the Company, reports that one or more complaints have been filed against WBTS(FM), WFYV-FM, WWKA(FM) and WHTQ(FM), but in accordance with its normal practice, did not divulge the subject matter of the complaints. The FCC has not requested that WFYV-FM, WWKA(FM) or WHTQ(FM) respond to a complaint. The Enforcement Bureau does not expect a licensee to respond to a complaint until the Bureau has determined that the complaint warrants a response. Unless and until such a determination has been made, the Enforcement Bureau, as a matter of general policy, does not release the text of the complaint. Complaints that address matters outside the FCC’s jurisdiction or that are otherwise deficient typically are dismissed through form letters without notice to the licensee. On June 8, 2006 the FCC’s Enforcement Bureau sent a letter to WBTS(FM) seeking information about the Company’s compliance with the FCC’s indecency rules. The Company responded to the FCC on June 28, 2006, informing the FCC that it elected not to challenge any FCC finding that the programming involved was indecent.   -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 7.01(b) Officer’s Certificate Cox Radio, Inc., a Delaware corporation (the “Company”), by its duly authorized officers, hereby certifies pursuant to Section 7.01(b) of the Credit Agreement, dated as of July 26, 2006, among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), Lehman Commercial Paper Inc. and Citigroup Global Markets Inc., as co-syndication agents, Wachovia Capital Markets, LLC and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as co-documentation agents, and J.P. Morgan Securities Inc., Lehman Brothers Inc. and Citibank, N.A., as joint lead arrangers and joint bookrunners (the “Credit Agreement”), as follows (capitalized terms used in this certificate and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement): (1) True and correct copies of the Certificate of Incorporation and Bylaws of the Company are attached hereto as Exhibit A. The Certificate of Incorporation of the Company has not been amended since May 12, 2000. The By-laws of the Company have not been amended since September 30, 1996. No liquidation or dissolution proceedings with respect to the Company have been commenced. (2) The persons named on the Incumbency Certificate attached hereto as Exhibit B are duly elected officers of the Company, now hold the offices set forth opposite their respective names, and the signature thereon opposite the name and title of each such person and officer is his correct signature. (3) Attached hereto as Exhibit C is a true and complete copy of resolutions respecting the Credit Agreement duly adopted by the Board of Directors of the Company dated May 11, 2006, and such resolutions have not been revoked, rescinded or modified and are now in full force and effect. (4) The representations and warranties contained in Article VI of the Credit Agreement are true in all material respects on and as of the date hereof with the same effect as though such representations and warranties had been made on and as of this date; and there exists on the date hereof no Event of Default or Default as defined in Article I of the Credit Agreement. (5) No material and adverse change has occurred with respect to the business, properties or financial condition of the Company and its Subsidiaries on a consolidated basis since December 31, 2005. (6) Each and all of the conditions precedent set forth in Section 7.02 of the Credit Agreement have been satisfied. (7) Except as listed on Exhibit D attached hereto, there are no agreements relating to the incurrence by the Company or any Subsidiary of indebtedness for borrowed money, the breach, violation or contravention of which would reasonably be expected to have a material adverse effect upon the business, properties or financial condition of the Company and its Restricted Subsidiaries on a consolidated basis. [Remainder of page intentionally left blank] -------------------------------------------------------------------------------- EXHIBIT A Certificate of Incorporation and By-laws [Attached] -------------------------------------------------------------------------------- EXHIBIT B Incumbency Certificate   Office   Name   Signature Treasurer   Richard J. Jacobson   /s/ Richard J. Jacobson Secretary   Andrew A. Merdek   /s/ Andrew A. Merdek   2 -------------------------------------------------------------------------------- EXHIBIT C Board Resolutions [Attached]   3 -------------------------------------------------------------------------------- EXHIBIT D Listed Contracts [Attached]   4 -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 9.01(d) List of Liens and Security Interests NONE   5 -------------------------------------------------------------------------------- CREDIT AGREEMENT COX RADIO, INC. EXHIBIT 13.07(c) [FORM OF] ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.   1.      Assignor:                                              2.      Assignee:                                                 [and is an Affiliate/Approved Fund of [identify Lender]] 3.      Borrower(s):                                              4.      Administrative Agent:                                             , as the administrative agent under the Credit Agreement 5.      Credit Agreement:    The Credit Agreement dated as of July 26, 2006 among Cox Radio, Inc., the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Lehman Commercial Paper Inc. and Citibank, N.A., as Syndication Agents, Wachovia Capital Markets, LLC and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as Documentation Agents, and J.P. Morgan Securities Inc., Lehman Brothers Inc. and Citigroup Global Markets Inc., as Joint Lead Arrangers and Joint Bookrunners   6 -------------------------------------------------------------------------------- 6. Assigned Interest:   Facility Assigned    Aggregate Amount of Commitment/Loans for all Lenders    Amount of Commitment/Loans Assigned    Percentage Assigned of Commitment/Loans8 Revolving Commitment    $    $    % Conventional Revolving Loans    $    $    % Effective Date:                     , 20         [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the Administrative Agent, the Arrangers, the Syndication Agents, the Documentation Agents, the Lenders and Lender Affiliates or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.   -------------------------------------------------------------------------------- 8 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.   7 -------------------------------------------------------------------------------- Annex 1 CREDIT AGREEMENT1 STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under the Credit Agreement. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.02 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is an Alternate Currency Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender. 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.   -------------------------------------------------------------------------------- 1 Capitalized terms used in this Assignment and Assumption and not otherwise defined herein have the meanings specified in the Credit Agreement dated as of July 26, 2006, among Cox Radio, Inc. (the “Borrower”), the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (as the same may be amended; supplemented or otherwise modified from time to time, the “Credit Agreement”).   8 -------------------------------------------------------------------------------- 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the laws of the State of New York and of the United States.

--------------------------------------------------------------------------------   CONSULTING AGREEMENT   This Consulting Agreement (this “Agreement”), is made and entered into as of this 13th day of February, 2006 by and between Bluestar Health, Inc., a Colorado corporation (“Bluestar” or the “Company”) and Alfred Oglesby, an individual (“Oglesby” or the “Consultant”).   RECITALS WHEREAS, the Company wishes to engage the consulting services of Consultant; and WHEREAS, Consultant wishes to provide the Company with consulting services. NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto hereby agree as follows: 1. CONSULTING SERVICES The Company hereby authorizes, appoints and engages the Consultant, and Consultant agrees to be available to consult with the Company’s officers and directors over the next twelve (12) months following the date of this Agreement, on projects agreed to in writing by the parties. The Company may request Consultant to work on projects in the following areas (the “Consulting Services”): (a)   Provide counsel regarding mergers and acquisitions, recapitalizations, and restructurings; (b)   Assist in getting the Company listed on a national securities exchange, and (c)   Act as a liaison between the Company and the lawyers and accountants concerning the Company’s ongoing obligations as a reporting company; Throughout this Agreement, the term “Consultant” shall include any and all employees or independent contractors of Consultant that performs services for the Company. 2. TERM OF AGREEMENT This Agreement shall be in full force and effect as of the date hereof and extend for a period of twelve (12) months. At the end of the twelve month term, this Agreement will automatically renew for additional twelve (12) month periods with the COMPANY paying CONSULTANT the same compensation as the initial twelve (12) month period unless this Agreement is terminated by COMPANY upon thirty (30) days written notice before the end of any twelve (12) month period. Page 1 of 6 -------------------------------------------------------------------------------- 3. COMPENSATION TO CONSULTANT (a)   The Consultant’s compensation for the Consulting Services shall be One Million (1,000,000) shares of common stock (the “Shares”) of the Company that will be registered on a Form S-8 and issued to the Consultant no later than thirty (30) days (the “Compensation Delivery Date”) after the closing of the transactions contemplated by that certain Asset Purchase Agreement dated February 9, 2006 by and between Bluestar, on the one hand, and Gold Leaf Homes, Inc., a Texas corporation (“Gold Leaf”), and Tom Redmon, the sole shareholder of Gold Leaf, on the other hand. If the Consultant does not receive the Shares on or before the Compensation Delivery Date, the Consultant shall be entitled to elect to receive from the Company either (i) the Shares or (ii) Seven Hundred Fifty Thousand Dollars ($750,000) (the “Cash Payment”) in lieu of the Shares. The Cash Payment shall be secured by a security interest in all of the assets of the Company. (b)   If the Company lists securities on a national securities exchange, including the NASDAQ Small Cap Market, during the term of this Agreement, the Company shall issue Two Million (2,000,000) shares of common stock (the “Bonus Shares”) of the Company that will be registered on a Form S-8 and issued to the Consultant no later than thirty (30) days (the “Bonus Delivery Date”) after the Company’s securities become listed. Consultant understands that NO DEDUCTION FOR FEDERAL, STATE OR OTHER GOVERNMENTAL SUBDIVISION TAXES OR CHARGES OF ANY TYPE WILL BE MADE FROM THE AMOUNT DUE CONSULTANT UNDER THE TERMS OF THIS AGREEMENT. CONSULTANT FULLY AND COMPLETELY UNDERSTANDS THAT IT IS SOLELY AND TOTALLY RESPONSIBLE FOR THE PAYMENT OF ALL SUCH TAXES OR CHARGES. At the end of the calendar year, Consultant shall receive a Form 1099 notifying the Internal Revenue Service of all compensation paid to Consultant by the Company. 4. CONFIDENTIALITY Consultant will maintain in confidence and will not, directly or indirectly, disclose or use, either during or after the term of this Agreement, any proprietary information or confidential information or know-how belonging to the Company, whether or not it is in written or permanent form, except to the extent necessary to perform the services under this Agreement. On termination of Consultant’s services to the Company, or at the request of the Company before termination, Consultant shall deliver to the Company all material in Consultant’s possession relating to the Company’s business. The obligations concerning proprietary information extend to information belonging to customers and suppliers of the Company about whom the Consultant may have gained knowledge as a result of performing services for the Company. Page 2 of 6 -------------------------------------------------------------------------------- 5. TERMINATION The Company shall have the right to terminate this Agreement at any time in the event of the death, bankruptcy, insolvency, or assignment for the benefit of creditors of the Consultant. Consultant shall have the right to terminate this Agreement at any time if the Company fails to comply with the terms of this Agreement, including without limitation its responsibilities for compensation as set forth in this Agreement. Other than as described herein, this Agreement can only be terminated in a writing signed by both parties. 6. REPRESENTATIONS AND WARRANTIES OF CONSULTANT Consultant represents and warrants to and agrees with the Company that: (a)   This Agreement has been duly authorized, executed and delivered by Consultant. This Agreement constitutes the valid, legal and binding obligation of Consultant, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by applicable federal or state securities laws, and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditor's rights generally; and (b)   The consummation of the transactions contemplated hereby will not result in any breach of the terms or conditions of, or constitute a default under, any agreement or other instrument to which Consultant is a party, or violate any order, applicable to Consultant, of any court or federal or state regulatory body or administrative agency having jurisdiction over Consultant or over any of its property, and will not conflict with or violate the terms of Consultant’s current employment or any other arrangements to which Consultant is a party. 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY The Company hereby represents, warrants, covenants to and agrees with Consultant that: This Agreement has been duly authorized, and executed by the Company and is a binding obligation of the Company, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by applicable federal or state securities laws, except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditor's rights generally. The Company hereby agrees to pay the following expenses of Consultant: (a)   Office overhead. The Company shall pay $6,000 per month to Consultant from April 1, 2006 through the remainder of the term of this Agreement for office space and operational expenses, paid in stock or cash at 100% of the closing bid price on the date due at Consultant’s election. (b)   Healthcare benefits. The Company shall pay for complete healthcare benefits for Consultant and Consultant’s family for a period of twenty four (24) months. Page 3 of 6 -------------------------------------------------------------------------------- (c)   Business expenses. The Company shall pay Consultant in advance for all reasonable business expenses, including, but not limited to, a $5,000 budget for each traveling engagement. In the event a traveling engagement is extended, the Company shall cover additional reasonable expenses. 8. INDEPENDENT CONTRACTOR Both the Company and the Consultant agree that the Consultant will act as an independent contractor in the performance of his duties under this Agreement. Nothing contained in this Agreement shall be construed to imply that Consultant, or any employee, agent or other authorized representative of Consultant, is a partner, joint venturer, agent, officer or employee of the Company. Neither party hereto shall have any authority to bind the other in any respect vis a vis any third party, it being intended that each shall remain an independent contractor and responsible only for its own actions. 9. NOTICES Any notice, request, demand, or other communication given pursuant to the terms of this Agreement shall be deemed given upon delivery, and may only be delivered or sent via hand delivery, facsimile, or by overnight courier, correctly addressed to the addresses of the parties indicated below or at such other address as such party shall in writing have advised the other party. If to the Company:   Bluestar Health, Inc.     19901 Southwest Freeway, Suite 209     Sugar Land, TX, 77479     Attn: President     Facsimile No.: (281) 207-5486             If to Consultant:   Alfred Oglesby                 Facsimile (___)   10. ASSIGNMENT This contract shall inure to the benefit of the parties hereto, their heirs, administrators and successors in interest. This Agreement shall not be assignable by either party hereto without the prior written consent of the other. 11. CHOICE OF LAW AND VENUE This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. Any action brought by any party hereto shall be brought within the County of Harris, State of Texas. Page 4 of 6 -------------------------------------------------------------------------------- 12. ENTIRE AGREEMENT Except as provided herein, this Agreement, including exhibits, contains the entire agreement of the parties, and supersedes all existing negotiations, representations, or agreements and all other oral, written, or other communications between them concerning the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings, oral or written, between and among the parties hereto relating to the subject matter of this Agreement that are not fully expressed herein. 13. SEVERABILITY If any provision of this Agreement is unenforceable, invalid, or violates applicable law, such provision, or unenforceable portion of such provision, shall be deemed stricken and shall not affect the enforceability of any other provisions of this Agreement. 14. CAPTIONS The captions in this Agreement are inserted only as a matter of convenience and for reference and shall not be deemed to define, limit, enlarge, or describe the scope of this Agreement or the relationship of the parties, and shall not affect this Agreement or the construction of any provisions herein. 15. COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. 16. MODIFICATION No change, modification, addition, or amendment to this Agreement shall be valid unless in writing and signed by all parties hereto. 17. ATTORNEYS FEES Except as otherwise provided herein, if a dispute should arise between the parties including, but not limited to arbitration, the prevailing party shall be reimbursed by the non-prevailing party for all reasonable expenses incurred in resolving such dispute, including reasonable attorneys' fees. [remainder of page intentionally left blank; signature page to follow] Page 5 of 6 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. “Company”   “Consultant”       Bluestar Health, Inc.,     a Colorado corporation                 /s/ Alfred Oglesby   /s/ Alfred Oglesby By:    Alfred Oglesby   Alfred Oglesby Its:    President                       /s/ Tom Redmon     By:    Tom Redmon     Its:    Incoming President                             Page 6 of 6 --------------------------------------------------------------------------------

Exhibit 10.15 SECOND AMENDMENT TO AGREEMENT TO AMEND/EXTEND WATER SERVICE AGREEMENT for the SKY RANCH PUD March 5, 2004 RE:                              Water Service Agreement dated October 31, 2003 by and between AIRPARK METROPOLITAN DISTRICT (“AMD”); ICON INVESTORS I LLC (“DEVELOPER”); PURE CYCLE CORPORATION (“PURECYCLE”); and RANGEVIEW METROPOLITAN DISTRICT (“RANGEVIEW”) relating to the provisions of water services to the Sky Ranch PUD (Arapahoe County case No. Z01-010). This Amendment, dated March 5, 2004, shall amend the aforesaid water service agreement as follows: Section 10.2, Termination Contingency, Subsection (c) shall be amended to read as follows: (c)                                  Water Rights.  If AMD or the DEVELOPER are unsatisfied with the opinion of water counsel provided pursuant to Section 6.03(e), AMD or the DEVELOPER shall have the right to terminate this Agreement by giving written notice to RANGEVIEW and PURECYCLE.  In no event shall AMD or DEVELOPER have the right to terminate this Agreement pursuant to this Section after the Board of County Commissioners of Arapahoe County has approved the PDP, or March 20, 2004, whichever is latest. AIRPARK METROPOLITAN DISTRICT By:   [signature not legible]                 ICON INVESTORS I LLC, a Colorado Limited Liability Company By:   AIRWAY PARK MANAGER LLC, A COLORADO LIMITED LIABILITY COMPANY           By:   [signature not legible]                 PURE CYCLE CORPORATION, a Delaware Corporation By:   /s/ Mark Harding         Mark Harding, President       RANGEVIEW METROPOLITAN DISTRICT By:   /s/ Thomas P. Clark         Thomas P. Clark, Director       --------------------------------------------------------------------------------

                                                                                        Exhibit 10.1   Retirement Agreement This Retirement and Consulting Services Agreement (this "Agreement") is entered into as of January 27, 2006, by and between Norfolk Southern Corporation (the "Corporation") and David R. Goode ("Executive"). WITNESSETH: WHEREAS, Executive has highly specialized skills which are valuable to the Corporation; WHEREAS, the Corporation and its Board of Directors are willing, in consideration of Executive entering into this Agreement and fulfilling its terms, to provide enhanced retirement benefits to Executive. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1.      Pension Enhancement                         The Corporation's Board of Directors has resolved to provide an enhanced pension benefit ("Pension Enhancement") to Executive upon his retirement.  The Pension Enhancement shall be in addition to the retirement benefits Executive may be entitled to under the Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary Companies ("Retirement Plan") and the Supplemental Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary Companies ("Supplemental Plan") (together, "Retirement Plans"), and this additional benefit shall be provided under Article IV, Section 2 of the Supplemental Plan.  The Pension Enhancement shall equal the excess of: (i)      the monthly benefit under Article VI of the Retirement Plan and under Article IV, Section 1 of the Supplemental Plan if such benefit had been computed by determining Average Final Compensation on the basis of the average monthly Compensation paid to the member during any three Compensation Years out of the 120 months of Creditable Service ending with the last month in which the Member was employed in a Nonagreement Position which will produce the highest average monthly compensation; over (ii) the monthly benefit actually payable under the Retirement Plans. Notwithstanding anything in this paragraph or in the Retirement Plans to the contrary, retirement benefits accrued under the Supplemental Plan after December 31, 2004, shall be distributed in accordance with section 409A of the Internal Revenue Code.  For the purposes of this section 1, capitalized terms shall be as defined in the Retirement Plans. 2.      Consulting Services For a five-year period beginning March 1, 2006 (the date of Executive's retirement), Executive agrees to provide consulting services commensurate with his status and experience with respect to matters as shall be reasonably requested from time to time by the chief executive officer of the Corporation, including matters related to (i) transition of his duties and responsibilities as the Corporation's chief executive officer to his successor, (ii) strategic acquisitions, dispositions, capital raising activities and major financings; (iii) compensation matters; (iv) business strategy planning; and (v) public speaking engagements and other public appearances on behalf of the Corporation.  Executive shall honor any such request unless he has a conflicting commitment that would preclude him from performing such services at the time and/or place requested by the Corporation, and in such circumstances shall make reasonable efforts to arrange a mutually satisfactory alternative.  The Corporation will use reasonable efforts not to require the performance of consulting services in any manner that unreasonably interferes with the activities of Executive.                3.  Relinquishment of Change in Control Agreement                         In consideration of the benefits provided under this Agreement, Executive agrees to relinquish and hereby waives any and all rights provided under the Agreement dated as of June 1, 1996, between Executive and the Corporation  providing economic protections in the event of Executive's termination during a two-year period immediately following a change in control ("Change in Control Agreement").  This relinquishment and waiver of the Change in Control Agreement shall be effective as of the date of this Agreement.         4.  Non-Competition and Non-Solicitation (a)  Executive covenants and agrees from March 1, 2006, for a period of five years thereafter, Executive will not work for or provide services for any Competitor, on his or her own behalf or in the service of or on behalf of others, including, but not limited to, as a consultant, independent contractor, owner, officer, partner, joint venturer, or employee, at any time.  For purposes of this Agreement, "Competitor" shall mean any entity in the same line of business as the Corporation in the North American markets in which the Corporation or any of its subsidiaries or affiliates competes, including, but not limited to, any North American Class I rail carrier, any other rail carrier competing with the Corporation (including without limitation a holding or other company that controls or operates or is otherwise affiliated with any rail carrier competing with the Corporation or any of its subsidiaries or affiliates), and any other provider of transportation services competing with the Corporation or any of its subsidiaries or affiliates, including motor and water carriers.    (b)  Executive also covenants and agrees from March 1, 2006, for a period of five years thereafter, Executive will not, on his own behalf or in the service of or on behalf of others, including, but not limited to, as a consultant, independent contractor, owner, partner, joint venturer or employee, (i) solicit, recruit, entice or persuade any employee of the Corporation or any of its subsidiaries or affiliates (other than persons employed in a clerical or other nonprofessional position) to leave the employment of the Corporation or any of its subsidiaries or affiliates, or recommend or refer any employees of the Corporation or any of its subsidiaries or affiliates for employment consideration to others, or (ii) solicit, entice, persuade or induce any person or entity doing business with the Corporation or any of its subsidiaries or affiliates to terminate or refrain from extending or renewing such relationship.              5.  Cooperation and Non-Disclosure                         (a)  Executive covenants and agrees to refrain from any action which would breach the fiduciary or other duty Executive owes the Corporation by virtue of his employment or former employment.  Each of Executive and the Corporation agree to cooperate fully with the other party in any matters that have given or may give rise to a legal claim against such other party and of which such party is knowledgeable.  This would require Executive and the Corporation, as the case may be, without limitation, to: (i)      make himself or itself available upon reasonable request to provide information and assistance to the other party on such matters without additional compensation, except for out of pocket costs, provided, however, that reasonable compensation shall be provided as mutually agreed if such assistance requires a significant amount of time; and (ii)  notify the other party promptly of any requests for information related to any pending or potential legal claim or litigation involving the other party, reviewing any such request with the other party prior to disclosing any such information, and permitting the other party to be present during any communication of such information.  To the extent that Executive is required to provide assistance to the Corporation on such matters, the Corporation would, at its expense, provide appropriate legal counsel for Executive.  (b)  Executive further covenants and agrees that any confidential or proprietary information acquired by him during his employment with the Corporation is the exclusive property of the Corporation, and Executive acknowledges that he has no ownership interest or right of any kind to said property.  Except as otherwise required by law, Executive agrees that he will not actively use, and that he will not, either directly or indirectly, disclose, or divulge to any unauthorized party for his own benefit or to the detriment of the Corporation, any confidential or proprietary information (as defined herein) of the Corporation which he may have acquired during his employment with the Corporation, whether or not developed or compiled by the Corporation, and whether or not Executive was authorized to have access to such information.                          (c)  For the purposes of this Section 5, "confidential/proprietary information" is any information or intellectual property acquired by Executive as a result of his employment with the Corporation such that if such information or intellectual property were disclosed, such disclosure could act to the prejudice of the Corporation.                          (d)  Executive agrees that if he believes that he is required by law or otherwise to reveal any confidential or proprietary information of the Corporation, he or his attorney will promptly contact the Corporation's Law Department prior to disclosing such information in order that the Corporation can take appropriate steps to safeguard the disclosure of such confidential and proprietary information.                         (e)  Nothing in this Agreement should be construed, either expressly or by implication, as limiting the maximum protections which may be available to the Corporation under appropriate state and federal common law or statute concerning the obligations and duties of Executive to protect the Corporation's property and/or confidential and proprietary information, including, but not limited to, under the Virginia Uniform Trade Secrets Acts (Va. Code,  § 59.1-336, et. seq.)                         (f)  Notwithstanding anything herein to the contrary, each party to this Agreement may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions covered by this Agreement and all materials of any kind that are provided to the party relating to such tax treatment and tax structure.             6.  Injunctive Relief - Executive acknowledges and agrees that the breach of this Agreement, or any portion thereof, may result in irreparable harm to the Corporation, the monetary value of which could be difficult to establish.  Executive therefore agrees and consents that the Corporation shall be entitled to injunctive relief or such other equitable relief as is necessary to prevent a breach by Executive of any of the covenants or provisions contained in this Agreement.  Nothing contained in this provision shall be construed as prohibiting the Corporation from pursuing any legal remedies available to the Corporation for such breach of this Agreement, including the recovery of damages from the Executive.  7.  Governing Law - This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Virginia.             8. Amendments and Termination - This Agreement may be amended, supplemented and terminated only by a written instrument duly executed by all of the parties.             9. Waiver - The failure of either party to insist upon strict performance of any of the terms and conditions of this Agreement will not constitute a waiver of any of its rights hereunder.  10. Severability - If any provision of this Agreement is held illegal, invalid, or unenforceable, such illegality, invalidity, or unenforceability will not affect any other provision hereof.  This Agreement shall, in such circumstances, be deemed modified to the extent necessary to render enforceable the provisions hereof.  11. Assignment - The obligations set forth in this Agreement cannot be assigned by either party, except in connection with a merger, reorganization or sale of substantially all of the assets of the Corporation.  12. Entire Agreement - This Agreement constitutes the entire understanding among the parties with respect to the subject matter contained herein and supersedes any prior understandings and agreements among them respecting such subject matter. This Agreement will become effective upon its execution by both parties.  [signature page follows] IN WITNESS WHEREOF, this Agreement is executed and delivered in duplicate on behalf of the Corporation by its officer thereunto duly authorized, and Executive has indicated his acceptance of and intent to be bound by this Agreement in the space provided below, as of the day and year first above written.                                                                           NORFOLK SOUTHERN CORPORATION >                                                               By:    /s/ John > P. Rathbone                                                                         EXECUTIVE Dated:  January 27, 2006                                    By:     /s/ David R. Goode

Exhibit 10.8 FIDELITY FEDERAL BANK & TRUST 2005 LONG-TERM DEFERRED COMPENSATION PLAN Effective January 1, 2005 -------------------------------------------------------------------------------- TABLE OF CONTENTS            PAGE ARTICLE I—PURPOSE    1 ARTICLE II—DEFINITIONS    1 2.1   Account    1 2.2   Beneficiary    1 2.3   Board    1 2.4   Change in Control    1 2.5   Code    2 2.6   Committee    2 2.7   Compensation    2 2.8   Deferral Commitment    2 2.9   Deferral Period    2 2.10   Determination Date    2 2.11   Disability    3 2.12   Employer    3 2.13   Initial Participation Date    3 2.14   Interest Rate    3 2.15   Normal Retirement Date    3 2.16   Participant    3 2.17   Participation Agreement    3 2.18   Plan Benefit    4 2.19   Qualified Retirement Plan    4 2.20   Spouse    4 2.21   Years of Credited Service    4 ARTICLE III—PARTICIPATION AND DEFERRAL COMMITMENTS    4 3.1   Eligibility and Participation    4 3.2   Form of Deferral; Minimum Deferral    4 3.3   Commitment Limited by Retirement    5 3.4   Modification of Deferral Commitment    5 3.5   Change in Employment Status    5 ARTICLE IV—DEFERRED COMPENSATION ACCOUNTS    5 4.1   Accounts    5 4.2   Elective Deferred Compensation    5 4.3   Employer Discretionary Contributions    6 4.4   Interest    6 4.5   Determination of Accounts    6 4.6   Vesting of Accounts    6 4.7   Defined Contribution Qualified Plan Make-Up Credits    6 4.8   Statement of Accounts    7   (i) -------------------------------------------------------------------------------- TABLE OF CONTENTS             PAGE ARTICLE V—PLAN BENEFITS    7 5.1   Plan Benefit    7 5.2   Death Benefit    7 5.3   Early Withdrawal Option    7 5.4   Prohibition on Acceleration of Distribution    8 5.5   Hardship Distributions    8 5.6   Form of Benefit Payment    8 5.7   Withholding; Payroll Taxes    9 5.8   Commencement of Payments    9 5.9   Full Payment of Benefits    9 5.10   Payment to Guardian    9 ARTICLE VI—BENEFICIARY DESIGNATION    10 6.1   Beneficiary Designation    10 6.2   Amendments    10 6.3   No Participant Beneficiary Designation    10 6.4   Effect of Payment    10 ARTICLE VII—ADMINISTRATION    10 7.1   Committee; Duties    10 7.2   Compliance With Section 409A of the Code    10 7.3   Agents    11 7.4   Binding Effect of Decisions    11 7.5   Indemnity of Committee    11 ARTICLE VIII—CLAIMS PROCEDURE    11 8.1   Claim    11 8.2   Denial of Claim    11 8.3   Review of Claim    11 8.4   Final Decision    12 ARTICLE IX—AMENDMENT AND TERMINATION OF PLAN    12 9.1   Amendment    12 9.2   Employer’s Right to Terminate    12   (ii) --------------------------------------------------------------------------------          PAGE ARTICLE X—MISCELLANEOUS    12 10.1   Unfunded Plan    12 10.2   Unsecured General Creditor    12 10.3   Trust Fund    12 10.4   Nonassignability    14 10.5   Not a Contract of Employment    14 10.6   Protective Provisions    14 10.7   Terms    14 10.8   Captions    14 10.9   Governing Law    14 10.10   Validity    14 10.11   Notice    15 10.12   Successors    15   (iii) -------------------------------------------------------------------------------- FIDELITY FEDERAL BANK & TRUST 2005 LONG-TERM DEFERRED COMPENSATION PLAN EFFECTIVE JANUARY 1, 2005 ARTICLE I—PURPOSE The purpose of this 2005 Long-Term Deferred Compensation Plan (hereinafter referred to as the “Plan”) is to provide current tax planning opportunities as well as supplemental funds for retirement or death for selected officers of Fidelity Federal Bank & Trust (hereinafter referred to as “Fidelity Federal”). It is intended that the Plan will aid in retaining and attracting employees of exceptional ability by providing them with these benefits. This Plan is intended to comply with the requirements of Section 409Aof the Code. This Plan shall be effective as of January 1, 2005. ARTICLE II—DEFINITIONS For the purposes of this Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise: 2.1 Account “Account” means the Account as maintained by the Employer in accordance with Article IV with respect to any deferral of Compensation pursuant to this Plan. A Participant’s Account shall be utilized solely as a device for the determination and measurement of the amounts to be paid to the Participant pursuant to the Plan. A Participant’s Account shall not constitute or be treated as a trust fund of any kind. 2.2 Beneficiary “Beneficiary” means the person, persons or entity entitled under Article VI to receive any Plan Benefits payable after a Participant’s death. 2.3 Board “Board” means the Board of Directors of Fidelity Federal. 2.4 Change in Control “Change in Control” shall occur if: (a) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board (and any new director whose election by the Board or whose nomination for election by the stockholders of Fidelity Federal was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof; or   1 -------------------------------------------------------------------------------- (b) In the event Fidelity Federal becomes chartered and operates as a stock company, any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Act)) becomes the “beneficial owner” (as defined in Rule 13-d under the Act) of more than twenty-five percent (25%) of the then outstanding Voting Securities of Fidelity Federal; or (c) In the event Fidelity Federal becomes chartered and operates as a stock company, the stockholders of Fidelity Federal approve a merger or consolidation of the institution with any other corporation, other than a merger or consolidation which would result in the Voting Securities of Fidelity Federal outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least sixty percent (60%) of the total voting power represented by the Voting Securities of Fidelity Federal or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of Fidelity Federal approve a plan of complete liquidation of Fidelity Federal or an agreement for the sale or disposition by Fidelity Federal (in one transaction or a series of transactions) of all or substantially all of Fidelity Federal’s assets. 2.5 Code “Code” means the Internal Revenue Code of 1986 as amended from time to time, and any rules and regulations promulgated thereunder. 2.6 Committee “Committee” means the Committee appointed to administer the Plan pursuant to Article VII. 2.7 Compensation “Compensation” means salary payable to a Participant during the calendar year, before reduction for amounts deferred under this Plan or any other salary reduction program. Compensation does not include bonuses, expense reimbursements, any form of noncash compensation or benefits, Employer contributions to the Retirement Plan for Employees of Fidelity Federal Bank & Trust, group life insurance premiums, or any other payments or benefits other than normal compensation. 2.8 Deferral Commitment “Deferral Commitment” means an election to defer Compensation made by a Participant pursuant to Article III and for which a separate Participation Agreement has been submitted by the Participant to the Committee. 2.9 Deferral Period “Deferral Period” means the period over which a Participant has elected to defer a portion of his Compensation. Each calendar year shall be a separate Deferral Period, provided that the Deferral Period may be modified pursuant to paragraph 3.4. 2.10 Determination Date “Determination Date” means the last day of each calendar month.   2 -------------------------------------------------------------------------------- 2.11 Disability “Disability” means any case in which the Participant: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under and accident and health plan covering employees of the Participant’s employer.In no event shall a Disability be deemed to occur or to continue after a Participant’s Normal Retirement Date. 2.12 Employer “Employer” means Fidelity Federal Bank & Trust, a federally chartered savings bank, or any successor to the business thereof, and any affiliated or subsidiary corporations designated by the Board. 2.13 Initial Participation Date “Initial Participation Date” means the date the Participant first became eligible to participate under Article III. 2.14 Interest Rate “Interest Rate” means, with respect to any calendar month, the monthly equivalent of three percentage points (3%) greater than the annual yield of the Moody’s Average Corporate Bond Yield Index for the preceding calendar month as published by Moody’s Investor Service, Inc. (or any successor thereto) or, if such index is no longer published, a substantially similar index selected by the Board. 2.15 Normal Retirement Date “Normal Retirement Date” means the first day of the month coincident with or next following the Participant’s attainment of age sixty-five (65) or age sixty (60) with thirty (30) Years of Credited Service. “Normal Retirement Date” shall also mean the date on which the Participant terminates employment with the Employer for any reason, without regard to age or service, within twenty-four (24) months following a Change in Control. 2.16 Participant “Participant” means any individual who is participating or has participated in this Plan as provided in Article III. 2.17 Participation Agreement “Participation Agreement” means the agreement filed by a Participant which acknowledges assent to the terms of the Plan and in which the Participant elects to defer the receipt of Compensation during a Deferral Period. The Participation Agreement must be filed with the Committee prior to the beginning of the Deferral Period. A new Participation Agreement shall be submitted by the Participant for each Deferral Commitment.   3 -------------------------------------------------------------------------------- 2.18 Plan Benefit “Plan Benefit” means the benefit payable to a Participant as calculated in Article V. 2.19 Qualified Retirement Plan “Qualified Retirement Plan” means the Retirement Plan for Employees of Fidelity Federal Bank & Trust or any successor defined benefit retirement income plan or plans maintained by the Employer which qualifies under Section 401(a) of the Internal Revenue Code. For purposes of determining benefits and actuarial equivalencies under the Qualified Retirement Plan, the actuarial principles and assumptions which have consistently applied to such plan(s) shall continue to be applied. 2.20 Spouse “Spouse” means a Participant’s wife or husband who is lawfully married to the Participant at the time of the Participant’s death. 2.21 Years of Credited Service “Years of Credited Service” means the number of years of credited vesting service determined under the provisions of the Retirement Plan for Employees of Fidelity Federal Savings Bank of Florida. ARTICLE III—PARTICIPATION AND DEFERRAL COMMITMENTS 3.1 Eligibility and Participation (a) Eligibility. Eligibility to participate in the Plan shall be limited to those employees of the Employer who are designated by the Board. (b) Participation. An eligible employee may elect to participate in the Plan with respect to any Deferral Period by submitting a Participation Agreement to the Committee by December 15 of the calendar year immediately preceding the Deferral Period. In the event that an employee first becomes eligible to participate during a calendar year, a Participation Agreement must be submitted to the Committee no later than thirty (30) days following notification of the employee of eligibility to participate, and such Participation Agreement shall be effective only with regard to Compensation earned or payable following the submission of the Participation Agreement to the Committee. 3.2 Form of Deferral; Minimum Deferral (a) Deferral Commitment. A Participant may elect in the Participation Agreement to defer any portion of his Compensation earned in the calendar year following the calendar year in which the Participation Agreement is submitted. The amount to be deferred shall be stated as a dollar amount and must not be less than two thousand four hundred dollars ($2,400) during the Deferral Period.   4 -------------------------------------------------------------------------------- (b) Participants Entering at Mid-Year. In the event an employee enters this Plan at any time other than January 1 of any calendar year, he or she must defer at least two hundred dollars ($200) times the number of months remaining in the Deferral Period. 3.3 Commitment Limited by Retirement If a Participant intends to terminate employment due to retirement prior to the end of the Deferral Period, the Participant may elect, with the Committee’s consent, to defer over a period which ends at the date of his intended retirement. The Minimum Deferral shall be two hundred dollars ($200) times the number of months to the date of retirement. 3.4 Modification of Deferral Commitment A Deferral Commitment shall be irrevocable with respect to any Deferral Period except that the Committee may permit a Participant to reduce the amount to be deferred, or waive the remainder of the Deferral Commitment upon a finding that the Participant has suffered a severe unforeseeable financial hardship as determined under Section 5.5, subject to the requirements of Code Section 409A. 3.5 Change in Employment Status If the Board determines that a Participant’s employment performance is no longer at a level that deserves reward through participation in this Plan, but does not terminate the Participant’s employment, no Deferral Commitments may be made by such Participant after the end of the Deferral Period within which such decision is reached. ARTICLE IV—DEFERRED COMPENSATION ACCOUNTS 4.1 Accounts For record keeping purposes only, an Account shall be maintained for each Participant. Separate sub-accounts shall be maintained to the extent necessary to properly reflect the Participant’s total vested Account balance. 4.2 Elective Deferred Compensation The amount of Compensation that a Participant elects to defer shall be withheld from each payment of Compensation and credited to the Participant’s Account as the nondeferred portion of the Compensation becomes or would have become payable. Any withholding of taxes or other amounts with respect to deferred Compensation which is required by state, federal or local law shall be withheld from the Participant’s nondeferred Compensation to the maximum extent possible with any excess being withheld from the Participant’s Account.   5 -------------------------------------------------------------------------------- 4.3 Employer Discretionary Contributions Employer may make Discretionary Contributions to Participants’ Accounts. Discretionary Contributions shall be credited at such times and in such amounts as the Board in its sole discretion shall determine. The amount of the Discretionary Contributions shall be evidenced in a special Participation Agreement approved by the Board. 4.4 Interest The Accounts shall be credited monthly with Interest earned based on the Interest Rate specified in Section 2.14. Interest earned shall be calculated as of each Determination Date based upon the average daily balance of the account since the preceding Determination Date and shall be credited to the Participant’s Account at that time. 4.5 Determination of Accounts Each Participant’s Account as of each Determination Date shall consist of the balance of the Participant’s Account as of the immediately preceding Determination Date, plus the Participant’s Elective Deferred Compensation credited, any Employer Discretionary Contributions and any Interest earned, minus the amount of any distributions made since the immediately preceding Determination Date. 4.6 Vesting of Accounts Each Participant shall be vested in the amounts credited to such Participant’s Account and earnings thereon as follows: (a) Amounts Deferred. A Participant shall be one hundred percent (100%) vested at all times in the amount of Compensation elected to be deferred under this Plan and Interest thereon. (b) Employer Discretionary Contributions. Employer Discretionary Contributions and Interest thereon shall be vested as follows unless the special Participation Agreement sets forth an alternative vesting schedule: One (1) divided by the number of years (including partial years) between the Initial Participation Date and the Participant’s Normal Retirement Date, times the number of full years since the Participant’s Initial Participation Date. Upon the Participant’s Normal Retirement Date, death or a Change in Control, the Participant shall be one hundred percent (100%) vested. 4.7 Defined Contribution Qualified Plan Make-Up Credits The Employer shall credit to each Participant’s account an amount designed to make up for lower levels of contributions to, and the benefits from, the Fidelity Federal Savings Bank Savings Plan and the Fidelity Federal Employee Stock Ownership Plan as a result of deferrals under this plan and the statutory limitations imposed by the Internal Revenue Code. The defined contribution qualified plan make-up credit shall be equal to the difference between: (a) The total amount that would have been contributed to the Participant’s Savings Plan and Employee Stock Ownership Plan accounts by the Employer, had the deferrals not been made, and had Section 401(a)(17) not been amended by the Omnibus Budget Reconciliation Act of 1993; and   6 -------------------------------------------------------------------------------- (b) The amount actually contributed to the Participant’s Savings Plan and Employee Stock Ownership Plan accounts by Fidelity Federal. The defined contribution make-up credit shall be credited on January 1 following the year such amount would have been credited to the Participant’s qualified plan accounts. The defined contribution make-up credit under this section shall vest at the same rate and level as the underlying qualified plans. 4.8 Statement of Accounts The Committee shall submit to each Participant, within one hundred twenty (120) days after the close of each calendar year and at such other time as determined by the Committee, a statement setting forth the balance to the credit of the Account maintained for a Participant. ARTICLE V—PLAN BENEFITS 5.1 Plan Benefit If a Participant terminates employment for reasons other than death, the Employer shall pay a Plan Benefit equal to the Participant’s vested Account, as determined in accordance with Article IV. 5.2 Death Benefit Upon the death of a Participant, the Employer shall pay to the Participant’s Beneficiary an amount determined as follows: (a) If the Participant dies after termination of employment with the Employer, the remaining unpaid balance of the Participant’s vested Account shall be paid in the same form that payments were being made prior to the Participant’s death. (b) If the Participant dies prior to termination of employment with the Employer, the amount payable shall be the Participant’s Account Balance. Payments shall be made in accordance with Section 5.5. 5.3 Distribution at Specified Date Participants shall be permitted to elect to withdraw amounts from their Account subject to the following restrictions: (a) Timing of Election to Withdraw. The election to make an Early Withdrawal must be made at the same time the Participant enters into a Participation Agreement for a Deferral Commitment. (b) Amount of Withdrawal. The amount which a Participant can elect to withdraw with respect to any Deferral Commitment shall be limited to one hundred percent (100%) of the amount of such Deferral Commitment, excluding any Interest or Employer Discretionary Contributions.   7 -------------------------------------------------------------------------------- (c) Timing of Early Withdrawals. The amount elected to be withdrawn shall be paid in consecutive annual payments commencing at the time elected by the Participant in his Participation Agreement wherein he elected the Early Withdrawal Option. In no event shall the withdrawals under this section commence prior to seven (7) years following the end of the Deferral Period in which the Participant elected the Early Withdrawal Option. Amounts paid to a Participant pursuant to this section shall be treated as distributions from the Participant’s account. 5.4 Prohibition on Acceleration of Distribution The time or schedule of payment of any withdrawal or distribution under the Plan shall not be subject to acceleration, except as provided under Treasury Regulations promulgated in accordance with Section 409A(a)(3) of the Code. 5.5 Hardship Distributions Upon a finding that a Participant has suffered a severe unforeseeable financial hardship, the Committee may, in its sole discretion, make distributions from the Participant’s Account prior to the time specified for payment of benefits under the Plan. The amount of such distribution shall be limited to the amount reasonably necessary to meet the Participant’s requirements during the financial hardship. For purposes of this Section 5.5, “Unforeseeable Financial Hardship” with respect to a Participant shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, as determined by the Committee in accordance with Section 409A(a)(2)(B)(ii)(I) of the Code and other guidance thereunder. 5.6 Form of Benefit Payment (a) All Plan Benefits other than In-Service Distributions or Hardship Distributions shall be paid in the form selected by the Participant at the time of the Deferral Commitment from among the following alternatives: (i) A lump sum payment. (ii) Equal monthly installments of the Account and Interest amortized over a period of sixty (60) months. (iii) Equal monthly installments of the Account and Interest amortized over a period of one hundred twenty (120) months. (iv) Equal monthly installments of the Account and Interest amortized over a period of one hundred eighty (180) months.   8 -------------------------------------------------------------------------------- (v) Any other method (not exceeding 180 months) that is the actuarial equivalent of the Participant’s appropriate Account balance. (b) If for any Deferral Commitment a Participant fails to elect a Form of Benefit Payment, the Form shall be the Form of Payment elected on the most recent past Deferral Commitment. (c) The Interest on the unpaid balance of an Account under (a) shall be equal to the average Interest rate on the applicable Account over the thirty-six (36) months immediately preceding the commencement of benefit payments. (d) The Participant may not change the form of benefit election. 5.7 Withholding; Payroll Taxes The Employer shall withhold from payments made hereunder any taxes required to be withheld from a Participant’s wages for the federal or any state or local government. However, a Beneficiary may elect not to have withholding for federal income tax purposes pursuant to section 3405(a)(2) of the Internal Revenue Code, or any successor provision. 5.8 Commencement of Payments Payment shall commence not later than sixty (60) days after the end of the month in which the Participant terminates employment with the Employer, provided, however, in the case of a Key Employee, payment shall not commence earlier than six (6) months after the end of the month in which the Key Employee separates from service. All payments shall be made as of the first day of the month. 5.9 Full Payment of Benefits Notwithstanding any other provision of this Plan, all benefits shall be paid no later than one hundred eighty-six (186) months following the Participant’s attaining age sixty-five (65) or termination of service, whichever is later. 5.10 Payment to Guardian If a Plan Benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of his property, the Committee may direct payment of such Plan Benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan Benefit. Such distribution shall completely discharge the Committee and the Employer from all liability with respect to such benefit.   9 -------------------------------------------------------------------------------- ARTICLE VI—BENEFICIARY DESIGNATION 6.1 Beneficiary Designation Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both principal as well as contingent) to whom benefits under this Plan shall be paid in the event of Participant’s death prior to complete distribution of the benefits due under the Plan. Each Beneficiary designation shall be in a written form prescribed by the Committee and will be effective only when filed with the Committee during the Participant’s lifetime. 6.2 Amendments Any Beneficiary designation may be changed by a Participant without the consent of any designated Beneficiary by the filing of a new Beneficiary designation with the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. If a Participant’s Compensation is community property, any Beneficiary designation shall be valid or effective only as permitted under applicable law. 6.3 No Participant Beneficiary Designation If any Participant fails to designate a Beneficiary in the manner provided above, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant’s benefits, the Participant’s designated Beneficiary shall be deemed to be the person in the first of the following classes in which there is a survivor: (a) The surviving Spouse; (b) The Participant’s children, except if any of the children predecease the Participant but leave issue surviving, then such issue shall take by right of representation the share the parent would have taken if living; (c) The Participant’s estate. 6.4 Effect of Payment The payment to the deemed Beneficiary shall completely discharge Employer’s obligations under this Plan. ARTICLE VII—ADMINISTRATION 7.1 Committee; Duties This Plan shall be administered by the Committee, which shall consist of not less than three (3) persons appointed by the Board. The Committee shall have the authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with the Plan. A majority vote of the Committee members shall control any decision. Members of the Committee may be Participants under this Plan. 7.2 Compliance With Section 409A of the Code The Plan shall be interpreted, construed and administered in a manner that satisfied the requirements of Section 409A of the Code and any Treasury regulations thereunder.   10 -------------------------------------------------------------------------------- 7.3 Agents The Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer. 7.4 Binding Effect of Decisions The decision or action of the Committee in respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in the Plan. 7.5 Indemnity of Committee The Employer shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct. ARTICLE VIII—CLAIMS PROCEDURE 8.1 Claim Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee, which shall respond in writing within thirty (30) days. 8.2 Denial of Claim If the claim or request is denied, the written notice of denial shall state: (a) The reasons for denial, with specific reference to the Plan provisions on which the denial is based. (b) A description of any additional material or information required and an explanation of why it is necessary. (c) An explanation of the Plan’s claim review procedure. 8.3 Review of Claim Any person whose claim or request is denied or who has not received a response within thirty (30) days may request review by notice given in writing to the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.   11 -------------------------------------------------------------------------------- 8.4 Final Decision The decision on review shall normally be made within sixty (60) days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days. The decision shall be in writing and shall state the reasons and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned. ARTICLE IX—AMENDMENT AND TERMINATION OF PLAN 9.1 Amendment The Board may at any time amend the Plan in whole or in part, provided, however, that no amendment shall be effective to decrease or restrict the amount accrued to the date of Amendment in any Account maintained under the Plan. Any change in the Interest Rate shall not become effective until the first day of the calendar year which follows the adoption of the amendment and providing at least thirty (30) days’ written notice of the amendment to the Participant. 9.2 Employer’s Right to Terminate The Board may at any time partially or completely terminate the Plan if, in its judgment, the tax, accounting, or other effects of the continuance of the Plan, or potential payments thereunder, would not be in the best interests of the Employer. (a) Partial Termination. The Board may partially terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments. In the event of such a Partial Termination, the Plan shall continue to operate and be effective with regard to Deferral Commitments entered into prior to the effective date of such Partial Termination. (b) Complete Termination. The Board may completely terminate the Plan by instructing the Committee not to accept any additional Deferral Commitments, and by terminating all ongoing Deferral Commitments. If this Plan is terminated, all Plan benefits shall be distributed in accordance with the Participants’ elections in accordance with Article V. ARTICLE X—MISCELLANEOUS 10.1 Unfunded Plan This Plan is intended to be an unfunded plan maintained primarily to provide deferred Compensation benefits for a select group of management or highly compensated employees. This Plan is not intended to create an investment contract, but to provide tax planning opportunities and retirement benefits to eligible individuals who have elected to participate in the Plan. Eligible individuals are select members of management who, by virtue of their position with the Employer, are uniquely informed as to the Employer’s operations and have the ability to materially affect the Employer’s profitability and operations.   12 -------------------------------------------------------------------------------- 10.2 Unsecured General Creditor Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by Employer. Such policies or other assets of Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or held in any way as collateral security for the fulfilling of the obligations of Employer under this Plan. Any and all of Employer’s assets and policies shall be, and remain, the general, unpledged, unrestricted assets of Employer. Employer’s obligation under the Plan shall be that of an unfunded and unsecured promise of Employer to pay money in the future. 10.3 Trust Fund The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Employer may establish one or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Employer’s creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Employer shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Employer.   13 -------------------------------------------------------------------------------- 10.4 Nonassignability Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency. 10.5 Not a Contract of Employment The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discipline or discharge him at any time. 10.6 Protective Provisions A Participant will cooperate with the Employer by furnishing any and all information requested by the Employer, in order to facilitate the payment of benefits hereunder, and by taking such physical examinations as the Employer may deem necessary and taking such other action as may be requested by the Employer. Notwithstanding the other provisions of this Plan, no death benefits in excess of the Account balance shall be paid if death occurs as a result of suicide. 10.7 Terms Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 10.8 Captions The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 10.9 Governing Law The provisions of this Plan shall be construed and interpreted according to the laws of the State of Florida. 10.10 Validity In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.   14 -------------------------------------------------------------------------------- 10.11 Notice Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to any member of the Committee, the Plan Administrator, or the Secretary of the Employer. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 10.12 Successors The provisions of this Plan shall bind and inure to the benefit of Fidelity Federal and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of Fidelity Federal, and successors of any such corporation or other business entity. IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of Fidelity Federal, as adopted and approved on December 21, 2004, such corporation has caused this instrument to be executed by its duly authorized officers effective as of January 1, 2005.   FIDELITY FEDERAL BANK & TRUST By:   /s/ Vince A. Elhilow   Vince A. Elhilow   President and Chief Executive Officer By:   /s/ Elizabeth Cook   Elizabeth Cook, Secretary Dated:       15

  EXHIBIT 10.4.1 FIRST AMENDMENT TO EMPLOYMENT, CONFIDENTIALITY AND NONCOMPETE AGREEMENT      This First Amendment (the “Amendment”) to the Employment, Confidentiality and Non-compete Agreement dated the 1st day of May, 2004 (the “Agreement”) is made effective as of February 24, 2006, between BUILD-A-BEAR WORKSHOP, INC. (“Company”) and MAXINE CLARK (“Employee” or “Ms. Clark”). Recital      Company and Employee previously entered into the Agreement whereby Company hired Employee to provide various services to Company under the title of Chief Executive Officer Bear. Company and Employee now mutually desire to amend the Agreement pursuant to the terms of this Amendment.      NOW, THEREFORE, in consideration of the premises and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1.   Section 3(b) of the Agreement is hereby amended as follows: (b) Bonus. Should Company exceed its sales, profits and other objectives for any fiscal year, Employee shall be eligible to receive a bonus for such fiscal year as determined by the Compensation Committee of the Board of Directors; provided however such potential bonus opportunity for Employee in any fiscal year shall be set by the Compensation Committee such that, if Company exceeds its objectives, Company will pay Employee an amount not less than 125% of Employee’s base compensation. Such bonus opportunity will be sufficiently large that if Employee achieves such bonus, she will be Company’s highest paid employee. Any bonus payable to Employee will be payable in cash, stock or stock options or combination thereof, all as determined by the Board of Directors of any duly authorized committee thereof, and unless a different payout schedule is applicable for all executive employees of Company, any such bonus payment will be payable in a single, lump sum payment. In the event of termination of this Agreement because of Employee’s death or disability (as defined by Section 4.1(b)), termination by Company without Cause pursuant to Section 4.1(d) or pursuant to Employee’s right to terminate this Agreement for Good Reason under Section 4.1(e), the bonus criteria shall not change and any bonus shall be pro-rated based on the number of full calendar weeks during the applicable fiscal year during which Employee was employed hereunder. Such bonus, if any, shall be payable after Company’s accountants have determined the sales and profits and have issued their audit report with respect thereto for the applicable fiscal year, which determination shall be binding on the parties. Any such bonus shall be paid within seventy-five (75) days after the end 1 --------------------------------------------------------------------------------   EXHIBIT 10.4.1 of each calendar year or thirty (30) days after the issuance of the auditor’s report, whichever is later, regardless of Employee’s employment status at the time payment is due. If timely payment is not made, Company shall indemnify Employee against any additional tax liability that Employee may incur proximately as a result of the payment being made late. Notwithstanding anything to the contrary herein, in no event shall Employee actually receive a bonus in any fiscal year of less than an amount, when paid, as would render her the most highly compensated executive at the Company by at least one dollar ($1.00) in terms of cash compensation (base salary plus the cash component of her bonus). For avoidance of doubt, Employee shall be the highest paid executive within Company during each fiscal year of her employment, beginning with Fiscal Year 2005. 2.   Section 3(f) of the Agreement is hereby amended as follows: (f) Other. Employee shall be eligible for a car allowance and such other perquisites as may from time to time be awarded to Employee by Company payable at such times and in such amounts as Company, in its sole discretion, may determine. All such compensation shall be subject to customary withholding taxes and other employment taxes as required with respect thereto. Employee shall also qualify for all rights and benefits for which Employee may be eligible under any benefit plans including group life, medical, health, dental and/or disability insurance or other benefits (“Welfare Benefits”) which are provided for employees generally at her then current location of employment. Employee may, in her sole discretion, decline any perquisite (including without limitation the car allowance), proposed annual salary increase, or bonus payment. 3.   Section 4.1(b) of the Agreement is hereby amended as follows: (b) By Company, upon thirty (30) day’s prior written notice to Employee in the event Employee, by reason of permanent physical or mental disability (which shall be determined by a physician selected by Company or its insurers and acceptable to Employee or Employee’s legal representative (such agreement as to acceptability not to be withheld unreasonably)), shall be unable to perform the essential functions of her position, with or without reasonable accommodation, for six (6) consecutive months; provided, however, Employee shall not be terminated due to permanent physical or mental disability unless or until said disability also entitles Employee to benefits under such disability insurance policy as is provided to Employee by Company. 4.   Section 4.1(c) is hereby amended to add the following at the end: Company shall not invoke this Section 4.1(c) to avoid the effects of Section 4.1(a) or (b). 2 --------------------------------------------------------------------------------   EXHIBIT 10.4.1 5.   Section 4.1 of the Agreement is hereby amended to add the following at the end: In the event of termination for Cause, Employee will be afforded an opportunity prior to the actual date of termination to discuss the matter with Company’s Board of Directors. 6.   Section 4.2(a) of the Agreement is hereby amended as follows: (a) Survival of Covenants. Upon termination of this Agreement, all rights and obligations of the parties hereunder shall cease, except termination of employment pursuant to Section 4 or otherwise shall not terminate or otherwise affect the rights and obligations of the parties pursuant to Section 3(b), Section 3(c) (subject to the terms of the Plan and applicable Option Agreements), and 4.2 through 13 hereof. 7.   Section 4.2(b) of the Agreement is hereby amended as follows: (b) Severance. In the event during the Employment Period (i) Company terminates Employee’s employment without Cause pursuant to Section 4.1(d) or (ii) Employee terminates her employment for Good Reason pursuant to Section 4.1(e), Company shall continue her base salary for a period of twenty-four (24) months following termination, such payments to be reduced by the amount of any cash compensation from a subsequent employer during such period. Company shall also continue Employee’s Welfare Benefits for such twenty-four (24) month period as if Employee were an active full-time employee during such period, to the extent permitted by Company’s Welfare Benefit Plans. If Employee cannot be treated as an active full-time employee during all or part of such twenty-four (24) months pursuant to the terms of Company’s Welfare Benefit Plans, Company shall pay towards the premium for any continuation or conversion insurance coverage available to Employee an amount equal to the amount it was paying for Employee’s coverage under Company’s Welfare Benefit Plans as of Employee’s termination date. Employee shall accept these payments in full discharge of all obligations of any kind which Company has to her except obligations, if any, (i) for post-employment benefits expressly provided under this Agreement and/or at law, (ii) to repurchase any capital stock of Company owned by Employee; or (iii) for indemnification under separate agreement by virtue of Employee’s status as a director/officer of Company. Employee shall also be eligible to receive a bonus with respect to the year of termination as provided in Section 3(b). 8.   Section 4.2(c) of the Agreement is hereby amended as follows: (c) Damages. In the event that during the Initial Term Company terminates Employee’s employment without Cause (other than for death or disability) in violation of the terms of this Agreement, Employee shall be entitled to damages in an amount not less than the sum of (i) the amount of base salary Employee would have been paid during the remainder of the Initial Term pursuant to Section 3(a), 3 --------------------------------------------------------------------------------   EXHIBIT 10.4.1 and (ii) an amount equal to the bonus Employee would have earned pursuant to Section 3(b) during the Initial Term (but in no event less than the average bonus paid to Employee during the 2 fiscal years immediately preceding such termination). This Section 4.2(c) is not intended to be a limit on the amount of damages Employee may recover or otherwise limit or reduce any remedies available to Employee in the event Company terminates Employee during the Initial Term in violation of the provisions of this Agreement. 9.   Section 6(a) of the Agreement is hereby amended as follows: (a) for twenty-four (24) months, engage in, assist or have an interest in, or enter the employment of or act as an agent, advisor or consultant for, any person or entity which is engaged in the development, manufacture, supplying or sale of a product, process, service or development: (i) which is competitive with a product, process, service or development on which the Company has expended resources, on which the Employee worked and which, at the time of Employee’s termination, Company is selling or producing or has not abandoned plans to sell or produce; or (ii) with respect to which Employee has or had access to Confidential Information while at Company provided Company has not abandoned, as of the date of Employee’s termination, plans to use such Confidential Information. (in either case (i) or (ii) a “Restricted Activity”), and which person or entity is located within the United States or within any country where Company has established a retail presence either directly or through a franchise arrangement; or 10.   The last two (2) sentences of Section 6 of the Agreement are hereby amended as follows: provided, however, that following termination of her employment, Employee shall be entitled to be an employee of or otherwise associated with an entity that engages in Restricted Activity so long as, for twenty-four (24) months following termination of said employment: (i) the sale of stuffed plush toys is not a material business of the entity; (ii) Employee has no direct or personal involvement in the sale of stuffed plush toys; and (iii) neither Employee, her relatives, nor any other entities with which she is affiliated own more than 1% of the entity. As used in this Section 6, “material business” shall mean that either (A) greater than 10% of annual revenues received by such entity were derived from the sale of stuffed plush toys and related products, or (B) the annual revenues received or projected to be received by such entity from the sale of stuffed plush toys and related products exceeded $10 million, or (C) the entity otherwise annually derives or is projected to derive annual revenues in excess of $5 million from a retail concept that is similar in any material regard to Company. 4 --------------------------------------------------------------------------------   EXHIBIT 10.4.1 11.   Section 8(b) of the Agreement is hereby amended as follows: (b) Employee acknowledges that as part of her work for Company she may be asked to create, or contribute to the creation of, computer programs, documentation and other copyrightable works. Employee hereby agrees that any and all computer programs, documentation and other copyrightable materials that she has prepared or worked on for Company, or is asked to prepare or work on by Company, shall be treated as and shall be a “work made for hire,” for the exclusive ownership and benefit of Company according to the copyright laws of the United States, including, but not limited to, Sections 101 and 201 of Title 17 of the U.S. Code (“U.S.C.”) as well as according to similar foreign laws. Company shall have the exclusive right to register the copyrights in all such works in its name as the owner and author of such works and shall have the exclusive rights conveyed under 17 U.S.C. Sections 106 and 106A including, but not limited to, the right to make all uses of the works in which attribution or integrity rights may be implicated. Without in any way limiting the foregoing, to the extent the works are not treated as works made for hire under any applicable law, Employee hereby irrevocably assigns, transfers, and conveys to Company and its successors and assigns any and all worldwide right, title, and interest that Employee may now or in the future have in or to the works, including, but not limited to, all ownership, U.S. and foreign copyrights, all treaty, convention, statutory, and common law rights under the law of any U.S. or foreign jurisdiction, the right to sue for past, present, and future infringement, and moral, attribution, and integrity rights. Employee hereby expressly and forever irrevocably waives any and all rights that she may have arising under 17 U.S.C. Sections 106A, rights that may arise under any federal, state, or foreign law that conveys rights that are similar in nature to those conveyed under 17 U.S.C. Sections 106A, and any other type of moral right or droit moral. 12.   Except to the extent expressly provided herein, the Agreement remains in full force and effect, in accordance with its terms. IN WITNESS WHEREOF, the parties have executed this First Amendment effective as of the date indicated above.       MAXINE CLARK   BUILD-A-BEAR WORKSHOP, INC.   By: /s/ Maxine Clark   By: /s/ Tina Klocke       Maxine Clark   Tina Klocke     Chief Financial Bear 5

-------------------------------------------------------------------------------- Exhibit 10.28   December 22, 2005 Stephen A. Bogiages 12 Hill Top Road Wellesley, MA 02982 RE:  Separation Agreement RCN Telecom Services, Inc. (along with its parent companies, subsidiaries and affiliates, “RCN” or the “Company”), and Stephen A. Bogiages (“Employee”), mutually desire to enter into this Separation Agreement (“Agreement”). Employee has carefully considered the terms and conditions of this Agreement, including the attached General Release and Waiver (“General Release”) and Employee understands that the General Release settles, bars and waives any and all claims and grievances that Employee may have or could possibly have against RCN as of the date of execution of the General Release. NOW, THEREFORE, Employee and RCN for the good and sufficient consideration set forth below, the receipt and sufficiency of which consideration is hereby acknowledged and intending to be legally bound, agree as follows: 1.    The parties agree that effective December 12, 2005, Employee ceased to serve as General Counsel of RCN and as an officer and director of all affiliates of RCN, but Employee shall be retained on RCN’s active payroll until January 1, 2006 (the “Date of Separation”). Whether or not Employee signs this Agreement or the General Release: --------------------------------------------------------------------------------   (i) Employee will be paid in full for all accrued but unpaid salary, accrued and unused vacation pay through the Date of Separation, that amount being paid in accordance with the Company's ordinary procedures for terminated employees;   (ii) Employee shall receive prompt payment in full for reasonable and necessary business expenses incurred by him prior to the Date of Separation and owed to the Employee by RCN pursuant to RCN’s expense reimbursement policy; and   (iii) Employee shall also receive any other accrued and vested benefits due to him under any employee benefit plans or programs of RCN as of the Date of Separation, except that Employee shall not be entitled to any payments under any severance plan or policy of RCN. 2.    Provided that Employee executes the General Release attached hereto on or after the Date of Separation and does not revoke such General Release and has not violated Sections 7, 8 or 9 of this Agreement prior to the date the applicable benefit or payment is to be provided or made, then RCN shall provide the following:   (i) The Company shall pay to Employee $92,500 in a cash lump sum promptly after Employee’s General Release becomes irrevocable;   (ii) Employee and his dependents shall be provided with health and welfare insurance coverage through the period ending July 31, 2006 under the same terms and conditions that the Employee and his dependents had on the Date of Separation (including cost sharing), as such terms and conditions may be modified from time to time generally for RCN's employees receiving such coverage, subject to such adjustments from time to time in Employee's contributions under the coverage and co-pays as may be applicable generally during this period to RCN's employees receiving such coverage; 2 --------------------------------------------------------------------------------   (iii) As of August 1, 2006 (so long as Employee is then participating in RCN medical and dental plans and consistent with the terms in subparagraph (ii) above), or any earlier date upon which RCN is unable to provide such continued health and dental coverage on commercially reasonable terms, Employee will be eligible for health insurance continuation coverage pursuant to the terms of Internal Revenue Code Section 4980B (“COBRA”);   (iv) Employee shall receive prompt payment of a pro rata portion (based on the portion of 2005 Employee was employed by RCN) of the annual bonus for 2005 that he would otherwise have earned for 2005 as if he were employed by RCN through the bonus payment date, which shall be payable at the time bonuses are otherwise paid to RCN employees;   (v) 29,333 of the options to acquire RCN Stock (consisting of 4,768 ISOs and 24,565 NQOs) held by Employee shall remain outstanding (the “Continued Options”) and shall vest and become exercisable on May 24, 2006, if Employee has complied with his obligations under this Agreement. All other Options to acquire RCN Stock held by Employee shall terminate on January 1, 2006. Any portion of the Continued Options that have not previously been exercised will expire and terminate on August 23, 2006; and 3 --------------------------------------------------------------------------------   (vi) RCN shall pay up to $6,834 for cancellation fees and expenses related to the cancellation of the lease for Employee’s Virginia apartment and Employee hereby authorizes RCN to negotiate the termination of such lease.   (vii) RCN shall pay Employee $3,926.25 for previously approved RCN Rewards reimbursement for university courses taken in the 2005 fall semester. 3.    Notwithstanding anything in this Agreement to the contrary, the Company may deduct any and all amounts required or authorized to be withheld by law from any payments due to be paid hereunder. 4.    Employee acknowledges and agrees the Employee is not entitled to any payments or benefits under the letter agreement dated April 7, 2005 by and between the Company and Employee (the “Letter Agreement”) or otherwise from the Company in connection with his separation from service. 5.    Employee agrees to return to RCN on or before the Effective Date, any and all of RCN's personal property used during Employee's employment including, without limitation, all keys in his control for his Virginia apartment, portable telephones, access cards, office keys, laptops, Blackberries, calling cards, credit cards, and pagers, together with all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing confidential information or relating to the business or proposed business of RCN or containing any trade secrets relating to RCN, except any personal diaries, calendars, rolodexes or personal notes or correspondence. 4 -------------------------------------------------------------------------------- 6.    Until August 1, 2006, Employee agrees to be reasonably available to cooperate and participate in any matters that have arisen during the time in which Employee was employed. In addition, Employee agrees that he will at all times fully cooperate in any litigation in which RCN may become involved. Such cooperation shall include Employee making himself available, upon the request of RCN, to provide truthful, accurate and complete information at depositions, court appearances and interviews by Company's counsel. To the maximum extent permitted by law, Employee agrees that he will notify RCN if he is contacted by any government agency or any other person contemplating or maintaining any claim or legal action against RCN or by any agent or attorney of such person. RCN agrees to reimburse Employee for any reasonable business expenses associated with such cooperation. 7.    Except in the performance of his duties during the period of his employment or his obligations under this Agreement, Employee agrees not to, at any time, divulge to any person, firm, corporation or any other entity, information not in the public domain received by Employee during the course of Employee's employment with RCN with regard to customers, prospects, pricing, marketing information, personnel matters, financial matters, business accounts and records, corporate documentation or structure, business strategy or any other information relating to the affairs of RCN, in any manner whatsoever, and all such information will be kept confidential by Employee and will not be revealed to anyone without the prior written permission of a duly authorized officer of RCN. Notwithstanding the foregoing, the parties agree that Employee may disclose confidential information to the extent necessary to comply with any law, court order or subpoena, or to any discovery request to which a response is required by law. 5 -------------------------------------------------------------------------------- 8.    During the period ending July 31, 2005, Employee shall not (i) own, engage in, become associated with or render services or provide advice to, in each case, in any capacity (including without limitation, as a shareholder, member, partner, employee consultant, officer or director) any business or operation that competes in any way with the business or operations of RCN or (ii) solicit, encourage to leave or hire, in each case, on Employee’s behalf or on behalf of any other person, any person employed by RCN or any person who was an exclusive consultant of RCN at the time of such action or within the one year period immediately preceding such action. 9.    Employee agrees that he shall not, directly or indirectly, disparage RCN, its affiliates or their directors, officers or employees and shall not make any public comments or statements regarding RCN without the prior written approval of RCN’s Chief Executive Officer. RCN agrees that it shall not, directly or indirectly, disparage Employee and shall not make any public comments or statements regarding Employee without his prior written approval. Furthermore, Employee shall not communicate with any employee, creditor, stockholder, director of RCN, or prospective acquiror of RCN’s assets or securities concerning RCN’s business without the prior written approval of RCN’s Chief Executive Officer. 10.    In the event of any breach or threatened breach of any of Sections 5, 7, 8 or 9, Employee agrees that RCN, in addition to any other remedies it may have (including, without limitation, the cancellation of any payment or benefit referenced in Section 2, above), shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach and Employee expressly acknowledges that damages would be an inadequate and insufficient remedy for any such breach or threatened breach. 6 -------------------------------------------------------------------------------- 11.    Neither the making of this Agreement nor anything contained in the General Release shall in any way be construed or considered to be an admission by RCN of non-compliance with any law or admission of any wrongdoing whatsoever. 12.    Employee represents and warrants that he has not filed, caused to be filed, or permitted to be filed on Employee's behalf, any charge, complaint or action before any federal, state or local administrative agency or court against RCN or filed any grievance against RCN. Employee agrees that he will not submit this Agreement as evidence of any kind of liability by RCN, other than for the enforcement of the terms of this Agreement, and that this Agreement is not relevant or material with respect to any issue of wrongdoing or liability on the part of RCN. 13.    Should any provision of this Agreement or the General Release be challenged by Employee or his representatives and declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect; provided, however, that if the General Release becomes null and void, Employee will be required to return any and all payments received under Section 2 of this Agreement and shall not be entitled to receive any further payments or benefits under this Agreement. The parties acknowledge that the Company is terminating employment of Employee for reasons other than for Just Cause (as defined in the Letter Agreement), and this Agreement is being entered into in the ordinary course of business, as in its business judgment it is beneficial for all the entities included under “RCN”. Employee acknowledges that absent execution of the General Release, he would not be entitled to the payments and benefits set forth in Section 2.   7 -------------------------------------------------------------------------------- 14.    The parties have read and have fully considered the Agreement and are mutually desirous of entering into such Agreement. Employee agrees that neither the Agreement, nor the General Release will be subject to any claim of mistake of fact or duress. Having elected to execute the Agreement, to fulfill the promises set forth herein, and to receive the benefits set forth with the Agreement, Employee freely and knowingly, and after due consideration, agrees to sign the General Release intending to waive, settle and release all claims Employee has against RCN from the beginning of the world to the date of the executed General Release. 15.    Both parties agree that the provisions, terms and conditions of the Agreement are to be held in strict confidence. The parties agree not to disclose, or cause their attorneys or agents to disclose, the terms hereof, except (i) as may be specifically permitted in writing by the other party; (ii) as either party may be compelled to do so by a court order or as required by state or federal law; or (iii) to accountants or other professionals who advise the parties with respect to legal, financial or tax matters. In addition, Employee may disclose the terms of this Agreement to his immediate family members, defined as his spouse, parents and children, but Employee will be liable for any disclosures of such information by any of his family members. 8 -------------------------------------------------------------------------------- 16.    This Agreement shall be governed by the laws of the Commonwealth of Virginia, notwithstanding conflict of law principles. 17.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18.    This Agreement is entered into between RCN and Employee for the benefit of each of RCN and Employee. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Employee and RCN. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 19.    This Agreement constitutes the entire agreement, and supersedes any and all prior agreements, and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof except as otherwise provided herein. 20.    This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and their respective heirs, legatees, executors, administrators, legal representatives, successors and assigns. 21.    Employee waives any right to reinstatement of employment or future employment with RCN and agrees not to knowingly apply for future employment with RCN.  9 -------------------------------------------------------------------------------- WHEREFORE, the parties voluntarily and knowingly execute this Agreement as of the date set forth above.     EMPLOYEE   RCN Telecom Services, Inc.                   Stephen A. Bogiages   Name:     Title: 10 --------------------------------------------------------------------------------   EXHIBIT A GENERAL RELEASE AND WAIVER   WHEREAS, Stephen Bogiages (“Employee”) and RCN Telecom Services, Inc. (“RCN” or the “Company”) are parties to an Agreement dated December 22, 2005 (the “Separation Agreement”); WHEREAS, the parties agree that the Employee’s employment with the Company has been terminated for reasons other than for Just Cause (as defined in the letter agreement dated April 7, 2005 by and between RCN and Employee (the “Letter Agreement”)), and the Employee is entitled to receive certain payments and benefits pursuant Section 2 of the Separation Agreement (such payments and benefits referred to herein as the “Termination Benefits”); WHEREAS, it is a condition to the obligation of the Company to pay the Termination Benefits to the Employee that the Employee execute and deliver to the Company, and not revoke, this General Release and Waiver, (the “General Release”). NOW, THEREFORE, in consideration of the payment to the Employee of the Termination Benefits, each of the Employee and the Company hereby agree as follows: -------------------------------------------------------------------------------- 1.    THE EMPLOYEE, ON HIS OWN BEHALF AND ON BEHALF OF HIS AGENTS, REPRESENTATIVES, ASSIGNS, HEIRS, EXECUTORS AND ADMINISTRATORS (COLLECTIVELY, THE “EMPLOYEE RELEASORS”) HEREBY RELEASES, REMISES AND ACQUITS THE COMPANY, ITS PARENT AND EACH OF THEIR RESPECTIVE SUBSIDIARIES AND AFFILIATES AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, MEMBERS, AGENTS, EMPLOYEES, CONSULTANTS, INDEPENDENT CONTRACTORS, ATTORNEYS, ADVISERS, SUCCESSORS AND ASSIGNS, AND EMPLOYEE BENEFIT PLANS (COLLECTIVELY, THE “COMPANY RELEASEES”), JOINTLY AND SEVERALLY, FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, CHARGES, COMPLAINTS, DEMANDS, COSTS, RIGHTS, LOSSES, DAMAGES AND OTHER LIABILITY WHATSOEVER, KNOWN OR UNKNOWN (COLLECTIVELY, THE “CLAIMS”), WHICH THE EMPLOYEE HAS OR MAY HAVE AGAINST ANY COMPANY RELEASEE THAT ARISES OUT OF OR IN CONNECTION WITH, OR RELATES TO, ANY FACT, EVENT, CIRCUMSTANCE, OCCURRENCE OR RELATIONSHIP AMONG THE EMPLOYEE AND ANY COMPANY RELEASEE OCCURRING OR EXISTING ON OR PRIOR TO THE DATE HEREOF, INCLUDING BUT NOT LIMITED TO, CLAIMS UNDER OR IN RESPECT OF ANY OF THE UNITED STATES AGE DISCRIMINATION IN EMPLOYMENT ACT, THE UNITED STATES AMERICANS WITH DISABILITIES ACT OF 1990, THE UNITED STATES FAMILY AND MEDICAL LEAVE ACT OF 1993, THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT OF 1988, TITLE VII OF THE UNITED STATES CIVIL RIGHTS ACT OF 1964, 42 U.S.C. § 1981, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, THE CALIFORNIA LABOR CODE, D.C. HUMAN RIGHTS ACT, ILLINOIS HUMAN RIGHTS ACT, THE NEW JERSEY LAW AGAINST DISCRIMINATION, THE NEW JERSEY CONSCIENTIOUS EMPLOYEE PROTECTION ACT, MASSACHUSETTS FAIR EMPLOYMENT PRACTICES ACT, NEW YORK HUMAN RIGHTS LAW, THE PENNSYLVANIA HUMAN RIGHTS ACT, WASHINGTON STATE LAW AGAINST DISCRIMINATION, VIRGINIA HUMAN RIGHTS ACT, CLAIMS FOR WRONGFUL DISCHARGE, CLAIMS FOR PAYMENTS UNDER THE LETTER AGREEMENT, BREACH OF CONTRACT, TORT, COMMON LAW OR ANY OTHER UNITED STATES FEDERAL, STATE, OR LOCAL LAW. THE EMPLOYEE FURTHER AGREES THAT THE EMPLOYEE WILL NOT SEEK OR BE ENTITLED TO ANY PERSONAL RECOVERY IN ANY ACTION THAT MAY BE COMMENCED ON EMPLOYEE'S BEHALF. THIS RELEASE IS FOR ANY RELIEF, NO MATTER HOW DENOMINATED, INCLUDING, BUT NOT LIMITED TO, INJUNCTIVE RELIEF, WAGES, BACK PAY, FRONT PAY, COMPENSATORY DAMAGES, AND PUNITIVE DAMAGES. NOTWITHSTANDING THE FOREGOING, THIS RELEASE SHALL NOT APPLY TO ANY EXCLUDED CLAIMS (AS DEFINED BELOW). 2 -------------------------------------------------------------------------------- 2.    THE EMPLOYEE ACKNOWLEDGES THAT HE WOULD NOT RECEIVE THE TERMINATION BENEFITS EXCEPT FOR HIS EXECUTION OF THIS GENERAL RELEASE. 3.    In order to provide a full and complete release, Employee understands and agrees that this General Release is intended to include all claims, if any, which Employee may have and which Employee does not now know or suspect to exist in his favor against any of the Releasees and that this General Release extinguishes those claims. Employee expressly waives all rights under California Civil Code Section 1542 or any statute or common law principle of similar effect in any jurisdiction. Section 1542 states as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. 3 -------------------------------------------------------------------------------- Thus, notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Employee understands and agrees that this General Release is intended to include all claims, if any, which Employee may have and which Employee does not now know or suspect to exist in his favor against any of the Releasees and that this Agreement extinguishes those claims. 4.    For purposes of this General Release, the term “Excluded Claim” means a Claim to enforce (x) any of the Employee’s rights under the Separation Agreement, (y) any of the Employee’s rights under any employee benefit plan of the Company qualified under Section 401 of the Internal Revenue Code of 1986, as amended, in which the Employee was a participant or under which the Employee has an accrued but unpaid a benefit, in either such case, immediately prior to the date hereof or (z) any rights the Employee may otherwise have for indemnification (it being specifically agreed that the Separation Agreement and this General Release do not confer any such rights). 5.    Knowing and Voluntary Waiver by the Employee. The Employee acknowledges that, by his free and voluntary act of signing below, the Employee agrees to all of the terms of this General Release and intends to be legally bound thereby. 6.    Acknowledgement of Employee’s Continuing Obligations. The Employee acknowledges and agrees that his obligations under the Separation Agreement shall continue in full force and effect after the date hereof in accordance with their terms.  7.    The Employee understands, agrees and acknowledges that:   a. he has been advised and encouraged by the Company to have this General Release reviewed by legal counsel of the Employee’s own choosing and that he has been given ample time to do so prior to his signing this General Release; 4 --------------------------------------------------------------------------------   b. he has been provided at least forty-five (45) days to consider this Release and to decide whether to agree to the terms contained herein;   c. the Company is providing Employee with the information in Attachment A to this General Release pursuant to the ADEA;   d. he will have the right to revoke this General Release during the seven (7) day period following the date the Employee signs this General Release by giving written notice of his revocation to Theresa Perniciaro, Director, Employee Relations of the Company at 105 Carnegie Center, Princeton, NJ 08540 on or prior to the seventh day after the date the Employee signs this General Release and if Employee exercises his right to revoke this General Release, he will not be entitled to receive any of the Termination Benefits;   e. the Separation Agreement will not become effective and the Termination Benefits provided therein will not be paid or provided to Employee until at least eight (8) days after Employee signs this General Release and will be paid only if Employee does not revoke this General Release pursuant to subsection (d) above (the “Effective Date”); and by signing this General Release, Employee represents that he fully understands the terms and conditions of this General Release and intends to be legally bound by them; and 5 --------------------------------------------------------------------------------   f. this General Release will become effective, enforceable and irrevocable seven (7) days after the date on which it is executed by Employee and provided it is not revoked by Employee during such seven day period. 8.    Governing Law. This General Release shall be governed by and construed in accordance with the laws of the State of Commonwealth of Virginia. 9.    Severability. The parties hereto intend that the validity and enforceability of any provision of this General Release shall not affect or render invalid any other provision of this General Release. 10.      Binding Agreement. This General Release shall be binding on and shall inure to the benefit of the parties hereto and their respective heirs, administrators, representatives, executors, successors and assigns. IN WITNESS WHEREOF, each of the Employee and the Company, by its duly authorized representative, has caused this General Release to be executed as of the ____ day of ____________, 2005.   Stephen Bogiages               RCN Telecom Services, Inc.          6 -------------------------------------------------------------------------------- ATTACHMENT A (A) Severance is being offered to employees of the Company who are terminated in connection with the December 2005 reduction in force. (B) All employees who are being offered severance must sign this General Release and return it to their local Human Resources representative within 45 days after receiving it. Once the signed General Release is returned to the employee’s local Human Resources representative, employees have 7 days to revoke the General Release. (C) Attached as Attachment B is a listing of the job titles and ages of all individuals who were selected for the December 2005 reduction in force and therefore are eligible for severance, and the ages of all individuals in the same job classification or organizational unit who were not selected and therefore are not eligible for severance: --------------------------------------------------------------------------------

Exhibit 10.2 Loan No. 502858632   LOAN AGREEMENT   Dated as of December     , 2006   Between   BEHRINGER HARVARD ELDRIDGE PLACE LP, as Borrower   and   WACHOVIA BANK, NATIONAL ASSOCIATION, as Lender -------------------------------------------------------------------------------- TABLE OF CONTENTS   Page       I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION 1         Section 1.1 Definitions 1   Section 1.2 Principles of Construction 23         II. GENERAL TERMS 23         Section 2.1 Loan Commitment; Disbursement to Borrower 23   Section 2.2 Interest Rate 24   Section 2.3 Loan Payment 25   Section 2.4 Prepayments 26   Section 2.5 Defeasance 26   Section 2.6 Release of Property 29   Section 2.7 Lockbox Account/Cash Management 29   Section 3.1 Conditions Precedent to Closing 30         IV. REPRESENTATIONS AND WARRANTIES 31         Section 4.1 Borrower Representations 31   Section 4.2 Survival of Representations 39         V. BORROWER COVENANTS 39         Section 5.1 Affirmative Covenants 39   Section 5.2 Negative Covenants 49         VI. INSURANCE; CASUALTY; CONDEMNATION 57         Section 6.1 Insurance 57   Section 6.2 Casualty 61   Section 6.3 Condemnation 61   Section 6.4 Restoration 62         VII. RESERVE FUNDS 66         Section 7.1 Required Repairs 66   Section 7.2 Tax and Insurance Escrow Fund 68   Section 7.3 Replacements and Replacement Reserve 68   Section 7.4 Rollover Reserve 73   Section 7.5 [RESERVED] 74   --------------------------------------------------------------------------------   Section 7.6 Lease Obligation Fund 74   Section 7.7 Reserve Funds, Generally 74   Section 7.8 Letter of Credit Rights 75   Section 7.9 Application of Letter of Credit Proceeds 75         VIII. DEFAULTS   75           Section 8.1 Event of Default 75   Section 8.2 Remedies 78   Section 8.3 Remedies Cumulative; Waivers 79         IX. SPECIAL PROVISIONS 79         Section 9.1 Securitization 79   Section 9.2 Intentionally Omitted 81   Section 9.3 Exculpation 82   Section 9.4 Matters Concerning Manager 84   Section 9.5 Servicer 84         X. MISCELLANEOUS 84         Section 10.1 Survival 84   Section 10.2 Lender’s Discretion 84   Section 10.3 Governing Law 85   Section 10.4 Modification, Waiver in Writing 85   Section 10.5 Delay Not a Waiver 85   Section 10.6 Notices 85   Section 10.7 Trial by Jury 86   Section 10.8 Headings 86   Section 10.9 Severability 86   Section 10.10 Preferences 86   Section 10.11 Waiver of Notice 87   Section 10.12 Remedies of Borrower 87   Section 10.13 Expenses; Indemnity 87   Section 10.14 Schedules Incorporated 88   Section 10.15 Offsets, Counterclaims and Defenses 88   Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries 89   Section 10.17 Publicity 89   Section 10.18 Waiver of Marshalling of Assets 89   ii --------------------------------------------------------------------------------   Section 10.19 Waiver of Counterclaim 89   Section 10.20 Conflict; Construction of Documents; Reliance 90   Section 10.21 Brokers and Financial Advisors 90   Section 10.22 Prior Agreements 90   Section 10.23 Transfer of Loan 90   Section 10.24 Joint and Several Liability 90     SCHEDULES Schedule I – [Reserved]       Schedule II – Rent Roll / Expansion Options / Outstanding Leasing Commissions / Outstanding Tenant Improvements / Existing Sublease Agreements           Schedule III – Required Repairs - Deadlines for Completion       Schedule IV – Organizational Chart of Borrower       Schedule V – Exceptions to Representations       Schedule VI – Lease Obligations   iii -------------------------------------------------------------------------------- LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of this          day of December, 2006 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between WACHOVIA BANK, NATIONAL ASSOCIATION, a banking association chartered under the laws of the United States of America, having an address at Wachovia Bank, National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 (“Lender”) and BEHRINGER HARVARD ELDRIDGE PLACE LP, a Delaware limited partnership, having its principal place of business c/o Behringer Harvard Funds, 15601 Dallas Parkway, Suite 600, Addison, Texas 75001 (“Borrower”). W I T N E S S E T H: WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined). NOW, THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows: I.                                         DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.1             DEFINITIONS.  FOR ALL PURPOSES OF THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED OR UNLESS THE CONTEXT CLEARLY INDICATES A CONTRARY INTENT: “Additional Insolvency Opinion” shall have the meaning set forth in Section 4.1.30(c) hereof. “Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person. “Affiliated Manager” shall mean any Manager in which Borrower, Principal, or Guarantor has, directly or indirectly, any legal, beneficial or economic interest. “Agreement” shall mean this Loan Agreement, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “ALTA” shall mean American Land Title Association, or any successor thereto. “Annual Budget” shall mean the operating budget, including all planned Capital Expenditures, for the Property prepared by Borrower in accordance with Section 5.1.11.(d) hereof for the applicable Fiscal Year or other period. -------------------------------------------------------------------------------- “Approved Annual Budget” shall have the meaning set forth in Section 5.1.11(d) hereof. “Assignment of Leases” shall mean that certain first priority Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower’s interest in and to the Leases and Rents of the Property as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Assignment of Management Agreement” shall mean that certain Assignment of Management Agreement and Subordination of Management Fees, dated as of the Closing Date, among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Award” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation with respect to all or any part of the Property. “Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, in which such Person colludes with, or otherwise assists such Person, or cause to be solicited petitioning creditors for any involuntary petition against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the Property; (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due. “Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state bankruptcy or insolvency law. “Basic Carrying Costs” shall mean the sum of the following costs associated with the Property for the relevant Fiscal Year or payment period:  (i) Taxes and (ii) Insurance Premiums. “Behringer Holdings” shall mean Behringer Harvard Holdings, a Delaware limited liability company. “Behringer Harvard Funds” shall mean, individually or collectively, Behringer Holdings, Behringer Harvard Short-Term Opportunity Fund I LP, a Texas limited partnership, Behringer Harvard Mid-Term Value Enhancement Fund I LP, a Texas limited partnership, Behringer Harvard Operating Partnership I LP, a Texas limited partnership, Behringer Harvard REIT I, Inc., a Maryland corporation, Behringer Harvard Opportunity REIT I, Inc., a Maryland 2 -------------------------------------------------------------------------------- corporation, and/or Behringer Harvard Strategic Opportunity Fund I LP, a Texas limited partnership. “Borrower” shall mean Behringer Harvard Eldridge Place LP, a Delaware limited partnership, together with its permitted successors and assigns. “Borrower’s Knowledge” shall mean the actual knowledge attributable to those principals, employees and officers of Borrower who have given substantive attention to the Property, the Loan Documents and related matters, without any implied duty to conduct any inquiry or investigation. “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business. “Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP or other accounting principles reasonably acceptable to Lender, consistently applied (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements). “Cash Management Account” shall have the meaning set forth in Section 2.7.2 hereof. “Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Manager and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Cash Sweep Period” shall have the meaning set forth in the Cash Management Agreement. “Casualty” shall have the meaning set forth in Section 6.2 hereof. “Casualty Consultant” shall have the meaning set forth in Section 6.4(b)(iii) hereof. “Casualty Retainage” shall have the meaning set forth in Section 6.4(b)(iv) hereof. “Casualty/Condemnation Prepayment” shall have the meaning set forth in Section 6.4(e) hereof. “Closing Date” shall mean the date of the funding of the Loan. “Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. 3 -------------------------------------------------------------------------------- “Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof. “Condemnation Proceeds” shall have the meaning set forth in Section 6.4(b) hereof. “Consumer Price Index” or “CPI” shall mean the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, All Items; 1982-84 = 100.  If the Bureau of Labor Statistics substantially revises the manner in which the CPI is determined, an adjustment shall be made by Lender in the revised index which would produce results equivalent, as nearly as possible, to those which would be obtained if the CPI had not been so revised. “Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise.  “Controlled”, “under common Control with” and “Controlling” shall have correlative meanings. “Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums (including the Defeasance Payment Amount and any Yield Maintenance Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document. “Debt Service” shall mean, with respect to any particular period of time, scheduled principal and interest payments due under this Agreement and the Note. “Debt Service Coverage Ratio” shall mean a ratio for the applicable period in which: (a)                                  the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, without deduction for (i) actual management fees incurred in connection with the operation of the Property, or (ii) amounts paid to the Reserve Funds, less (A) management fees equal to the greater of (1) assumed management fees of three percent (3%) of Gross Income from Operations or (2) the actual management fees incurred, (B) assumed Replacement Reserve Fund contributions equal to $0.20 per square foot of gross leasable area at the Property, and (C) assumed Rollover Reserve Fund contributions equal to $0.70 per square foot of gross leasable area at the Property (adjusted proportionately for any period other than one year); and 4 -------------------------------------------------------------------------------- (b)                                 the denominator is the aggregate amount of principal and interest due and payable on the Loan and any Mezzanine Loan for such applicable period (assuming a thirty (30) year amortization schedule, unless otherwise provided herein). “Default” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default. “Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate or (b) five percent (5%) above the Interest Rate. “Defeasance Date” shall have the meaning set forth in Section 2.5.1(a)(i) hereof. “Defeasance Deposit” shall mean an amount equal to the remaining principal amount of the Note, the Defeasance Payment Amount, any costs and expenses incurred or to be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled Defeasance Payments and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the transfer of the Note or otherwise required to accomplish the agreements of Sections 2.4 and 2.5 hereof (including, without limitation, any fees and expenses of accountants, attorneys and the Rating Agencies incurred in connection therewith). “Defeasance Event” shall have the meaning set forth in Section 2.5.1(a) hereof. “Defeasance Expiration Date” shall mean the date that is two (2) years from the “startup day” within the meaning of Section 860G(a)(9) of the Code for the REMIC Trust holding the Note; provided that if Lender exercises its right to split the Note into two or more notes, the Defeasance Expiration Date shall mean the date that is two (2) years from the “start-up day” within the meaning of Section 860(G)(a)(9) of the Code for the REMIC Trust holding the last such note to be included in a Securitization. “Defeasance Payment Amount” shall mean the amount (if any) which, when added to the remaining principal amount of the Note will be sufficient to purchase U.S. Obligations providing the required Scheduled Defeasance Payments. “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, offering memorandum, offering circular, term sheet, road show presentation materials or other offering documents or marketing materials, in each case in preliminary or final form, used to offer Securities in connection with a Securitization. “Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least Fifty Million and 00/100 Dollars ($50,000,000.00) and subject to 5 -------------------------------------------------------------------------------- supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument. “Eligible Institution” shall mean a depository institution or trust company, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of (a) accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s or (b) any Letter of Credit, the long-term unsecured debt obligations of which are rated at least “A” by Fitch and S&P and “A2” by Moody’s). “Embargoed Person” shall have the meaning set forth in Section 4.1.35 hereof. “Environmental Indemnity” shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. “Event of Default” shall have the meaning set forth in Section 8.1(a) hereof. “Extraordinary Expense” shall have the meaning set forth in Section 5.1.11(e) hereof. “Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan. “Fitch” shall mean Fitch, Inc. “GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. “Governmental Authority” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. “Gross Income from Operations” shall mean for any period, all income, computed in accordance with GAAP or other accounting principles reasonably acceptable to Lender, derived from the ownership and operation of the Property from whatever source during such period, including, but not limited to, Rents from tenants in occupancy, open for business (except that tenants with ratings of “BBB” (or its equivalent) or better from the Rating Agencies need not be in occupancy or open for business) and paying full contractual rent without right of offset or credit, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, business interruption or other loss of income or rental insurance proceeds or other required pass-throughs and interest on Reserve Funds, if any, but excluding Rents which in the aggregate exceed 5% of the total Rents 6 -------------------------------------------------------------------------------- that are from month-to-month tenants or tenants that are included in any Bankruptcy Action (unless such tenant’s Lease has been affirmed in the related Bankruptcy Action), sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, Insurance Proceeds (other than business interruption or other loss of income or rental insurance), Awards, unforfeited security deposits, utility and other similar deposits and any disbursements to Borrower from the Reserve Funds, if any.  Gross income shall not be diminished as a result of the Mortgage or the creation of any intervening estate or interest in the Property or any part thereof. “Guarantor” shall mean Behringer Harvard REIT I, Inc., a Maryland corporation. “Guaranty” shall mean that certain Guaranty Agreement, dated as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Improvements” shall have the meaning set forth in the granting clause of the Mortgage. “Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (a) all indebtedness or liability of such Person (including, without limitation, amounts for borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed. “Indemnifying Person” shall mean each of Borrower, Principal and Guarantor. “Independent Director” shall mean a natural person serving as director of a corporation or manager of a limited liability company who is not at the time of initial appointment, or at any time while serving in such capacity, and has not been at any time during the preceding five (5) years:  (a) a stockholder, director, member, manager (with the exception of serving as the Independent Director of Borrower or Principal), trustee, officer, employee, partner, attorney or counsel of the Borrower or Principal or any Affiliate of either of them; (b) a creditor, customer, supplier or other Person who derives any of its purchases or revenues (other than fees for services as an Independent Director and for providing services incidental thereto) from its activities with the Borrower or Principal or any Affiliate of either of them; (c) a Person or other entity Controlling or under common Control with any Person excluded from serving as Independent Director under subparagraph (a) or (b); or (d) a member of the immediate family of any Person excluded from serving as Independent Director under subparagraph (a) or (b). 7 -------------------------------------------------------------------------------- “Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the date hereof delivered by Luce, Forward, Hamilton & Scripps LLP in connection with the Loan. “Insurance Premiums” shall have the meaning set forth in Section 6.1(b) hereof. “Insurance Proceeds” shall have the meaning set forth in Section 6.4(b) hereof. “Interest Rate” shall mean a rate of 5.41% per annum. “Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in the Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. “Lease Obligation Fund” shall have the meaning set forth in Section 7.6 hereof. “Lease Obligations” shall have the meaning set forth in Section 7.6 hereof. “Lease Termination Fee” shall mean any payment, fee or penalty paid by a Tenant in connection with any modification which shortens the term of the applicable Lease or reduces the Rent due thereunder, or the cancellation, surrender or termination of such Tenant’s Lease, whether by reason of such Tenant’s default or pursuant to the terms of such Lease. “Legal Requirements” shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof. “Lender” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns. “Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit with respect to which Borrower has no reimbursement obligations, as the same may be replaced, split, substituted, modified, amended, supplemented, assigned or otherwise restated from time to time (either an evergreen letter of credit or a letter of credit which does not expire until at least thirty (30) days after the Maturity Date or such earlier date as such Letter of Credit is no longer required pursuant to the terms of this Agreement) in favor of 8 -------------------------------------------------------------------------------- Lender and entitling Lender to draw thereon based solely on a statement purportedly executed by an officer of Lender stating that it has the right to draw thereon, and issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution, or if there are no domestic Eligible Institutions or U.S. agencies or branches of a foreign Eligible Institution then issuing letters of credit, then such letter of credit may be issued by a domestic bank, the long term unsecured debt rating of which is the highest such rating then given by the Rating Agency or Rating Agencies, as applicable, to a domestic commercial bank. “Licenses” shall have the meaning set forth in Section 4.1.22 hereof. “Lien” shall mean any mortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation, assignment (for security), security interest, or any other encumbrance, charge or transfer (for security) of, on or affecting Borrower, the Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances. “Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement and evidenced by the Note. “Loan Documents” shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Leases, the Environmental Indemnity, the O&M Agreement, the Assignment of Management Agreement, the Guaranty, the Cash Management Agreement, the Lockbox Agreement and all other documents pursuant to which any Person incurs, has incurred or assumes any obligation to or for the benefit of Lender in connection with the Loan. “Lockbox Account” shall have the meaning set forth in Section 2.7.1 hereof. “Lockbox Agreement” shall mean that certain Clearing Account Agreement dated the date hereof among Borrower, Lender and Lockbox Bank, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Lockbox Account. “Lockbox Bank” shall mean JPMorgan Chase, N.A., or any successor or permitted assigns thereof. “Manager” shall mean HPT Management Services LP, a Texas limited partnership, or, if the context requires, a Qualifying Manager who is managing the Property in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement. “Material Action” means, with respect to any Person, to file any insolvency or reorganization case or proceeding, to institute proceedings to have such Person be adjudicated bankrupt or insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under any law relating to relief from debts or the protection of debtors, to consent to the filing or institution of bankruptcy or insolvency proceedings against such Person, to file a petition seeking, or consent to, reorganization or relief with respect to such Person under any 9 -------------------------------------------------------------------------------- applicable federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for such Person or a substantial part of its property, to make any assignment for the benefit of creditors of such Person, to admit in writing such Person’s inability to pay its debts generally as they become due, or to affirmatively take action in furtherance of any of the foregoing. “Maturity Date” shall mean January 11, 2017, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise. “Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan. “Monthly Debt Service Payment Amount” shall mean (a) an amount equal to interest only on the outstanding principal balance of the Loan, calculated in accordance with the terms hereof, for each Payment Date commencing on the Payment Date occurring in February, 2007 through and including the Payment Date occurring in January, 2012 and (b) a constant monthly payment of $421,616.38 with respect to each Payment Date thereafter. “Moody’s” shall mean Moody’s Investors Service, Inc. “Mortgage” shall mean that certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt) and Security Agreement, dated the date hereof, executed and delivered by Borrower to Lender as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Net Cash Flow” shall mean, for any period, the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period. “Net Cash Flow Schedule” shall have the meaning set forth in Section 5.1.11(b) hereof. “Net Operating Income” shall mean the amount obtained by subtracting Operating Expenses from Gross Income from Operations. “Net Proceeds” shall have the meaning set forth in Section 6.4(b) hereof. “Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(b)(vi) hereof. “Net Proceeds Prepayment” shall have the meaning set forth in Section 6.4(e) hereof. 10 -------------------------------------------------------------------------------- “Note” shall mean that certain Promissory Note of even date herewith, in the principal amount of Seventy-Five Million and No/100 Dollars ($75,000,000), made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of the general partner or managing member of Borrower. “OFAC List” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf. “O&M Agreement” shall mean that certain Operations and Maintenance Agreement, dated as of the Closing Date, executed and delivered by Borrower in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. “Operating Expenses” shall mean the total of all expenditures, computed in accordance with GAAP or other accounting principles reasonably acceptable to Lender, of whatever kind relating to the operation, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including without limitation, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments, and other similar costs, but excluding depreciation, Debt Service, Capital Expenditures and contributions to the Reserve Funds. “Other Charges” shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof, but shall exclude charges for utilities payable directly by a Tenant. “Other Obligations” shall have the meaning as set forth in the Mortgage. “Patriot Act” shall mean the USA PATRIOT Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act, including Executive Order 13224 effective September 24, 2001. “Payment Date” shall mean the eleventh (11th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day. “Permitted Encumbrances” shall mean, with respect to the Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by 11 -------------------------------------------------------------------------------- any Governmental Authority not yet due or delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s reasonable discretion, which Permitted Encumbrances in the aggregate do not materially adversely affect the value or use of the Property or Borrower’s ability to repay the Loan. “Permitted Release Date” shall mean the date that is the third (3rd) anniversary of the first Payment Date. “Permitted Use” shall mean office and other appurtenant and related uses. “Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. “Personal Property” shall have the meaning set forth in the granting clause of the Mortgage. “Physical Conditions Report” shall mean a report prepared by a company satisfactory to Lender regarding the physical condition of the Property, satisfactory in form and substance to Lender in its sole discretion, which report shall, among other things, (a) confirm that the Property and its use complies, in all material respects, with all applicable Legal Requirements (including, without limitation, zoning, subdivision and building laws) and (b) to the extent available, include a copy of a final certificate of occupancy with respect to all Improvements on the Property. “Plan” shall have the meaning specified in Section 5.2.9(c) hereof. “Policies” shall have the meaning specified in Section 6.1(b) hereof. “Policy” shall have the meaning specified in Section 6.1(b) hereof. “Prepayment Rate” shall mean the yield calculated by the linear interpolation of the yields, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading “U.S. Government Securities/Treasury Constant Maturities” for the week ending prior to the date the payment or such proceeds are received, of U.S. Treasury constant maturities with maturity dates (one longer and one shorter) most nearly approximating the Maturity Date.  (In the event Release H.15 is no longer published, Lender shall select a comparable publication to determine the Treasury Rate). “Prime Rate” shall mean the prime rate reported in the Money Rates section of The Wall Street Journal.  In the event that The Wall Street Journal should cease or temporarily interrupt publication, the term “Prime Rate” shall mean the daily average prime rate published in another business newspaper, or business section of a newspaper, of national standing and general circulation chosen by Lender.  In the event that a prime rate is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall select a comparable interest rate index which is readily available and verifiable to Borrower but is beyond Lender’s control. 12 -------------------------------------------------------------------------------- “Principal” shall mean the Special Purpose Entity that is the general partner of Borrower, if Borrower is a limited partnership, or managing member of Borrower, if Borrower is a limited liability company. “Prohibited Person” shall mean any Person: (a)           a “blocked” person listed in the Annex, or otherwise subject to the provisions of, the Executive Order Nos. 12947, 13099 and 13224 on Terrorist Financing, effective September 24, 2001, and all modifications thereto or thereof, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Annex”); (b)           that is owned or controlled by, or acting for or on behalf of, any Person that is listed to the Annex, or is otherwise subject to the provisions of, the Annex; (c)           with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering law, including the Annex; (d)           who commits, threatens or conspires to commit or supports “terrorism” as defined in the Annex; (e)           that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other list of terrorists or terrorist organizations maintained pursuant to the Patriot Act; or (f)            who is an Affiliate of a Person listed above. “Property” shall mean the parcel of real property, the Improvements thereon and all personal property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clauses of the Mortgage and referred to therein as the “Property”. “Property Management Agreement” shall mean the management agreement entered into by and between Borrower and Manager, pursuant to which Manager is to provide management and other services with respect to the Property, or, if the context requires, the Replacement Management Agreement. “Provided Information” shall mean any and all financial and other information provided at any time by, or on behalf of, any Indemnifying Person with respect to any Property, Borrower, Principal, Guarantor and/or Manager. “Qualifying Manager” shall mean either (a) Manager; or (b) a reputable and experienced management organization reasonably satisfactory to Lender, which organization or its principals possess at least ten (10) years experience in managing properties similar in size, 13 -------------------------------------------------------------------------------- scope, use and value as the Property, provided, that Borrower shall have obtained (i) prior written confirmation from the applicable Rating Agencies that management of the Property by such Person will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof and (ii) if such Person is an Affiliate of Borrower, an Additional Insolvency Opinion.  Lender acknowledges that, notwithstanding anything herein to the contrary, HPT Management Services LP, a Texas limited partnership shall be deemed to be a Qualifying Manager. “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally recognized statistical rating agency which has been approved by Lender. “Regulation AB” shall mean Regulation AB under the Securities Act and the Exchange Act, as such Regulation may be amended from time to time. “Related Entities” shall have the meaning set forth in Section 5.2.10(e) hereof. “REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note. “Relevant Leasing Threshold” shall mean any Lease for an amount of leaseable square footage equal to one (1) full floor. “Relevant Restoration Threshold” shall mean Five Hundred Thousand and No/100 dollars ($500,000). “Rents” shall mean all rents (including, without limitation, percentage rents), rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, all other amounts payable as rent under any Lease or other agreement relating to the Property, including, without limitation, charges for electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy, telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges, sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, Operating Expenses or other reimbursables payable to Borrower (or to the Manager for the account of Borrower) under any Lease, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or its agents or employees (but excluding amounts paid by Borrower to its agents or employees) from any and all sources arising from or attributable to the Property, and proceeds, if any, from business interruption or other loss of income insurance. “Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement with a Qualifying Manager substantially in the same form and substance as the Property Management Agreement, or (ii) a management agreement with a Qualifying Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided, with respect to this subclause (ii), Lender, at its option, may require that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrade, withdrawal or qualification of the 14 -------------------------------------------------------------------------------- then current rating of the Securities or any class thereof and (b) an assignment of management agreement and subordination of management fees substantially in the form then used by Lender (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualifying Manager at Borrower’s expense. “Replacement Reserve Account” shall have the meaning set forth in Section 7.3.1 hereof. “Replacement Reserve Fund” shall have the meaning set forth in Section 7.3.1 hereof. “Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 7.3.1 hereof. “Replacements” shall have the meaning set forth in Section 7.3.1(a) hereof. “Required Amount” shall mean, at any time, an amount equal to not more than 200% of the annual premium paid by Borrower for its comprehensive “all-risk” insurance required under this Agreement for the immediately prior year, excluding the cost of any coverage for acts of terrorism previously provided by insurers (“Terrorism Insurance Cap”).  If the cost of terrorism insurance exceeds the Terrorism Insurance Cap, the Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to the Terrorism Insurance Cap. “Required Repairs” shall have the meaning set forth in Section 7.1 hereof. “Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Rollover Reserve Fund, the Lease Obligation Fund and any other escrow fund established by the Loan Documents. “Resizing Event” shall have the meaning set forth in Section 9.1.2 hereof. “Restoration” shall mean the repair and restoration of the Property after a Casualty or Condemnation as nearly as possible to the condition the Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender. “Restricted Party” shall mean collectively, (a) Borrower, Principal, any Guarantor, and any Affiliated Manager and (b) any shareholder, partner, member, non-member manager, any direct or indirect legal or beneficial owner of, Borrower, Principal, any Guarantor, any Affiliated Manager or any non-member manager. “Rollover Reserve Account” shall have the meaning set forth in Section 7.4.1 hereof. “Rollover Reserve Fund” shall have the meaning set forth in Section 7.4.1 hereof. 15 -------------------------------------------------------------------------------- “S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies. “Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial interest, whether direct or indirect. “Scheduled Defeasance Payments” shall have the meaning set forth in Section 2.5.1(b) hereof. “Securities” shall have the meaning set forth in Section 9.1 hereof. “Securitization” shall have the meaning set forth in Section 9.1 hereof. “Security Agreement” shall have the meaning set forth in Section 2.5.1(a)(vi) hereof. “Servicer” shall have the meaning set forth in Section 9.5 hereof. “Servicing Agreement” shall have the meaning set forth in Section 9.5 hereof. “Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof. “Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB under the Securities Act. “Special Purpose Entity” shall mean a corporation, limited partnership or limited liability company that, since the date of its formation and at all times on and after the date thereof, has complied with and shall at all times comply with the following requirements unless it has received either prior written consent to do otherwise from Lender or a permitted administrative agent thereof, or, while the Loan is securitized, prior written confirmation from each of the applicable Rating Agencies requiring such review that such noncompliance would not result in the requalification, withdrawal, or downgrade of the ratings of any Securities or any class thereof: (i)              is and shall be organized solely for the purpose of (A) in the case of Borrower, acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Property, entering into and performing its obligations under the Loan Documents with Lender, refinancing the Property in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (B) in the case of a Principal, acting as a general partner of the limited partnership that owns the Property or as member of the limited liability company that owns the Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; 16 -------------------------------------------------------------------------------- (ii)             has not engaged and shall not engage in any business unrelated to (A) the acquisition, development, ownership, management, operation or sale of the Property, or (B) in the case of a Principal, acting as general partner of the limited partnership that owns the Property or acting as a member of the limited liability company that owns the Property, as applicable; (iii)            has not owned and shall not own any real property other than, in the case of Borrower, the Property; (iv)           does not have, shall not have and at no time had any assets other than (A) in the case of Borrower, the Property and personal property necessary or incidental to its ownership and operation of the Property or (B) in the case of a Principal, its general partner interest in the limited partnership or the member interest in the limited liability company that owns the Property and personal property necessary or incidental to its ownership of such interests; (v)            has not engaged in, sought, consented or permitted to and shall not engage in, seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or merger, (B) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents, or (C) in the case of a Principal, any transfer of its partnership or membership interests; (vi)           shall not cause, consent to or permit any amendment of its limited partnership agreement, certificate of limited partnership, articles of incorporation, articles of organization, certificate of formation, operating agreement or other formation document or organizational document (as applicable) with respect to the matters set forth in this definition; (vii)          if such entity is a limited partnership, has and shall have at least one general partner and has and shall have, as its only general partners, Special Purpose Entities each of which (A) is a corporation or single-member Delaware limited liability company, (B) has one Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director), and (C) holds a direct interest as general partner in the limited partnership of not less than 0.5% (or 0.1%, if the limited partnership is a Delaware entity); (viii)         if such entity is a corporation, has and shall have at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director), and shall not cause or permit the board of directors of such entity to take any Material Action either with respect to itself or, if the corporation is a Principal, with respect to Borrower or any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless each Independent Director shall have participated in such vote and shall have voted in favor of such action; 17 -------------------------------------------------------------------------------- (ix)            if such entity is a limited liability company (other than a limited liability company meeting all of the requirements applicable to a single-member limited liability company set forth in this definition of “Special Purpose Entity”), has and shall have at least one (1) member that is a Special Purpose Entity, that is a corporation, that has at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director) and that directly owns at least one-half-of-one percent (0.5%) of the equity of the limited liability company (or 0.1% if the limited liability company is a Delaware entity); (x)             if such entity is a single-member limited liability company, (A) is and shall be a Delaware limited liability company, (B) has and shall have at least one (1) Independent Director (provided, however, if any Rating Agency requires two (2) Independent Directors, Borrower shall appoint, or cause the appointment of, a second Independent Director) serving as manager of such company, (C) shall not take any Material Action and shall not cause or permit the members or managers of such entity to take any Material Action, either with respect to itself or, if such company is a Principal, with respect to Borrower, in each case unless the required number of Independent Directors then serving as managers of the company shall have participated and consented in writing to such action, and (D) has and shall have either (1) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (2) a natural person or entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of such company; (xi)            has not and shall not (and, if such entity is (a) a limited liability company, has and shall have a limited liability agreement or an operating agreement, as applicable, (b) a limited partnership, has a limited partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its assets; (3) to the extent permitted by applicable law, amend its organizational documents with respect to the matters set forth in this definition without the consent of Lender; or (4) without the affirmative vote of each Independent Director of itself or the consent of the Principal and each Independent Director of a Principal that is a member or general partner of it:  (A) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding, institute any proceedings under any applicable insolvency law or otherwise seek relief under any laws relating to the relief from debts or the protection of debtors generally, file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the entity or a substantial portion of its property; (C) make an assignment for the benefit of the creditors of the entity; or (D) affirmatively take any action in furtherance of any of the foregoing; 18 -------------------------------------------------------------------------------- (xii)           has at all times been and shall at all times remain solvent and has paid and shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and has maintained and shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (xiii)          has not failed and shall not fail to correct any known misunderstanding regarding the separate identity of such entity; (xiv)          has maintained and shall maintain its bank accounts, books of account, books and records separate from those of any other Person and, to the extent that it is not a disregarded entity for tax purposes and is required to file tax returns under applicable law, has filed and shall file its own tax returns, except to the extent that it is required by law to file consolidated tax returns and, if it is a corporation, has not filed and shall not file a consolidated federal income tax return with any other corporation, except to the extent that it is required by law to file consolidated tax returns; (xv)           has maintained and shall maintain its own resolutions and agreements; (xvi)          has not commingled and shall not commingle its funds or assets with those of any other Person and has not participated and shall not participate in any cash management system with any other Person, except with respect to a custodial account maintained by the Manager on behalf of Affiliates of Borrower and, with respect to funds in such custodial account, has separately accounted, and will continue to separately account for, each item of income and expense applicable to the Property and Borrower; (xvii)         has held and shall hold its assets in its own name; (xviii)        [intentionally omitted]; (xix)          (A) has maintained and shall maintain its financial statements, accounting records and other entity documents separate from those of any other Person; (B) has shown and shall show, in its financial statements, its asset and liabilities separate and apart from those of any other Person; and (C) has not permitted and shall not permit its assets to be listed as assets on the financial statement of any of its Affiliates except as required by GAAP; provided, however, that any such consolidated financial statement contains a note indicating that the Special Purpose Entity’s separate assets and credit are not available to pay the debts of such Affiliate and that the Special Purpose Entity’s liabilities do not  constitute obligations of the consolidated entity; (xx)           has paid and shall pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained 19 -------------------------------------------------------------------------------- and shall maintain a sufficient number of employees in light of its contemplated business operations, which may be none; (xxi)          has observed and shall observe all partnership, corporate or limited liability company formalities, as applicable; (xxii)         [intentionally omitted] (xxiii)        shall have no Indebtedness other than (i) the Loan, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower, in amounts not to exceed three percent (3%) of the original principal amount of the Loan (other than management fees and commissions and liabilities that are reserved for) and, in the case of a general partner or managing member of a Person, liabilities arising by reason of its status as a general partner or managing member, which liabilities are paid not more than sixty (60) days after the later of the date incurred or invoiced (unless disputed in good faith with adequate reserves established therefor), are not evidenced by a note, and which amounts are normal and reasonable under the circumstances and (iii) such other liabilities that are expressly permitted pursuant to the Loan Documents; (xxiv)        has not assumed, guaranteed or become obligated and shall not assume or guarantee or become obligated for the debts of any other Person, has not held out and shall not hold out its credit as being available to satisfy the obligations of any other Person or has not pledged and shall not pledge its assets for the benefit of any other Person, in each case except as permitted pursuant to this Agreement; (xxv)         has not acquired and shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate (other than, in the case of Principal, its equity interest in Borrower); (xxvi)        has allocated and shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate; (xxvii)       has maintained and used and shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity’s agent, provided, however, that Manager, on behalf of such Person, may maintain and use invoices and checks bearing Manager’s name; (xxviii)      [intentionally omitted]; (xxix)         has held itself out and identified itself and shall hold itself out and identify itself as a separate and distinct entity under its own name or in a name 20 -------------------------------------------------------------------------------- franchised or licensed to it by an entity other than an Affiliate of Borrower and not as a division or part of any other Person, except for services rendered by Manager under the Property Management Agreement, so long as Manager holds itself out as an agent of Borrower (xxx)          has maintained and shall maintain its assets in such a manner that it shall not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (xxxi)         has not made and shall not make loans to any Person and has not held and shall not hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity); (xxxii)        has not identified and shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it; (xxxiii)       other than capital contributions and distributions permitted under the terms of its organizational documents, has not entered into or been a party to, and shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arm’s-length transaction with an unrelated third party; (xxxiv)      has not had and shall not have any obligation to, and has not indemnified and shall not indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Debt and shall not constitute a claim against it in the event that its cash flow is insufficient to pay the Debt; (xxxv)       if such entity is a corporation, to the extent permitted under applicable corporate law, has considered and shall consider the interests of its creditors in connection with all corporate actions that could reasonably be expected to affect such creditors; (xxxvi)      has not had and shall not have any of its obligations guaranteed by any Affiliate except as otherwise required in the Loan Documents; (xxxvii)     has not formed, acquired or held and shall not form, acquire or hold any subsidiary, except that a Principal may acquire and hold its interest in Borrower; (xxxviii)    has complied and shall comply with all of the terms and provisions contained in its organizational documents. (xxxix)       has conducted and shall conduct its business so that each of the assumptions made about it and each of the facts stated about it in the Insolvency Opinion are true; 21 -------------------------------------------------------------------------------- (xl)            has not permitted and shall not permit any Affiliate or constituent party independent access to its bank accounts; (xli)           is, has always been and shall continue to be duly formed, validly existing, and in good standing in the state of its incorporation or formation and in all other jurisdictions where it is required to be qualified to do business; and (xlii)          has no material contingent or actual obligations not related to the Property. “State” shall mean the State or Commonwealth in which the Property or any part thereof is located. “Successor Borrower” shall have the meaning set forth in Section 2.5.3 hereof. “Survey” shall mean a survey of the Property prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and containing a certification of such surveyor satisfactory to Lender. “Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2 hereof regardless of whether the funds held therein are held by Lender for the payment of Taxes or Insurance Premiums or both. “Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or part thereof. “Threshold Amount” shall have the meaning set forth in Section 5.1.21 hereof. “Tenant” shall mean any person or entity with a possessory right to all or any part of the Property pursuant to a Lease or other written agreement. “Title Insurance Policy” shall mean an ALTA mortgagee title insurance policy in the form acceptable to Lender (or, if the Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to the Property and insuring the lien of the Mortgage. “Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof. “Transferee” shall have the meaning set forth in Section 5.2.10(e)(iii) hereof. “Transferee’s Principals” shall mean collectively, (A) Transferee’s managing members, general partners or principal shareholders and (B) such other members, partners or shareholders which directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest in Transferee. “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State in which the Property is located; provided, however, that if by 22 -------------------------------------------------------------------------------- reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the collateral granted as security under the Loan is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State in which the Property is located (“Other UCC State”), the term “Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect in such Other UCC State for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority of such collateral. “U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended; provided that up to twenty-five percent (25%) of the U.S. obligations may be securities issued by quasi-governmental agencies rated at least AAA by the Rating Agencies provided that such securities are acceptable to the Rating Agencies. “Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%) of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all outstanding principal and interest on the Loan is paid on the Maturity Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid. Section 1.2             Principles of Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. II.                                     GENERAL TERMS SECTION 2.1             LOAN COMMITMENT; DISBURSEMENT TO BORROWER. 2.1.1        AGREEMENT TO LEND AND BORROW. SUBJECT TO AND UPON THE TERMS AND CONDITIONS SET FORTH HEREIN, LENDER HEREBY AGREES TO MAKE AND BORROWER HEREBY AGREES TO ACCEPT THE LOAN ON THE CLOSING DATE. 23 -------------------------------------------------------------------------------- 2.1.2        SINGLE DISBURSEMENT TO BORROWER. BORROWER MAY REQUEST AND RECEIVE ONLY ONE (1) BORROWING HEREUNDER IN RESPECT OF THE LOAN AND ANY AMOUNT BORROWED AND REPAID HEREUNDER IN RESPECT OF THE LOAN MAY NOT BE REBORROWED. 2.1.3        THE NOTE, MORTGAGE AND LOAN DOCUMENTS. THE LOAN SHALL BE EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE, THE ASSIGNMENT OF LEASES AND THE OTHER LOAN DOCUMENTS. 2.1.4        USE OF PROCEEDS. BORROWER SHALL USE THE PROCEEDS OF THE LOAN TO (A) ACQUIRE THE PROPERTY AND/OR REPAY AND DISCHARGE ANY EXISTING LOANS RELATING TO THE PROPERTY, (B) PAY ALL PAST-DUE BASIC CARRYING COSTS, IF ANY, WITH RESPECT TO THE PROPERTY, (C) MAKE DEPOSITS INTO THE RESERVE FUNDS ON THE CLOSING DATE IN THE AMOUNTS PROVIDED HEREIN, (D) PAY COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE CLOSING OF THE LOAN, AS APPROVED BY LENDER, (E) FUND ANY WORKING CAPITAL REQUIREMENTS OF THE PROPERTY AND (F) DISTRIBUTE THE BALANCE, IF ANY, TO BORROWER. SECTION 2.2             INTEREST RATE. 2.2.1        INTEREST RATE. INTEREST ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN SHALL ACCRUE FROM (AND INCLUDE) THE CLOSING DATE TO BUT EXCLUDING THE MATURITY DATE AT THE INTEREST RATE (UNLESS THE DEFAULT RATE SHALL BE IN EFFECT). 2.2.2        INTEREST CALCULATION. INTEREST ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN SHALL BE CALCULATED BY MULTIPLYING (A) THE ACTUAL NUMBER OF DAYS ELAPSED IN THE PERIOD FOR WHICH THE CALCULATION IS BEING MADE BY (B) A DAILY RATE BASED ON A THREE HUNDRED SIXTY (360) DAY YEAR BY (C) THE OUTSTANDING PRINCIPAL BALANCE. 2.2.3        DEFAULT RATE. IN THE EVENT THAT, AND FOR SO LONG AS, ANY EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AND, TO THE EXTENT PERMITTED BY LAW, ALL ACCRUED AND UNPAID INTEREST IN RESPECT OF THE LOAN AND ANY OTHER AMOUNTS DUE PURSUANT TO THE LOAN DOCUMENTS, SHALL ACCRUE INTEREST AT THE DEFAULT RATE, CALCULATED FROM THE DATE SUCH PAYMENT WAS DUE WITHOUT REGARD TO ANY GRACE OR CURE PERIODS CONTAINED HEREIN. 2.2.4        USURY SAVINGS. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS ARE SUBJECT TO THE EXPRESS CONDITION THAT AT NO TIME SHALL BORROWER BE OBLIGATED OR REQUIRED TO PAY INTEREST ON THE PRINCIPAL BALANCE OF THE LOAN AT A RATE WHICH COULD SUBJECT LENDER TO EITHER CIVIL OR CRIMINAL LIABILITY AS A RESULT OF BEING IN EXCESS OF THE MAXIMUM LEGAL RATE.  IF, BY THE TERMS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, BORROWER IS AT ANY TIME REQUIRED OR OBLIGATED TO PAY INTEREST ON THE PRINCIPAL BALANCE DUE HEREUNDER AT A RATE IN EXCESS OF THE MAXIMUM LEGAL RATE, THE INTEREST RATE OR THE DEFAULT RATE, AS THE CASE MAY BE, SHALL BE DEEMED TO BE IMMEDIATELY REDUCED TO THE MAXIMUM LEGAL RATE AND ALL PREVIOUS PAYMENTS IN EXCESS OF THE MAXIMUM LEGAL RATE SHALL BE DEEMED TO HAVE BEEN PAYMENTS IN REDUCTION OF PRINCIPAL AND NOT ON ACCOUNT OF THE INTEREST DUE HEREUNDER.  ALL SUMS PAID OR AGREED TO BE PAID TO LENDER FOR THE USE, FORBEARANCE, OR DETENTION OF THE SUMS DUE UNDER THE LOAN, SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM OF THE LOAN UNTIL PAYMENT IN FULL SO THAT THE RATE OR AMOUNT OF INTEREST ON ACCOUNT OF THE LOAN DOES 24 -------------------------------------------------------------------------------- NOT EXCEED THE MAXIMUM LEGAL RATE OF INTEREST FROM TIME TO TIME IN EFFECT AND APPLICABLE TO THE LOAN FOR SO LONG AS THE LOAN IS OUTSTANDING. SECTION 2.3             LOAN PAYMENT. 2.3.1        MONTHLY DEBT SERVICE PAYMENTS.  BORROWER SHALL PAY TO LENDER (A) ON THE CLOSING DATE, AN AMOUNT EQUAL TO INTEREST ONLY ON THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN FROM THE CLOSING DATE THROUGH AND INCLUDING THE TENTH (10TH) DAY OF THE MONTH FOLLOWING THE MONTH IN WHICH THE CLOSING DATE OCCURS (UNLESS THE CLOSING DATE IS THE ELEVENTH (11TH) DAY OF THE MONTH, IN WHICH CASE NO SUCH INTEREST ONLY PAYMENT SHALL BE DUE), AND (B) ON EACH PAYMENT DATE THEREAFTER UP TO AND INCLUDING THE MATURITY DATE, BORROWER SHALL MAKE A PAYMENT TO LENDER IN AN AMOUNT EQUAL TO THE MONTHLY DEBT SERVICE PAYMENT AMOUNT, WHICH PAYMENTS SHALL BE APPLIED TO ACCRUED AND UNPAID INTEREST. 2.3.2        PAYMENTS GENERALLY.  THE FIRST (1ST) INTEREST ACCRUAL PERIOD HEREUNDER SHALL COMMENCE ON AND INCLUDE THE CLOSING DATE AND SHALL END ON AND INCLUDE JANUARY 10, 2007.  EACH INTEREST ACCRUAL PERIOD THEREAFTER SHALL COMMENCE ON THE ELEVENTH (11TH) DAY OF EACH CALENDAR MONTH DURING THE TERM OF THIS AGREEMENT AND SHALL END ON AND INCLUDE THE TENTH (10TH) DAY OF THE FOLLOWING CALENDAR MONTH.  FOR PURPOSES OF MAKING PAYMENTS HEREUNDER, BUT NOT FOR PURPOSES OF CALCULATING INTEREST ACCRUAL PERIODS, IF THE DAY ON WHICH SUCH PAYMENT IS DUE IS NOT A BUSINESS DAY, THEN AMOUNTS DUE ON SUCH DATE SHALL BE DUE ON THE IMMEDIATELY PRECEDING BUSINESS DAY AND WITH RESPECT TO PAYMENTS OF PRINCIPAL DUE ON THE MATURITY DATE, INTEREST SHALL BE PAYABLE AT THE INTEREST RATE OR THE DEFAULT RATE, AS THE CASE MAY BE, THROUGH AND INCLUDING THE DAY IMMEDIATELY PRECEDING SUCH MATURITY DATE.  ALL AMOUNTS DUE UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE PAYABLE WITHOUT SETOFF, COUNTERCLAIM, DEFENSE OR ANY OTHER DEDUCTION WHATSOEVER. 2.3.3        PAYMENT ON MATURITY DATE.  BORROWER SHALL PAY TO LENDER ON THE MATURITY DATE THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN, ALL ACCRUED AND UNPAID INTEREST AND ALL OTHER AMOUNTS DUE HEREUNDER AND UNDER THE NOTE, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS. 2.3.4        LATE PAYMENT CHARGE.  IF ANY PRINCIPAL, INTEREST OR ANY OTHER SUMS DUE UNDER THE LOAN DOCUMENTS (EXCLUDING PRINCIPAL DUE ON THE MATURITY DATE) ARE NOT PAID BY BORROWER ON OR PRIOR TO THE DATE ON WHICH IT IS DUE, BORROWER SHALL PAY TO LENDER UPON DEMAND AN AMOUNT EQUAL TO THE LESSER OF FIVE PERCENT (5%) OF SUCH UNPAID SUM OR THE MAXIMUM LEGAL RATE IN ORDER TO DEFRAY THE EXPENSE INCURRED BY LENDER IN HANDLING AND PROCESSING SUCH DELINQUENT PAYMENT AND TO COMPENSATE LENDER FOR THE LOSS OF THE USE OF SUCH DELINQUENT PAYMENT.  ANY SUCH AMOUNT SHALL BE SECURED BY THE MORTGAGE AND THE OTHER LOAN DOCUMENTS TO THE EXTENT PERMITTED BY APPLICABLE LAW. 2.3.5        METHOD AND PLACE OF PAYMENT.  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, ALL PAYMENTS AND PREPAYMENTS UNDER THIS AGREEMENT AND THE NOTE SHALL BE MADE TO LENDER NOT LATER THAN 11:00 A.M., NEW YORK CITY TIME, ON THE DATE WHEN DUE AND SHALL BE MADE IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA IN IMMEDIATELY AVAILABLE FUNDS AT LENDER’S OFFICE OR AS OTHERWISE DIRECTED BY LENDER, AND ANY FUNDS RECEIVED BY LENDER AFTER SUCH TIME SHALL, FOR ALL PURPOSES HEREOF, BE DEEMED TO HAVE BEEN PAID ON THE NEXT SUCCEEDING BUSINESS DAY. 25 -------------------------------------------------------------------------------- SECTION 2.4             PREPAYMENTS. 2.4.1        VOLUNTARY PREPAYMENTS.  EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.4.2, UNLESS THE LOAN IS PREPAID IN FULL AND SUCH PREPAYMENT IS ACCOMPANIED BY A PAYMENT EQUAL TO THE YIELD MAINTENANCE PREMIUM, BORROWER SHALL NOT HAVE THE RIGHT TO PREPAY THE LOAN IN WHOLE OR IN PART PRIOR TO THE MATURITY DATE (THE “LOCKOUT EXPIRATION DATE”); PROVIDED THAT ON THE PAYMENT DATE THREE (3) MONTHS PRIOR TO THE MATURITY DATE, OR ON ANY PAYMENT DATE THEREAFTER (OR ON ANY DATE THEREAFTER PROVIDED THAT INTEREST IS PAID THROUGH THE NEXT PAYMENT DATE), BORROWER MAY, AT ITS OPTION AND UPON THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO LENDER PREPAY THE DEBT IN WHOLE WITHOUT PAYMENT OF THE YIELD MAINTENANCE PREMIUM.  IF FOR ANY REASON BORROWER PREPAYS THE LOAN ON A DATE OTHER THAN A PAYMENT DATE, BORROWER SHALL PAY LENDER, IN ADDITION TO THE DEBT, ALL INTEREST WHICH WOULD HAVE ACCRUED ON THE AMOUNT OF THE LOAN THROUGH AND INCLUDING THE PAYMENT DATE NEXT OCCURRING FOLLOWING THE DATE OF SUCH PREPAYMENT. 2.4.2        MANDATORY PREPAYMENTS.  ON THE NEXT OCCURRING PAYMENT DATE FOLLOWING THE DATE ON WHICH LENDER ACTUALLY RECEIVES ANY NET PROCEEDS, IF LENDER IS NOT OBLIGATED OR DOES NOT ELECT TO MAKE SUCH NET PROCEEDS AVAILABLE TO BORROWER FOR THE RESTORATION OF THE PROPERTY OR OTHERWISE REMIT SUCH NET PROCEEDS TO BORROWER PURSUANT TO SECTION 6.4 HEREOF, BORROWER SHALL PREPAY OR AUTHORIZE LENDER TO APPLY SUCH NET PROCEEDS AS A PREPAYMENT OF ALL OR A PORTION OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN TOGETHER WITH ACCRUED INTEREST AND ANY OTHER SUMS DUE HEREUNDER IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF SUCH NET PROCEEDS; PROVIDED, HOWEVER, IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, LENDER MAY APPLY SUCH NET PROCEEDS TO THE DEBT (UNTIL PAID IN FULL) IN ANY ORDER OR PRIORITY IN ITS SOLE DISCRETION.  OTHER THAN DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, NO YIELD MAINTENANCE PREMIUM SHALL BE DUE IN CONNECTION WITH ANY PREPAYMENT MADE PURSUANT TO THIS SECTION 2.4.2. 2.4.3        PREPAYMENTS AFTER DEFAULT.  IF DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, PAYMENT OF ALL OR ANY PART OF THE DEBT IS TENDERED BY BORROWER OR OTHERWISE RECOVERED BY LENDER, SUCH TENDER OR RECOVERY SHALL BE (A) MADE ON THE NEXT OCCURRING PAYMENT DATE TOGETHER WITH THE MONTHLY DEBT SERVICE PAYMENT AND (B) DEEMED A VOLUNTARY PREPAYMENT BY BORROWER IN VIOLATION OF THE PROHIBITION AGAINST PREPAYMENT SET FORTH IN SECTION 2.4.1 HEREOF AND BORROWER SHALL PAY, IN ADDITION TO THE DEBT, AN AMOUNT EQUAL TO THE YIELD MAINTENANCE PREMIUM. SECTION 2.5             DEFEASANCE. 2.5.1        VOLUNTARY DEFEASANCE.  (A)  PROVIDED NO EVENT OF DEFAULT SHALL THEN EXIST, BORROWER SHALL HAVE THE RIGHT AT ANY TIME AFTER THE EARLIER TO OCCUR OF THE DEFEASANCE EXPIRATION DATE AND THE PERMITTED RELEASE DATE TO VOLUNTARILY DEFEASE THE LOAN IN FULL BY AND UPON SATISFACTION OF THE FOLLOWING CONDITIONS (SUCH EVENT BEING A “DEFEASANCE EVENT”): (I)            BORROWER SHALL PROVIDE NOT LESS THAN THIRTY (30) DAYS PRIOR WRITTEN NOTICE TO LENDER SPECIFYING THE PAYMENT DATE (THE “DEFEASANCE DATE”) ON WHICH THE DEFEASANCE EVENT IS TO OCCUR; (II)           [INTENTIONALLY OMITTED]; 26 -------------------------------------------------------------------------------- (III)          BORROWER SHALL PAY TO LENDER ALL OTHER SUMS, NOT INCLUDING SCHEDULED INTEREST OR PRINCIPAL PAYMENTS, THEN DUE UNDER THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS; (IV)          BORROWER SHALL PAY TO LENDER THE REQUIRED DEFEASANCE DEPOSIT FOR THE DEFEASANCE EVENT; (V)           [INTENTIONALLY OMITTED]; (VI)          BORROWER SHALL EXECUTE AND DELIVER A PLEDGE AND SECURITY AGREEMENT, IN FORM AND SUBSTANCE THAT WOULD BE REASONABLY SATISFACTORY TO A PRUDENT LENDER CREATING A FIRST PRIORITY LIEN ON THE DEFEASANCE DEPOSIT AND THE U.S. OBLIGATIONS PURCHASED WITH THE DEFEASANCE DEPOSIT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 2.5 (THE “SECURITY AGREEMENT”); (VII)         BORROWER SHALL DELIVER AN OPINION OF COUNSEL FOR BORROWER THAT IS STANDARD IN COMMERCIAL LENDING TRANSACTIONS AND SUBJECT ONLY TO CUSTOMARY QUALIFICATIONS, ASSUMPTIONS AND EXCEPTIONS OPINING, AMONG OTHER THINGS, THAT BORROWER HAS LEGALLY AND VALIDLY TRANSFERRED AND ASSIGNED THE U.S. OBLIGATIONS AND ALL OBLIGATIONS, RIGHTS AND DUTIES UNDER AND TO THE NOTE TO THE SUCCESSOR BORROWER, THAT LENDER HAS A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE DEFEASANCE DEPOSIT AND THE U.S. OBLIGATIONS DELIVERED BY BORROWER AND THAT ANY REMIC TRUST FORMED PURSUANT TO A SECURITIZATION WILL NOT FAIL TO MAINTAIN ITS STATUS AS A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” WITHIN THE MEANING OF SECTION 860D OF THE CODE AS A RESULT OF SUCH DEFEASANCE EVENT; (VIII)        IF REQUIRED PURSUANT TO THE APPLICABLE POOLING AND SERVICING AGREEMENT OR BY THE RATING AGENCIES, BORROWER SHALL DELIVER CONFIRMATION IN WRITING FROM EACH OF THE APPLICABLE RATING AGENCIES TO THE EFFECT THAT SUCH RELEASE WILL NOT RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE RESPECTIVE RATINGS IN EFFECT IMMEDIATELY PRIOR TO SUCH DEFEASANCE EVENT FOR THE SECURITIES ISSUED IN CONNECTION WITH THE SECURITIZATION WHICH ARE THEN OUTSTANDING.  IF REQUIRED BY THE APPLICABLE RATING AGENCIES, BORROWER SHALL ALSO DELIVER OR CAUSE TO BE DELIVERED AN ADDITIONAL INSOLVENCY OPINION WITH RESPECT TO THE SUCCESSOR BORROWER IN FORM AND SUBSTANCE SATISFACTORY TO LENDER AND THE APPLICABLE RATING AGENCIES; (IX)           BORROWER SHALL DELIVER AN OFFICER’S CERTIFICATE CERTIFYING THAT THE REQUIREMENTS SET FORTH IN THIS SECTION 2.5.1(A) HAVE BEEN SATISFIED; (X)            BORROWER SHALL DELIVER A CERTIFICATE OF BORROWER’S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT CERTIFYING THAT THE U.S. OBLIGATIONS PURCHASED WITH THE DEFEASANCE DEPOSIT GENERATE MONTHLY AMOUNTS EQUAL TO OR GREATER THAN THE SCHEDULED DEFEASANCE PAYMENTS; (XI)           BORROWER SHALL DELIVER SUCH OTHER CERTIFICATES, DOCUMENTS OR INSTRUMENTS AS LENDER MAY REASONABLY REQUEST; AND 27 -------------------------------------------------------------------------------- (XII)          BORROWER SHALL PAY ALL COSTS AND EXPENSES OF LENDER INCURRED IN CONNECTION WITH THE DEFEASANCE EVENT, INCLUDING (A) ANY COSTS AND EXPENSES ASSOCIATED WITH A RELEASE OF THE LIEN OF THE MORTGAGE AS PROVIDED IN SECTION 2.6 HEREOF, (B) REASONABLE ATTORNEYS’ FEES AND EXPENSES INCURRED IN CONNECTION WITH THE DEFEASANCE EVENT, (C) THE COSTS AND EXPENSES OF THE RATING AGENCIES, (D) ANY REVENUE, DOCUMENTARY STAMP OR INTANGIBLE TAXES OR ANY OTHER TAX OR CHARGE DUE IN CONNECTION WITH THE TRANSFER OF THE NOTE, OR OTHERWISE REQUIRED TO ACCOMPLISH THE DEFEASANCE AND (E) THE COSTS AND EXPENSES OF SERVICER AND ANY TRUSTEE, INCLUDING REASONABLE ATTORNEYS’ FEES. (B)           IN CONNECTION WITH THE DEFEASANCE EVENT, BORROWER SHALL USE THE DEFEASANCE DEPOSIT TO PURCHASE U.S. OBLIGATIONS WHICH PROVIDE PAYMENTS ON OR PRIOR TO, BUT AS CLOSE AS POSSIBLE TO, ALL SUCCESSIVE SCHEDULED PAYMENT DATES AFTER THE DEFEASANCE DATE UPON WHICH INTEREST AND PRINCIPAL PAYMENTS ARE REQUIRED UNDER THIS AGREEMENT AND THE NOTE, AND IN AMOUNTS EQUAL TO THE SCHEDULED PAYMENTS DUE ON SUCH PAYMENT DATES UNDER THIS AGREEMENT AND THE NOTE (INCLUDING, WITHOUT LIMITATION, SCHEDULED PAYMENTS OF PRINCIPAL, INTEREST, SERVICING FEES (IF ANY), AND ANY OTHER AMOUNTS DUE UNDER THE LOAN DOCUMENTS ON SUCH DATES) AND ASSUMING THE NOTE IS PAID IN FULL ON THE MATURITY DATE (THE “SCHEDULED DEFEASANCE PAYMENTS”).  ANY PORTION OF THE DEFEASANCE DEPOSIT IN EXCESS OF THE AMOUNT NECESSARY TO PURCHASE THE U.S. OBLIGATIONS REQUIRED BY THIS SECTION 2.5 AND SATISFY BORROWER’S OTHER OBLIGATIONS UNDER THIS SECTION 2.5 AND SECTION 2.6 SHALL BE REMITTED TO BORROWER. 2.5.2        COLLATERAL.  EACH OF THE U.S. OBLIGATIONS THAT ARE PART OF THE DEFEASANCE COLLATERAL SHALL BE DULY ENDORSED BY THE HOLDER THEREOF AS DIRECTED BY LENDER OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER IN FORM AND SUBSTANCE THAT WOULD BE SATISFACTORY TO A PRUDENT LENDER (INCLUDING, WITHOUT LIMITATION, SUCH INSTRUMENTS AS MAY BE REQUIRED BY THE DEPOSITORY INSTITUTION HOLDING SUCH SECURITIES OR BY THE ISSUER THEREOF, AS THE CASE MAY BE, TO EFFECTUATE BOOK ENTRY TRANSFERS AND PLEDGES THROUGH THE BOOK ENTRY FACILITIES OF SUCH INSTITUTION) IN ORDER TO PERFECT UPON THE DELIVERY OF THE DEFEASANCE COLLATERAL A FIRST PRIORITY SECURITY INTEREST THEREIN IN FAVOR OF LENDER IN CONFORMITY WITH ALL APPLICABLE STATE AND FEDERAL LAWS GOVERNING THE GRANTING OF SUCH SECURITY INTERESTS. 2.5.3        SUCCESSOR BORROWER.  IN CONNECTION WITH ANY DEFEASANCE EVENT, BORROWER MAY AT ITS OPTION, OR IF SO REQUIRED BY THE APPLICABLE RATING AGENCIES SHALL, ESTABLISH OR DESIGNATE A SUCCESSOR ENTITY (THE “SUCCESSOR BORROWER”) ACCEPTABLE TO LENDER, WHICH SHALL BE A SPECIAL PURPOSE ENTITY, AND BORROWER SHALL TRANSFER AND ASSIGN ALL OBLIGATIONS, RIGHTS AND DUTIES UNDER AND TO THE NOTE TOGETHER WITH THE PLEDGED U.S. OBLIGATIONS TO SUCH SUCCESSOR BORROWER.  SUCH SUCCESSOR BORROWER SHALL ASSUME THE OBLIGATIONS UNDER THE NOTE AND THE SECURITY AGREEMENT AND BORROWER SHALL BE RELIEVED OF ITS OBLIGATIONS UNDER SUCH DOCUMENTS.  BORROWER SHALL PAY ONE THOUSAND AND 00/100 DOLLARS ($1,000) TO ANY SUCH SUCCESSOR BORROWER AS CONSIDERATION FOR ASSUMING THE OBLIGATIONS UNDER THE NOTE AND THE SECURITY AGREEMENT.  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO OTHER ASSUMPTION FEE SHALL BE PAYABLE UPON A TRANSFER OF THE NOTE IN ACCORDANCE WITH THIS SECTION 2.5.3, BUT BORROWER SHALL PAY ALL COSTS AND EXPENSES INCURRED BY LENDER, INCLUDING LENDER’S ATTORNEYS’ FEES AND EXPENSES AND ANY FEES AND EXPENSES OF ANY RATING AGENCIES, INCURRED IN CONNECTION THEREWITH. 28 -------------------------------------------------------------------------------- SECTION 2.6             RELEASE OF PROPERTY. EXCEPT AS SET FORTH IN THIS SECTION 2.6 OR A PREPAYMENT OF THE ENTIRE LOAN PURSUANT TO SECTION 2.4, NO REPAYMENT, PREPAYMENT OR DEFEASANCE OF ALL OR ANY PORTION OF THE LOAN SHALL CAUSE, GIVE RISE TO A RIGHT TO REQUIRE, OR OTHERWISE RESULT IN, THE RELEASE OF THE LIEN OF THE MORTGAGE ON THE PROPERTY.  IF THE ENTIRE LOAN HAS BEEN PREPAID PURSUANT TO SECTION 2.4, OR AFTER THE REQUIREMENTS OF SECTION 2.6.1 HAVE BEEN SATISFIED, THE PROPERTY SHALL BE RELEASED FROM THE LIEN OF THE MORTGAGE. 2.6.1        RELEASE OF PROPERTY (A)           IF BORROWER HAS ELECTED TO DEFEASE THE ENTIRE LOAN AND THE REQUIREMENTS OF SECTION 2.5 AND THIS SECTION 2.6 HAVE BEEN SATISFIED, THE PROPERTY SHALL BE RELEASED FROM THE LIEN OF THE MORTGAGE. (B)           IN CONNECTION WITH THE RELEASE OF THE MORTGAGE, BORROWER SHALL SUBMIT TO LENDER, NOT LESS THAN THIRTY (30) DAYS PRIOR TO THE DEFEASANCE DATE, A RELEASE OF LIEN (AND RELATED LOAN DOCUMENTS) FOR THE PROPERTY FOR EXECUTION BY LENDER.  SUCH RELEASE SHALL BE IN A FORM APPROPRIATE IN THE JURISDICTION IN WHICH THE PROPERTY IS LOCATED AND THAT WOULD BE SATISFACTORY TO A PRUDENT LENDER AND CONTAINS STANDARD PROVISIONS, IF ANY, PROTECTING THE RIGHTS OF THE RELEASING LENDER.  IN ADDITION, BORROWER SHALL PROVIDE ALL OTHER DOCUMENTATION LENDER REASONABLY REQUIRES TO BE DELIVERED BY BORROWER IN CONNECTION WITH SUCH RELEASE, TOGETHER WITH AN OFFICER’S CERTIFICATE CERTIFYING THAT SUCH DOCUMENTATION (I) IS IN COMPLIANCE WITH ALL LEGAL REQUIREMENTS, AND (II) WILL EFFECT SUCH RELEASES IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 2.6.2        RELEASE ON PAYMENT IN FULL.  LENDER SHALL, UPON PAYMENT IN FULL OF ALL PRINCIPAL AND INTEREST DUE ON THE LOAN AND ALL OTHER AMOUNTS DUE AND PAYABLE UNDER THE LOAN DOCUMENTS IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE NOTE AND THIS AGREEMENT, RELEASE THE LIEN OF THE MORTGAGE ON THE PROPERTY.  BORROWER SHALL PAY TO LENDER ALL REASONABLE ADMINISTRATIVE AND LEGAL COSTS INCURRED IN CONNECTION WITH SUCH RELEASE. SECTION 2.7             LOCKBOX ACCOUNT/CASH MANAGEMENT. 2.7.1        LOCKBOX ACCOUNT. (A)           DURING THE TERM OF THE LOAN, BORROWER SHALL ESTABLISH AND MAINTAIN AN ACCOUNT (THE “LOCKBOX ACCOUNT”) WITH LOCKBOX BANK IN TRUST FOR THE BENEFIT OF LENDER, WHICH LOCKBOX ACCOUNT SHALL BE UNDER THE SOLE DOMINION AND CONTROL OF LENDER.  THE LOCKBOX ACCOUNT SHALL BE ENTITLED “BEHRINGER HARVARD ELDRIDGE PLACE LP, AS BORROWER, AND WACHOVIA BANK, NATIONAL ASSOCIATION, AS LENDER, PURSUANT TO LOAN AGREEMENT DATED AS OF DECEMBER    , 2006 – LOCKBOX ACCOUNT”.  BORROWER HEREBY GRANTS TO LENDER A FIRST-PRIORITY SECURITY INTEREST IN THE LOCKBOX ACCOUNT AND ALL DEPOSITS AT ANY TIME CONTAINED THEREIN AND THE PROCEEDS THEREOF AND WILL TAKE ALL ACTIONS NECESSARY TO MAINTAIN IN FAVOR OF LENDER A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE LOCKBOX ACCOUNT, INCLUDING, WITHOUT LIMITATION, EXECUTING AND FILING UCC-1 FINANCING STATEMENTS AND CONTINUATIONS THEREOF.  LENDER AND SERVICER SHALL HAVE THE SOLE RIGHT TO MAKE WITHDRAWALS FROM THE LOCKBOX ACCOUNT AND ALL COSTS AND EXPENSES FOR ESTABLISHING AND MAINTAINING THE LOCKBOX ACCOUNT SHALL BE PAID BY BORROWER.  ALL MONIES NOW OR HEREAFTER DEPOSITED INTO THE LOCKBOX ACCOUNT SHALL BE DEEMED ADDITIONAL SECURITY FOR THE DEBT. 29 -------------------------------------------------------------------------------- (B)           BORROWER SHALL, OR SHALL CAUSE MANAGER TO, DELIVER IRREVOCABLE WRITTEN INSTRUCTIONS TO ALL TENANTS UNDER LEASES TO DELIVER ALL RENTS PAYABLE THEREUNDER DIRECTLY TO THE LOCKBOX ACCOUNT.  BORROWER SHALL, AND SHALL CAUSE MANAGER TO, DEPOSIT ALL AMOUNTS RECEIVED BY BORROWER OR MANAGER CONSTITUTING RENTS INTO THE LOCKBOX ACCOUNT WITHIN ONE (1) BUSINESS DAY AFTER RECEIPT THEREOF. (C)           BORROWER SHALL OBTAIN FROM LOCKBOX BANK ITS AGREEMENT TO TRANSFER TO THE CASH MANAGEMENT ACCOUNT IN IMMEDIATELY AVAILABLE FUNDS BY FEDERAL WIRE TRANSFER ALL AMOUNTS ON DEPOSIT IN THE LOCKBOX ACCOUNT ONCE EVERY BUSINESS DAY DURING THE CONTINUANCE OF A CASH SWEEP PERIOD. (D)           UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY, IN ADDITION TO ANY AND ALL OTHER RIGHTS AND REMEDIES AVAILABLE TO LENDER, APPLY ANY SUMS THEN PRESENT IN THE LOCKBOX ACCOUNT TO THE PAYMENT OF THE DEBT IN ANY ORDER IN ITS SOLE DISCRETION. (E)           THE LOCKBOX ACCOUNT SHALL BE AN ELIGIBLE ACCOUNT AND SHALL NOT BE COMMINGLED WITH OTHER MONIES HELD BY BORROWER OR LOCKBOX BANK. (F)            BORROWER SHALL NOT FURTHER PLEDGE, ASSIGN OR GRANT ANY SECURITY INTEREST IN THE LOCKBOX ACCOUNT OR THE MONIES DEPOSITED THEREIN OR PERMIT ANY LIEN OR ENCUMBRANCE TO ATTACH THERETO, OR ANY LEVY TO BE MADE THEREON, OR ANY UCC-1 FINANCING STATEMENTS, EXCEPT THOSE NAMING LENDER AS THE SECURED PARTY, TO BE FILED WITH RESPECT THERETO, AND EXCEPT FOR THE RIGHTS OF THE LOCKBOX BANK UNDER THE LOCKBOX AGREEMENT. (G)           BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE LOCKBOX ACCOUNT AND/OR THE LOCKBOX AGREEMENT (UNLESS ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER) OR THE PERFORMANCE OF THE OBLIGATIONS FOR WHICH THE LOCKBOX ACCOUNT WAS ESTABLISHED. 2.7.2        CASH MANAGEMENT ACCOUNT. (A)           PURSUANT TO THE CASH MANAGEMENT AGREEMENT, LENDER HAS ESTABLISHED AN ACCOUNT (THE “CASH MANAGEMENT ACCOUNT”) WITH A FINANCIAL INSTITUTION CHOSEN BY LENDER IN ITS DISCRETION, WHICH CASH MANAGEMENT ACCOUNT SHALL BE UNDER THE SOLE DOMINION AND CONTROL OF LENDER.  BORROWER HEREBY GRANTS TO LENDER A FIRST PRIORITY SECURITY INTEREST IN THE CASH MANAGEMENT ACCOUNT AND ALL DEPOSITS AT ANY TIME CONTAINED THEREIN AND THE PROCEEDS THEREOF AND WILL TAKE ALL ACTIONS NECESSARY TO MAINTAIN IN FAVOR OF LENDER A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE CASH MANAGEMENT ACCOUNT, INCLUDING, WITHOUT LIMITATION, EXECUTING AND FILING UCC-1 FINANCING STATEMENTS AND CONTINUATIONS THEREOF.  LENDER AND SERVICER SHALL HAVE THE SOLE RIGHT TO MAKE WITHDRAWALS FROM THE CASH MANAGEMENT ACCOUNT AND ALL COSTS AND EXPENSES FOR ESTABLISHING AND MAINTAINING THE CASH MANAGEMENT ACCOUNT SHALL BE PAID BY BORROWER. (B)           THE INSUFFICIENCY OF FUNDS ON DEPOSIT IN THE CASH MANAGEMENT ACCOUNT SHALL NOT RELIEVE BORROWER FROM THE OBLIGATION TO MAKE ANY PAYMENTS, AS AND WHEN DUE PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND SUCH OBLIGATIONS SHALL BE SEPARATE AND INDEPENDENT, AND NOT CONDITIONED ON ANY EVENT OR CIRCUMSTANCE WHATSOEVER. 30 -------------------------------------------------------------------------------- (C)           ALL FUNDS ON DEPOSIT IN THE CASH MANAGEMENT ACCOUNT FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT MAY BE APPLIED BY LENDER IN SUCH ORDER AND PRIORITY AS LENDER SHALL DETERMINE. (D)           BORROWER HEREBY AGREES THAT LENDER MAY MODIFY THE CASH MANAGEMENT AGREEMENT FOR THE PURPOSE OF ESTABLISHING ADDITIONAL SUB-ACCOUNTS IN CONNECTION WITH ANY PAYMENTS OTHERWISE REQUIRED UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND LENDER SHALL PROVIDE NOTICE THEREOF TO BORROWER. 2.7.3        PAYMENTS RECEIVED UNDER THE CASH MANAGEMENT AGREEMENT.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND PROVIDED NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, BORROWER’S OBLIGATIONS WITH RESPECT TO THE PAYMENT OF THE MONTHLY DEBT SERVICE PAYMENT AMOUNT AND AMOUNTS REQUIRED TO BE DEPOSITED INTO THE RESERVE FUNDS, IF ANY, SHALL BE DEEMED SATISFIED TO THE EXTENT SUFFICIENT AMOUNTS ARE DEPOSITED IN THE CASH MANAGEMENT ACCOUNT TO SATISFY SUCH OBLIGATIONS PURSUANT TO THE CASH MANAGEMENT AGREEMENT ON THE DATES EACH SUCH PAYMENT IS REQUIRED, REGARDLESS OF WHETHER ANY OF SUCH AMOUNTS ARE SO APPLIED BY LENDER. III.                                 INTENTIONALLY OMITTED IV.                                 REPRESENTATIONS AND WARRANTIES SECTION 4.1             BORROWER REPRESENTATIONS.  BORROWER REPRESENTS AND WARRANTS AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE THAT, EXCEPT AS SET FORTH ON SCHEDULE V: 4.1.1        ORGANIZATION.  BORROWER HAS BEEN DULY ORGANIZED AND IS VALIDLY EXISTING AND IN GOOD STANDING WITH REQUISITE POWER AND AUTHORITY TO OWN THE PROPERTY AND TO TRANSACT THE BUSINESSES IN WHICH IT IS NOW ENGAGED.  BORROWER IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD STANDING IN EACH JURISDICTION WHERE IT IS REQUIRED TO BE SO QUALIFIED IN CONNECTION WITH THE PROPERTY, BUSINESSES AND OPERATIONS.  BORROWER POSSESSES ALL RIGHTS, LICENSES, PERMITS AND AUTHORIZATIONS, GOVERNMENTAL OR OTHERWISE, NECESSARY TO ENTITLE IT TO OWN THE PROPERTY AND TO TRANSACT THE BUSINESSES IN WHICH IT IS NOW ENGAGED, AND THE SOLE BUSINESS OF BORROWER IS THE OWNERSHIP, MANAGEMENT, OPERATION AND SALE OF THE PROPERTY. 4.1.2        PROCEEDINGS.  BORROWER HAS TAKEN ALL NECESSARY ACTION TO AUTHORIZE THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THIS AGREEMENT AND SUCH OTHER LOAN DOCUMENTS HAVE BEEN DULY EXECUTED AND DELIVERED BY OR ON BEHALF OF BORROWER AND CONSTITUTE LEGAL, VALID AND BINDING OBLIGATIONS OF BORROWER ENFORCEABLE AGAINST BORROWER IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, SUBJECT ONLY TO APPLICABLE BANKRUPTCY, INSOLVENCY AND SIMILAR LAWS AFFECTING RIGHTS OF CREDITORS GENERALLY, AND SUBJECT, AS TO ENFORCEABILITY, TO GENERAL PRINCIPLES OF EQUITY (REGARDLESS OF WHETHER ENFORCEMENT IS SOUGHT IN A PROCEEDING IN EQUITY OR AT LAW). 4.1.3        NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY BORROWER WILL NOT CONFLICT WITH OR RESULT IN A BREACH OF ANY OF THE TERMS OR PROVISIONS OF, OR CONSTITUTE A DEFAULT UNDER, OR RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN, CHARGE OR ENCUMBRANCE (OTHER THAN PURSUANT TO THE LOAN DOCUMENTS) UPON ANY OF THE PROPERTY OR ASSETS OF BORROWER PURSUANT TO THE TERMS OF ANY INDENTURE, MORTGAGE, DEED OF TRUST, 31 -------------------------------------------------------------------------------- LOAN AGREEMENT, PARTNERSHIP AGREEMENT, OR OTHER AGREEMENT OR INSTRUMENT TO WHICH BORROWER IS A PARTY OR BY WHICH ANY OF BORROWER’S PROPERTY OR ASSETS IS SUBJECT, NOR TO BORROWER’S KNOWLEDGE WILL SUCH ACTION RESULT IN ANY VIOLATION OF THE PROVISIONS OF ANY STATUTE OR ANY ORDER, RULE OR REGULATION OF ANY GOVERNMENTAL AUTHORITY HAVING JURISDICTION OVER BORROWER OR ANY OF BORROWER’S PROPERTIES OR ASSETS, AND ANY CONSENT, APPROVAL, AUTHORIZATION, ORDER, REGISTRATION OR QUALIFICATION OF OR WITH ANY COURT OR ANY SUCH GOVERNMENTAL AUTHORITY REQUIRED FOR THE EXECUTION, DELIVERY AND PERFORMANCE BY BORROWER OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS HAS BEEN OBTAINED AND IS IN FULL FORCE AND EFFECT. 4.1.4        LITIGATION.  THERE ARE NO ACTIONS, SUITS OR PROCEEDINGS AT LAW OR IN EQUITY BY OR BEFORE ANY GOVERNMENTAL AUTHORITY OR OTHER AGENCY NOW PENDING OR, TO BORROWER’S KNOWLEDGE, THREATENED AGAINST OR AFFECTING BORROWER, GUARANTOR, OR PRINCIPAL OR, TO BORROWER’S KNOWLEDGE (BASED ON A LITIGATION SEARCH WITH RESPECT TO THE PROPERTY), AFFECTING TITLE TO THE PROPERTY, WHICH ACTIONS, SUITS OR PROCEEDINGS, IF DETERMINED AGAINST BORROWER, GUARANTOR, PRINCIPAL OR THE PROPERTY, MIGHT MATERIALLY ADVERSELY AFFECT THE CONDITION (FINANCIAL OR OTHERWISE) OR BUSINESS OF BORROWER, GUARANTOR, PRINCIPAL OR THE CONDITION OR OWNERSHIP OF THE PROPERTY. 4.1.5        AGREEMENTS.  EXCEPT SUCH INSTRUMENTS AND AGREEMENTS SET FORTH AS PERMITTED ENCUMBRANCES IN THE TITLE INSURANCE POLICY, BORROWER IS NOT A PARTY TO ANY AGREEMENT OR INSTRUMENT OR SUBJECT TO ANY RESTRICTION WHICH MIGHT MATERIALLY AND ADVERSELY AFFECT BORROWER OR THE PROPERTY, OR BORROWER’S BUSINESS, PROPERTIES OR ASSETS, OPERATIONS OR CONDITION, FINANCIAL OR OTHERWISE.  BORROWER IS NOT IN DEFAULT IN ANY RESPECT IN THE PERFORMANCE, OBSERVANCE OR FULFILLMENT OF ANY OF THE OBLIGATIONS, COVENANTS OR CONDITIONS CONTAINED IN ANY AGREEMENT OR INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH BORROWER OR THE PROPERTY IS BOUND, WHICH WOULD INDIVIDUALLY OR IN THE AGGREGATE HAVE A MATERIAL ADVERSE EFFECT ON (A) THE PROPERTY, (B) THE BUSINESS, PROSPECTS, PROFITS, MANAGEMENT, OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF BORROWER, (C) THE ENFORCEABILITY, VALIDITY, PERFECTION OR PRIORITY OF THE LIEN OF ANY LOAN DOCUMENT OR (D) THE ABILITY OF BORROWER TO PERFORM ANY OBLIGATIONS UNDER ANY LOAN DOCUMENT.  BORROWER HAS NO MATERIAL FINANCIAL OBLIGATION UNDER ANY INDENTURE, MORTGAGE, DEED OF TRUST, LOAN AGREEMENT OR OTHER AGREEMENT OR INSTRUMENT TO WHICH BORROWER IS A PARTY OR BY WHICH BORROWER OR THE PROPERTY IS OTHERWISE BOUND, OTHER THAN (A) OBLIGATIONS INCURRED IN THE ORDINARY COURSE OF THE OPERATION OF THE PROPERTY AS PERMITTED PURSUANT TO CLAUSE (XXIII) OF THE DEFINITION OF “SPECIAL PURPOSE ENTITY” SET FORTH IN SECTION 1.1 HEREOF AND (B) OBLIGATIONS UNDER THE LOAN DOCUMENTS. 4.1.6        TITLE.  BORROWER HAS GOOD AND INDEFEASIBLE FEE SIMPLE TITLE TO THE REAL PROPERTY COMPRISING PART OF THE PROPERTY AND GOOD TITLE TO THE BALANCE OF THE PROPERTY, FREE AND CLEAR OF ALL LIENS WHATSOEVER EXCEPT THE PERMITTED ENCUMBRANCES, SUCH OTHER LIENS AS ARE PERMITTED PURSUANT TO THE LOAN DOCUMENTS AND THE LIENS CREATED BY THE LOAN DOCUMENTS.  THE PERMITTED ENCUMBRANCES IN THE AGGREGATE DO NOT MATERIALLY AND ADVERSELY AFFECT THE VALUE, OPERATION OR USE OF THE PROPERTY (AS CURRENTLY USED) OR BORROWER’S ABILITY TO REPAY THE LOAN.  THERE ARE NO CLAIMS FOR PAYMENT FOR WORK, LABOR OR MATERIALS AFFECTING THE PROPERTY WHICH ARE DUE AND UNPAID UNDER THE CONTRACTS PURSUANT TO WHICH WORK OR LABOR WAS PERFORMED OR MATERIALS PROVIDED WHICH ARE OR MAY BECOME A LIEN PRIOR TO, OR OF EQUAL PRIORITY WITH, THE LIENS CREATED BY THE LOAN DOCUMENTS. 4.1.7        SOLVENCY; NO BANKRUPTCY FILING.  BORROWER (A) HAS NOT ENTERED INTO THE TRANSACTION OR EXECUTED THE NOTE, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS WITH THE ACTUAL 32 -------------------------------------------------------------------------------- INTENT TO HINDER, DELAY OR DEFRAUD ANY CREDITOR AND (B) RECEIVED REASONABLY EQUIVALENT VALUE IN EXCHANGE FOR ITS OBLIGATIONS UNDER SUCH LOAN DOCUMENTS.  GIVING EFFECT TO THE LOAN, THE FAIR SALEABLE VALUE OF BORROWER’S ASSETS EXCEEDS AND WILL, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN, EXCEED BORROWER’S TOTAL LIABILITIES, INCLUDING, WITHOUT LIMITATION, SUBORDINATED, UNLIQUIDATED, DISPUTED AND CONTINGENT LIABILITIES.  THE FAIR SALEABLE VALUE OF BORROWER’S ASSETS IS AND WILL, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN, BE GREATER THAN BORROWER’S PROBABLE LIABILITIES, INCLUDING THE MAXIMUM AMOUNT OF ITS CONTINGENT LIABILITIES ON ITS DEBTS AS SUCH DEBTS BECOME ABSOLUTE AND MATURED.  BORROWER’S ASSETS DO NOT AND, IMMEDIATELY FOLLOWING THE MAKING OF THE LOAN WILL NOT, CONSTITUTE UNREASONABLY SMALL CAPITAL TO CARRY OUT ITS BUSINESS AS CONDUCTED OR AS PROPOSED TO BE CONDUCTED.  BORROWER DOES NOT INTEND TO, AND DOES NOT BELIEVE THAT IT WILL, INCUR DEBT AND LIABILITIES (INCLUDING CONTINGENT LIABILITIES AND OTHER COMMITMENTS) BEYOND ITS ABILITY TO PAY SUCH DEBT AND LIABILITIES AS THEY MATURE (TAKING INTO ACCOUNT THE TIMING AND AMOUNTS OF CASH TO BE RECEIVED BY BORROWER AND THE AMOUNTS TO BE PAYABLE ON OR IN RESPECT OF OBLIGATIONS OF BORROWER).  EXCEPT AS EXPRESSLY DISCLOSED TO LENDER IN WRITING, NO PETITION IN BANKRUPTCY HAS BEEN FILED AGAINST BORROWER, OR TO BORROWER’S KNOWLEDGE, OR ANY CONSTITUENT PERSON IN THE LAST SEVEN (7) YEARS, AND NEITHER BORROWER NOR, TO BORROWER’S KNOWLEDGE, ANY CONSTITUENT PERSON IN THE LAST SEVEN (7) YEARS HAS EVER MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR TAKEN ADVANTAGE OF ANY INSOLVENCY ACT FOR THE BENEFIT OF DEBTORS.  NEITHER BORROWER NOR ANY OF ITS CONSTITUENT PERSONS ARE CONTEMPLATING EITHER THE FILING OF A PETITION BY IT UNDER ANY STATE OR FEDERAL BANKRUPTCY OR INSOLVENCY LAWS OR THE LIQUIDATION OF ALL OR A MAJOR PORTION OF BORROWER’S ASSETS OR PROPERTY, AND BORROWER HAS NO KNOWLEDGE OF ANY PERSON CONTEMPLATING THE FILING OF ANY SUCH PETITION AGAINST IT OR SUCH CONSTITUENT PERSONS. 4.1.8        FULL AND ACCURATE DISCLOSURE.  NO STATEMENT OF FACT MADE BY BORROWER IN THIS AGREEMENT OR IN ANY OF THE OTHER LOAN DOCUMENTS CONTAINS ANY UNTRUE STATEMENT OF A MATERIAL FACT OR, TO BORROWER’S KNOWLEDGE, OMITS TO STATE ANY MATERIAL FACT NECESSARY TO MAKE STATEMENTS CONTAINED HEREIN OR THEREIN NOT MISLEADING.  THERE IS NO MATERIAL FACT PRESENTLY KNOWN TO BORROWER WHICH HAS NOT BEEN DISCLOSED TO LENDER WHICH ADVERSELY AFFECTS THE PROPERTY OR THE BUSINESS, OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF BORROWER. 4.1.9        NO PLAN ASSETS.  BORROWER DOES NOT SPONSOR, IS NOT OBLIGATED TO CONTRIBUTE TO, AND IS NOT ITSELF AN “EMPLOYEE BENEFIT PLAN,” AS DEFINED IN SECTION 3(3) OF ERISA, SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE, AND NONE OF THE ASSETS OF BORROWER CONSTITUTES OR WILL CONSTITUTE “PLAN ASSETS” OF ONE OR MORE SUCH PLANS WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-101.  IN ADDITION, (A) BORROWER IS NOT A “GOVERNMENTAL PLAN” WITHIN THE MEANING OF SECTION 3(32) OF ERISA AND (B) TRANSACTIONS BY OR WITH BORROWER ARE NOT SUBJECT TO ANY STATE OR OTHER STATUTE, REGULATION OR OTHER RESTRICTION REGULATING INVESTMENTS OF, OR FIDUCIARY OBLIGATIONS WITH RESPECT TO, GOVERNMENTAL PLANS WITHIN THE MEANING OF SECTION 3(32) OF ERISA WHICH IS SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WHICH PROHIBIT OR OTHERWISE RESTRICT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS UNDER THE LOAN DOCUMENTS. 4.1.10      COMPLIANCE.  TO BORROWER’S KNOWLEDGE, BORROWER AND THE PROPERTY AND THE USE THEREOF COMPLY IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE LEGAL REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, BUILDING AND ZONING ORDINANCES AND CODES.  BORROWER IS NOT IN DEFAULT OR VIOLATION OF ANY ORDER, WRIT, INJUNCTION, DECREE OR DEMAND OF ANY GOVERNMENTAL AUTHORITY.  THERE HAS NOT BEEN COMMITTED BY BORROWER OR, TO BORROWER’S KNOWLEDGE, ANY OTHER PERSON IN 33 -------------------------------------------------------------------------------- OCCUPANCY OF OR INVOLVED WITH THE OPERATION OR USE OF THE PROPERTY ANY ACT OR OMISSION AFFORDING THE FEDERAL GOVERNMENT OR ANY OTHER GOVERNMENTAL AUTHORITY THE RIGHT OF FORFEITURE AS AGAINST THE PROPERTY OR ANY PART THEREOF OR ANY MONIES PAID IN PERFORMANCE OF BORROWER’S OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS. 4.1.11      FINANCIAL INFORMATION.  TO BORROWER’S KNOWLEDGE, ALL FINANCIAL DATA, INCLUDING, WITHOUT LIMITATION, THE STATEMENTS OF CASH FLOW AND INCOME AND OPERATING EXPENSE, THAT HAVE BEEN DELIVERED TO LENDER IN RESPECT OF THE PROPERTY (I) ARE TRUE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS, (II) ACCURATELY REPRESENT THE FINANCIAL CONDITION OF BORROWER AND THE PROPERTY, AS APPLICABLE, AS OF THE DATE OF SUCH REPORTS, AND (III) TO THE EXTENT PREPARED OR AUDITED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM, HAVE BEEN PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES REASONABLY ACCEPTABLE TO LENDER, CONSISTENTLY APPLIED THROUGHOUT THE PERIODS COVERED, EXCEPT AS DISCLOSED THEREIN.  BORROWER DOES NOT HAVE ANY CONTINGENT LIABILITIES, LIABILITIES FOR TAXES, UNUSUAL FORWARD OR LONG-TERM COMMITMENTS OR UNREALIZED OR ANTICIPATED LOSSES FROM ANY UNFAVORABLE COMMITMENTS THAT ARE KNOWN TO BORROWER AND REASONABLY LIKELY TO HAVE A MATERIALLY ADVERSE EFFECT ON THE PROPERTY OR THE OPERATION THEREOF FOR THE PERMITTED USE, EXCEPT AS REFERRED TO OR REFLECTED IN SAID FINANCIAL STATEMENTS.  SINCE THE DATE OF SUCH FINANCIAL STATEMENTS, THERE HAS BEEN NO MATERIALLY ADVERSE CHANGE IN THE FINANCIAL CONDITION, OPERATIONS OR BUSINESS OF BORROWER FROM THAT SET FORTH IN SAID FINANCIAL STATEMENTS. 4.1.12      CONDEMNATION.  NO CONDEMNATION OR OTHER PROCEEDING HAS BEEN COMMENCED OR, TO BORROWER’S KNOWLEDGE, IS CONTEMPLATED WITH RESPECT TO ALL OR ANY PORTION OF THE PROPERTY OR FOR THE RELOCATION OF ROADWAYS PROVIDING ACCESS TO THE PROPERTY. 4.1.13      FEDERAL RESERVE REGULATIONS.  NO PART OF THE PROCEEDS OF THE LOAN WILL BE USED FOR THE PURPOSE OF PURCHASING OR ACQUIRING ANY “MARGIN STOCK” WITHIN THE MEANING OF REGULATION U OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM OR FOR ANY OTHER PURPOSE WHICH WOULD BE INCONSISTENT WITH SUCH REGULATION U OR ANY OTHER REGULATIONS OF SUCH BOARD OF GOVERNORS, OR FOR ANY PURPOSES PROHIBITED BY LEGAL REQUIREMENTS OR BY THE TERMS AND CONDITIONS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. 4.1.14      UTILITIES AND PUBLIC ACCESS.  THE PROPERTY HAS RIGHTS OF ACCESS TO PUBLIC WAYS AND IS SERVED BY WATER, SEWER, SANITARY SEWER AND STORM DRAIN FACILITIES ADEQUATE TO SERVICE THE PROPERTY FOR ITS INTENDED USES.  ALL PUBLIC UTILITIES NECESSARY OR, TO BORROWER’S KNOWLEDGE, CONVENIENT TO THE FULL USE AND ENJOYMENT OF THE PROPERTY ARE LOCATED EITHER IN THE PUBLIC RIGHT-OF-WAY ABUTTING THE PROPERTY (WHICH ARE CONNECTED SO AS TO SERVE THE PROPERTY WITHOUT PASSING OVER OTHER PROPERTY) OR IN RECORDED EASEMENTS SERVING THE PROPERTY AND SUCH EASEMENTS ARE SET FORTH IN AND INSURED BY THE TITLE INSURANCE POLICY.  ALL ROADS NECESSARY FOR THE USE OF THE PROPERTY FOR ITS CURRENT PURPOSES HAVE BEEN COMPLETED AND DEDICATED TO PUBLIC USE AND ACCEPTED BY ALL GOVERNMENTAL AUTHORITIES. 4.1.15      NOT A FOREIGN PERSON.  BORROWER IS NOT A “FOREIGN PERSON” WITHIN THE MEANING OF §1445(F)(3) OF THE CODE. 4.1.16      SEPARATE LOTS.  THE PROPERTY IS COMPRISED OF ONE (1) OR MORE PARCELS WHICH CONSTITUTE A SEPARATE TAX LOT OR LOTS AND DOES NOT CONSTITUTE A PORTION OF ANY OTHER TAX LOT NOT A PART OF THE PROPERTY. 34 -------------------------------------------------------------------------------- 4.1.17      ASSESSMENTS.  THERE ARE NO PENDING, OR TO BORROWER’S KNOWLEDGE, PROPOSED SPECIAL OR OTHER ASSESSMENTS FOR PUBLIC IMPROVEMENTS OR OTHERWISE AFFECTING THE PROPERTY, NOR ARE THERE ANY CONTEMPLATED IMPROVEMENTS TO THE PROPERTY THAT MAY RESULT IN SUCH SPECIAL OR OTHER ASSESSMENTS. 4.1.18      ENFORCEABILITY.  THE LOAN DOCUMENTS ARE NOT SUBJECT TO ANY RIGHT OF RESCISSION, SET-OFF, COUNTERCLAIM OR DEFENSE BY BORROWER OR GUARANTOR, INCLUDING THE DEFENSE OF USURY, NOR WOULD THE OPERATION OF ANY OF THE TERMS OF THE LOAN DOCUMENTS, OR THE EXERCISE OF ANY RIGHT THEREUNDER EXERCISED BY LENDER IN ACCORDANCE WITH APPLICABLE LAW, RENDER THE LOAN DOCUMENTS UNENFORCEABLE, AND NEITHER BORROWER NOR GUARANTOR HAS ASSERTED ANY RIGHT OF RESCISSION, SET-OFF, COUNTERCLAIM OR DEFENSE WITH RESPECT THERETO. 4.1.19      NO PRIOR ASSIGNMENT.  THERE IS NO PRIOR ASSIGNMENT OF THE LEASES OR ANY PORTION OF THE RENTS BY BORROWER OR ANY OF ITS PREDECESSORS IN INTEREST, GIVEN AS COLLATERAL SECURITY WHICH WILL BE OUTSTANDING UPON APPLICATION OF THE PROCEEDS OF THE LOAN. 4.1.20      INSURANCE.  BORROWER HAS OBTAINED AND HAS DELIVERED TO LENDER (A) CERTIFIED COPIES OF THE POLICIES REFLECTING THE INSURANCE COVERAGES, AMOUNTS AND OTHER REQUIREMENTS SET FORTH IN THIS AGREEMENT OR (B) OTHER EVIDENCE OF SUCH MATTERS ACCEPTABLE TO LENDER.  NO CLAIMS HAVE BEEN MADE OR ARE CURRENTLY PENDING, OUTSTANDING OR OTHERWISE REMAIN UNSATISFIED UNDER ANY SUCH POLICY, AND NEITHER BORROWER NOR, TO BORROWER’S KNOWLEDGE, ANY OTHER PERSON, HAS DONE, BY ACT OR OMISSION, ANYTHING WHICH WOULD IMPAIR THE COVERAGE OF ANY SUCH POLICY. 4.1.21      USE OF PROPERTY.  THE PROPERTY IS USED EXCLUSIVELY FOR THE PERMITTED USE. 4.1.22      CERTIFICATE OF OCCUPANCY; LICENSES.  ALL CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS, INCLUDING WITHOUT LIMITATION, CERTIFICATES OF COMPLETION AND OCCUPANCY PERMITS REQUIRED TO BE OBTAINED BY BORROWER FOR THE LEGAL USE, OCCUPANCY AND OPERATION OF THE PROPERTY FOR THE PERMITTED USE HAVE BEEN OBTAINED AND ARE IN FULL FORCE AND EFFECT, AND TO BORROWER’S KNOWLEDGE, ALL CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS, INCLUDING WITHOUT LIMITATION, CERTIFICATES OF COMPLETION AND OCCUPANCY PERMITS REQUIRED TO BE OBTAINED BY ANY PERSON OTHER THAN BORROWER FOR THE LEGAL USE, OCCUPANCY AND OPERATION OF THE PROPERTY THE PERMITTED USE, HAVE BEEN OBTAINED AND ARE IN FULL FORCE AND EFFECT (ALL OF THE FOREGOING CERTIFICATIONS, PERMITS, LICENSES AND APPROVALS ARE COLLECTIVELY REFERRED TO AS THE “LICENSES”).  BORROWER SHALL AND SHALL CAUSE ALL OTHER PERSONS TO, KEEP AND MAINTAIN ALL LICENSES NECESSARY FOR THE OPERATION OF THE PROPERTY FOR THE PERMITTED USE. TO BORROWER’S KNOWLEDGE, THE USE BEING MADE OF THE PROPERTY IS IN CONFORMITY WITH ALL CERTIFICATES OF OCCUPANCY ISSUED FOR THE PROPERTY. 4.1.23      FLOOD ZONE.  NO IMPROVEMENTS ON THE PROPERTY ARE LOCATED IN AN AREA IDENTIFIED BY THE FEDERAL EMERGENCY MANAGEMENT AGENCY AS AN AREA HAVING SPECIAL FLOOD HAZARDS OR, IF SO LOCATED, THE FLOOD INSURANCE REQUIRED PURSUANT TO SECTION 6.1(A)(I) IS IN FULL FORCE AND EFFECT WITH RESPECT TO THE PROPERTY. 4.1.24      PHYSICAL CONDITION.  EXCEPT AS DISCLOSED IN THE PHYSICAL CONDITIONS REPORT DELIVERED TO LENDER IN CONNECTION WITH THIS LOAN, TO BORROWER’S KNOWLEDGE, THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL BUILDINGS, IMPROVEMENTS, PARKING FACILITIES, SIDEWALKS, STORM 35 -------------------------------------------------------------------------------- DRAINAGE SYSTEMS, ROOFS, PLUMBING SYSTEMS, HVAC SYSTEMS, FIRE PROTECTION SYSTEMS, ELECTRICAL SYSTEMS, EQUIPMENT, ELEVATORS, EXTERIOR SIDINGS AND DOORS, LANDSCAPING, IRRIGATION SYSTEMS AND ALL STRUCTURAL COMPONENTS, ARE IN GOOD CONDITION, ORDER AND REPAIR IN ALL MATERIAL RESPECTS; THERE EXISTS NO STRUCTURAL OR OTHER MATERIAL DEFECTS OR DAMAGES IN THE PROPERTY AND BORROWER HAS NOT RECEIVED NOTICE FROM ANY INSURANCE COMPANY OR BONDING COMPANY OF ANY DEFECTS OR INADEQUACIES IN THE PROPERTY, OR ANY PART THEREOF, WHICH WOULD ADVERSELY AFFECT THE INSURABILITY OF THE SAME OR CAUSE THE IMPOSITION OF EXTRAORDINARY PREMIUMS OR CHARGES THEREON OR OF ANY TERMINATION OR THREATENED TERMINATION OF ANY POLICY OF INSURANCE OR BOND. 4.1.25      BOUNDARIES.  TO BORROWER’S KNOWLEDGE, ALL OF THE IMPROVEMENTS WHICH WERE INCLUDED IN DETERMINING THE APPRAISED VALUE OF THE PROPERTY LIE WHOLLY WITHIN THE BOUNDARIES AND BUILDING RESTRICTION LINES OF THE PROPERTY, AND NO IMPROVEMENTS ON ADJOINING PROPERTIES ENCROACH UPON THE PROPERTY, AND NO EASEMENTS OR OTHER ENCUMBRANCES UPON THE PROPERTY ENCROACH UPON ANY OF THE IMPROVEMENTS, SO AS TO AFFECT THE VALUE OR MARKETABILITY OF THE PROPERTY EXCEPT THOSE WHICH ARE INSURED AGAINST BY THE TITLE INSURANCE POLICY. 4.1.26      LEASES.  THE PROPERTY IS NOT SUBJECT TO ANY LEASES OTHER THAN THE LEASES DESCRIBED IN THE RENT ROLL ATTACHED AS SCHEDULE II HERETO AND MADE A PART HEREOF.  BORROWER IS THE OWNER AND LESSOR OF LANDLORD’S INTEREST IN THE LEASES.  NO PERSON HAS ANY POSSESSORY INTEREST IN THE PROPERTY OR RIGHT TO OCCUPY THE SAME EXCEPT UNDER AND PURSUANT TO THE PROVISIONS OF THE LEASES.  THE CURRENT LEASES ARE IN FULL FORCE AND EFFECT AND, TO BORROWER’S KNOWLEDGE, THERE ARE NO DEFAULTS THEREUNDER BY EITHER PARTY AND THERE ARE NO CONDITIONS THAT, WITH THE PASSAGE OF TIME OR THE GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE DEFAULTS THEREUNDER.  NO RENT (INCLUDING SECURITY DEPOSITS) HAS BEEN PAID MORE THAN ONE (1) MONTH IN ADVANCE OF ITS DUE DATE.  ALL WORK TO BE PERFORMED BY BORROWER UNDER EACH LEASE HAS BEEN PERFORMED AS REQUIRED AND HAS BEEN ACCEPTED BY THE APPLICABLE TENANT, AND ANY PAYMENTS, FREE RENT, PARTIAL RENT, REBATE OF RENT OR OTHER PAYMENTS, CREDITS, ALLOWANCES OR ABATEMENTS REQUIRED TO BE GIVEN BY BORROWER TO ANY TENANT HAS ALREADY BEEN RECEIVED BY SUCH TENANT.  THERE HAS BEEN NO PRIOR SALE, TRANSFER OR ASSIGNMENT, HYPOTHECATION OR PLEDGE OF ANY LEASE OR OF THE RENTS RECEIVED THEREIN WHICH IS OUTSTANDING.  TO BORROWER’S KNOWLEDGE, EXCEPT AS SET FORTH ON SCHEDULE II, NO TENANT LISTED ON SCHEDULE II HAS ASSIGNED ITS LEASE OR SUBLET ALL OR ANY PORTION OF THE PREMISES DEMISED THEREBY, NO SUCH TENANT HOLDS ITS LEASED PREMISES UNDER ASSIGNMENT OR SUBLEASE, NOR DOES ANYONE EXCEPT SUCH TENANT AND ITS EMPLOYEES OCCUPY SUCH LEASED PREMISES.  NO TENANT UNDER ANY LEASE HAS A RIGHT OR OPTION PURSUANT TO SUCH LEASE OR OTHERWISE TO PURCHASE ALL OR ANY PART OF THE LEASED PREMISES OR THE BUILDING OF WHICH THE LEASED PREMISES ARE A PART.  EXCEPT AS SET FORTH IN SCHEDULE II, NO TENANT UNDER ANY LEASE HAS ANY RIGHT OR OPTION FOR ADDITIONAL SPACE IN THE IMPROVEMENTS.  TO BORROWER’S KNOWLEDGE BASED ON THE ENVIRONMENTAL REPORT DELIVERED TO LENDER IN CONNECTION HEREWITH, NO HAZARDOUS WASTES OR TOXIC SUBSTANCES, AS DEFINED BY APPLICABLE FEDERAL, STATE OR LOCAL STATUTES, RULES AND REGULATIONS, HAVE BEEN DISPOSED, STORED OR TREATED BY ANY TENANT UNDER ANY LEASE ON OR ABOUT THE LEASED PREMISES NOR DOES BORROWER HAVE ANY KNOWLEDGE OF ANY TENANT’S INTENTION TO USE ITS LEASED PREMISES FOR ANY ACTIVITY WHICH, DIRECTLY OR INDIRECTLY, INVOLVES THE USE, GENERATION, TREATMENT, STORAGE, DISPOSAL OR TRANSPORTATION OF ANY PETROLEUM PRODUCT OR ANY TOXIC OR HAZARDOUS CHEMICAL, MATERIAL, SUBSTANCE OR WASTE, EXCEPT IN EITHER EVENT, IN COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR LOCAL STATUES, RULES AND REGULATIONS. 36 -------------------------------------------------------------------------------- 4.1.27      SURVEY.  TO BORROWER’S KNOWLEDGE, NO SURVEY FOR THE PROPERTY DELIVERED TO LENDER IN CONNECTION WITH THIS AGREEMENT FAILS TO REFLECT ANY MATERIAL MATTER AFFECTING THE PROPERTY OR THE TITLE THERETO. 4.1.28      INVENTORY.  BORROWER IS THE OWNER OF ALL OF THE EQUIPMENT, FIXTURES AND PERSONAL PROPERTY (AS SUCH TERMS ARE DEFINED IN THE MORTGAGE) LOCATED ON OR AT THE PROPERTY AND SHALL NOT LEASE ANY EQUIPMENT, FIXTURES OR PERSONAL PROPERTY OTHER THAN AS PERMITTED HEREUNDER.  ALL OF THE EQUIPMENT, FIXTURES AND PERSONAL PROPERTY ARE SUFFICIENT TO OPERATE THE PROPERTY IN THE MANNER REQUIRED HEREUNDER AND IN THE MANNER IN WHICH IT IS CURRENTLY OPERATED. 4.1.29      FILING AND RECORDING TAXES.  ALL TRANSFER TAXES, DEED STAMPS, INTANGIBLE TAXES OR OTHER AMOUNTS IN THE NATURE OF TRANSFER TAXES REQUIRED TO BE PAID BY ANY PERSON UNDER APPLICABLE LEGAL REQUIREMENTS CURRENTLY IN EFFECT IN CONNECTION WITH THE ACQUISITION OF THE PROPERTY TO BORROWER HAVE BEEN PAID OR ARE PAID ON THE CLOSING DATE.  ALL MORTGAGE, MORTGAGE RECORDING, STAMP, INTANGIBLE OR OTHER SIMILAR TAX REQUIRED TO BE PAID BY ANY PERSON UNDER APPLICABLE LEGAL REQUIREMENTS CURRENTLY IN EFFECT IN CONNECTION WITH THE EXECUTION, DELIVERY, RECORDATION, FILING, REGISTRATION, PERFECTION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE MORTGAGE, HAVE BEEN PAID, AND, UNDER CURRENT LEGAL REQUIREMENTS, THE MORTGAGE IS ENFORCEABLE IN ACCORDANCE WITH ITS TERMS BY LENDER (OR ANY SUBSEQUENT HOLDER THEREOF). 4.1.30      SPECIAL PURPOSE ENTITY/SEPARATENESS. (A)           UNTIL THE DEBT HAS BEEN PAID IN FULL, BORROWER HEREBY REPRESENTS, WARRANTS AND COVENANTS THAT (I) BORROWER HAS AT ALL TIMES SINCE ITS FORMATION BEEN, SHALL BE AND SHALL CONTINUE TO BE A SPECIAL PURPOSE ENTITY AND (II) PRINCIPAL HAS AT ALL TIMES SINCE ITS FORMATION BEEN, SHALL BE AND SHALL CONTINUE TO BE A SPECIAL PURPOSE ENTITY (LENDER ACKNOWLEDGES THAT THE SINGLE PURPOSE PROVISIONS CONTAINED IN THE ORGANIZATIONAL DOCUMENTS OF BORROWER AND PRINCIPAL SATISFY THE REQUIREMENTS OF A SPECIAL PURPOSE ENTITY). (B)           THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN SECTION 4.1.30(A) SHALL SURVIVE FOR SO LONG AS ANY AMOUNT REMAINS PAYABLE TO LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. (C)           ALL OF THE FACTS STATED AND ALL OF THE ASSUMPTIONS MADE IN THE INSOLVENCY OPINION, INCLUDING, BUT NOT LIMITED TO, IN ANY EXHIBITS ATTACHED THERETO, ARE TRUE AND CORRECT IN ALL RESPECTS.  BORROWER HAS COMPLIED AND WILL COMPLY WITH, AND PRINCIPAL HAS COMPLIED AND BORROWER WILL CAUSE PRINCIPAL TO COMPLY WITH, ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO BORROWER AND PRINCIPAL IN THE INSOLVENCY OPINION.  BORROWER WILL COMPLY WITH ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO BORROWER AND PRINCIPAL IN ANY SUBSEQUENT NON-CONSOLIDATION OPINION REQUIRED TO BE DELIVERED IN CONNECTION WITH THE LOAN DOCUMENTS (AN “ADDITIONAL INSOLVENCY OPINION”).  EACH AFFILIATE OF BORROWER AND PRINCIPAL WITH RESPECT TO WHICH AN ASSUMPTION SHALL BE MADE IN ANY ADDITIONAL INSOLVENCY OPINION WILL COMPLY WITH ALL OF THE ASSUMPTIONS MADE WITH RESPECT TO IT IN ANY ADDITIONAL INSOLVENCY OPINION. 4.1.31      PROPERTY MANAGEMENT AGREEMENT.  THE PROPERTY MANAGEMENT AGREEMENT IS IN FULL FORCE AND EFFECT AND, TO BORROWER’S KNOWLEDGE, THERE ARE NO DEFAULTS THEREUNDER BY ANY 37 -------------------------------------------------------------------------------- PARTY THERETO AND NO EVENT HAS OCCURRED THAT, WITH THE PASSAGE OF TIME AND/OR THE GIVING OF NOTICE WOULD CONSTITUTE A DEFAULT THEREUNDER. 4.1.32      ILLEGAL ACTIVITY.  NO PORTION OF THE PROPERTY HAS BEEN OR WILL BE PURCHASED WITH PROCEEDS OF ANY ILLEGAL ACTIVITY. 4.1.33      NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE.  ALL INFORMATION SUBMITTED BY BORROWER TO LENDER AND IN ALL FINANCIAL STATEMENTS, RENT ROLLS (INCLUDING THE RENT ROLL ATTACHED HERETO AS SCHEDULE II), REPORTS, CERTIFICATES AND OTHER DOCUMENTS SUBMITTED IN CONNECTION WITH THE LOAN OR IN SATISFACTION OF THE TERMS THEREOF AND ALL STATEMENTS OF FACT MADE BY BORROWER IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT, ARE ACCURATE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS, PROVIDED, HOWEVER, THAT IF SUCH INFORMATION WAS PROVIDED TO BORROWER BY NON-AFFILIATED THIRD PARTIES, BORROWER REPRESENTS THAT SUCH INFORMATION IS, TO BORROWER’S KNOWLEDGE, ACCURATE, COMPLETE AND CORRECT IN ALL MATERIAL RESPECTS.  TO BORROWER’S KNOWLEDGE, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN ANY CONDITION, FACT, CIRCUMSTANCE OR EVENT THAT WOULD MAKE ANY SUCH INFORMATION INACCURATE, INCOMPLETE OR OTHERWISE MISLEADING IN ANY MATERIAL RESPECT OR THAT OTHERWISE MATERIALLY AND ADVERSELY AFFECTS OR MIGHT MATERIALLY AND ADVERSELY AFFECT THE PROPERTY OR THE BUSINESS OPERATIONS OR THE FINANCIAL CONDITION OF BORROWER.  TO BORROWER’S KNOWLEDGE, BORROWER HAS DISCLOSED TO LENDER ALL MATERIAL FACTS AND HAS NOT FAILED TO DISCLOSE ANY MATERIAL FACT THAT COULD CAUSE ANY PROVIDED INFORMATION OR REPRESENTATION OR WARRANTY MADE HEREIN TO BE MATERIALLY MISLEADING. 4.1.34      INVESTMENT COMPANY ACT.  BORROWER IS NOT (A) AN “INVESTMENT COMPANY” OR A COMPANY “CONTROLLED” BY AN “INVESTMENT COMPANY,” WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED; (B) A “HOLDING COMPANY” OR A “SUBSIDIARY COMPANY” OF A “HOLDING COMPANY” OR AN “AFFILIATE” OF EITHER A “HOLDING COMPANY” OR A “SUBSIDIARY COMPANY” WITHIN THE MEANING OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED; OR (C) SUBJECT TO ANY OTHER FEDERAL OR STATE LAW OR REGULATION WHICH PURPORTS TO RESTRICT OR REGULATE ITS ABILITY TO BORROW MONEY. 4.1.35      EMBARGOED PERSON.  AS OF THE CLOSING DATE, TO BORROWER’S KNOWLEDGE, (A) NONE OF THE FUNDS OR OTHER ASSETS OF BORROWER CONSTITUTE PROPERTY OF, OR ARE BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BY ANY PERSON, ENTITY OR GOVERNMENT NAMED ON THE OFAC LIST, SUBJECT TO TRADE RESTRICTIONS UNDER U.S. LAW, INCLUDING, BUT NOT LIMITED TO, THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT, 50 U.S.C. §§ 1701 ET SEQ., THE TRADING WITH THE ENEMY ACT, 50 U.S.C. APP. 1 ET SEQ., THE UNITING AND STRENGTHENING AMERICA BY PROVIDING APPROPRIATE TOOLS REQUIRED TO INTERCEPT AND OBSTRUCT TERRORISM ACT OF 2001, U.S. PUBLIC LAW 107-56 AND ANY EXECUTIVE ORDERS OR REGULATIONS PROMULGATED THEREUNDER WITH THE RESULT THAT THE INVESTMENT IN BORROWER, PRINCIPAL OR GUARANTOR, AS APPLICABLE (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN MADE BY THE LENDER IS IN VIOLATION OF LAW (“EMBARGOED PERSON”); (B) NO EMBARGOED PERSON HAS ANY INTEREST OF ANY NATURE WHATSOEVER IN BORROWER WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW; (C) NONE OF THE FUNDS OF BORROWER HAVE BEEN DERIVED FROM ANY UNLAWFUL ACTIVITY WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW; AND (D) BORROWER, PRINCIPAL AND GUARANTOR ARE IN FULL COMPLIANCE WITH ALL APPLICABLE ORDERS, RULES, REGULATIONS AND RECOMMENDATIONS OF THE OFFICE OF FOREIGN ASSET CONTROL OF THE U.S. DEPARTMENT OF TREASURY. 38 -------------------------------------------------------------------------------- 4.1.36      PRINCIPAL PLACE OF BUSINESS; STATE OF ORGANIZATION.  BORROWER’S PRINCIPAL PLACE OF BUSINESS AS OF THE DATE HEREOF IS THE ADDRESS SET FORTH IN THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT.  THE BORROWER IS ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE. 4.1.37      LOAN TO VALUE.  THE MAXIMUM PRINCIPAL AMOUNT OF THE LOAN DOES NOT EXCEED ONE HUNDRED TWENTY-FIVE PERCENT (125%) OF THE FAIR MARKET VALUE OF THE PROPERTY AS SET FORTH ON THE APPRAISAL OF THE PROPERTY. 4.1.38      MORTGAGE TAXES.  AS OF THE DATE HEREOF, BORROWER REPRESENTS THAT IT HAS PAID OR HAS DEPOSITED WITH THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY FUNDS SUFFICIENT TO PAY ALL STATE, COUNTY AND MUNICIPAL RECORDING AND ALL OTHER TAXES IMPOSED UPON THE EXECUTION AND RECORDATION OF THE MORTGAGE. SECTION 4.2             SURVIVAL OF REPRESENTATIONS.  BORROWER AGREES THAT ALL OF THE REPRESENTATIONS AND WARRANTIES OF BORROWER SET FORTH IN SECTION 4.1 AND ELSEWHERE IN THIS AGREEMENT AND IN THE OTHER LOAN DOCUMENTS SHALL SURVIVE FOR SO LONG AS ANY AMOUNT REMAINS OWING TO LENDER UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS BY BORROWER.  ALL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS MADE IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS BY BORROWER SHALL BE DEEMED TO HAVE BEEN RELIED UPON BY LENDER NOTWITHSTANDING ANY INVESTIGATION HERETOFORE OR HEREAFTER MADE BY LENDER OR ON ITS BEHALF. V.                                     BORROWER COVENANTS SECTION 5.1             AFFIRMATIVE COVENANTS.  FROM THE CLOSING DATE AND UNTIL PAYMENT AND PERFORMANCE IN FULL OF ALL OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS OR THE EARLIER RELEASE OF THE LIEN OF THE MORTGAGE ENCUMBERING THE PROPERTY (AND ALL RELATED OBLIGATIONS) IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, BORROWER HEREBY COVENANTS AND AGREES WITH LENDER THAT: 5.1.1        EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS; INSURANCE.  BORROWER SHALL DO OR CAUSE TO BE DONE ALL THINGS NECESSARY TO PRESERVE, RENEW AND KEEP IN FULL FORCE AND EFFECT ITS EXISTENCE, RIGHTS, LICENSES, PERMITS AND FRANCHISES AND COMPLY WITH ALL LEGAL REQUIREMENTS APPLICABLE TO IT AND THE PROPERTY.  BORROWER SHALL NOT COMMIT, NOR SHALL BORROWER PERMIT ANY OTHER PERSON IN OCCUPANCY OF OR INVOLVED WITH THE OPERATION OR USE OF THE PROPERTY TO COMMIT ANY ACT OR OMISSION AFFORDING THE FEDERAL GOVERNMENT OR ANY STATE OR LOCAL GOVERNMENT THE RIGHT OF FORFEITURE AS AGAINST THE PROPERTY OR ANY PART THEREOF OR ANY MONIES PAID IN PERFORMANCE OF BORROWER’S OBLIGATIONS UNDER ANY OF THE LOAN DOCUMENTS.  BORROWER HEREBY COVENANTS AND AGREES NOT TO COMMIT, PERMIT OR SUFFER TO EXIST ANY ACT OR OMISSION AFFORDING SUCH RIGHT OF FORFEITURE.  BORROWER SHALL AT ALL TIMES MAINTAIN, PRESERVE AND PROTECT ALL ITS FRANCHISES AND TRADE NAMES AND PRESERVE ALL THE REMAINDER OF ITS PROPERTY USED OR USEFUL IN THE CONDUCT OF ITS BUSINESS AND SHALL KEEP THE PROPERTY IN GOOD WORKING ORDER AND REPAIR, AND FROM TIME TO TIME MAKE, OR CAUSE TO BE MADE, ALL REASONABLY NECESSARY REPAIRS, RENEWALS, REPLACEMENTS, BETTERMENTS AND IMPROVEMENTS THERETO, ALL AS MORE FULLY PROVIDED IN THE MORTGAGE.  BORROWER SHALL KEEP THE PROPERTY INSURED AT ALL TIMES BY FINANCIALLY SOUND AND REPUTABLE INSURERS, TO SUCH EXTENT AND AGAINST SUCH RISKS, AND MAINTAIN LIABILITY AND SUCH OTHER INSURANCE, AS IS MORE FULLY PROVIDED IN THIS AGREEMENT.  BORROWER SHALL OPERATE THE PROPERTY IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE O&M AGREEMENT IN ALL MATERIAL RESPECTS.  AFTER PRIOR WRITTEN NOTICE TO LENDER, 39 -------------------------------------------------------------------------------- BORROWER, AT ITS OWN EXPENSE, MAY CONTEST BY APPROPRIATE LEGAL PROCEEDING PROMPTLY INITIATED AND CONDUCTED IN GOOD FAITH AND WITH DUE DILIGENCE, THE VALIDITY OF ANY LEGAL REQUIREMENT, THE APPLICABILITY OF ANY LEGAL REQUIREMENT TO BORROWER OR THE PROPERTY OR ANY ALLEGED VIOLATION OF ANY LEGAL REQUIREMENT, PROVIDED THAT (I) NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED; (II) INTENTIONALLY OMITTED; (III) SUCH PROCEEDING SHALL BE PERMITTED UNDER AND BE CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF ANY INSTRUMENT TO WHICH BORROWER IS SUBJECT AND SHALL NOT CONSTITUTE A DEFAULT THEREUNDER AND SUCH PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH ALL APPLICABLE STATUTES, LAWS AND ORDINANCES; (IV) NEITHER THE PROPERTY NOR ANY PART THEREOF OR INTEREST THEREIN WILL BE IN IMMEDIATE DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST; (V) BORROWER SHALL PROMPTLY UPON FINAL DETERMINATION THEREOF COMPLY WITH ANY SUCH LEGAL REQUIREMENT DETERMINED TO BE VALID OR APPLICABLE OR CURE ANY VIOLATION OF ANY LEGAL REQUIREMENT; (VI) SUCH PROCEEDING SHALL SUSPEND THE ENFORCEMENT OF THE CONTESTED LEGAL REQUIREMENT AGAINST BORROWER OR THE PROPERTY; AND (VII) BORROWER SHALL FURNISH SUCH SECURITY AS MAY BE REQUIRED IN THE PROCEEDING, OR AS MAY BE REQUESTED BY LENDER, TO INSURE COMPLIANCE WITH SUCH LEGAL REQUIREMENT, TOGETHER WITH ALL INTEREST AND PENALTIES PAYABLE IN CONNECTION THEREWITH.  LENDER MAY APPLY ANY SUCH SECURITY, AS NECESSARY TO CAUSE COMPLIANCE WITH SUCH LEGAL REQUIREMENT AT ANY TIME WHEN, IN THE REASONABLE JUDGMENT OF LENDER, THE VALIDITY, APPLICABILITY OR VIOLATION OF SUCH LEGAL REQUIREMENT IS FINALLY ESTABLISHED OR THE PROPERTY (OR ANY PART THEREOF OR INTEREST THEREIN) SHALL BE IN DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST.  PROVIDED NO EVENT OF DEFAULT THEN EXISTS, ANY SECURITY DEPOSITED WITH LENDER PURSUANT TO THIS SECTION 5.1.1 MAY BE USED TO SATISFY COMPLIANCE WITH THE RELATED LEGAL REQUIREMENT WITH ANY EXCESS AFTER THE SATISFACTION OF SAME TO BE RETURNED TO BORROWER. 5.1.2        TAXES AND OTHER CHARGES. BORROWER SHALL PAY OR CAUSE TO BE PAID ALL TAXES AND OTHER CHARGES NOW OR HEREAFTER LEVIED OR ASSESSED OR IMPOSED AGAINST THE PROPERTY OR ANY PART THEREOF PRIOR TO THE SAME BECOMING DELINQUENT OR THE IMPOSITION OF PENALTIES AND INTEREST DUE THEREON; PROVIDED, HOWEVER, BORROWER’S OBLIGATION TO DIRECTLY PAY TO THE APPROPRIATE TAXING AUTHORITY TAXES SHALL BE SUSPENDED IF BORROWER HAS DEPOSITED AMOUNTS FOR THE PAYMENT OF SUCH TAXES INTO THE TAX AND INSURANCE ESCROW FUND PURSUANT TO OF SECTION 7.2 HEREOF.  BORROWER WILL DELIVER TO LENDER RECEIPTS FOR PAYMENT OR OTHER EVIDENCE SATISFACTORY TO LENDER THAT THE TAXES AND OTHER CHARGES HAVE BEEN SO PAID OR ARE NOT THEN DELINQUENT NO LATER THAN TEN (10) DAYS PRIOR TO THE DATE ON WHICH THE TAXES AND/OR OTHER CHARGES WOULD OTHERWISE BE DELINQUENT IF NOT PAID (PROVIDED, HOWEVER, THAT BORROWER IS NOT REQUIRED TO FURNISH SUCH RECEIPTS FOR PAYMENT OF TAXES IN THE EVENT THAT SUCH TAXES HAVE BEEN PAID BY LENDER PURSUANT TO SECTION 7.2 HEREOF).  IF BORROWER PAYS OR CAUSES TO BE PAID ALL TAXES AND OTHER CHARGES AND PROVIDES A COPY OF THE RECEIPT EVIDENCING THE PAYMENT THEREOF TO LENDER, THEN LENDER SHALL REIMBURSE BORROWER, PROVIDED THAT THERE ARE THEN SUFFICIENT PROCEEDS IN THE TAX AND INSURANCE ESCROW FUND AND PROVIDED THAT THE TAXES ARE BEING PAID PURSUANT TO SECTION 7.2.  UPON WRITTEN REQUEST OF BORROWER, IF LENDER HAS PAID SUCH TAXES PURSUANT TO SECTION 7.2 HEREOF, LENDER SHALL PROVIDE BORROWER WITH EVIDENCE THAT SUCH TAXES HAVE BEEN PAID.  BORROWER SHALL NOT SUFFER AND SHALL PROMPTLY CAUSE TO BE PAID AND DISCHARGED ANY LIEN OR CHARGE WHATSOEVER WHICH MAY BE OR BECOME A LIEN OR CHARGE AGAINST THE PROPERTY, AND SHALL PROMPTLY PAY FOR ALL UTILITY SERVICES PROVIDED TO THE PROPERTY.  AFTER PRIOR WRITTEN NOTICE TO LENDER, BORROWER, AT ITS OWN EXPENSE, MAY CONTEST BY APPROPRIATE LEGAL PROCEEDING, PROMPTLY INITIATED AND CONDUCTED IN GOOD FAITH AND WITH DUE DILIGENCE, THE AMOUNT OR VALIDITY OR APPLICATION IN WHOLE OR IN PART OF ANY TAXES OR OTHER CHARGES, PROVIDED THAT (I)  BORROWER IS PERMITTED TO DO SO UNDER THE PROVISIONS OF ANY MORTGAGE OR DEED OF TRUST SUPERIOR IN LIEN TO THE MORTGAGE; (II) SUCH PROCEEDING SHALL BE PERMITTED 40 -------------------------------------------------------------------------------- UNDER AND BE CONDUCTED IN ACCORDANCE WITH THE PROVISIONS OF ANY OTHER INSTRUMENT TO WHICH BORROWER IS SUBJECT AND SHALL NOT CONSTITUTE A DEFAULT THEREUNDER AND SUCH PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH ALL APPLICABLE STATUTES, LAWS AND ORDINANCES; (III) NEITHER THE PROPERTY NOR ANY PART THEREOF OR INTEREST THEREIN WILL BE IN IMMEDIATE DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST; (IV) BORROWER SHALL PROMPTLY UPON FINAL DETERMINATION THEREOF PAY THE AMOUNT OF ANY SUCH TAXES OR OTHER CHARGES, TOGETHER WITH ALL COSTS, INTEREST AND PENALTIES WHICH MAY BE PAYABLE IN CONNECTION THEREWITH; (V) SUCH PROCEEDING SHALL SUSPEND THE COLLECTION OF SUCH CONTESTED TAXES OR OTHER CHARGES FROM THE PROPERTY; AND (VI) BORROWER SHALL FURNISH SUCH SECURITY AS MAY BE REQUIRED IN THE PROCEEDING, OR AS MAY BE REASONABLY REQUESTED BY LENDER, TO INSURE THE PAYMENT OF ANY SUCH TAXES OR OTHER CHARGES, TOGETHER WITH ALL INTEREST AND PENALTIES THEREON.  LENDER MAY PAY OVER ANY SUCH CASH DEPOSIT OR PART THEREOF HELD BY LENDER TO THE CLAIMANT ENTITLED THERETO AT ANY TIME WHEN, IN THE REASONABLE JUDGMENT OF LENDER, THE ENTITLEMENT OF SUCH CLAIMANT IS ESTABLISHED OR THE PROPERTY (OR PART THEREOF OR INTEREST THEREIN) SHALL BE IN IMMINENT DANGER OF BEING SOLD, FORFEITED, TERMINATED, CANCELLED OR LOST OR THERE SHALL BE ANY DANGER OF THE LIEN OF THE MORTGAGE BEING PRIMED BY ANY RELATED LIEN OTHER THAN A LIEN IN RESPECT OF TAXES BEING CONTESTED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 5.1.2.  PROVIDED NO EVENT OF DEFAULT THEN EXISTS, ANY SECURITY DEPOSITED WITH LENDER PURSUANT TO THIS SECTION 5.1.2 MAY BE USED TO SATISFY THE RELATED TAXES OR OTHER CHARGES WITH ANY EXCESS AFTER THE SATISFACTION OF SAME TO BE RETURNED TO BORROWER. 5.1.3        LITIGATION.  BORROWER SHALL GIVE PROMPT WRITTEN NOTICE TO LENDER UPON OBTAINING INFORMATION OF ANY LITIGATION OR GOVERNMENTAL PROCEEDINGS PENDING OR THREATENED AGAINST BORROWER AND/OR GUARANTOR WHICH MIGHT MATERIALLY ADVERSELY AFFECT BORROWER’S OR GUARANTOR’S CONDITION (FINANCIAL OR OTHERWISE) OR BUSINESS OR THE PROPERTY. 5.1.4        ACCESS TO PROPERTY.  BORROWER SHALL PERMIT AGENTS, REPRESENTATIVES AND EMPLOYEES OF LENDER TO INSPECT THE PROPERTY OR ANY PART THEREOF AT REASONABLE HOURS UPON REASONABLE ADVANCE NOTICE, SUBJECT TO THE RIGHTS OF TENANTS UNDER THEIR RESPECTIVE LEASES. 5.1.5        NOTICE OF DEFAULT.  BORROWER SHALL PROMPTLY ADVISE LENDER OF THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT OF WHICH BORROWER HAS KNOWLEDGE. 5.1.6        COOPERATE IN LEGAL PROCEEDINGS.  BORROWER SHALL COOPERATE FULLY WITH LENDER WITH RESPECT TO ANY PROCEEDINGS BEFORE ANY COURT, BOARD OR OTHER GOVERNMENTAL AUTHORITY WHICH MAY IN ANY WAY AFFECT THE RIGHTS OF LENDER HEREUNDER OR ANY RIGHTS OBTAINED BY LENDER UNDER ANY OF THE OTHER LOAN DOCUMENTS AND, IN CONNECTION THEREWITH, PERMIT LENDER, AT ITS ELECTION, TO PARTICIPATE IN ANY SUCH PROCEEDINGS. 5.1.7        PERFORM LOAN DOCUMENTS.  BORROWER SHALL OBSERVE, PERFORM AND SATISFY ALL THE TERMS, PROVISIONS, COVENANTS AND CONDITIONS OF, AND SHALL PAY WHEN DUE ALL COSTS, FEES AND EXPENSES TO THE EXTENT REQUIRED UNDER THE LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER. 5.1.8        AWARD AND INSURANCE BENEFITS.  BORROWER SHALL COOPERATE WITH LENDER IN OBTAINING FOR LENDER THE BENEFITS OF ANY AWARDS OR INSURANCE PROCEEDS LAWFULLY OR EQUITABLY PAYABLE IN CONNECTION WITH THE PROPERTY, AND LENDER SHALL BE REIMBURSED FOR ANY EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS, AND 41 -------------------------------------------------------------------------------- THE PAYMENT BY BORROWER OF THE EXPENSE OF AN APPRAISAL ON BEHALF OF LENDER IN CASE OF CASUALTY OR CONDEMNATION AFFECTING THE PROPERTY OR ANY PART THEREOF) OUT OF SUCH INSURANCE PROCEEDS. 5.1.9        FURTHER ASSURANCES. BORROWER SHALL, AT BORROWER’S SOLE COST AND EXPENSE: (A)           FURNISH TO LENDER ALL INSTRUMENTS, DOCUMENTS, BOUNDARY SURVEYS, FOOTING OR FOUNDATION SURVEYS, CERTIFICATES, PLANS AND SPECIFICATIONS, APPRAISALS, TITLE AND OTHER INSURANCE REPORTS AND AGREEMENTS, AND EACH AND EVERY OTHER DOCUMENT, CERTIFICATE, AGREEMENT AND INSTRUMENT REQUIRED TO BE FURNISHED BY BORROWER PURSUANT TO THE TERMS OF THE LOAN DOCUMENTS OR REASONABLY REQUESTED BY LENDER IN CONNECTION THEREWITH; (B)           EXECUTE AND DELIVER TO LENDER SUCH DOCUMENTS, INSTRUMENTS, CERTIFICATES, ASSIGNMENTS AND OTHER WRITINGS, AND DO SUCH OTHER ACTS NECESSARY OR DESIRABLE, TO EVIDENCE, PRESERVE AND/OR PROTECT THE COLLATERAL AT ANY TIME SECURING OR INTENDED TO SECURE THE OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS, AS LENDER MAY REASONABLY REQUIRE; AND (C)           DO AND EXECUTE ALL AND SUCH FURTHER LAWFUL AND REASONABLE ACTS, CONVEYANCES AND ASSURANCES FOR THE BETTER AND MORE EFFECTIVE CARRYING OUT OF THE INTENTS AND PURPOSES OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS LENDER SHALL REASONABLY REQUIRE FROM TIME TO TIME. 5.1.10      PRINCIPAL PLACE OF BUSINESS, STATE OF ORGANIZATION.  BORROWER WILL NOT CAUSE OR PERMIT ANY CHANGE TO BE MADE IN ITS NAME, IDENTITY (INCLUDING ITS TRADE NAME OR NAMES), PLACE OF ORGANIZATION OR FORMATION (AS SET FORTH IN SECTION 4.1.36 HEREOF) OR BORROWER’S CORPORATE, PARTNERSHIP OR OTHER STRUCTURE UNLESS BORROWER SHALL HAVE FIRST NOTIFIED LENDER IN WRITING OF SUCH CHANGE AT LEAST THIRTY (30) DAYS PRIOR TO THE EFFECTIVE DATE OF SUCH CHANGE, AND SHALL HAVE FIRST TAKEN ALL ACTION REQUIRED BY LENDER FOR THE PURPOSE OF PERFECTING OR PROTECTING THE LIEN AND SECURITY INTERESTS OF LENDER PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND, IN THE CASE OF A CHANGE IN BORROWER’S STRUCTURE, WITHOUT FIRST OBTAINING THE PRIOR CONSENT OF LENDER.  UPON LENDER’S REQUEST, BORROWER SHALL EXECUTE AND DELIVER ADDITIONAL FINANCING STATEMENTS, SECURITY AGREEMENTS AND OTHER INSTRUMENTS WHICH MAY BE NECESSARY TO EFFECTIVELY EVIDENCE OR PERFECT LENDER’S SECURITY INTEREST IN THE PROPERTY AS A RESULT OF SUCH CHANGE OF PRINCIPAL PLACE OF BUSINESS OR PLACE OF ORGANIZATION.  BORROWER’S PRINCIPAL PLACE OF BUSINESS AND CHIEF EXECUTIVE OFFICE, AND THE PLACE WHERE BORROWER KEEPS ITS BOOKS AND RECORDS, INCLUDING RECORDED DATA OF ANY KIND OR NATURE, REGARDLESS OF THE MEDIUM OR RECORDING, INCLUDING SOFTWARE, WRITINGS, PLANS, SPECIFICATIONS AND SCHEMATICS, HAS BEEN FOR THE PRECEDING FOUR MONTHS (OR, IF LESS, THE ENTIRE PERIOD OF THE EXISTENCE OF BORROWER) AND WILL CONTINUE TO BE THE ADDRESS OF BORROWER SET FORTH AT THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT (UNLESS BORROWER NOTIFIES LENDER IN WRITING AT LEAST THIRTY (30) DAYS PRIOR TO THE DATE OF SUCH CHANGE).  BORROWER’S ORGANIZATIONAL IDENTIFICATION NUMBER, IF ANY, ASSIGNED BY THE STATE OF INCORPORATION OR ORGANIZATION IS CORRECTLY SET FORTH IN THE INTRODUCTORY PARAGRAPH OF THIS AGREEMENT.  BORROWER SHALL PROMPTLY NOTIFY LENDER OF ANY CHANGE IN ITS ORGANIZATIONAL IDENTIFICATION NUMBER.  IF BORROWER DOES NOT NOW HAVE AN ORGANIZATIONAL IDENTIFICATION NUMBER AND LATER OBTAINS ONE, BORROWER PROMPTLY SHALL NOTIFY LENDER OF SUCH ORGANIZATIONAL IDENTIFICATION NUMBER. 42 -------------------------------------------------------------------------------- 5.1.11      FINANCIAL REPORTING. (A)           BORROWER WILL KEEP AND MAINTAIN OR WILL CAUSE TO BE KEPT AND MAINTAINED ON A FISCAL YEAR BASIS, IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER), RECORDS AND ACCOUNTS REFLECTING ALL OF THE FINANCIAL AFFAIRS OF BORROWER AND ALL ITEMS OF INCOME AND EXPENSE IN CONNECTION WITH THE OPERATION OF THE PROPERTY.  LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME AT ALL TIMES DURING NORMAL BUSINESS HOURS UPON REASONABLE NOTICE TO EXAMINE SUCH BOOKS, RECORDS AND ACCOUNTS AT THE OFFICE OF BORROWER OR OTHER PERSON MAINTAINING SUCH BOOKS, RECORDS AND ACCOUNTS AND TO MAKE SUCH COPIES OR EXTRACTS THEREOF AS LENDER SHALL DESIRE.  AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, BORROWER SHALL PAY ANY COSTS AND EXPENSES INCURRED BY LENDER TO EXAMINE BORROWER’S ACCOUNTING RECORDS WITH RESPECT TO THE PROPERTY, AS LENDER SHALL REASONABLY DETERMINE TO BE NECESSARY OR APPROPRIATE IN THE PROTECTION OF LENDER’S INTEREST. (B)           BORROWER WILL FURNISH TO LENDER ANNUALLY, WITHIN ONE HUNDRED TWENTY (120) DAYS FOLLOWING THE END OF EACH FISCAL YEAR OF BORROWER, CERTIFIED ANNUAL FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER) COVERING THE PROPERTY FOR SUCH FISCAL YEAR AND CONTAINING STATEMENTS OF PROFIT AND LOSS FOR BORROWER AND THE PROPERTY AND A BALANCE SHEET FOR BORROWER.  SUCH STATEMENTS SHALL SET FORTH THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS FOR THE PROPERTY FOR SUCH FISCAL YEAR, AND SHALL INCLUDE, BUT NOT BE LIMITED TO, AMOUNTS REPRESENTING ANNUAL NET CASH FLOW, NET OPERATING INCOME, GROSS INCOME FROM OPERATIONS AND OPERATING EXPENSES.  SUCH ANNUAL FINANCIAL STATEMENTS SHALL BE ACCOMPANIED BY (I) A COMPARISON OF THE BUDGETED INCOME AND EXPENSES AND THE ACTUAL INCOME AND EXPENSES FOR THE PRIOR FISCAL YEAR, (II) AN OFFICER’S CERTIFICATE STATING THAT EACH SUCH ANNUAL FINANCIAL STATEMENT PRESENTS FAIRLY THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS OF BORROWER AND THE PROPERTY BEING REPORTED UPON AND HAS BEEN PREPARED IN ACCORDANCE WITH GAAP (OR SUCH OTHER ACCOUNTING BASIS REASONABLY ACCEPTABLE TO LENDER), (III) A LIST OF TENANTS, IF ANY, OCCUPYING MORE THAN TWENTY PERCENT (20%) OF THE TOTAL FLOOR AREA OF THE IMPROVEMENTS, (IV) A BREAKDOWN SHOWING THE YEAR IN WHICH EACH LEASE THEN IN EFFECT EXPIRES AND THE PERCENTAGE OF TOTAL FLOOR AREA OF THE IMPROVEMENTS AND THE PERCENTAGE OF BASE RENT WITH RESPECT TO WHICH LEASES SHALL EXPIRE IN EACH SUCH YEAR, EACH SUCH PERCENTAGE TO BE EXPRESSED ON BOTH A PER YEAR AND CUMULATIVE BASIS, AND (V) A SCHEDULE RECONCILING NET OPERATING INCOME TO NET CASH FLOW (THE “NET CASH FLOW SCHEDULE”), WHICH SHALL ITEMIZE ALL MATERIAL ADJUSTMENTS MADE TO NET OPERATING INCOME TO ARRIVE AT NET CASH FLOW.  TOGETHER WITH BORROWER’S ANNUAL FINANCIAL STATEMENTS, BORROWER SHALL FURNISH TO LENDER AN OFFICER’S CERTIFICATE CERTIFYING TO ITS KNOWLEDGE AS OF THE DATE THEREOF WHETHER THERE EXISTS AN EVENT OR CIRCUMSTANCE WHICH CONSTITUTES A DEFAULT OR EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER, AND IF SUCH DEFAULT OR EVENT OF DEFAULT EXISTS, THE NATURE THEREOF, THE PERIOD OF TIME IT HAS EXISTED AND THE ACTION THEN BEING TAKEN TO REMEDY THE SAME. (C)           BORROWER WILL FURNISH, OR CAUSE TO BE FURNISHED, TO LENDER ON OR BEFORE TWENTY (20) DAYS AFTER THE END OF EACH CALENDAR QUARTER THE FOLLOWING ITEMS, ACCOMPANIED BY AN OFFICER’S CERTIFICATE STATING THAT SUCH ITEMS ARE TRUE, CORRECT, ACCURATE, AND COMPLETE AND FAIRLY PRESENT THE FINANCIAL CONDITION AND RESULTS OF THE OPERATIONS OF BORROWER AND THE PROPERTY (SUBJECT TO NORMAL YEAR-END ADJUSTMENTS) AS APPLICABLE:  (I)  QUARTERLY AND YEAR-TO-DATE OPERATING STATEMENTS (INCLUDING CAPITAL EXPENDITURES) PREPARED FOR EACH CALENDAR QUARTER, NOTING NET OPERATING INCOME, GROSS INCOME FROM OPERATIONS, AND OPERATING EXPENSES (NOT INCLUDING ANY CONTRIBUTIONS TO THE REPLACEMENT RESERVE FUND), AND OTHER INFORMATION NECESSARY AND SUFFICIENT 43 -------------------------------------------------------------------------------- TO FAIRLY REPRESENT THE FINANCIAL POSITION AND RESULTS OF OPERATION OF THE PROPERTY DURING SUCH CALENDAR QUARTER, AND CONTAINING A COMPARISON OF BUDGETED INCOME AND EXPENSES AND THE ACTUAL INCOME AND EXPENSES TOGETHER WITH A DETAILED EXPLANATION OF ANY VARIANCES OF FIVE PERCENT (5%) OR MORE BETWEEN BUDGETED AND ACTUAL AMOUNTS FOR SUCH PERIODS, ALL IN FORM SATISFACTORY TO LENDER; (II) A CALCULATION REFLECTING THE ANNUAL DEBT SERVICE COVERAGE RATIO FOR THE IMMEDIATELY PRECEDING TWELVE (12) MONTH PERIOD AS OF THE LAST DAY OF SUCH QUARTER ACCOMPANIED BY AN OFFICER’S CERTIFICATE WITH RESPECT THERETO; AND (III) A NET CASH FLOW SCHEDULE.  PRIOR TO A SECURITIZATION, BORROWER SHALL PROVIDE THE ITEMS REQUIRED PURSUANT TO THIS SECTION 5.1.11(C) ON A MONTHLY BASIS. (D)           FOR THE PARTIAL YEAR PERIOD COMMENCING ON THE CLOSING DATE, AND FOR EACH FISCAL YEAR THEREAFTER, BORROWER SHALL SUBMIT TO LENDER AN ANNUAL BUDGET NOT LATER THAN THIRTY (30) DAYS AFTER THE COMMENCEMENT OF SUCH PERIOD OR FISCAL YEAR IN FORM REASONABLY SATISFACTORY TO LENDER.  THE ANNUAL BUDGET SHALL BE SUBJECT TO LENDER’S WRITTEN APPROVAL IF A CASH SWEEP PERIOD EXISTS (EACH SUCH ANNUAL BUDGET, AN “APPROVED ANNUAL BUDGET”).  IN THE EVENT THAT LENDER OBJECTS TO A PROPOSED ANNUAL BUDGET SUBMITTED BY BORROWER DURING A CASH SWEEP PERIOD, LENDER SHALL ADVISE BORROWER OF SUCH OBJECTIONS WITHIN FIFTEEN (15) DAYS AFTER RECEIPT THEREOF (AND DELIVER TO BORROWER A REASONABLY DETAILED DESCRIPTION OF SUCH OBJECTIONS) AND BORROWER SHALL PROMPTLY REVISE SUCH ANNUAL BUDGET AND RESUBMIT THE SAME TO LENDER.  LENDER SHALL ADVISE BORROWER OF ANY OBJECTIONS TO SUCH REVISED ANNUAL BUDGET WITHIN TEN (10) DAYS AFTER RECEIPT THEREOF (AND DELIVER TO BORROWER A REASONABLY DETAILED DESCRIPTION OF SUCH OBJECTIONS) AND BORROWER SHALL PROMPTLY REVISE THE SAME IN ACCORDANCE WITH THE PROCESS DESCRIBED IN THIS SUBSECTION UNTIL LENDER APPROVES THE ANNUAL BUDGET.  UNTIL SUCH TIME THAT LENDER APPROVES A PROPOSED ANNUAL BUDGET, THE MOST RECENTLY APPROVED ANNUAL BUDGET SHALL APPLY; PROVIDED THAT, SUCH APPROVED ANNUAL BUDGET SHALL BE ADJUSTED TO REFLECT ACTUAL INCREASES IN TAXES, INSURANCE PREMIUMS AND OTHER CHARGES. (E)           IN THE EVENT THAT A CASH SWEEP PERIOD EXISTS AND BORROWER MUST INCUR AN EXTRAORDINARY OPERATING EXPENSE OR CAPITAL EXPENSE NOT SET FORTH IN THE APPROVED ANNUAL BUDGET (EACH AN “EXTRAORDINARY EXPENSE”), THEN BORROWER SHALL PROMPTLY DELIVER TO LENDER A REASONABLY DETAILED EXPLANATION OF SUCH PROPOSED EXTRAORDINARY EXPENSE FOR LENDER’S APPROVAL. (F)            ANY REPORTS, STATEMENTS OR OTHER INFORMATION REQUIRED TO BE DELIVERED UNDER THIS AGREEMENT SHALL BE DELIVERED (I) IN PAPER FORM, (II) ON A DISKETTE, AND (III) IF REQUESTED BY LENDER AND WITHIN THE CAPABILITIES OF BORROWER’S DATA SYSTEMS WITHOUT CHANGE OR MODIFICATION THERETO, IN ELECTRONIC FORM AND PREPARED USING MICROSOFT WORD FOR WINDOWS OR WORDPERFECT FOR WINDOWS FILES (WHICH FILES MAY BE PREPARED USING A SPREADSHEET PROGRAM AND SAVED AS WORD PROCESSING FILES).  BORROWER AGREES THAT LENDER MAY DISCLOSE INFORMATION REGARDING THE PROPERTY AND BORROWER THAT IS PROVIDED TO LENDER PURSUANT TO THIS SECTION 5.1.11(F) IN CONNECTION WITH THE SECURITIZATION TO SUCH PARTIES REQUESTING SUCH INFORMATION IN CONNECTION WITH SUCH SECURITIZATION. 5.1.12      BUSINESS AND OPERATIONS.  BORROWER WILL CONTINUE TO ENGAGE IN THE BUSINESSES PRESENTLY CONDUCTED BY IT AS AND TO THE EXTENT THE SAME ARE NECESSARY FOR THE OWNERSHIP, MAINTENANCE, MANAGEMENT AND OPERATION OF THE PROPERTY.  BORROWER WILL QUALIFY TO DO BUSINESS AND WILL REMAIN IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION AS AND TO THE EXTENT THE SAME ARE REQUIRED FOR THE OWNERSHIP, MAINTENANCE, MANAGEMENT AND OPERATION OF THE PROPERTY.  BORROWER SHALL AT ALL TIMES DURING THE TERM OF THE LOAN, CONTINUE TO OWN ALL OF THE 44 -------------------------------------------------------------------------------- EQUIPMENT, FIXTURES AND PERSONAL PROPERTY WHICH ARE NECESSARY TO OPERATE THE PROPERTY IN THE MANNER REQUIRED HEREUNDER AND IN THE MANNER IN WHICH IT IS CURRENTLY OPERATED. 5.1.13      TITLE TO THE PROPERTY.  BORROWER WILL WARRANT AND DEFEND (A) THE TITLE TO THE PROPERTY AND EVERY PART THEREOF, SUBJECT ONLY TO LIENS PERMITTED HEREUNDER (INCLUDING PERMITTED ENCUMBRANCES) AND (B) THE VALIDITY AND PRIORITY OF THE LIEN OF THE MORTGAGE AND THE ASSIGNMENT OF LEASES, SUBJECT ONLY TO LIENS PERMITTED HEREUNDER (INCLUDING PERMITTED ENCUMBRANCES), IN EACH CASE AGAINST THE CLAIMS OF ALL PERSONS WHOMSOEVER.  BORROWER SHALL REIMBURSE LENDER FOR ANY LOSSES, COSTS, DAMAGES OR EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND COURT COSTS) INCURRED BY LENDER IF AN INTEREST IN THE PROPERTY, OTHER THAN AS PERMITTED HEREUNDER, IS CLAIMED BY ANOTHER PERSON. 5.1.14      COSTS OF ENFORCEMENT.  IN THE EVENT (A) THAT THE MORTGAGE IS FORECLOSED IN WHOLE OR IN PART OR THAT THE MORTGAGE IS PUT INTO THE HANDS OF AN ATTORNEY FOR COLLECTION, SUIT, ACTION OR FORECLOSURE, (B) OF THE FORECLOSURE OF ANY MORTGAGE PRIOR TO OR SUBSEQUENT TO THE MORTGAGE IN WHICH PROCEEDING LENDER IS MADE A PARTY, OR (C) OF THE BANKRUPTCY, INSOLVENCY, REHABILITATION OR OTHER SIMILAR PROCEEDING IN RESPECT OF BORROWER OR ANY OF ITS CONSTITUENT PERSONS OR AN ASSIGNMENT BY BORROWER OR ANY OF ITS CONSTITUENT PERSONS FOR THE BENEFIT OF ITS CREDITORS, BORROWER, ITS SUCCESSORS OR ASSIGNS, SHALL BE CHARGEABLE WITH AND AGREES TO PAY ALL COSTS OF COLLECTION AND DEFENSE, INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS, INCURRED BY LENDER OR BORROWER IN CONNECTION THEREWITH AND IN CONNECTION WITH ANY APPELLATE PROCEEDING OR POST-JUDGMENT ACTION INVOLVED THEREIN, TOGETHER WITH ALL REQUIRED SERVICE OR USE TAXES. 5.1.15      ESTOPPEL STATEMENT. (A)           AFTER REQUEST BY LENDER, BORROWER SHALL FURNISH TO LENDER WITHIN TEN (10) DAYS A STATEMENT, DULY ACKNOWLEDGED AND CERTIFIED, SETTING FORTH (I)  THE AMOUNT OF THE ORIGINAL PRINCIPAL AMOUNT OF THE NOTE, (II) THE UNPAID PRINCIPAL AMOUNT OF THE NOTE, (III) THE INTEREST RATE OF THE NOTE, (IV) THE DATE INSTALLMENTS OF INTEREST AND/OR PRINCIPAL WERE LAST PAID, (V) ANY KNOWN OFFSETS OR DEFENSES TO THE PAYMENT OF THE DEBT, IF ANY, AND (VI) THAT THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS ARE VALID, LEGAL AND BINDING OBLIGATIONS AND HAVE NOT BEEN MODIFIED OR IF MODIFIED, GIVING PARTICULARS OF SUCH MODIFICATION. (B)           BORROWER SHALL USE COMMERCIALLY REASONABLE EFFORTS TO DELIVER TO LENDER UPON REQUEST, TENANT ESTOPPEL CERTIFICATES FROM EACH COMMERCIAL TENANT LEASING SPACE AT THE PROPERTY IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER PROVIDED THAT BORROWER SHALL NOT BE REQUIRED TO DELIVER SUCH CERTIFICATES MORE FREQUENTLY THAN ONE (1) TIME IN ANY CALENDAR YEAR. (C)           WITHIN THIRTY (30) DAYS OF REQUEST BY BORROWER, LENDER SHALL DELIVER TO BORROWER A STATEMENT SETTING FORTH THE ITEMS DESCRIBED AT (A)(I), (II), (III) AND (IV) OF THIS SECTION 5.1.15. 5.1.16      LOAN PROCEEDS.  BORROWER SHALL USE THE PROCEEDS OF THE LOAN RECEIVED BY IT ON THE CLOSING DATE ONLY FOR THE PURPOSES SET FORTH IN SECTION 2.1.4. 5.1.17      PERFORMANCE BY BORROWER.  BORROWER SHALL IN A TIMELY MANNER OBSERVE, PERFORM AND FULFILL EACH AND EVERY COVENANT, TERM AND PROVISION OF EACH LOAN DOCUMENT 45 -------------------------------------------------------------------------------- EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER, AND SHALL NOT ENTER INTO OR OTHERWISE SUFFER OR PERMIT ANY AMENDMENT, WAIVER, SUPPLEMENT, TERMINATION OR OTHER MODIFICATION OF ANY LOAN DOCUMENT EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER. 5.1.18      CONFIRMATION OF REPRESENTATIONS.  BORROWER SHALL DELIVER, IN CONNECTION WITH ANY SECURITIZATION, (A) ONE (1) OR MORE OFFICER’S CERTIFICATES CERTIFYING AS TO THE ACCURACY (OR DISCLOSING ANY INACCURACIES, AS APPLICABLE) OF ALL REPRESENTATIONS MADE BY BORROWER IN THE LOAN DOCUMENTS AS OF THE DATE OF THE CLOSING OF SUCH SECURITIZATION, AND (B) CERTIFICATES OF THE RELEVANT GOVERNMENTAL AUTHORITIES IN ALL RELEVANT JURISDICTIONS INDICATING THE GOOD STANDING AND QUALIFICATION OF BORROWER, PRINCIPAL AND GUARANTOR AS OF THE DATE OF THE SECURITIZATION. 5.1.19      NO JOINT ASSESSMENT. BORROWER SHALL NOT SUFFER, PERMIT OR INITIATE THE JOINT ASSESSMENT OF THE PROPERTY (A) WITH ANY OTHER REAL PROPERTY CONSTITUTING A TAX LOT SEPARATE FROM THE PROPERTY, AND (B) WHICH CONSTITUTES REAL PROPERTY WITH ANY PORTION OF THE PROPERTY WHICH MAY BE DEEMED TO CONSTITUTE PERSONAL PROPERTY, OR ANY OTHER PROCEDURE WHEREBY THE LIEN OF ANY TAXES WHICH MAY BE LEVIED AGAINST SUCH PERSONAL PROPERTY SHALL BE ASSESSED OR LEVIED OR CHARGED TO SUCH REAL PROPERTY PORTION OF THE PROPERTY. 5.1.20      LEASING MATTERS. ANY LEASES WITH RESPECT TO THE PROPERTY WRITTEN AFTER THE CLOSING DATE, FOR MORE THAN THE RELEVANT LEASING THRESHOLD SQUARE FOOTAGE SHALL BE SUBJECT TO THE PRIOR WRITTEN APPROVAL OF LENDER, WHICH APPROVAL MAY BE GIVEN OR WITHHELD IN THE SOLE DISCRETION OF LENDER.  LENDER SHALL APPROVE OR DISAPPROVE ANY SUCH LEASE WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF A FINAL EXECUTION DRAFT OF SUCH LEASE (INCLUDING ALL EXHIBITS, SCHEDULES, SUPPLEMENTS, ADDENDA OR OTHER AGREEMENTS RELATING THERETO) AND A WRITTEN NOTICE FROM BORROWER REQUESTING LENDER’S APPROVAL TO SUCH LEASE, AND SUCH LEASE SHALL BE DEEMED APPROVED, IF LENDER DOES NOT DISAPPROVE SUCH LEASE WITHIN SAID TEN (10) BUSINESS DAY PERIOD PROVIDED SUCH WRITTEN NOTICE CONSPICUOUSLY STATES, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.1.20 OF THE LOAN AGREEMENT, THE LEASE SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF SUCH LEASE AND WRITTEN NOTICE”, PROVIDED THAT IN NO EVENT SHALL LENDER’S CONSENT BE DEEMED GIVEN WITH RESPECT TO ANY LEASE FOR 21,000 OR MORE RENTABLE SQUARE FEET.  BORROWER SHALL FURNISH LENDER WITH EXECUTED COPIES OF ALL LEASES.  ALL RENEWALS OF LEASES AND ALL PROPOSED LEASES SHALL PROVIDE FOR RENTAL RATES COMPARABLE TO EXISTING LOCAL MARKET RATES (UNLESS SUCH RENTAL RATES ARE OTHERWISE SET FORTH IN THE LEASES EXECUTED PRIOR TO THE CLOSING DATE).  ALL PROPOSED LEASES SHALL BE ON COMMERCIALLY REASONABLE TERMS AND SHALL NOT CONTAIN ANY TERMS WHICH WOULD MATERIALLY IMPAIR LENDER’S RIGHTS UNDER THE LOAN DOCUMENTS.  ALL LEASES EXECUTED AFTER THE CLOSING DATE SHALL PROVIDE THAT THEY ARE SUBORDINATE TO THE MORTGAGE ENCUMBERING THE PROPERTY AND THAT THE TENANT THEREUNDER AGREES TO ATTORN TO LENDER OR ANY PURCHASER AT A SALE BY FORECLOSURE OR POWER OF SALE.  BORROWER (I) SHALL OBSERVE AND PERFORM THE OBLIGATIONS IMPOSED UPON THE LESSOR UNDER THE LEASES IN A COMMERCIALLY REASONABLE MANNER; (II) SHALL ENFORCE THE TERMS, COVENANTS AND CONDITIONS CONTAINED IN THE LEASES UPON THE PART OF THE TENANT THEREUNDER TO BE OBSERVED OR PERFORMED IN A COMMERCIALLY REASONABLE MANNER AND IN A MANNER NOT TO IMPAIR THE VALUE OF THE PROPERTY INVOLVED EXCEPT THAT NO TERMINATION BY BORROWER OR ACCEPTANCE OF SURRENDER BY A TENANT OF ANY LEASE SHALL BE PERMITTED UNLESS BY REASON OF A TENANT DEFAULT AND THEN ONLY IN A COMMERCIALLY REASONABLE MANNER TO PRESERVE AND PROTECT THE PROPERTY; PROVIDED, HOWEVER, THAT NO SUCH TERMINATION OR SURRENDER OF 46 -------------------------------------------------------------------------------- ANY LEASE COVERING MORE THAN THE RELEVANT LEASING THRESHOLD WILL BE PERMITTED WITHOUT THE WRITTEN CONSENT OF LENDER WHICH CONSENT MAY BE WITHHELD IN THE REASONABLE DISCRETION OF LENDER; (III) SHALL NOT COLLECT ANY OF THE RENTS MORE THAN ONE (1) MONTH IN ADVANCE (OTHER THAN SECURITY DEPOSITS); (IV) SHALL NOT EXECUTE ANY OTHER ASSIGNMENT OF LESSOR’S INTEREST IN THE LEASES OR THE RENTS (EXCEPT AS CONTEMPLATED BY THE LOAN DOCUMENTS); (V) SHALL NOT ALTER, MODIFY OR CHANGE THE TERMS OF THE LEASES IN A MANNER INCONSISTENT WITH THE PROVISIONS OF THE LOAN DOCUMENTS WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, WHICH CONSENT MAY BE WITHHELD IN THE SOLE DISCRETION OF LENDER; AND (VI) SHALL EXECUTE AND DELIVER AT THE REQUEST OF LENDER ALL SUCH FURTHER ASSURANCES, CONFIRMATIONS AND ASSIGNMENTS IN CONNECTION WITH THE LEASES AS LENDER SHALL FROM TIME TO TIME REASONABLY REQUIRE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BORROWER SHALL NOT ENTER INTO A LEASE OF ALL OR SUBSTANTIALLY ALL OF THE PROPERTY WITHOUT LENDER’S PRIOR WRITTEN CONSENT.  NOTWITHSTANDING THE FOREGOING, BORROWER MAY, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, TERMINATE ANY LEASE WHICH DEMISES LESS THAN THE RELEVANT LEASING THRESHOLD UNDER ANY OF THE FOLLOWING CIRCUMSTANCES: (I) THE TENANT UNDER SAID LEASE IS IN DEFAULT BEYOND ANY APPLICABLE GRACE AND CURE PERIOD, AND BORROWER HAS THE RIGHT TO TERMINATE SUCH LEASE; (II) SUCH TERMINATION IS PERMITTED BY THE TERMS OF THE LEASE IN QUESTION AND BORROWER HAS SECURED AN OBLIGATION FROM A THIRD PARTY TO LEASE THE SPACE UNDER THE LEASE TO BE TERMINATED AT A RENTAL EQUAL TO OR HIGHER THAN THE RENTAL DUE UNDER THE LEASE TO BE TERMINATED; AND (III) IF THE TENANT UNDER THE LEASE TO BE TERMINATED, HAS EXECUTED A RIGHT UNDER SAID LEASE TO TERMINATE ITS LEASE UPON PAYMENT OF A TERMINATION FEE TO BORROWER, AND HAS IN FACT TERMINATED ITS LEASE AND PAID SAID FEE, BORROWER MAY ACCEPT SAID TERMINATION.  LENDER SHALL, UPON REQUEST OF BORROWER, ENTER INTO A SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (“SNDA”) WITH RESPECT TO EACH PROPOSED TENANT ENTERING INTO A LEASE IN COMPLIANCE WITH THE REQUIREMENTS OF THIS AGREEMENT; PROVIDED, THAT SUCH LEASE IS (I) FOR AT LEAST 10,000 SQUARE FEET OF SPACE OF THE IMPROVEMENTS, (II) WITH A TENANT REASONABLY APPROVED BY LENDER IN WRITING PRIOR TO BORROWER’S EXECUTION OF ANY SUCH LEASE AND (III) ON THE STANDARD FORM OF LEASE PREVIOUSLY APPROVED IN WRITING BY LENDER.  ANY SNDA EXECUTED BY LENDER SHALL BE IN THE FORM ATTACHED HERETO AS EXHIBIT A AND MADE A PART HEREOF WITH SUCH COMMERCIALLY REASONABLE CHANGES THERETO AS LENDER SHALL AGREE TO IN ITS REASONABLE DISCRETION. 5.1.21      ALTERATIONS. SUBJECT TO THE RIGHTS OF TENANTS TO MAKE ALTERATIONS PURSUANT TO THE TERMS OF THEIR RESPECTIVE LEASES, BORROWER SHALL OBTAIN LENDER’S PRIOR WRITTEN CONSENT TO ANY ALTERATIONS TO ANY IMPROVEMENTS, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED EXCEPT WITH RESPECT TO ALTERATIONS THAT MAY HAVE A MATERIAL ADVERSE EFFECT ON BORROWER’S FINANCIAL CONDITION, THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME.  NOTWITHSTANDING THE FOREGOING, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH ANY ALTERATIONS THAT WILL NOT HAVE A MATERIAL ADVERSE EFFECT ON BORROWER’S FINANCIAL CONDITION, THE VALUE OF THE PROPERTY OR THE NET OPERATING INCOME, PROVIDED THAT SUCH ALTERATIONS ARE MADE IN CONNECTION WITH (A) TENANT IMPROVEMENT WORK PERFORMED PURSUANT TO THE TERMS OF ANY LEASE EXECUTED ON OR BEFORE THE CLOSING DATE, (B) TENANT IMPROVEMENT WORK PERFORMED PURSUANT TO THE TERMS AND PROVISIONS OF A LEASE AND NOT ADVERSELY AFFECTING ANY STRUCTURAL COMPONENT OF ANY IMPROVEMENTS, ANY UTILITY OR HVAC SYSTEM CONTAINED IN ANY IMPROVEMENTS OR THE EXTERIOR OF ANY BUILDING CONSTITUTING A PART OF ANY IMPROVEMENTS, (C) ALTERATIONS PERFORMED IN CONNECTION WITH THE RESTORATION OF THE PROPERTY AFTER THE OCCURRENCE OF A CASUALTY OR CONDEMNATION IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THIS AGREEMENT OR (D) ANY STRUCTURAL ALTERATION WHICH COSTS LESS THAN $150,000.00 IN THE AGGREGATE FOR ALL COMPONENTS THEREOF WHICH CONSTITUTE SUCH ALTERATION OR ANY NON-STRUCTURAL ALTERATION WHICH COSTS LESS THAN $300,000.00 IN THE AGGREGATE FOR ALL COMPONENTS THEREOF WHICH 47 -------------------------------------------------------------------------------- CONSTITUTE SUCH ALTERATION.  IF THE TOTAL UNPAID AMOUNTS DUE AND PAYABLE WITH RESPECT TO ALTERATIONS TO THE IMPROVEMENTS AT THE PROPERTY (OTHER THAN SUCH AMOUNTS TO BE PAID OR REIMBURSED BY TENANTS UNDER THE LEASES) SHALL AT ANY TIME EQUAL OR EXCEED $300,000.00 (AND SUCH AMOUNT IS NOT BEING PAID FROM ANY RESERVE FUNDS) (THE “THRESHOLD AMOUNT”), BORROWER, UPON LENDER’S REQUEST, SHALL PROMPTLY DELIVER TO LENDER AS SECURITY FOR THE PAYMENT OF SUCH AMOUNTS AND AS ADDITIONAL SECURITY FOR BORROWER’S OBLIGATIONS UNDER THE LOAN DOCUMENTS ANY OF THE FOLLOWING:  (A) CASH, (B) U.S. OBLIGATIONS, (C) OTHER SECURITIES HAVING A RATING ACCEPTABLE TO LENDER AND THAT THE APPLICABLE RATING AGENCIES HAVE CONFIRMED IN WRITING WILL NOT, IN AND OF ITSELF, RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE THEN CURRENT RATINGS ASSIGNED TO ANY SECURITIES OR ANY CLASS THEREOF IN CONNECTION WITH ANY SECURITIZATION OR (D) A COMPLETION AND PERFORMANCE BOND OR AN IRREVOCABLE LETTER OF CREDIT (PAYABLE ON SIGHT DRAFT ONLY) ISSUED BY A FINANCIAL INSTITUTION HAVING A RATING BY S&P OF NOT LESS THAN “A-1+” IF THE TERM OF SUCH BOND OR LETTER OF CREDIT IS NO LONGER THAN THREE (3) MONTHS OR, IF SUCH TERM IS IN EXCESS OF THREE (3) MONTHS, ISSUED BY A FINANCIAL INSTITUTION HAVING A RATING THAT IS ACCEPTABLE TO LENDER AND THAT THE APPLICABLE RATING AGENCIES HAVE CONFIRMED IN WRITING WILL NOT, IN AND OF ITSELF, RESULT IN A DOWNGRADE, WITHDRAWAL OR QUALIFICATION OF THE THEN CURRENT RATINGS ASSIGNED TO ANY SECURITIES OR CLASS THEREOF IN CONNECTION WITH ANY SECURITIZATION.  SUCH SECURITY SHALL BE IN AN AMOUNT EQUAL TO THE EXCESS OF THE TOTAL UNPAID AMOUNTS WITH RESPECT TO ALTERATIONS TO THE IMPROVEMENTS ON THE PROPERTY (OTHER THAN SUCH AMOUNTS TO BE PAID OR REIMBURSED BY TENANTS UNDER THE LEASES) OVER THE THRESHOLD AMOUNT AND, IF CASH, U.S. OBLIGATIONS OR OTHER SECURITIES, MAY BE APPLIED FROM TIME TO TIME, AT THE OPTION OF BORROWER OR, DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, AT THE OPTION OF LENDER, TO PAY FOR SUCH ALTERATIONS.  AT THE OPTION OF LENDER, FOLLOWING THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, LENDER MAY TERMINATE ANY OF THE ALTERATIONS AND USE THE DEPOSIT TO RESTORE THE PROPERTY TO THE EXTENT NECESSARY TO PREVENT ANY MATERIAL ADVERSE EFFECT ON THE VALUE OF THE PROPERTY. 5.1.22      OPERATION OF PROPERTY. (A)           BORROWER SHALL CAUSE THE PROPERTY TO BE OPERATED, IN ALL MATERIAL RESPECTS, IN ACCORDANCE WITH THE PROPERTY MANAGEMENT AGREEMENT (OR REPLACEMENT MANAGEMENT AGREEMENT) AS APPLICABLE.  IN THE EVENT THAT THE PROPERTY MANAGEMENT AGREEMENT EXPIRES OR IS TERMINATED (WITHOUT LIMITING ANY OBLIGATION OF BORROWER TO OBTAIN LENDER’S CONSENT TO ANY TERMINATION OR MODIFICATION OF THE PROPERTY MANAGEMENT AGREEMENT IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THIS AGREEMENT), BORROWER SHALL PROMPTLY ENTER INTO A REPLACEMENT MANAGEMENT AGREEMENT WITH MANAGER OR ANOTHER QUALIFYING MANAGER, AS APPLICABLE. (B)           BORROWER SHALL:  (I) PROMPTLY PERFORM AND/OR OBSERVE, IN ALL MATERIAL RESPECTS, ALL OF THE COVENANTS AND AGREEMENTS REQUIRED TO BE PERFORMED AND OBSERVED BY IT UNDER THE PROPERTY MANAGEMENT AGREEMENT AND DO ALL THINGS NECESSARY TO PRESERVE AND TO KEEP UNIMPAIRED ITS MATERIAL RIGHTS THEREUNDER; (II) PROMPTLY NOTIFY LENDER OF ANY MATERIAL DEFAULT UNDER THE PROPERTY MANAGEMENT AGREEMENT OF WHICH IT IS AWARE; AND (III) ENFORCE THE PERFORMANCE AND OBSERVANCE OF ALL OF THE COVENANTS AND AGREEMENTS REQUIRED TO BE PERFORMED AND/OR OBSERVED BY MANAGER UNDER THE PROPERTY MANAGEMENT AGREEMENT, IN A COMMERCIALLY REASONABLE MANNER. 5.1.23      SUPPLEMENTAL MORTGAGE AFFIDAVITS. AS OF THE DATE HEREOF, BORROWER REPRESENTS THAT IT HAS PAID OR HAS DEPOSITED WITH THE TITLE COMPANY ISSUING THE TITLE INSURANCE 48 -------------------------------------------------------------------------------- POLICY FUNDS SUFFICIENT TO PAY ALL STATE, COUNTY AND MUNICIPAL RECORDING AND ALL OTHER TAXES IMPOSED UPON THE EXECUTION AND RECORDATION OF THE MORTGAGE.  IF AT ANY TIME LENDER DETERMINES, BASED ON APPLICABLE LAW, THAT LENDER IS NOT BEING AFFORDED THE MAXIMUM AMOUNT OF SECURITY AVAILABLE FROM THE PROPERTY AS A DIRECT OR INDIRECT RESULT OF APPLICABLE TAXES NOT HAVING BEEN PAID WITH RESPECT TO THE PROPERTY, BORROWER AGREES THAT BORROWER WILL EXECUTE, ACKNOWLEDGE AND DELIVER TO LENDER, WITHIN FIFTEEN (15) DAYS OF LENDER’S REQUEST, SUPPLEMENTAL AFFIDAVITS INCREASING THE AMOUNT OF THE DEBT ATTRIBUTABLE TO THE PROPERTY FOR WHICH ALL APPLICABLE TAXES HAVE BEEN PAID TO AN AMOUNT DETERMINED BY LENDER TO BE EQUAL TO THE LESSER OF (A) THE GREATER OF THE FAIR MARKET VALUE OF THE PROPERTY (I) AS OF THE DATE HEREOF AND (II) AS OF THE DATE SUCH SUPPLEMENTAL AFFIDAVITS ARE TO BE DELIVERED TO LENDER, AND (B) THE AMOUNT OF THE DEBT ATTRIBUTABLE TO THE PROPERTY, AND BORROWER SHALL, ON DEMAND, PAY ANY ADDITIONAL TAXES. 5.1.24      EMBARGOED PERSON.  BORROWER COVENANTS AND AGGRESS (A) THAT IT HAS PERFORMED AND SHALL PERFORM REASONABLE DUE DILIGENCE TO ENSURE THAT  AT ALL TIMES THROUGHOUT THE TERM OF THE LOAN, INCLUDING AFTER GIVING EFFECT TO ANY TRANSFERS BY BORROWER TO ANY AFFILIATES OF BORROWER PERMITTED PURSUANT TO THE LOAN DOCUMENTS, (I) NONE OF THE FUNDS OR OTHER ASSETS OF BORROWER CONSTITUTE PROPERTY OF, OR ARE BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BY ANY PERSON, ENTITY OR GOVERNMENT NAMED ON THE OFAC LIST, SUBJECT TO TRADE RESTRICTIONS UNDER U.S. LAW, INCLUDING, BUT NOT LIMITED TO, THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT, 50 U.S.C. §§ 1701 ET SEQ., THE TRADING WITH THE ENEMY ACT, 50 U.S.C. APP. 1 ET SEQ., THE UNITING AND STRENGTHENING AMERICA BY PROVIDING APPROPRIATE TOOLS REQUIRED TO INTERCEPT AND OBSTRUCT TERRORISM ACT OF 2001, U.S. PUBLIC LAW 107-56 AND ANY EXECUTIVE ORDERS OR REGULATIONS PROMULGATED THEREUNDER WITH THE RESULT THAT THE INVESTMENT IN BORROWER, PRINCIPAL OR GUARANTOR, AS APPLICABLE (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN MADE BY THE LENDER IS IN VIOLATION OF LAW (“EMBARGOED PERSON”), (II) NO EMBARGOED PERSON HAS ANY INTEREST OF ANY NATURE WHATSOEVER IN BORROWER WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW, (III) NONE OF THE FUNDS OF BORROWER HAVE BEEN DERIVED FROM ANY UNLAWFUL ACTIVITY WITH THE RESULT THAT THE INVESTMENT IN BORROWER (WHETHER DIRECTLY OR INDIRECTLY), IS PROHIBITED BY LAW OR THE LOAN IS IN VIOLATION OF LAW, (IV) BORROWER, PRINCIPAL AND GUARANTOR ARE IN FULL COMPLIANCE WITH ALL APPLICABLE ORDERS, RULES, REGULATIONS AND RECOMMENDATIONS OF THE OFFICE OF FOREIGN ASSET CONTROL OF THE U.S. DEPARTMENT OF TREASURY (“OFAC”), AND (V) NO PROCEEDS OF THE LOAN WILL BE USED TO FUND ANY OPERATIONS IN, FINANCE ANY INVESTMENTS OR ACTIVITIES IN OR MAKE ANY PAYMENTS TO, EMBARGOED PERSON;  (B)  THAT IN THE EVENT BORROWER RECEIVES ANY NOTICE THAT BORROWER, PRINCIPAL OR GUARANTOR (OR ANY OF THEIR RESPECTIVE BENEFICIAL OWNERS, AFFILIATES OR PARTICIPANTS) BECOME LISTED ON THE OFAC LIST, ANNEX OR ANY OTHER LIST PROMULGATED UNDER THE PATRIOT ACT OR IS INDICTED, ARRAIGNED, OR CUSTODIALLY DETAINED ON CHARGES INVOLVING MONEY LAUNDERING OR PREDICATE CRIMES TO MONEY LAUNDERING, BORROWER SHALL IMMEDIATELY NOTIFY LENDER.  IT SHALL BE AN EVENT OF DEFAULT HEREUNDER IF BORROWER, GUARANTOR, ANY PRINCIPAL OR ANY AFFILIATE OF BORROWER THAT IS A PARTY TO ANY LOAN DOCUMENT BECOMES LISTED ON ANY LIST PROMULGATED UNDER THE PATRIOT ACT OR IS INDICTED, ARRAIGNED OR CUSTODIALLY DETAINED ON CHARGES INVOLVING MONEY LAUNDERING OR PREDICATE CRIMES TO MONEY LAUNDERING. SECTION 5.2             NEGATIVE COVENANTS.  FROM THE CLOSING DATE UNTIL PAYMENT AND PERFORMANCE IN FULL OF ALL OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS OR THE EARLIER RELEASE OF THE LIEN OF THE MORTGAGE IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND THE OTHER 49 -------------------------------------------------------------------------------- LOAN DOCUMENTS, BORROWER COVENANTS AND AGREES WITH LENDER THAT IT WILL NOT DO, DIRECTLY OR INDIRECTLY, ANY OF THE FOLLOWING: 5.2.1        OPERATION OF PROPERTY.  BORROWER SHALL NOT, WITHOUT LENDER’S PRIOR WRITTEN CONSENT (WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD): (I) SURRENDER, TERMINATE OR CANCEL THE PROPERTY MANAGEMENT AGREEMENT; PROVIDED, THAT BORROWER MAY, WITHOUT LENDER’S CONSENT, REPLACE THE MANAGER SO LONG AS THE REPLACEMENT MANAGER IS A QUALIFYING MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT; (II) REDUCE OR CONSENT TO THE REDUCTION OF THE TERM OF THE PROPERTY MANAGEMENT AGREEMENT; (III) INCREASE OR CONSENT TO THE INCREASE OF THE AMOUNT OF ANY CHARGES UNDER THE PROPERTY MANAGEMENT AGREEMENT; OR (IV) OTHERWISE MODIFY, CHANGE, SUPPLEMENT, ALTER OR AMEND, OR WAIVE OR RELEASE ANY OF ITS RIGHTS AND REMEDIES UNDER, THE PROPERTY MANAGEMENT AGREEMENT IN ANY MATERIAL RESPECT.  LENDER AGREES THAT ITS CONSENT PURSUANT TO THIS SECTION 5.2.1(A) WILL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED PROVIDED THAT IN CONNECTION WITH ANY REPLACEMENT OF THE MANAGER THE PERSON CHOSEN BY BORROWER AS THE REPLACEMENT MANAGER IS A QUALIFYING MANAGER, AND FURTHER AGREES THAT ANY SUCH WRITTEN REQUEST FOR CONSENT THAT INCLUDES EVIDENCE THAT THE REPLACEMENT MANAGER IS A QUALIFYING MANAGER, SHALL BE APPROVED OR DISAPPROVED WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT, PROVIDED SUCH WRITTEN REQUEST FROM BORROWER SHALL CONSPICUOUSLY STATE, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.2.1 OF THE LOAN AGREEMENT, A RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF THIS WRITTEN NOTICE”.  IF LENDER FAILS TO DISAPPROVE ANY SUCH MATTER WITHIN SUCH PERIOD, BORROWER SHALL PROVIDE A SECOND WRITTEN NOTICE REQUESTING APPROVAL, WHICH WRITTEN NOTICE SHALL CONSPICUOUSLY STATE, IN LARGE BOLD TYPE, THAT “PURSUANT TO SECTION 5.2.1 OF THE LOAN AGREEMENT, THE MATTER DESCRIBED HEREIN SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN FIVE (5) BUSINESS DAYS OF LENDER’S RECEIPT OF THIS WRITTEN NOTICE”.  THEREAFTER, IF LENDER DOES NOT DISAPPROVE SUCH MATTER WITHIN SAID FIVE (5) BUSINESS DAY PERIOD SUCH MATTER SHALL BE DEEMED APPROVED. 5.2.2        LIENS.  BORROWER SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, CREATE, INCUR, ASSUME OR SUFFER TO EXIST ANY LIEN ON ANY PORTION OF THE PROPERTY OR PERMIT ANY SUCH ACTION TO BE TAKEN, EXCEPT: (I)          PERMITTED ENCUMBRANCES; (II)         LIENS CREATED BY OR PERMITTED PURSUANT TO THE LOAN DOCUMENTS; AND (III)        LIENS FOR TAXES OR OTHER CHARGES NOT YET DELINQUENT (OR THAT BORROWER IS CONTESTING IN ACCORDANCE WITH THE TERMS OF SECTION 5.1.2 HEREOF). 5.2.3        DISSOLUTION.  BORROWER SHALL NOT (A) ENGAGE IN ANY DISSOLUTION, LIQUIDATION OR CONSOLIDATION OR MERGER WITH OR INTO ANY OTHER BUSINESS ENTITY, (B) ENGAGE IN ANY BUSINESS ACTIVITY NOT RELATED TO THE OWNERSHIP AND OPERATION OF THE PROPERTY, (C) TRANSFER, LEASE OR SELL, IN ONE TRANSACTION OR ANY COMBINATION OF TRANSACTIONS, THE ASSETS OR ALL OR SUBSTANTIALLY ALL OF THE PROPERTIES OR ASSETS OF BORROWER EXCEPT TO THE EXTENT PERMITTED BY THE LOAN DOCUMENTS, (D) MODIFY, AMEND, WAIVE OR TERMINATE ITS ORGANIZATIONAL DOCUMENTS OR ITS QUALIFICATION AND GOOD STANDING IN ANY JURISDICTION IN WHICH IT IS ORGANIZED OR THE PROPERTY IS LOCATED OR (E) CAUSE THE 50 -------------------------------------------------------------------------------- PRINCIPAL TO (I) DISSOLVE, WIND UP OR LIQUIDATE OR TAKE ANY ACTION, OR OMIT TO TAKE AN ACTION, AS A RESULT OF WHICH THE PRINCIPAL WOULD BE DISSOLVED, WOUND UP OR LIQUIDATED IN WHOLE OR IN PART, OR (II) AMEND, MODIFY, WAIVE OR TERMINATE THE CERTIFICATE OF FORMATION OR OPERATING AGREEMENT OF THE PRINCIPAL, IN EACH CASE, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF LENDER OR LENDER’S DESIGNEE. 5.2.4        CHANGE IN BUSINESS.  BORROWER SHALL NOT ENTER INTO ANY LINE OF BUSINESS OTHER THAN THE OWNERSHIP AND OPERATION OF THE PROPERTY, OR MAKE ANY MATERIAL CHANGE IN THE SCOPE OR NATURE OF ITS BUSINESS OBJECTIVES, PURPOSES OR OPERATIONS, OR UNDERTAKE OR PARTICIPATE IN ACTIVITIES OTHER THAN THE CONTINUANCE OF ITS PRESENT BUSINESS.  NOTHING CONTAINED IN THIS SECTION 5.2.4 IS INTENDED TO EXPAND THE RIGHTS OF BORROWER CONTAINED IN SECTION 5.2.10(D) HEREOF. 5.2.5        DEBT CANCELLATION.  BORROWER SHALL NOT CANCEL OR OTHERWISE FORGIVE OR RELEASE ANY CLAIM OR DEBT (OTHER THAN TERMINATION OF LEASES IN ACCORDANCE HEREWITH) OWED TO BORROWER BY ANY PERSON, EXCEPT FOR ADEQUATE CONSIDERATION AND IN THE ORDINARY COURSE OF BORROWER’S BUSINESS. 5.2.6        ZONING.  BORROWER SHALL NOT INITIATE OR CONSENT TO ANY ZONING RECLASSIFICATION OF ANY PORTION OF THE PROPERTY OR SEEK ANY VARIANCE UNDER ANY EXISTING ZONING ORDINANCE OR USE OR PERMIT THE USE OF ANY PORTION OF THE PROPERTY IN ANY MANNER THAT COULD RESULT IN SUCH USE BECOMING A NON-CONFORMING USE UNDER ANY ZONING ORDINANCE OR ANY OTHER APPLICABLE LAND USE LAW, RULE OR REGULATION, WITHOUT THE PRIOR CONSENT OF LENDER. 5.2.7        INTENTIONALLY OMITTED. 5.2.8        INTENTIONALLY OMITTED. 5.2.9        ERISA. (A)           BORROWER SHALL NOT ENGAGE IN ANY TRANSACTION WHICH WOULD CAUSE ANY OBLIGATION, OR ACTION TAKEN OR TO BE TAKEN, HEREUNDER (OR THE EXERCISE BY LENDER OF ANY OF ITS RIGHTS UNDER THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS) TO BE A NON-EXEMPT (UNDER A STATUTORY OR ADMINISTRATIVE CLASS EXEMPTION) PROHIBITED TRANSACTION UNDER ERISA. (B)           DURING THE TERM OF THE LOAN OR ANY OBLIGATION OR RIGHT HEREUNDER, BORROWER  SHALL NOT BE A PLAN AND NONE OF THE ASSETS OF BORROWER SHALL CONSTITUTE OF A PLAN WITHIN THE MEANING OF SECTION 29C.F.R. §2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA.  BORROWER FURTHER COVENANTS AND AGREES TO DELIVER TO LENDER SUCH CERTIFICATIONS OR OTHER EVIDENCE FROM TIME TO TIME THROUGHOUT THE TERM OF THE LOAN, AS REQUESTED BY LENDER IN ITS SOLE DISCRETION, THAT (I) BORROWER IS NOT A PLAN, OR A “GOVERNMENTAL PLAN” WITHIN THE MEANING OF SECTION 3(32) OF ERISA; (II) BORROWER IS NOT SUBJECT TO ANY STATE STATUTE REGULATING INVESTMENTS OF, OR FIDUCIARY OBLIGATIONS WITH RESPECT TO, GOVERNMENTAL PLANS; AND (III) ONE OR MORE OF THE FOLLOWING CIRCUMSTANCES IS TRUE: (I)          EQUITY INTERESTS IN BORROWER ARE PUBLICLY OFFERED SECURITIES, WITHIN THE MEANING OF 29 C.F.R. §2510.3-101(B)(2); 51 -------------------------------------------------------------------------------- (II)                           NONE OF THE ASSETS OF THE BORROWER ARE, WITH THE APPLICATION OF 29 C.F.R. §2510.3 101, AS MODIFIED BY SECTION 3(42) OF ERISA, REGARDED AS ASSETS OF ANY PLAN; OR (III)                        BORROWER QUALIFIES AS AN “OPERATING COMPANY” OR A “REAL ESTATE OPERATING COMPANY” WITHIN THE MEANING OF 29 C.F.R. §2510.3-101(C) OR (E). (C)                                  “PLAN” SHALL MEAN AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) SUBJECT TO TITLE I OF ERISA OR A PLAN OR ANOTHER ARRANGEMENT (WITHIN THE MEANING OF SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE RELATED TREASURY DEPARTMENT REGULATIONS, INCLUDING TEMPORARY REGULATIONS), SUBJECT TO SECTION 4975 OF THE CODE. 5.2.10                  TRANSFERS. (A)                                  BORROWER ACKNOWLEDGES THAT LENDER HAS EXAMINED AND RELIED ON THE EXPERIENCE OF BORROWER AND ITS STOCKHOLDERS, GENERAL PARTNERS, MEMBERS, PRINCIPALS AND (IF BORROWER IS A TRUST) BENEFICIAL OWNERS IN OWNING AND OPERATING PROPERTIES SUCH AS THE PROPERTY IN AGREEING TO MAKE THE LOAN, AND WILL CONTINUE TO RELY ON BORROWER’S OWNERSHIP OF THE PROPERTY AS A MEANS OF MAINTAINING THE VALUE OF THE PROPERTY AS SECURITY FOR REPAYMENT OF THE DEBT AND THE PERFORMANCE OF THE OTHER OBLIGATIONS.  BORROWER ACKNOWLEDGES THAT LENDER HAS A VALID INTEREST IN MAINTAINING THE VALUE OF THE PROPERTY SO AS TO ENSURE THAT, SHOULD BORROWER DEFAULT IN THE REPAYMENT OF THE DEBT OR THE PERFORMANCE OF THE OTHER OBLIGATIONS, LENDER CAN RECOVER THE DEBT BY A SALE OF THE PROPERTY. (B)                                 WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER, AND EXCEPT TO THE EXTENT OTHERWISE SET FORTH IN THIS SECTION 5.2.10, BORROWER SHALL NOT, AND SHALL NOT PERMIT ANY RESTRICTED PARTY DO ANY OF THE FOLLOWING (COLLECTIVELY, A “TRANSFER”): (I) SELL, CONVEY, MORTGAGE, GRANT, BARGAIN, ENCUMBER, PLEDGE, ASSIGN, GRANT OPTIONS WITH RESPECT TO, OR OTHERWISE TRANSFER OR DISPOSE OF (DIRECTLY OR INDIRECTLY, VOLUNTARILY OR INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE, AND WHETHER OR NOT FOR CONSIDERATION OR OF RECORD) THE PROPERTY OR ANY PART THEREOF OR ANY LEGAL OR BENEFICIAL INTEREST THEREIN OR (II) PERMIT A SALE OR PLEDGE OF AN INTEREST IN ANY RESTRICTED PARTY, OTHER THAN PURSUANT TO LEASES OF SPACE IN THE IMPROVEMENTS TO TENANTS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.1.20. (C)                                  A TRANSFER SHALL INCLUDE, BUT NOT BE LIMITED TO, (I) AN INSTALLMENT SALES AGREEMENT WHEREIN BORROWER AGREES TO SELL THE PROPERTY OR ANY PART THEREOF FOR A PRICE TO BE PAID IN INSTALLMENTS; (II) AN AGREEMENT BY BORROWER LEASING ALL OR A SUBSTANTIAL PART OF THE PROPERTY FOR OTHER THAN ACTUAL OCCUPANCY BY A SPACE TENANT THEREUNDER OR A SALE, ASSIGNMENT OR OTHER TRANSFER OF, OR THE GRANT OF A SECURITY INTEREST IN, BORROWER’S RIGHT, TITLE AND INTEREST IN AND TO ANY LEASES OR ANY RENTS; (III) IF A RESTRICTED PARTY IS A CORPORATION, ANY MERGER, CONSOLIDATION OR SALE OR PLEDGE OF SUCH CORPORATION’S STOCK OR THE CREATION OR ISSUANCE OF NEW STOCK; (IV) IF A RESTRICTED PARTY IS A LIMITED OR GENERAL PARTNERSHIP OR JOINT VENTURE, ANY MERGER OR CONSOLIDATION OR THE CHANGE, REMOVAL, RESIGNATION OR ADDITION OF A GENERAL PARTNER OR THE SALE OR PLEDGE OF THE PARTNERSHIP INTEREST OF ANY GENERAL PARTNER OR ANY PROFITS OR PROCEEDS RELATING TO SUCH PARTNERSHIP INTEREST, OR THE SALE OR PLEDGE OF LIMITED PARTNERSHIP INTERESTS OR ANY PROFITS OR PROCEEDS RELATING TO SUCH LIMITED PARTNERSHIP INTEREST OR THE CREATION OR ISSUANCE OF NEW LIMITED PARTNERSHIP INTERESTS; (V) IF A RESTRICTED PARTY IS A LIMITED LIABILITY COMPANY, ANY MERGER OR CONSOLIDATION OR THE CHANGE, 52 -------------------------------------------------------------------------------- REMOVAL, RESIGNATION OR ADDITION OF A MANAGING MEMBER OR NON-MEMBER MANAGER (OR IF NO MANAGING MEMBER, ANY MEMBER) OR THE SALE OR PLEDGE OF THE MEMBERSHIP INTEREST OF A MANAGING MEMBER (OR IF NO MANAGING MEMBER, ANY MEMBER) OR ANY PROFITS OR PROCEEDS RELATING TO SUCH MEMBERSHIP INTEREST, OR THE SALE OR PLEDGE OF NON-MANAGING MEMBERSHIP INTERESTS OR THE CREATION OR ISSUANCE OF NEW NON-MANAGING MEMBERSHIP INTERESTS; (VI) IF A RESTRICTED PARTY IS A TRUST OR NOMINEE TRUST, ANY MERGER, CONSOLIDATION OR THE SALE OR PLEDGE OF THE LEGAL OR BENEFICIAL INTEREST IN A RESTRICTED PARTY OR THE CREATION OR ISSUANCE OF NEW LEGAL OR BENEFICIAL INTERESTS; OR (VII) THE REMOVAL OR THE RESIGNATION OF THE MANAGING AGENT (INCLUDING, WITHOUT LIMITATION, AN AFFILIATED MANAGER) OTHER THAN IN ACCORDANCE WITH SECTION 5.1.22 HEREOF. (D)                                 NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 5.2.10, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH (I) ONE OR A SERIES OF TRANSFERS, OF UP TO FORTY-NINE PERCENT (49%) OF THE STOCK IN A RESTRICTED PARTY, THE LIMITED PARTNERSHIP INTERESTS OR NON-MANAGING MEMBERSHIP INTERESTS (AS THE CASE MAY BE) IN A RESTRICTED PARTY (II) ANY TRANSFER TO BEHRINGER HARVARD FUNDS OR AN AFFILIATE OF BEHRINGER HARVARD FUNDS (III) ANY TRANSFER OF AN EQUITY INTEREST IN BEHRINGER HARVARD FUNDS OR ANY AFFILIATE THEREOF OR THE ISSUANCE OF ADDITIONAL EQUITY INTERESTS IN BEHRINGER HOLDINGS OR ANY AFFILIATE THEREOF OR (IV) ANY TRANSFER OF A DIRECT OR INDIRECT EQUITY INTEREST IN BORROWER TO A NEWLY FORMED ENTITY FORMED TO BE THE MEZZANINE BORROWER PURSUANT TO SECTION 5.2.10(H) BELOW; PROVIDED, HOWEVER, NO SUCH TRANSFER SHALL RESULT IN THE CHANGE OF CONTROL IN BORROWER, GUARANTOR OR MANAGER.  IF AFTER GIVING EFFECT TO ANY SUCH TRANSFER, MORE THAN FORTY-NINE PERCENT (49%) IN THE AGGREGATE OF DIRECT OR INDIRECT INTERESTS IN A RESTRICTED PARTY ARE OWNED BY ANY PERSON AND ITS AFFILIATES THAT OWNED LESS THAN FORTY-NINE PERCENT (49%) DIRECT OR INDIRECT INTEREST IN SUCH RESTRICTED PARTY AS OF THE CLOSING DATE, BORROWER SHALL, NO LESS THAN THIRTY (30) DAYS PRIOR TO THE EFFECTIVE DATE OF ANY SUCH TRANSFER, DELIVER TO LENDER AN ADDITIONAL INSOLVENCY OPINION ACCEPTABLE TO LENDER AND THE RATING AGENCIES.  IN ADDITION, AS A CONDITION TO ANY TRANSFER PURSUANT TO THIS SECTION 5.2.10(D), AT ALL TIMES, GUARANTOR MUST CONTINUE TO CONTROL BORROWER AND OWN, DIRECTLY OR INDIRECTLY, AT LEAST A 51% LEGAL AND BENEFICIAL INTEREST IN BORROWER. (E)                                  NO CONSENT TO ANY ASSUMPTION OF THE LOAN SHALL OCCUR ON OR BEFORE THE FIRST (1ST) ANNIVERSARY OF THE FIRST (1ST) PAYMENT DATE. THEREAFTER, LENDER’S CONSENT TO TRANSFERS OF THE PROPERTY SHALL NOT BE UNREASONABLY WITHHELD PROVIDED THAT LENDER RECEIVES SIXTY (60) DAYS PRIOR WRITTEN NOTICE OF SUCH TRANSFER AND NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, AND FURTHER PROVIDED THAT THE FOLLOWING ADDITIONAL REQUIREMENTS ARE SATISFIED: (I)                              BORROWER SHALL PAY LENDER A TRANSFER FEE EQUAL TO ONE-QUARTER OF ONE PERCENT (0.25%) OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AT THE TIME OF THE FIRST SUCH TRANSFER AND A TRANSFER FEE EQUAL TO ONE-HALF OF ONE PERCENT (0.5%) OF THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AT THE TIME OF EACH SUBSEQUENT TRANSFER (PROVIDED THAT NO TRANSFER FEE SHALL BE PAYABLE IN CONNECTION WITH ANY TRANSFER TO BEHRINGER HARVARD FUNDS OR AN AFFILIATE OF BEHRINGER HARVARD FUNDS); (II)                           BORROWER SHALL PAY ANY AND ALL REASONABLE OUT-OF-POCKET COSTS INCURRED IN CONNECTION WITH SUCH TRANSFER (INCLUDING, WITHOUT LIMITATION, LENDER’S COUNSEL FEES AND DISBURSEMENTS AND ALL RECORDING FEES, TITLE INSURANCE PREMIUMS AND MORTGAGE AND INTANGIBLE TAXES AND THE FEES AND EXPENSES OF THE RATING AGENCIES PURSUANT TO CLAUSE (X) BELOW); 53 -------------------------------------------------------------------------------- (III)                        THE PROPOSED TRANSFEREE (THE “TRANSFEREE”) OR TRANSFEREE’S PRINCIPALS MUST HAVE DEMONSTRATED EXPERTISE IN OWNING AND OPERATING PROPERTIES SIMILAR IN LOCATION, SIZE, CLASS AND OPERATION TO THE PROPERTY, WHICH EXPERTISE SHALL BE REASONABLY DETERMINED BY LENDER; (IV)                       TRANSFEREE AND TRANSFEREE’S PRINCIPALS SHALL, AS OF THE DATE OF SUCH TRANSFER, HAVE AN AGGREGATE NET WORTH AND LIQUIDITY REASONABLY ACCEPTABLE TO LENDER; (V)                          TRANSFEREE, TRANSFEREE’S PRINCIPALS AND ALL OTHER ENTITIES WHICH MAY BE OWNED OR CONTROLLED DIRECTLY OR INDIRECTLY BY TRANSFEREE’S PRINCIPALS (“RELATED ENTITIES”) MUST NOT HAVE BEEN PARTY TO ANY BANKRUPTCY PROCEEDINGS, VOLUNTARY OR INVOLUNTARY, MADE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS OR TAKEN ADVANTAGE OF ANY INSOLVENCY ACT, OR ANY ACT FOR THE BENEFIT OF DEBTORS WITHIN SEVEN (7) YEARS PRIOR TO THE DATE OF THE PROPOSED TRANSFER; (VI)                       TRANSFEREE SHALL ASSUME ALL OF THE OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS IN A MANNER SATISFACTORY TO LENDER IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, BY ENTERING INTO AN ASSUMPTION AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO LENDER; (VII)                    THERE SHALL BE NO MATERIAL LITIGATION OR REGULATORY ACTION PENDING OR THREATENED AGAINST TRANSFEREE, TRANSFEREE’S PRINCIPALS OR RELATED ENTITIES WHICH IS NOT REASONABLY ACCEPTABLE TO LENDER; (VIII)                 TRANSFEREE, TRANSFEREE’S PRINCIPALS AND RELATED ENTITIES SHALL NOT HAVE DEFAULTED UNDER ITS OR THEIR OBLIGATIONS WITH RESPECT TO ANY OTHER INDEBTEDNESS IN A MANNER WHICH IS NOT REASONABLY ACCEPTABLE TO LENDER; (IX)                         TRANSFEREE AND TRANSFEREE’S PRINCIPALS MUST BE ABLE TO SATISFY ALL THE REPRESENTATIONS AND COVENANTS SET FORTH IN SECTIONS 4.1.30 AND 5.2.9 OF THIS AGREEMENT, NO DEFAULT OR EVENT OF DEFAULT SHALL OTHERWISE OCCUR AS A RESULT OF SUCH TRANSFER, AND TRANSFEREE AND TRANSFEREE’S PRINCIPALS SHALL DELIVER (A) ALL ORGANIZATIONAL DOCUMENTATION REASONABLY REQUESTED BY LENDER, WHICH SHALL BE REASONABLY SATISFACTORY TO LENDER AND (B) ALL CERTIFICATES, AGREEMENTS AND COVENANTS REASONABLY REQUIRED BY LENDER; (X)                            TRANSFEREE SHALL BE APPROVED BY THE RATING AGENCIES SELECTED BY LENDER, WHICH APPROVAL, IF REQUIRED BY LENDER, SHALL TAKE THE FORM OF A CONFIRMATION IN WRITING FROM SUCH RATING AGENCIES TO THE EFFECT THAT SUCH TRANSFER WILL NOT RESULT IN A REQUALIFICATION, REDUCTION, DOWNGRADE OR WITHDRAWAL OF THE RATINGS IN EFFECT IMMEDIATELY PRIOR TO SUCH ASSUMPTION OR TRANSFER FOR THE SECURITIES OR ANY CLASS THEREOF ISSUED IN CONNECTION WITH A SECURITIZATION WHICH ARE THEN OUTSTANDING; (XI)                         BORROWER OR TRANSFEREE, AT ITS SOLE COST AND EXPENSE, SHALL DELIVER TO LENDER AN ADDITIONAL INSOLVENCY OPINION REFLECTING SUCH TRANSFER SATISFACTORY IN FORM AND SUBSTANCE TO LENDER; 54 -------------------------------------------------------------------------------- (XII)                      PRIOR TO ANY RELEASE OF GUARANTOR, ONE (1) OR MORE SUBSTITUTE GUARANTORS REASONABLY ACCEPTABLE TO LENDER SHALL HAVE ASSUMED ALL OF THE LIABILITIES AND OBLIGATIONS OF GUARANTOR UNDER THE GUARANTY AND ENVIRONMENTAL INDEMNITY EXECUTED BY GUARANTOR OR EXECUTE A REPLACEMENT GUARANTY, ENVIRONMENTAL INDEMNITY REASONABLY SATISFACTORY TO LENDER; (XIII)                   BORROWER OR TRANSFEREE SHALL DELIVER, AT ITS SOLE COST AND EXPENSE, AN ENDORSEMENT TO THE TITLE INSURANCE POLICY, AS MODIFIED BY THE ASSUMPTION AGREEMENT, AS A VALID FIRST LIEN ON THE PROPERTY AND NAMING THE TRANSFEREE AS OWNER OF THE PROPERTY, WHICH ENDORSEMENT SHALL INSURE THAT, AS OF THE DATE OF THE RECORDING OF THE ASSUMPTION AGREEMENT, THE PROPERTY SHALL NOT BE SUBJECT TO ANY ADDITIONAL EXCEPTIONS OR LIENS OTHER THAN THOSE CONTAINED IN THE TITLE POLICY ISSUED ON THE DATE HEREOF AND OTHER PERMITTED ENCUMBRANCES; AND (XIV)                  THE PROPERTY SHALL BE MANAGED BY A QUALIFYING MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT. Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Borrower and Guarantor herein shall be released from all liability under this Agreement, the Note, the Mortgage and the other Loan Documents accruing after such Transfer.  The foregoing release shall be effective upon the date of such Transfer, but Lender agrees to provide written evidence thereof reasonably requested by Borrower. (f)                                    Borrower, without the consent of Lender, may grant easements, restrictions, covenants, reservations and rights of way in the ordinary course of business for water and sewer lines, telephone and telegraph lines, electric lines and other utilities or for other similar purposes, provided that no transfer, conveyance or encumbrance shall materially impair the utility and operation of the Property or materially adversely affect the value of the Property or the Net Operating Income of the Property.  If Borrower shall receive any consideration in connection with any of said described transfers or conveyances, Borrower shall have the right to use any such proceeds in connection with any alterations performed in connection therewith, or required thereby.  In connection with any transfer, conveyance or encumbrance permitted above, the Lender shall execute and deliver any instrument reasonably necessary or appropriate to evidence its consent to said action or to subordinate the Lien of the related Mortgage to such easements, restrictions, covenants, reservations and rights of way or other similar grants upon receipt by the Lender of: (A) a copy of the instrument of transfer; and (B) an Officer’s Certificate stating with respect to any transfer described above, that such transfer does not materially impair the utility and operation of the Property or materially reduce the value of the Property or the Net Operating Income of the Property. (G)                                 LENDER SHALL NOT BE REQUIRED TO DEMONSTRATE ANY ACTUAL IMPAIRMENT OF ITS SECURITY OR ANY INCREASED RISK OF DEFAULT HEREUNDER IN ORDER TO DECLARE THE DEBT IMMEDIATELY DUE AND PAYABLE UPON BORROWER’S TRANSFER WITHOUT LENDER’S CONSENT.  THIS PROVISION SHALL APPLY TO EVERY TRANSFER REGARDLESS OF WHETHER VOLUNTARY OR NOT, OR WHETHER OR NOT LENDER HAS CONSENTED TO ANY PREVIOUS TRANSFER. 55 -------------------------------------------------------------------------------- (H)                                 NOTWITHSTANDING THE PROVISIONS OF THIS SECTION 5.2.10, LENDER’S CONSENT SHALL NOT BE REQUIRED IN CONNECTION WITH TRANSFERS IN THE NATURE OF A PLEDGE BY A MEZZANINE BORROWER (AS DEFINED BELOW) OF ITS DIRECT AND/OR INDIRECT EQUITY INTEREST IN BORROWER (BUT NOT OF ANY DIRECT INTEREST IN THE PROPERTY) TO A PERMITTED MEZZANINE LENDER (DEFINED BELOW) AS SECURITY FOR A LOAN TO SUCH MEZZANINE BORROWER (A “MEZZANINE LOAN”) PROVIDED THAT THE FOLLOWING TERMS AND CONDITIONS ARE SATISFIED: (I)                              NO EVENT OF DEFAULT SHALL THEN EXIST; (II)                           LENDER SHALL HAVE RECEIVED AT LEAST THIRTY (30) AND NO MORE THAN SIXTY (60) DAYS’ PRIOR WRITTEN NOTICE OF THE PROPOSED MEZZANINE LOAN; (III)                        THE AGGREGATE AMOUNT OF THE LOAN AND THE MEZZANINE LOAN (AS OF THE EFFECTIVE DATE OF THE MEZZANINE LOAN) SHALL NOT EXCEED EIGHTY-FIVE PERCENT (85%) OF THE FAIR MARKET VALUE OF THE PROPERTY AS DETERMINED BY AN INDEPENDENT MAI APPRAISAL DATED NOT MORE THAN NINETY (90) DAYS PRIOR TO THE EFFECTIVE DATE OF THE MEZZANINE LOAN AND OTHERWISE ACCEPTABLE TO LENDER; (IV)                       THE AGGREGATE DEBT SERVICE COVERAGE RATIO OF THE LOAN AND SUCH MEZZANINE LOAN IS AT LEAST 1.20 TO 1.0; (V)                          BORROWER SHALL NOT BE OBLIGATED TO REPAY THE MEZZANINE LOAN NOR INCUR ANY OBLIGATION OR LIABILITY TO THE PERMITTED MEZZANINE LENDER OR ANY OTHER PERSON WITH RESPECT TO THE MEZZANINE LOAN, AND THE TERMS AND CONDITIONS OF THE MEZZANINE LOAN, THE COLLATERAL PLEDGED AS SECURITY THEREFOR, AND THE DOCUMENTS EVIDENCING THE MEZZANINE LOAN, SHALL BE SATISFACTORY TO LENDER; (VI)                       A NEW SINGLE PURPOSE ENTITY SHALL HAVE BEEN FORMED THAT WILL DIRECTLY OR INDIRECTLY OWN 100% OF THE EQUITY INTERESTS IN BORROWER AND PRINCIPAL (THE “MEZZANINE BORROWER”), THE ORGANIZATIONAL DOCUMENTS OF BORROWER, SUCH MEZZANINE BORROWER, AND THEIR RESPECTIVE CONSTITUENT OWNERS SHALL BE SATISFACTORY TO LENDER, AND BORROWER AND SUCH MEZZANINE BORROWER SHALL OTHERWISE SATISFY ALL APPLICABLE RATING AGENCY CRITERIA FOR SINGLE-PURPOSE ENTITIES, BANKRUPTCY REMOTENESS, AND MEZZANINE BORROWERS; (VII)                    THE PERMITTED MEZZANINE LENDER SHALL HAVE EXECUTED AND DELIVERED TO LENDER AN INTERCREDITOR AGREEMENT ACCEPTABLE TO LENDER IN ITS SOLE AND ABSOLUTE DISCRETION, PROVIDED THAT LENDER’S APPROVAL OF SUCH INTERCREDITOR AGREEMENT SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED SO LONG AS IT IS SUBSTANTIALLY SIMILAR TO THE FORM OF INTERCREDITOR AGREEMENT ATTACHED AS APPENDIX VI TO THE STANDARD & POOR’S U.S. CMBS LEGAL AND STRUCTURAL FINANCE CRITERIA PUBLISHED MAY 1, 2003 OR ANY OTHER FORM SUBSEQUENTLY APPROVED BY STANDARD & POOR’S IN WRITING; (VIII)                 BORROWER, PRINCIPAL AND GUARANTOR SHALL HAVE EXECUTED SUCH ADDITIONAL LOAN DOCUMENTS AND SUCH AMENDMENTS TO AND REAFFIRMATIONS OF THE EXISTING LOAN DOCUMENTS AS LENDER MAY REQUIRE, INCLUDING ENTERING INTO A CASH MANAGEMENT ARRANGEMENT WITH LENDER (OR MODIFYING ANY EXISTING CASH 56 -------------------------------------------------------------------------------- MANAGEMENT REQUIREMENT) TO PROVIDE FOR, AMONG OTHER THINGS, THE PAYMENT OF LENDER-APPROVED OPERATING EXPENSES AND CAPITAL EXPENSES PRIOR TO THE PAYMENT OF DEBT SERVICE ON THE MEZZANINE LOAN; (IX)                         THE LENDER UNDER THE MEZZANINE LOAN SHALL BE EITHER (A) ANY PERSON OR ENTITY SATISFYING THE DEFINITION OF “QUALIFIED TRANSFEREE” UNDER CLAUSE (II) OF THE DEFINITION OF “QUALIFIED TRANSFEREE” SET FORTH IN THE FORM INTERCREDITOR AGREEMENT ATTACHED AS APPENDIX VI TO THE STANDARD & POOR’S U.S. CMBS LEGAL AND STRUCTURAL FINANCE CRITERIA PUBLISHED MAY 1, 2003, BASED ON THE DEFAULT VALUES FOR MINIMUM TOTAL ASSETS AND CAPITAL/STATUTORY SURPLUS OR SHAREHOLDERS’ EQUITY INCLUDED IN THE DEFINITION OF “ELIGIBILITY REQUIREMENTS” IN SUCH PUBLICATION OR (B) A THIRD-PARTY INSTITUTIONAL LENDER, THAT IN ANY SUCH CASE IS ACCEPTABLE TO LENDER (EITHER OF THE FOREGOING, A “PERMITTED MEZZANINE LENDER”), PROVIDED THAT IN NO EVENT SHALL THE LENDER UNDER THE MEZZANINE LOAN BE AN AFFILIATE OF BORROWER; AND (X)                            BORROWER SHALL HAVE PAID OR REIMBURSED LENDER FOR ALL OF ITS COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED IN CONNECTION WITH THE FOREGOING. VI.                                 INSURANCE; CASUALTY; CONDEMNATION SECTION 6.1                                      INSURANCE. (A)                                  BORROWER SHALL OBTAIN AND MAINTAIN, OR CAUSE TO BE MAINTAINED, INSURANCE FOR BORROWER AND THE PROPERTY PROVIDING AT LEAST THE FOLLOWING COVERAGES: (I)                              COMPREHENSIVE ALL RISK INSURANCE (“SPECIAL FORM”) INCLUDING, BUT NOT LIMITED TO, LOSS CAUSED BY ANY TYPE OF WINDSTORM OR HAIL ON THE IMPROVEMENTS AND THE PERSONAL PROPERTY, (A) IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE “FULL REPLACEMENT COST,” WHICH FOR PURPOSES OF THIS AGREEMENT SHALL MEAN ACTUAL REPLACEMENT VALUE (EXCLUSIVE OF COSTS OF EXCAVATIONS, FOUNDATIONS, UNDERGROUND UTILITIES AND FOOTINGS) WITH A WAIVER OF DEPRECIATION; (B) CONTAINING AN AGREED AMOUNT ENDORSEMENT WITH RESPECT TO THE IMPROVEMENTS AND PERSONAL PROPERTY WAIVING ALL CO-INSURANCE PROVISIONS; (C) PROVIDING FOR NO DEDUCTIBLE IN EXCESS OF ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000) FOR ALL SUCH INSURANCE COVERAGE EXCLUDING WINDSTORM AND EARTHQUAKE AND (D)  CONTAINING AN “ORDINANCE OR LAW COVERAGE” OR “ENFORCEMENT” ENDORSEMENT IF ANY OF THE IMPROVEMENTS OR THE USE OF THE PROPERTY SHALL AT ANY TIME CONSTITUTE LEGAL NON-CONFORMING STRUCTURES OR USES.  IN ADDITION, BORROWER SHALL OBTAIN:  (Y) IF ANY PORTION OF THE IMPROVEMENTS IS CURRENTLY OR AT ANY TIME IN THE FUTURE LOCATED IN A “SPECIAL FLOOD HAZARD AREA,” AS DESIGNATED BY THE FEDERAL EMERGENCY MANAGEMENT AGENCY OR SUCH OTHER APPLICABLE FEDERAL AGENCY, FLOOD HAZARD INSURANCE IN AN AMOUNT EQUAL TO THE MAXIMUM AMOUNT AVAILABLE UNDER THE NATIONAL FLOOD INSURANCE PROGRAM AND IN ADDITION TO THE MAXIMUM AVAILABLE UNDER THE NATIONAL FLOOD PROGRAM, ANY EXCESS LIMITS AS DETERMINED BY LENDER IN ITS SOLE AND ABSOLUTE DISCRETION; AND (Z) EARTHQUAKE INSURANCE IN AMOUNTS AND IN FORM AND SUBSTANCE SATISFACTORY TO LENDER IN THE EVENT THE PROPERTY IS LOCATED IN AN AREA WITH A HIGH 57 -------------------------------------------------------------------------------- DEGREE OF SEISMIC ACTIVITY, WITH A PROBABLE MAXIMUM LOSS EXCEEDING TWENTY PERCENT (20%), PROVIDED THAT THE INSURANCE PURSUANT TO CLAUSES (Y) AND (Z) HEREOF SHALL BE ON TERMS CONSISTENT WITH THE COMPREHENSIVE ALL RISK INSURANCE POLICY REQUIRED UNDER THIS SUBSECTION (I). (II)                           BUSINESS INCOME INSURANCE (A) WITH LOSS PAYABLE TO LENDER; (B) COVERING ALL RISKS REQUIRED TO BE COVERED BY THE INSURANCE PROVIDED FOR IN SUBSECTION (I) ABOVE; (C) IN AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE PROJECTED GROSS REVENUES FROM THE OPERATION OF THE PROPERTY (AS REDUCED TO REFLECT EXPENSES NOT INCURRED DURING A PERIOD OF RESTORATION) FOR A PERIOD OF AT LEAST EIGHTEEN (18) MONTHS AFTER THE DATE OF THE CASUALTY; AND (D) CONTAINING AN EXTENDED PERIOD OF INDEMNITY ENDORSEMENT WHICH PROVIDES THAT AFTER THE PHYSICAL LOSS TO THE IMPROVEMENTS AND PERSONAL PROPERTY HAS BEEN REPAIRED, THE CONTINUED LOSS OF INCOME WILL BE INSURED UNTIL SUCH INCOME EITHER RETURNS TO THE SAME LEVEL IT WAS AT PRIOR TO THE LOSS, OR THE EXPIRATION OF EIGHTEEN (18) MONTHS FROM THE DATE THAT THE PROPERTY IS REPAIRED OR REPLACED AND OPERATIONS ARE RESUMED, WHICHEVER FIRST OCCURS, AND NOTWITHSTANDING THAT THE POLICY MAY EXPIRE PRIOR TO THE END OF SUCH PERIOD.  THE AMOUNT OF SUCH BUSINESS INCOME INSURANCE SHALL BE DETERMINED PRIOR TO THE CLOSING DATE AND AT LEAST ONCE EACH YEAR THEREAFTER BASED ON BORROWER’S REASONABLE ESTIMATE OF THE GROSS INCOME FROM THE PROPERTY FOR THE SUCCEEDING EIGHTEEN (18) MONTH PERIOD.  ALL PROCEEDS PAYABLE TO LENDER PURSUANT TO THIS SUBSECTION SHALL BE HELD BY LENDER AND SHALL BE APPLIED TO THE OBLIGATIONS SECURED BY THE LOAN DOCUMENTS FROM TIME TO TIME DUE AND PAYABLE HEREUNDER AND UNDER THE NOTE; PROVIDED, HOWEVER, THAT NOTHING HEREIN CONTAINED SHALL BE DEEMED TO RELIEVE BORROWER OF ITS OBLIGATIONS TO PAY THE OBLIGATIONS SECURED BY THE LOAN DOCUMENTS ON THE RESPECTIVE DATES OF PAYMENT PROVIDED FOR IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS EXCEPT TO THE EXTENT SUCH AMOUNTS ARE ACTUALLY PAID OUT OF THE PROCEEDS OF SUCH BUSINESS INCOME INSURANCE; (III)                        AT ALL TIMES DURING WHICH STRUCTURAL CONSTRUCTION, REPAIRS OR ALTERATIONS ARE BEING MADE WITH RESPECT TO THE IMPROVEMENTS, AND ONLY IF THE PROPERTY COVERAGE FORM DOES NOT OTHERWISE APPLY, (A) OWNER’S CONTINGENT OR PROTECTIVE LIABILITY INSURANCE, OTHERWISE KNOWN AS OWNER CONTRACTOR’S PROTECTIVE LIABILITY, COVERING CLAIMS NOT COVERED BY OR UNDER THE TERMS OR PROVISIONS OF THE ABOVE MENTIONED COMMERCIAL GENERAL LIABILITY INSURANCE POLICY; AND (B) THE INSURANCE PROVIDED FOR IN SUBSECTION (I) ABOVE WRITTEN IN A SO-CALLED BUILDER’S RISK COMPLETED VALUE FORM (1) ON A NON-REPORTING BASIS, (2) AGAINST ALL RISKS INSURED AGAINST PURSUANT TO SUBSECTION (I) ABOVE, (3) INCLUDING PERMISSION TO OCCUPY THE PROPERTY, AND (4) WITH AN AGREED AMOUNT ENDORSEMENT WAIVING CO-INSURANCE PROVISIONS; (IV)                       COMPREHENSIVE BOILER AND MACHINERY INSURANCE, IF APPLICABLE, IN AMOUNTS AS SHALL BE REASONABLY REQUIRED BY LENDER ON TERMS CONSISTENT WITH THE COMMERCIAL PROPERTY INSURANCE POLICY REQUIRED UNDER SUBSECTION (I) ABOVE; (V)                          COMMERCIAL GENERAL LIABILITY INSURANCE AGAINST CLAIMS FOR PERSONAL INJURY, BODILY INJURY, DEATH OR PROPERTY DAMAGE OCCURRING UPON, IN OR ABOUT THE 58 -------------------------------------------------------------------------------- PROPERTY, SUCH INSURANCE (A) TO BE ON THE SO-CALLED “OCCURRENCE” FORM WITH A COMBINED LIMIT OF NOT LESS THAN TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) IN THE AGGREGATE AND ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) PER OCCURRENCE; (B) TO CONTINUE AT NOT LESS THAN THE AFORESAID LIMIT UNTIL REQUIRED TO BE CHANGED BY LENDER IN WRITING BY REASON OF CHANGED ECONOMIC CONDITIONS MAKING SUCH PROTECTION INADEQUATE AND (C) TO COVER AT LEAST THE FOLLOWING HAZARDS:  (1) PREMISES AND OPERATIONS; (2) PRODUCTS AND COMPLETED OPERATIONS ON AN “IF ANY” BASIS; (3) INDEPENDENT CONTRACTORS; (4) BLANKET CONTRACTUAL LIABILITY FOR ALL WRITTEN CONTRACTS AND (5) CONTRACTUAL LIABILITY COVERING THE INDEMNITIES CONTAINED IN ARTICLE 9 OF THE MORTGAGE TO THE EXTENT THE SAME IS AVAILABLE; (VI)                       AUTOMOBILE LIABILITY COVERAGE FOR ALL OWNED AND NON-OWNED VEHICLES, INCLUDING RENTED AND LEASED VEHICLES CONTAINING MINIMUM LIMITS PER OCCURRENCE OF ONE MILLION DOLLARS AND 00/100 DOLLARS ($1,000,000.00); (VII)                    WORKER’S COMPENSATION AND EMPLOYEE’S LIABILITY SUBJECT TO THE WORKER’S COMPENSATION LAWS OF THE APPLICABLE STATE; (VIII)                 UMBRELLA AND EXCESS LIABILITY INSURANCE IN AN AMOUNT NOT LESS THAN FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) PER OCCURRENCE ON TERMS CONSISTENT WITH THE COMMERCIAL GENERAL LIABILITY INSURANCE POLICY REQUIRED UNDER SUBSECTION (V) ABOVE, INCLUDING, BUT NOT LIMITED TO, SUPPLEMENTAL COVERAGE FOR EMPLOYER LIABILITY AND AUTOMOBILE LIABILITY, WHICH UMBRELLA LIABILITY COVERAGE SHALL APPLY IN EXCESS OF THE AUTOMOBILE LIABILITY COVERAGE IN CLAUSE (VI) ABOVE; (IX)                         THE INSURANCE REQUIRED UNDER SECTION 6.1(A)(I) AND (II) ABOVE SHALL COVER PERILS OF TERRORISM AND ACTS OF TERRORISM AND BORROWER SHALL MAINTAIN INSURANCE FOR LOSS RESULTING FROM PERILS AND ACTS OF TERRORISM ON TERMS (INCLUDING AMOUNTS) CONSISTENT WITH THOSE REQUIRED UNDER SECTION 6.1(A)(I) AND (II) ABOVE AT ALL TIMES DURING THE TERM OF THE LOAN; PROVIDED, HOWEVER, BORROWER SHALL NOT BE REQUIRED TO PAY ANNUAL PREMIUMS IN EXCESS OF THE REQUIRED AMOUNT FOR THE COVERAGE REQUIRED UNDER THIS SECTION 6.1.1(A)(IX).  IF FULL COVERAGE FOR ACTS OF TERRORISM SATISFYING SUCH REQUIREMENTS IS NOT AVAILABLE FOR AN AMOUNT EQUAL TO OR LESS THAN THE REQUIRED AMOUNT (BUT COVERAGE FOR ACTS OF TERRORISM NOT FULLY SATISFYING SUCH REQUIREMENTS IS AVAILABLE), BORROWER SHALL BE REQUIRED TO SPEND AN AMOUNT EQUAL TO THE REQUIRED AMOUNT FOR COVERAGE FOR ACTS OF TERRORISM, AND THE SCOPE, FORM, DEDUCTIBLE AND CARRIER WITH RESPECT TO SUCH COVERAGE SHALL BE ACCEPTABLE TO LENDER IN ITS SOLE DISCRETION; AND (X)                            UPON SIXTY (60) DAYS WRITTEN NOTICE, SUCH OTHER REASONABLE INSURANCE AND IN SUCH REASONABLE AMOUNTS AS LENDER FROM TIME TO TIME MAY REASONABLY REQUEST AGAINST SUCH OTHER INSURABLE HAZARDS WHICH AT THE TIME ARE COMMONLY INSURED AGAINST FOR PROPERTY SIMILAR TO THE PROPERTY LOCATED IN OR AROUND THE REGION IN WHICH THE PROPERTY IS LOCATED. (B)                                 ALL INSURANCE PROVIDED FOR IN SECTION 6.1(A) SHALL BE OBTAINED UNDER VALID AND ENFORCEABLE POLICIES (COLLECTIVELY, THE “POLICIES” OR IN THE SINGULAR, THE “POLICY”), AND SHALL 59 -------------------------------------------------------------------------------- BE SUBJECT TO THE APPROVAL OF LENDER AS TO INSURANCE COMPANIES, AMOUNTS, DEDUCTIBLES, LOSS PAYEES AND INSUREDS.  THE POLICIES SHALL BE ISSUED BY FINANCIALLY SOUND AND RESPONSIBLE INSURANCE COMPANIES AUTHORIZED TO DO BUSINESS IN THE STATE AND HAVING A CLAIMS PAYING ABILITY RATING OF “A” OR BETTER (AND THE EQUIVALENT THEREOF) BY AT LEAST TWO (2) OF THE RATING AGENCIES RATING THE SECURITIES (ONE (1) OF WHICH SHALL BE S&P IF THEY ARE RATING THE SECURITIES AND ONE (1) OF WHICH WILL BE MOODY’S IF THEY ARE RATING THE SECURITIES), OR IF ONLY ONE (1) RATING AGENCY IS RATING THE SECURITIES, THEN ONLY BY SUCH RATING AGENCY.  THE POLICIES DESCRIBED IN SECTION 6.1 (OTHER THAN THOSE STRICTLY LIMITED TO LIABILITY PROTECTION) SHALL DESIGNATE LENDER AS LOSS PAYEE.  NOT LESS THAN THIRTY (30) DAYS PRIOR TO THE EXPIRATION DATES OF THE POLICIES THERETOFORE FURNISHED TO LENDER, CERTIFICATES OF INSURANCE EVIDENCING THE POLICIES ACCOMPANIED BY EVIDENCE SATISFACTORY TO LENDER OF PAYMENT OF THE PREMIUMS DUE THEREUNDER (THE “INSURANCE PREMIUMS”), SHALL BE DELIVERED BY BORROWER TO LENDER. (C)                                  ANY BLANKET INSURANCE POLICY SHALL SPECIFICALLY ALLOCATE TO THE PROPERTY THE AMOUNT OF COVERAGE FROM TIME TO TIME REQUIRED HEREUNDER AND SHALL OTHERWISE PROVIDE THE SAME PROTECTION AS WOULD A SEPARATE POLICY INSURING ONLY THE PROPERTY IN COMPLIANCE WITH THE PROVISIONS OF SECTION 6.1(A). (D)                                 ALL POLICIES OF INSURANCE PROVIDED FOR OR CONTEMPLATED BY SECTION 6.1(A), EXCEPT FOR THE POLICY REFERENCED IN SECTION 6.1(A)(VII) OF THIS AGREEMENT, SHALL NAME BORROWER, OR THE TENANT, AS THE INSURED AND LENDER AS THE ADDITIONAL INSURED, AS ITS INTERESTS MAY APPEAR, AND IN THE CASE OF PROPERTY DAMAGE, BOILER AND MACHINERY, FLOOD AND EARTHQUAKE INSURANCE, SHALL CONTAIN A SO-CALLED NEW YORK STANDARD NON-CONTRIBUTING MORTGAGEE CLAUSE IN FAVOR OF LENDER PROVIDING THAT THE LOSS THEREUNDER SHALL BE PAYABLE TO LENDER. (E)                                  ALL POLICIES OF INSURANCE PROVIDED FOR IN SECTION 6.1(A) SHALL CONTAIN CLAUSES OR ENDORSEMENTS TO THE EFFECT THAT: (I)                              NO ACT OR NEGLIGENCE OF BORROWER, OR ANYONE ACTING FOR BORROWER, OR OF ANY TENANT OR OTHER OCCUPANT, OR FAILURE TO COMPLY WITH THE PROVISIONS OF ANY POLICY, WHICH MIGHT OTHERWISE RESULT IN A FORFEITURE OF THE INSURANCE OR ANY PART THEREOF, SHALL IN ANY WAY AFFECT THE VALIDITY OR ENFORCEABILITY OF THE INSURANCE INSOFAR AS LENDER IS CONCERNED; (II)                           THE POLICY SHALL NOT BE MATERIALLY CHANGED (OTHER THAN TO INCREASE THE COVERAGE PROVIDED THEREBY) OR CANCELED WITHOUT AT LEAST THIRTY (30) DAYS WRITTEN NOTICE TO LENDER AND ANY OTHER PARTY NAMED THEREIN AS AN ADDITIONAL INSURED; (III)                        THE ISSUERS THEREOF SHALL GIVE WRITTEN NOTICE TO LENDER IF THE POLICY HAS NOT BEEN RENEWED FIFTEEN (15) DAYS PRIOR TO ITS EXPIRATION; AND (IV)                       LENDER SHALL NOT BE LIABLE FOR ANY INSURANCE PREMIUMS THEREON OR SUBJECT TO ANY ASSESSMENTS THEREUNDER. (F)                                    IF AT ANY TIME LENDER IS NOT IN RECEIPT OF WRITTEN EVIDENCE THAT ALL INSURANCE REQUIRED HEREUNDER IS IN FULL FORCE AND EFFECT, LENDER SHALL HAVE THE RIGHT, WITHOUT NOTICE TO BORROWER, TO TAKE SUCH ACTION AS LENDER DEEMS NECESSARY TO PROTECT ITS INTEREST IN THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE OBTAINING OF SUCH INSURANCE COVERAGE AS LENDER IN ITS 60 -------------------------------------------------------------------------------- REASONABLE DISCRETION DEEMS APPROPRIATE AFTER THREE (3) BUSINESS DAYS NOTICE TO BORROWER IF PRIOR TO THE DATE UPON WHICH ANY SUCH COVERAGE WILL LAPSE OR AT ANY TIME LENDER DEEMS NECESSARY (REGARDLESS OF PRIOR NOTICE TO BORROWER) TO AVOID THE LAPSE OF ANY SUCH COVERAGE.  ALL PREMIUMS INCURRED BY LENDER IN CONNECTION WITH SUCH ACTION OR IN OBTAINING SUCH INSURANCE AND KEEPING IT IN EFFECT SHALL BE PAID BY BORROWER TO LENDER UPON DEMAND AND, UNTIL PAID, SHALL BE SECURED BY THE MORTGAGE AND SHALL BEAR INTEREST AT THE DEFAULT RATE.  IF BORROWER FAILS IN SO INSURING THE PROPERTY OR IN SO ASSIGNING AND DELIVERING THE POLICY, LENDER MAY, AT ITS OPTION, OBTAIN SUCH INSURANCE USING SUCH CARRIERS AND AGENCIES AS LENDER SHALL ELECT FROM YEAR TO YEAR AND PAY THE PREMIUMS THEREFOR, AND BORROWER WILL REIMBURSE LENDER FOR ANY PREMIUM SO PAID, WITH INTEREST THEREON AS STATED IN THE NOTE FROM THE TIME OF PAYMENT, ON DEMAND, AND THE AMOUNT SO OWING TO LENDER SHALL BE SECURED BY THE MORTGAGE.  THE INSURANCE OBTAINED BY LENDER MAY, BUT NEED NOT, PROTECT BORROWER’S INTEREST AND THE COVERAGE THAT LENDER PURCHASES MAY NOT PAY ANY CLAIM THAT BORROWER MAKES OR ANY CLAIM THAT IS MADE AGAINST BORROWER IN CONNECTION WITH THE PROPERTY. SECTION 6.2                                      CASUALTY.  IF THE PROPERTY SHALL BE DAMAGED OR DESTROYED, IN WHOLE OR IN PART, BY FIRE OR OTHER CASUALTY (A “CASUALTY”), BORROWER (A) SHALL GIVE TO LENDER PROMPT NOTICE OF SUCH DAMAGE REASONABLY ESTIMATED BY BORROWER TO COST MORE THAN TWO HUNDRED THOUSAND DOLLARS ($200,000.00) TO REPAIR, AND (B) SHALL PROMPTLY COMMENCE AND DILIGENTLY PROSECUTE THE COMPLETION OF THE RESTORATION OF THE PROPERTY PURSUANT TO SECTION 6.4 HEREOF AS NEARLY AS POSSIBLE TO THE CONDITION THE PROPERTY WAS IN IMMEDIATELY PRIOR TO SUCH CASUALTY, WITH SUCH ALTERATIONS AS MAY BE REASONABLY APPROVED BY LENDER AND OTHERWISE IN ACCORDANCE WITH SECTION 6.4 HEREOF.  BORROWER SHALL PAY, OR CAUSE TO BE PAID, ALL COSTS OF SUCH RESTORATION WHETHER OR NOT SUCH COSTS ARE COVERED BY INSURANCE.  LENDER MAY, BUT SHALL NOT BE OBLIGATED TO MAKE PROOF OF LOSS IF NOT MADE PROMPTLY BY BORROWER.  IN ADDITION, LENDER MAY PARTICIPATE IN ANY SETTLEMENT DISCUSSIONS WITH ANY INSURANCE COMPANIES (AND SHALL APPROVE THE FINAL SETTLEMENT, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED) WITH RESPECT TO ANY CASUALTY IN WHICH THE NET PROCEEDS OR THE COSTS OF COMPLETING THE RESTORATION ARE EQUAL TO OR GREATER THAN TWO HUNDRED THOUSAND AND 00/100 DOLLARS ($200,000.00) AND BORROWER SHALL DELIVER TO LENDER ALL INSTRUMENTS REQUIRED BY LENDER TO PERMIT SUCH PARTICIPATION. SECTION 6.3                                      CONDEMNATION.  BORROWER SHALL PROMPTLY GIVE LENDER NOTICE OF THE ACTUAL OR THREATENED COMMENCEMENT OF ANY PROCEEDING FOR THE CONDEMNATION OF THE PROPERTY UPON OBTAINING INFORMATION OF SUCH PROCEEDING AND SHALL DELIVER TO LENDER COPIES OF ANY AND ALL PAPERS SERVED IN CONNECTION WITH SUCH PROCEEDINGS.  LENDER MAY PARTICIPATE IN ANY SUCH PROCEEDINGS IF AN EVENT OF DEFAULT EXISTS OR IF THE AMOUNT OF THE AWARD EXCEEDS ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AND 00/100 ($1,500,000.00), AND BORROWER SHALL FROM TIME TO TIME DELIVER TO LENDER ALL INSTRUMENTS REQUESTED BY IT TO PERMIT SUCH PARTICIPATION.  BORROWER SHALL, AT ITS EXPENSE, DILIGENTLY PROSECUTE ANY SUCH PROCEEDINGS, AND SHALL CONSULT WITH LENDER, ITS ATTORNEYS AND EXPERTS, AND COOPERATE WITH THEM IN THE CARRYING ON OR DEFENSE OF ANY SUCH PROCEEDINGS.  NOTWITHSTANDING ANY TAKING BY ANY PUBLIC OR QUASI-PUBLIC AUTHORITY THROUGH CONDEMNATION OR OTHERWISE (INCLUDING, BUT NOT LIMITED TO, ANY TRANSFER MADE IN LIEU OF OR IN ANTICIPATION OF THE EXERCISE OF SUCH TAKING), BORROWER SHALL CONTINUE TO PAY THE DEBT AT THE TIME AND IN THE MANNER PROVIDED FOR ITS PAYMENT IN THE NOTE AND IN THIS AGREEMENT AND THE DEBT SHALL NOT BE REDUCED UNTIL ANY AWARD SHALL HAVE BEEN ACTUALLY RECEIVED AND APPLIED BY LENDER, AFTER THE DEDUCTION OF EXPENSES OF COLLECTION, TO THE REDUCTION OR DISCHARGE OF THE DEBT.  LENDER SHALL NOT BE LIMITED TO THE INTEREST PAID ON THE AWARD BY THE CONDEMNING AUTHORITY BUT SHALL BE ENTITLED TO RECEIVE OUT OF THE AWARD INTEREST AT THE RATE OR RATES PROVIDED HEREIN OR IN THE NOTE.  IF THE 61 -------------------------------------------------------------------------------- PROPERTY OR ANY PORTION THEREOF IS TAKEN BY A CONDEMNING AUTHORITY, BORROWER SHALL PROMPTLY COMMENCE AND DILIGENTLY PROSECUTE THE RESTORATION OF THE PROPERTY OR ANY PORTION THEREOF PURSUANT TO SECTION 6.4 HEREOF AND OTHERWISE COMPLY WITH THE PROVISIONS OF SECTION 6.4 HEREOF.  IF THE PROPERTY IS SOLD, THROUGH FORECLOSURE OR OTHERWISE, PRIOR TO THE RECEIPT BY LENDER OF THE AWARD, LENDER SHALL HAVE THE RIGHT, WHETHER OR NOT A DEFICIENCY JUDGMENT ON THE NOTE SHALL HAVE BEEN SOUGHT, RECOVERED OR DENIED, TO RECEIVE THE AWARD, OR A PORTION THEREOF SUFFICIENT TO PAY THE DEBT. SECTION 6.4                                      RESTORATION.  THE FOLLOWING PROVISIONS SHALL APPLY IN CONNECTION WITH THE RESTORATION OF THE PROPERTY: (A)                                  IF THE NET PROCEEDS SHALL BE LESS THAN THE RELEVANT RESTORATION THRESHOLD AND THE COSTS OF COMPLETING THE RESTORATION SHALL BE LESS THAN THE RELEVANT RESTORATION THRESHOLD, THE NET PROCEEDS WILL BE DISBURSED BY LENDER TO BORROWER UPON RECEIPT, PROVIDED THAT ALL OF THE CONDITIONS SET FORTH IN SECTION 6.4(B)(I) BELOW ARE MET AND BORROWER DELIVERS TO LENDER A WRITTEN UNDERTAKING TO EXPEDITIOUSLY COMMENCE AND TO SATISFACTORILY COMPLETE WITH DUE DILIGENCE THE RESTORATION IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. (B)                                 IF THE NET PROCEEDS ARE EQUAL TO OR GREATER THAN THE RELEVANT RESTORATION THRESHOLD OR THE COSTS OF COMPLETING THE RESTORATION IS EQUAL TO OR GREATER THAN THE RELEVANT RESTORATION THRESHOLD, THEN IN EITHER CASE LENDER SHALL MAKE THE NET PROCEEDS AVAILABLE FOR THE RESTORATION IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B).  THE TERM “NET PROCEEDS” FOR PURPOSES OF THIS SECTION 6.4 SHALL MEAN:  (X) THE NET AMOUNT OF ALL INSURANCE PROCEEDS RECEIVED BY LENDER PURSUANT TO SECTION 6.1 (A)(I), (IV), (IX) AND (X) AS A RESULT OF SUCH DAMAGE OR DESTRUCTION, AFTER DEDUCTION OF ITS REASONABLE COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE COUNSEL FEES), IF ANY, IN COLLECTING SAME (“INSURANCE PROCEEDS”), OR (Y) THE NET AMOUNT OF THE AWARD, AFTER DEDUCTION OF ITS REASONABLE COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE COUNSEL FEES), IF ANY, IN COLLECTING SAME (“CONDEMNATION PROCEEDS”), WHICHEVER THE CASE MAY BE. (I)                              THE NET PROCEEDS SHALL BE MADE AVAILABLE TO BORROWER FOR RESTORATION PROVIDED THAT EACH OF THE FOLLOWING CONDITIONS ARE MET: (A)                              NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING; (B)                                (1) IN THE EVENT THE NET PROCEEDS ARE INSURANCE PROCEEDS, LESS THAN TWENTY-FIVE PERCENT (25%) OF THE TOTAL FLOOR AREA OF THE IMPROVEMENTS ON THE PROPERTY HAS BEEN DAMAGED, DESTROYED OR RENDERED UNUSABLE AS A RESULT OF SUCH CASUALTY OR (2) IN THE EVENT THE NET PROCEEDS ARE CONDEMNATION PROCEEDS, LESS THAN TEN PERCENT (10%) OF THE LAND CONSTITUTING THE PROPERTY IS TAKEN, AND SUCH LAND IS LOCATED ALONG THE PERIMETER OR PERIPHERY OF THE PROPERTY, AND NO PORTION OF THE IMPROVEMENTS IS LOCATED ON SUCH LAND; (C)                                THE LENDER IS REASONABLY SATISFIED THAT THE DEBT SERVICE COVERAGE RATIO, AFTER SUBSTANTIAL COMPLETION OF THE REPAIR, RESTORATION OR REBUILDING OF THE PROPERTY WILL BE AT LEAST EQUAL TO THE LESSER OF (I) 1.3:1.0 62 -------------------------------------------------------------------------------- AND (II) THE DEBT SERVICE COVERAGE RATIO FOR THE REPORTING PERIOD IMMEDIATELY PRIOR TO THE DATE OF THE RELEVANT CASUALTY OR CONDEMNATION; (D)                               BORROWER SHALL COMMENCE THE RESTORATION AS SOON AS REASONABLY PRACTICABLE (BUT IN NO EVENT LATER THAN ONE HUNDRED TWENTY (120) DAYS AFTER SUCH CASUALTY OR CONDEMNATION OR OBTAINING BUILDING PERMITS, WHICHEVER THE CASE MAY BE, OCCURS) AND SHALL DILIGENTLY PURSUE THE SAME TO SATISFACTORY COMPLETION; (E)                                 LENDER SHALL BE SATISFIED THAT ANY OPERATING DEFICITS, INCLUDING ALL SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST UNDER THE NOTE, WHICH WILL BE INCURRED WITH RESPECT TO THE PROPERTY AS A RESULT OF THE OCCURRENCE OF ANY SUCH CASUALTY OR CONDEMNATION, WHICHEVER THE CASE MAY BE, WILL BE COVERED OUT OF (1) THE NET PROCEEDS, (2) THE INSURANCE COVERAGE REFERRED TO IN SECTION 6.1(A)(II) HEREOF, IF APPLICABLE, OR (3) BY OTHER FUNDS OF BORROWER; (F)                                 LENDER SHALL BE SATISFIED THAT THE RESTORATION WILL BE COMPLETED ON OR BEFORE THE EARLIEST TO OCCUR OF (1) SIX (6) MONTHS PRIOR TO THE MATURITY DATE, (2) THE EARLIEST DATE REQUIRED FOR SUCH COMPLETION UNDER THE TERMS OF ANY LEASES, (3) SUCH TIME AS MAY BE REQUIRED UNDER ALL APPLICABLE LEGAL REQUIREMENTS IN ORDER TO REPAIR AND RESTORE THE PROPERTY TO THE CONDITION IT WAS IN IMMEDIATELY PRIOR TO SUCH CASUALTY OR TO AS NEARLY AS POSSIBLE THE CONDITION IT WAS IN IMMEDIATELY PRIOR TO SUCH CONDEMNATION, AS APPLICABLE, OR (4) THE EXPIRATION OF THE INSURANCE COVERAGE REFERRED TO IN SECTION 6.1(A)(II) HEREOF; (G)                                THE PROPERTY AND THE USE THEREOF AFTER THE RESTORATION WILL BE IN COMPLIANCE WITH AND PERMITTED UNDER ALL APPLICABLE LEGAL REQUIREMENTS; (H)                               THE RESTORATION SHALL BE DONE AND COMPLETED BY BORROWER IN AN EXPEDITIOUS AND DILIGENT FASHION AND IN COMPLIANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS; (I)                                    SUCH CASUALTY OR CONDEMNATION, AS APPLICABLE, DOES NOT RESULT IN THE LOSS OF ACCESS TO THE PROPERTY OR THE IMPROVEMENTS; (J)                                   BORROWER SHALL DELIVER, OR CAUSE TO BE DELIVERED, TO LENDER A SIGNED DETAILED BUDGET APPROVED IN WRITING BY BORROWER’S ARCHITECT OR ENGINEER STATING THE ENTIRE COST OF COMPLETING THE RESTORATION, WHICH BUDGET SHALL BE APPROVED BY LENDER, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD; AND (K)                               THE NET PROCEEDS TOGETHER WITH ANY CASH OR CASH EQUIVALENT DEPOSITED BY BORROWER WITH LENDER ARE SUFFICIENT IN LENDER’S DISCRETION TO COVER THE COST OF THE RESTORATION. 63 -------------------------------------------------------------------------------- (II)                           THE NET PROCEEDS SHALL BE HELD BY LENDER IN AN INTEREST-BEARING ACCOUNT AND, UNTIL DISBURSED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B), SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT AND OTHER OBLIGATIONS UNDER THE LOAN DOCUMENTS.  THE NET PROCEEDS SHALL BE DISBURSED BY LENDER TO, OR AS DIRECTED BY, BORROWER FROM TIME TO TIME DURING THE COURSE OF THE RESTORATION, UPON RECEIPT OF EVIDENCE SATISFACTORY TO LENDER THAT (A) ALL MATERIALS INSTALLED AND WORK AND LABOR PERFORMED (EXCEPT TO THE EXTENT THAT THEY ARE TO BE PAID FOR OUT OF THE REQUESTED DISBURSEMENT) IN CONNECTION WITH THE RESTORATION HAVE BEEN PAID FOR IN FULL OR WILL BE PAID IN FULL UPON SUCH DISBURSEMENT, AND (B) THERE EXIST NO NOTICES OF PENDENCY, STOP ORDERS, MECHANIC’S OR MATERIALMAN’S LIENS OR NOTICES OF INTENTION TO FILE SAME, OR ANY OTHER LIENS OR ENCUMBRANCES OF ANY NATURE WHATSOEVER ON THE PROPERTY WHICH HAVE NOT EITHER BEEN FULLY BONDED TO THE SATISFACTION OF LENDER AND DISCHARGED OF RECORD OR IN THE ALTERNATIVE FULLY INSURED TO THE SATISFACTION OF LENDER BY THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY. (III)                        ALL PLANS AND SPECIFICATIONS REQUIRED IN CONNECTION WITH THE RESTORATION, THE COST OF WHICH EXCEEDS THE RELEVANT RESTORATION THRESHOLD, SHALL BE SUBJECT TO PRIOR REVIEW AND ACCEPTANCE IN ALL RESPECTS BY LENDER AND BY AN INDEPENDENT CONSULTING ENGINEER SELECTED BY LENDER (THE “CASUALTY CONSULTANT”), SUCH REVIEW AND ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD OR DELAYED.  LENDER SHALL HAVE THE USE OF THE PLANS AND SPECIFICATIONS AND ALL PERMITS, LICENSES AND APPROVALS REQUIRED OR OBTAINED IN CONNECTION WITH THE RESTORATION.  THE IDENTITY OF THE CONTRACTORS, SUBCONTRACTORS AND MATERIALMEN ENGAGED IN THE RESTORATION, AS WELL AS THE CONTRACTS UNDER WHICH THEY HAVE BEEN ENGAGED, SHALL BE SUBJECT TO PRIOR REVIEW AND ACCEPTANCE BY LENDER AND THE CASUALTY CONSULTANT, SUCH REVIEW AND ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD OR DELAYED.  ALL COSTS AND EXPENSES INCURRED BY LENDER IN CONNECTION WITH MAKING THE NET PROCEEDS AVAILABLE FOR THE RESTORATION INCLUDING, WITHOUT LIMITATION, REASONABLE COUNSEL FEES AND DISBURSEMENTS AND THE CASUALTY CONSULTANT’S FEES, SHALL BE PAID BY BORROWER. (IV)                       IN NO EVENT SHALL LENDER BE OBLIGATED TO MAKE DISBURSEMENTS OF THE NET PROCEEDS IN EXCESS OF AN AMOUNT EQUAL TO THE COSTS ACTUALLY INCURRED FROM TIME TO TIME FOR WORK IN PLACE AS PART OF THE RESTORATION, AS CERTIFIED BY THE CASUALTY CONSULTANT, MINUS THE CASUALTY RETAINAGE.  THE TERM “CASUALTY RETAINAGE” SHALL MEAN AN AMOUNT EQUAL TO TEN PERCENT (10%) OF THE COSTS ACTUALLY INCURRED FOR WORK IN PLACE AS PART OF THE RESTORATION, AS CERTIFIED BY THE CASUALTY CONSULTANT, UNTIL THE RESTORATION HAS BEEN COMPLETED.  THE CASUALTY RETAINAGE SHALL IN NO EVENT, AND NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH ABOVE IN THIS SECTION 6.4(B), BE LESS THAN THE AMOUNT ACTUALLY HELD BACK BY BORROWER FROM CONTRACTORS, SUBCONTRACTORS AND MATERIALMEN ENGAGED IN THE RESTORATION.  THE CASUALTY RETAINAGE SHALL NOT BE RELEASED UNTIL THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE RESTORATION HAS BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B) AND THAT ALL APPROVALS NECESSARY FOR THE RE-OCCUPANCY AND USE OF THE PROPERTY HAVE BEEN OBTAINED FROM ALL APPROPRIATE GOVERNMENTAL AND QUASI-GOVERNMENTAL AUTHORITIES, AND LENDER RECEIVES EVIDENCE SATISFACTORY TO 64 -------------------------------------------------------------------------------- LENDER THAT THE COSTS OF THE RESTORATION HAVE BEEN PAID IN FULL OR WILL BE PAID IN FULL OUT OF THE CASUALTY RETAINAGE; PROVIDED, HOWEVER, THAT LENDER WILL RELEASE THE PORTION OF THE CASUALTY RETAINAGE BEING HELD WITH RESPECT TO ANY CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN ENGAGED IN THE RESTORATION AS OF THE DATE UPON WHICH THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN HAS SATISFACTORILY COMPLETED ALL WORK AND HAS SUPPLIED ALL MATERIALS IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACTOR’S, SUBCONTRACTOR’S OR MATERIALMAN’S CONTRACT, THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN DELIVERS THE LIEN WAIVERS AND EVIDENCE OF PAYMENT IN FULL OF ALL SUMS DUE TO THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN AS MAY BE REASONABLY REQUESTED BY LENDER OR BY THE TITLE COMPANY ISSUING THE TITLE INSURANCE POLICY, AND LENDER RECEIVES AN ENDORSEMENT TO THE TITLE INSURANCE POLICY INSURING THE CONTINUED PRIORITY OF THE LIEN OF THE MORTGAGE AND EVIDENCE OF PAYMENT OF ANY PREMIUM PAYABLE FOR SUCH ENDORSEMENT.  IF REQUIRED BY LENDER, THE RELEASE OF ANY SUCH PORTION OF THE CASUALTY RETAINAGE SHALL BE APPROVED BY THE SURETY COMPANY, IF ANY, WHICH HAS ISSUED A PAYMENT OR PERFORMANCE BOND WITH RESPECT TO THE CONTRACTOR, SUBCONTRACTOR OR MATERIALMAN. (V)                          LENDER SHALL NOT BE OBLIGATED TO MAKE DISBURSEMENTS OF THE NET PROCEEDS MORE FREQUENTLY THAN ONCE EVERY CALENDAR MONTH. (VI)                       IF AT ANY TIME THE NET PROCEEDS OR THE UNDISBURSED BALANCE THEREOF SHALL NOT, IN THE REASONABLE OPINION OF LENDER IN CONSULTATION WITH THE CASUALTY CONSULTANT, BE SUFFICIENT TO PAY IN FULL THE BALANCE OF THE COSTS WHICH ARE ESTIMATED BY THE CASUALTY CONSULTANT TO BE INCURRED IN CONNECTION WITH THE COMPLETION OF THE RESTORATION, BORROWER SHALL DEPOSIT THE DEFICIENCY (THE “NET PROCEEDS DEFICIENCY”) WITH LENDER BEFORE ANY FURTHER DISBURSEMENT OF THE NET PROCEEDS SHALL BE MADE.  THE NET PROCEEDS DEFICIENCY DEPOSITED WITH LENDER SHALL BE HELD BY LENDER AND SHALL BE DISBURSED FOR COSTS ACTUALLY INCURRED IN CONNECTION WITH THE RESTORATION ON THE SAME CONDITIONS APPLICABLE TO THE DISBURSEMENT OF THE NET PROCEEDS, AND UNTIL SO DISBURSED PURSUANT TO THIS SECTION 6.4(B) SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT AND OTHER OBLIGATIONS UNDER THE LOAN DOCUMENTS. (VII)                    THE EXCESS, IF ANY, OF THE NET PROCEEDS (AND THE REMAINING BALANCE, IF ANY, OF THE NET PROCEEDS DEFICIENCY) DEPOSITED WITH LENDER AFTER THE CASUALTY CONSULTANT CERTIFIES TO LENDER THAT THE RESTORATION HAS BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 6.4(B), AND THE RECEIPT BY LENDER OF EVIDENCE SATISFACTORY TO LENDER THAT ALL COSTS INCURRED IN CONNECTION WITH THE RESTORATION HAVE BEEN PAID IN FULL, SHALL BE REMITTED BY LENDER TO BORROWER, PROVIDED NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND SHALL BE CONTINUING. (C)                                  ALL NET PROCEEDS NOT REQUIRED (I) TO BE MADE AVAILABLE FOR THE RESTORATION OR (II) TO BE RETURNED TO BORROWER AS EXCESS NET PROCEEDS PURSUANT TO SECTION 6.4(B)(VII) MAY BE RETAINED AND APPLIED BY LENDER TOWARD THE PAYMENT OF THE DEBT WHETHER OR NOT THEN DUE AND PAYABLE IN SUCH ORDER, PRIORITY AND PROPORTIONS AS LENDER IN ITS SOLE DISCRETION SHALL DEEM PROPER (PROVIDED NO EVENT OF DEFAULT EXISTS, BORROWER SHALL NOT BE REQUIRED TO PAY ANY PREPAYMENT 65 -------------------------------------------------------------------------------- CONSIDERATION IN CONNECTION WITH SUCH PAYMENT), OR, AT THE DISCRETION OF LENDER, THE SAME MAY BE PAID, EITHER IN WHOLE OR IN PART, TO BORROWER FOR SUCH PURPOSES AS LENDER SHALL DESIGNATE, IN ITS DISCRETION. (D)                                 IN THE EVENT OF FORECLOSURE OF THE MORTGAGE, OR OTHER TRANSFER OF TITLE TO THE PROPERTY IN EXTINGUISHMENT IN WHOLE OR IN PART OF THE DEBT ALL RIGHT, TITLE AND INTEREST OF BORROWER IN AND TO THE POLICIES THAT ARE NOT BLANKET POLICIES THEN IN FORCE CONCERNING THE PROPERTY AND ALL PROCEEDS PAYABLE THEREUNDER SHALL THEREUPON VEST IN THE PURCHASER AT SUCH FORECLOSURE OR LENDER OR OTHER TRANSFEREE IN THE EVENT OF SUCH OTHER TRANSFER OF TITLE. (E)                                  LENDER SHALL WITH REASONABLE PROMPTNESS FOLLOWING ANY CASUALTY OR CONDEMNATION NOTIFY BORROWER WHETHER OR NOT NET PROCEEDS ARE REQUIRED TO BE MADE AVAILABLE TO BORROWER FOR RESTORATION PURSUANT TO THIS SECTION 6.4.  ALL NET PROCEEDS NOT REQUIRED TO BE MADE AVAILABLE FOR RESTORATION SHALL BE RETAINED AND APPLIED BY LENDER IN ACCORDANCE WITH SECTION 2.4.2 HEREOF (A “NET PROCEEDS PREPAYMENT”).  IF SUCH NET PROCEEDS PREPAYMENT SHALL BE EQUAL TO OR GREATER THAN FIVE MILLION AND 00/100 DOLLARS ($5,000,000.00), BORROWER SHALL HAVE THE RIGHT TO ELECT TO PREPAY THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN (LESS THE NET PROCEEDS PREPAYMENT) FOR THE PROPERTY (A “CASUALTY/CONDEMNATION PREPAYMENT”) WITHOUT PAYMENT OF THE YIELD MAINTENANCE PREMIUM UPON SATISFACTION OF THE FOLLOWING CONDITIONS:  (I) WITHIN THIRTY (30) DAYS FOLLOWING THE DATE OF THE NET PROCEEDS PREPAYMENT, BORROWER SHALL PROVIDE LENDER WITH WRITTEN NOTICE OF BORROWER’S INTENTION TO PAY THE NOTE IN FULL (WITH A CREDIT FOR THE AMOUNT OF THE NET PROCEEDS PREPAYMENT), (II) BORROWER SHALL PREPAY THE NOTE IN SUCH AMOUNT ON OR BEFORE THE THIRD (3RD) PAYMENT DATE OCCURRING FOLLOWING THE DATE OF THE NET PROCEEDS PREPAYMENT (PROVIDED THAT IF ANY SUCH PREPAYMENT IS MADE ON A DATE OTHER THAN A PAYMENT DATE, BORROWER SHALL PAY LENDER ALL INTEREST WHICH WOULD HAVE ACCRUED ON THE AMOUNT BEING PREPAID THROUGH THE NEXT PAYMENT DATE), AND (III) NO EVENT OF DEFAULT SHALL EXIST ON THE DATE OF SUCH CASUALTY/CONDEMNATION PREPAYMENT.  NOTWITHSTANDING ANYTHING IN SECTION 6.2 OR SECTION 6.3 TO THE CONTRARY, BORROWER SHALL HAVE NO OBLIGATION TO COMMENCE RESTORATION OF THE PROPERTY UPON DELIVERY OF THE WRITTEN NOTICE SET FORTH IN CLAUSE (I) OF THE PRECEDING SENTENCE (UNLESS BORROWER SUBSEQUENTLY SHALL FAIL TO SATISFY THE REQUIREMENT OF CLAUSE (II) OF THE PRECEDING SENTENCE). VII.                             RESERVE FUNDS SECTION 7.1                                      REQUIRED REPAIRS.  BORROWER SHALL PERFORM THE REPAIRS AT THE PROPERTY, AS MORE PARTICULARLY SET FORTH ON SCHEDULE III HERETO (SUCH REPAIRS HEREINAFTER REFERRED TO AS “REQUIRED REPAIRS”).  BORROWER SHALL COMPLETE THE REQUIRED REPAIRS ON OR BEFORE THE REQUIRED DEADLINE FOR EACH REPAIR AS SET FORTH ON SCHEDULE III.  IT SHALL BE AN EVENT OF DEFAULT UNDER THIS AGREEMENT IF BORROWER DOES NOT COMPLETE THE REQUIRED REPAIRS AT THE PROPERTY BY THE REQUIRED DEADLINE FOR EACH REPAIR AS SET FORTH ON SCHEDULE III; PROVIDED, HOWEVER, THAT LENDER IN ITS SOLE AND ABSOLUTE DISCRETION MAY AGREE TO EXTEND THE TIME TO COMPLETE THE REQUIRED REPAIRS IF BORROWER, DESPITE ITS GOOD FAITH EFFORTS, HAS FAILED TO COMPLETE THE REQUIRED REPAIRS WITHIN SUCH PERIOD. 7.1.1                        RELEASE OF REQUIRED REPAIR FUNDS.  LENDER SHALL DISBURSE TO BORROWER ANY FUNDS DEPOSITED PURSUANT TO SECTION 7.1 (THE “REQUIRED REPAIR FUNDS”) FROM TIME TO TIME, BUT NOT MORE FREQUENTLY THAN ONCE IN ANY THIRTY (30) DAY PERIOD, UPON SATISFACTION BY BORROWER OF EACH OF THE FOLLOWING CONDITIONS:  (A) BORROWER SHALL SUBMIT A WRITTEN REQUEST FOR PAYMENT TO LENDER AT 66 -------------------------------------------------------------------------------- LEAST FIFTEEN (15) DAYS PRIOR TO THE DATE ON WHICH BORROWER REQUESTS SUCH PAYMENT BE MADE AND SPECIFIES THE REQUIRED REPAIRS TO BE PAID, (B) ON THE DATE SUCH REQUEST IS RECEIVED BY LENDER AND ON THE DATE SUCH PAYMENT IS TO BE MADE, NO EVENT OF DEFAULT SHALL EXIST AND REMAIN UNCURED, (C) LENDER SHALL HAVE RECEIVED AN OFFICER’S CERTIFICATE (I) STATING THAT ALL REQUIRED REPAIRS (OR IN THE CASE OF PROGRESS PAYMENTS, THE PORTION THEREOF) TO BE FUNDED BY THE REQUESTED DISBURSEMENT HAVE BEEN COMPLETED IN GOOD AND WORKMANLIKE MANNER AND IN ACCORDANCE WITH ALL APPLICABLE FEDERAL, STATE AND LOCAL LAWS, RULES AND REGULATIONS, SUCH OFFICER’S CERTIFICATE TO BE ACCOMPANIED BY A COPY OF ANY LICENSE, PERMIT OR OTHER APPROVAL BY ANY GOVERNMENTAL AUTHORITY REQUIRED TO COMMENCE AND/OR COMPLETE THE REQUIRED REPAIRS, (II) IDENTIFYING EACH PERSON THAT SUPPLIED MATERIALS OR LABOR IN CONNECTION WITH THE REQUIRED REPAIRS TO BE FUNDED BY THE REQUESTED DISBURSEMENT, AND (III) STATING THAT EACH SUCH PERSON HAS BEEN PAID IN FULL OR WILL BE PAID IN FULL UPON APPLICATION OF SUCH DISBURSEMENT, SUCH OFFICER’S CERTIFICATE TO BE ACCOMPANIED BY LIEN WAIVERS (WHICH MAY BE CONDITIONED ON PAYMENT) OR OTHER EVIDENCE OF PAYMENT REASONABLY SATISFACTORY TO LENDER, (D) AT LENDER’S OPTION, A TITLE SEARCH INDICATING THAT THE PROPERTY IS FREE FROM ALL LIENS, CLAIMS AND OTHER ENCUMBRANCES NOT PREVIOUSLY APPROVED BY LENDER, AND (E) LENDER SHALL HAVE RECEIVED SUCH OTHER EVIDENCE AS LENDER SHALL REASONABLY REQUEST THAT THE REQUIRED REPAIRS (OR PORTIONS THEREOF) TO BE FUNDED BY THE REQUESTED DISBURSEMENT HAVE BEEN COMPLETED AND ARE PAID FOR OR WILL BE PAID UPON SUCH DISBURSEMENT TO BORROWER.  LENDER SHALL NOT BE REQUIRED TO MAKE DISBURSEMENTS FROM THE REQUIRED REPAIR FUND UNLESS SUCH REQUESTED DISBURSEMENT IS IN AN AMOUNT GREATER THAN $5,000 (OR A LESSER AMOUNT IF THE TOTAL AMOUNT IN THE REQUIRED REPAIR FUND IS LESS THAN $5,000, IN WHICH CASE ONLY ONE DISBURSEMENT OF THE AMOUNT REMAINING IN THE ACCOUNT SHALL BE MADE) AND SUCH DISBURSEMENT SHALL BE MADE ONLY UPON SATISFACTION OF EACH CONDITION CONTAINED IN THIS SECTION 7.1.1.  LENDER SHALL DISBURSE TO BORROWER ANY AMOUNTS REMAINING IN THE REQUIRED REPAIR FUND UPON THE COMPLETION OF ALL REQUIRED REPAIRS, PROVIDED, THAT THE FOLLOWING CONDITIONS ARE SATISFIED:  (A) BORROWER SHALL SUBMIT A WRITTEN REQUEST TO LENDER FOR PAYMENT OF ANY REMAINING REQUIRED REPAIR FUNDS, (B) ON THE DATE SUCH REQUEST IS RECEIVED BY LENDER AND ON THE DATE SUCH PAYMENT IS TO BE MADE, NO EVENT OF DEFAULT SHALL EXIST AND REMAIN UNCURED, (C) LENDER SHALL HAVE RECEIVED AN OFFICER’S CERTIFICATE STATING THAT ALL REQUIRED REPAIRS HAVE BEEN COMPLETED IN GOOD AND WORKMANLIKE MANNER AND IN ACCORDANCE WITH ALL APPLICABLE FEDERAL, STATE AND LOCAL LAWS, RULES AND REGULATIONS, AND (II) STATING THAT EACH PERSON THAT SUPPLIED MATERIALS OR LABOR IN CONNECTION WITH THE REQUIRED REPAIRS HAS BEEN PAID IN FULL AS OF THE DATE OF SUCH REQUEST, SUCH OFFICER’S CERTIFICATE TO BE ACCOMPANIED BY LIEN WAIVERS OR OTHER EVIDENCE OF PAYMENT REASONABLY SATISFACTORY TO LENDER, (D) AT LENDER’S OPTION, A TITLE SEARCH INDICATING THAT THE PROPERTY IS FREE FROM ALL LIENS, CLAIMS AND OTHER ENCUMBRANCES NOT PREVIOUSLY APPROVED BY LENDER, AND (E) LENDER SHALL HAVE RECEIVED SUCH OTHER EVIDENCE AS LENDER SHALL REASONABLY REQUEST THAT THE REQUIRED REPAIRS HAVE BEEN COMPLETED AND ARE PAID IN FULL. SECTION 7.2                                      TAX AND INSURANCE ESCROW FUND.  BORROWER SHALL PAY TO LENDER ON EACH PAYMENT DATE (A) ONE-TWELFTH (1/12) OF THE TAXES THAT LENDER ESTIMATES WILL BE PAYABLE DURING THE NEXT ENSUING TWELVE (12) MONTHS IN ORDER TO ACCUMULATE WITH LENDER SUFFICIENT FUNDS TO PAY ALL SUCH TAXES AT LEAST THIRTY (30) DAYS PRIOR TO THEIR RESPECTIVE DUE DATES, AND (B) ONE-TWELFTH (1/12) OF THE INSURANCE PREMIUMS THAT LENDER ESTIMATES WILL BE PAYABLE FOR THE RENEWAL OF THE COVERAGE AFFORDED BY THE POLICIES UPON THE EXPIRATION THEREOF IN ORDER TO ACCUMULATE WITH LENDER SUFFICIENT FUNDS TO PAY ALL SUCH INSURANCE PREMIUMS AT LEAST THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF THE POLICIES (SAID AMOUNTS IN (A) AND (B) ABOVE ARE HEREINAFTER CALLED THE “TAX AND INSURANCE ESCROW FUND”).  THE TAX AND INSURANCE ESCROW FUND AND THE MONTHLY DEBT SERVICE 67 -------------------------------------------------------------------------------- PAYMENT AMOUNT, SHALL BE ADDED TOGETHER AND SHALL BE PAID AS AN AGGREGATE SUM BY BORROWER TO LENDER.  LENDER WILL APPLY THE TAX AND INSURANCE ESCROW FUND TO PAYMENTS OF TAXES AND INSURANCE PREMIUMS REQUIRED TO BE MADE BY BORROWER PURSUANT TO THIS AGREEMENT AND UNDER THE MORTGAGE.  IN MAKING ANY PAYMENT RELATING TO THE TAX AND INSURANCE ESCROW FUND, LENDER MAY DO SO ACCORDING TO ANY BILL, STATEMENT OR ESTIMATE PROCURED FROM THE APPROPRIATE PUBLIC OFFICE (WITH RESPECT TO TAXES) OR INSURER OR AGENT (WITH RESPECT TO INSURANCE PREMIUMS) OR FROM BORROWER WITHOUT INQUIRY INTO THE ACCURACY OF SUCH BILL, STATEMENT OR ESTIMATE OR INTO THE VALIDITY OF ANY TAX, ASSESSMENT, SALE, FORFEITURE, TAX LIEN OR TITLE OR CLAIM THEREOF, PROVIDED, HOWEVER, LENDER SHALL USE REASONABLE EFFORTS TO PAY SUCH REAL PROPERTY TAXES SUFFICIENTLY EARLY TO OBTAIN THE BENEFIT OF ANY AVAILABLE DISCOUNTS OF WHICH IT HAS KNOWLEDGE.  IF THE AMOUNT OF THE TAX AND INSURANCE ESCROW FUND SHALL EXCEED THE AMOUNTS DUE FOR TAXES AND INSURANCE PREMIUMS, LENDER SHALL, IN ITS SOLE DISCRETION, RETURN ANY EXCESS TO BORROWER OR CREDIT SUCH EXCESS AGAINST FUTURE PAYMENTS TO BE MADE TO THE TAX AND INSURANCE ESCROW FUND.  ANY AMOUNT REMAINING IN THE TAX AND INSURANCE ESCROW FUND AFTER THE DEBT HAS BEEN PAID IN FULL SHALL BE RETURNED TO BORROWER.  IN ALLOCATING SUCH EXCESS, LENDER MAY DEAL WITH THE PERSON SHOWN ON THE RECORDS OF LENDER TO BE THE OWNER OF THE PROPERTY.  IF AT ANY TIME LENDER REASONABLY DETERMINES THAT THE TAX AND INSURANCE ESCROW FUND IS NOT OR WILL NOT BE SUFFICIENT TO PAY TAXES AND INSURANCE PREMIUMS BY THE DATES SET FORTH ABOVE, LENDER SHALL NOTIFY BORROWER OF SUCH DETERMINATION AND BORROWER SHALL INCREASE ITS MONTHLY PAYMENTS TO LENDER BY THE AMOUNT THAT LENDER ESTIMATES IS SUFFICIENT TO MAKE UP THE DEFICIENCY AT LEAST THIRTY (30) DAYS PRIOR TO DELINQUENCY OF THE TAXES OR INSURANCE PREMIUMS.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BORROWER SHALL NOT BE REQUIRED TO MAKE MONTHLY DEPOSITS WITH RESPECT TO THE TAX AND INSURANCE ESCROW FUND PROVIDED THAT: (I) NO EVENT OF DEFAULT HAS OCCURRED, (II) BORROWER PAYS ALL TAXES PRIOR TO DELINQUENCY AND INSURANCE PREMIUMS AS THE SAME BECOME DUE AND PAYABLE AND DELIVERS TO LENDER EVIDENCE OF SUCH PAYMENT PURSUANT TO SECTION 5.1.2 HEREOF, AND (III) WITH RESPECT TO TAXES, BORROWER CAUSES BEHRINGER HARVARD REIT I, INC. TO DELIVER A GUARANTY IN FORM AND SUBSTANCE ACCEPTABLE TO LENDER WITH RESPECT TO THE TIMELY PAYMENT OF TAXES OR BORROWER HAS DEPOSITED WITH LENDER AN AMOUNT EQUAL TO ONE-HALF OF THE ANNUAL TAXES. SECTION 7.3                                      REPLACEMENTS AND REPLACEMENT RESERVE. 7.3.1                        REPLACEMENT RESERVE FUND.  BORROWER SHALL PAY TO LENDER ON EACH PAYMENT DATE THE SUM OF $8,661.75 (THE “REPLACEMENT RESERVE MONTHLY DEPOSIT”) FOR REPLACEMENTS AND REPAIRS REQUIRED TO BE MADE TO THE PROPERTY DURING THE CALENDAR YEAR (COLLECTIVELY, THE “REPLACEMENTS”).  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS BORROWER’S “REPLACEMENT RESERVE FUND” AND THE ACCOUNT IN WHICH SUCH AMOUNTS ARE HELD SHALL HEREINAFTER BE REFERRED TO AS BORROWER’S “REPLACEMENT RESERVE ACCOUNT”.  LENDER MAY REASSESS ITS ESTIMATE OF THE AMOUNT NECESSARY FOR THE REPLACEMENT RESERVE FUND FROM TIME TO TIME, AND MAY INCREASE THE MONTHLY AMOUNTS REQUIRED TO BE DEPOSITED INTO THE REPLACEMENT RESERVE FUND UPON THIRTY (30) DAYS NOTICE TO BORROWER IF LENDER DETERMINES IN ITS COMMERCIALLY REASONABLE DISCRETION BASED UPON UPDATED ENGINEERING REPORTS OR INSPECTIONS OF THE PROPERTY THAT AN INCREASE IS NECESSARY TO MAINTAIN THE PROPER MAINTENANCE AND OPERATION OF THE PROPERTY.  NOTWITHSTANDING THE FOREGOING, BORROWER’S OBLIGATION TO MAKE MONTHLY DEPOSITS TO THE REPLACEMENT RESERVE FUND SHALL BE SUSPENDED PROVIDED THAT NO EVENT OF DEFAULT OCCURS. 68 -------------------------------------------------------------------------------- 7.3.2                        DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNT. (A)                                  LENDER SHALL MAKE DISBURSEMENTS FROM THE REPLACEMENT RESERVE ACCOUNT TO PAY BORROWER ONLY FOR THE COSTS OF THE REPLACEMENTS.  LENDER SHALL NOT BE OBLIGATED TO MAKE DISBURSEMENTS FROM THE REPLACEMENT RESERVE ACCOUNT TO REIMBURSE BORROWER FOR THE COSTS OF ROUTINE MAINTENANCE TO THE PROPERTY, REPLACEMENTS OF INVENTORY OR FOR COSTS WHICH ARE TO BE REIMBURSED FROM THE ROLLOVER RESERVE FUND. (B)                                 LENDER SHALL, UPON WRITTEN REQUEST FROM BORROWER AND SATISFACTION OF THE REQUIREMENTS SET FORTH IN THIS SECTION 7.3.2, DISBURSE TO BORROWER AMOUNTS FROM THE REPLACEMENT RESERVE ACCOUNT NECESSARY TO PAY FOR THE ACTUAL APPROVED COSTS OF REPLACEMENTS OR TO REIMBURSE BORROWER THEREFOR, UPON COMPLETION OF SUCH REPLACEMENTS (OR, UPON PARTIAL COMPLETION IN THE CASE OF REPLACEMENTS MADE PURSUANT TO SECTION 7.3.2(E)) AS DETERMINED BY LENDER.  IN NO EVENT SHALL LENDER BE OBLIGATED TO DISBURSE FUNDS FROM THE REPLACEMENT RESERVE ACCOUNT IF A DEFAULT OR AN EVENT OF DEFAULT EXISTS. (C)                                  EACH REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT SHALL BE IN A FORM SPECIFIED OR APPROVED BY LENDER AND SHALL SPECIFY (I) THE SPECIFIC REPLACEMENTS FOR WHICH THE DISBURSEMENT IS REQUESTED, (II) THE QUANTITY AND PRICE OF EACH ITEM PURCHASED, IF THE REPLACEMENT INCLUDES THE PURCHASE OR REPLACEMENT OF SPECIFIC ITEMS, (III) THE PRICE OF ALL MATERIALS (GROUPED BY TYPE OR CATEGORY) USED IN ANY REPLACEMENT OTHER THAN THE PURCHASE OR REPLACEMENT OF SPECIFIC ITEMS, AND (IV) THE COST OF ALL CONTRACTED LABOR OR OTHER SERVICES APPLICABLE TO EACH REPLACEMENT FOR WHICH SUCH REQUEST FOR DISBURSEMENT IS MADE.  WITH EACH REQUEST BORROWER SHALL CERTIFY THAT ALL REPLACEMENTS HAVE BEEN MADE IN ACCORDANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS AND, UNLESS LENDER HAS AGREED TO ISSUE JOINT CHECKS AS DESCRIBED BELOW, EACH REQUEST SHALL INCLUDE EVIDENCE OF PAYMENT OF ALL SUCH AMOUNTS.  EACH REQUEST FOR DISBURSEMENT SHALL INCLUDE COPIES OF INVOICES FOR ALL ITEMS OR MATERIALS PURCHASED AND ALL CONTRACTED LABOR OR SERVICES PROVIDED.  EXCEPT AS PROVIDED IN SECTION 7.3.2(E), EACH REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT SHALL BE MADE ONLY AFTER COMPLETION OF THE REPLACEMENT FOR WHICH DISBURSEMENT IS REQUESTED.  BORROWER SHALL PROVIDE LENDER EVIDENCE OF COMPLETION OF THE SUBJECT REPLACEMENT SATISFACTORY TO LENDER IN ITS REASONABLE JUDGMENT. (D)                                 BORROWER SHALL PAY ALL INVOICES IN CONNECTION WITH THE REPLACEMENTS WITH RESPECT TO WHICH A DISBURSEMENT IS REQUESTED PRIOR TO SUBMITTING SUCH REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT OR, AT THE REQUEST OF BORROWER, LENDER WILL ISSUE JOINT CHECKS, PAYABLE TO BORROWER AND THE CONTRACTOR, SUPPLIER, MATERIALMAN, MECHANIC, SUBCONTRACTOR OR OTHER PARTY TO WHOM PAYMENT IS DUE IN CONNECTION WITH A REPLACEMENT.  IN THE CASE OF PAYMENTS MADE BY JOINT CHECK, LENDER MAY REQUIRE A WAIVER OF LIEN FROM EACH PERSON RECEIVING PAYMENT PRIOR TO LENDER’S DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT.  IN ADDITION, AS A CONDITION TO ANY DISBURSEMENT, LENDER MAY REQUIRE BORROWER TO OBTAIN LIEN WAIVERS FROM EACH CONTRACTOR, SUPPLIER, MATERIALMAN, MECHANIC OR SUBCONTRACTOR WHO RECEIVES PAYMENT IN AN AMOUNT EQUAL TO OR GREATER THAN $100,000 FOR COMPLETION OF ITS WORK OR DELIVERY OF ITS MATERIALS.  ANY LIEN WAIVER DELIVERED HEREUNDER SHALL CONFORM TO THE REQUIREMENTS OF APPLICABLE LAW AND SHALL COVER ALL WORK PERFORMED AND MATERIALS SUPPLIED (INCLUDING EQUIPMENT AND FIXTURES) FOR THE PROPERTY BY THAT CONTRACTOR, SUPPLIER, SUBCONTRACTOR, MECHANIC OR MATERIALMAN THROUGH THE DATE COVERED BY THE CURRENT REIMBURSEMENT REQUEST (OR, IN THE EVENT THAT PAYMENT TO SUCH CONTRACTOR, SUPPLIER, SUBCONTRACTOR, MECHANIC OR MATERIALMEN IS TO BE MADE BY A JOINT CHECK, THE RELEASE OF LIEN SHALL BE EFFECTIVE THROUGH THE DATE COVERED BY THE PREVIOUS RELEASE OF FUNDS REQUEST). 69 -------------------------------------------------------------------------------- (E)                                  IF (I) THE COST OF A REPLACEMENT EXCEEDS $100,000, (II) THE CONTRACTOR PERFORMING SUCH REPLACEMENT REQUIRES PERIODIC PAYMENTS PURSUANT TO TERMS OF A WRITTEN CONTRACT, AND (III) LENDER HAS APPROVED IN WRITING IN ADVANCE SUCH PERIODIC PAYMENTS, A REQUEST FOR REIMBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT MAY BE MADE AFTER COMPLETION OF A PORTION OF THE WORK UNDER SUCH CONTRACT, PROVIDED (A) SUCH CONTRACT REQUIRES PAYMENT UPON COMPLETION OF SUCH PORTION OF THE WORK, (B) THE MATERIALS FOR WHICH THE REQUEST IS MADE ARE ON SITE AT THE PROPERTY AND ARE PROPERLY SECURED OR HAVE BEEN INSTALLED IN THE PROPERTY, (C) ALL OTHER CONDITIONS IN THIS AGREEMENT FOR DISBURSEMENT HAVE BEEN SATISFIED, (D) FUNDS REMAINING IN THE REPLACEMENT RESERVE ACCOUNT ARE, IN LENDER’S JUDGMENT, SUFFICIENT TO COMPLETE SUCH REPLACEMENT AND OTHER REPLACEMENTS WHEN REQUIRED, AND (E) IF REQUIRED BY LENDER, EACH CONTRACTOR OR SUBCONTRACTOR RECEIVING PAYMENTS UNDER SUCH CONTRACT SHALL PROVIDE A WAIVER OF LIEN WITH RESPECT TO AMOUNTS WHICH HAVE BEEN PAID TO THAT CONTRACTOR OR SUBCONTRACTOR. (F)                                    BORROWER SHALL NOT MAKE A REQUEST FOR DISBURSEMENT FROM THE REPLACEMENT RESERVE ACCOUNT MORE FREQUENTLY THAN ONCE IN ANY CALENDAR MONTH AND (EXCEPT IN CONNECTION WITH THE FINAL DISBURSEMENT) THE TOTAL COST OF ALL REPLACEMENTS IN ANY REQUEST SHALL NOT BE LESS THAN $15,000.00. 7.3.3                        PERFORMANCE OF REPLACEMENTS. (A)                                  BORROWER SHALL MAKE REPLACEMENTS WHEN REQUIRED IN ORDER TO KEEP THE PROPERTY IN CONDITION AND REPAIR CONSISTENT WITH OTHER SIMILAR PROPERTIES IN THE SAME MARKET SEGMENT IN THE METROPOLITAN AREA IN WHICH THE PROPERTY IS LOCATED, AND TO KEEP THE PROPERTY OR ANY PORTION THEREOF FROM DETERIORATING.  BORROWER SHALL COMPLETE ALL REPLACEMENTS IN A GOOD AND WORKMANLIKE MANNER AS SOON AS PRACTICABLE FOLLOWING THE COMMENCEMENT OF MAKING EACH SUCH REPLACEMENT. (B)                                 LENDER RESERVES THE RIGHT, AT ITS OPTION, TO APPROVE ALL CONTRACTS OR WORK ORDERS WITH MATERIALMEN, MECHANICS, SUPPLIERS, SUBCONTRACTORS, CONTRACTORS OR OTHER PARTIES PROVIDING LABOR OR MATERIALS UNDER CONTRACTS FOR AN AMOUNT IN EXCESS OF $100,000 IN CONNECTION WITH THE REPLACEMENTS PERFORMED BY BORROWER.  UPON LENDER’S REQUEST, BORROWER SHALL ASSIGN ANY CONTRACT OR SUBCONTRACT TO LENDER. (C)                                  IN THE EVENT LENDER DETERMINES IN ITS REASONABLE DISCRETION THAT ANY REPLACEMENT IS NOT BEING PERFORMED IN A WORKMANLIKE OR TIMELY MANNER OR THAT ANY REPLACEMENT HAS NOT BEEN COMPLETED IN A WORKMANLIKE OR TIMELY MANNER, AND SUCH FAILURE CONTINUES TO EXIST FOR MORE THAN THIRTY (30) DAYS AFTER NOTICE FROM LENDER TO BORROWER, LENDER SHALL HAVE THE OPTION, UPON TEN (10) DAYS NOTICE TO BORROWER (EXCEPT IN THE CASE OF AN EMERGENCY), TO WITHHOLD DISBURSEMENT FOR SUCH UNSATISFACTORY REPLACEMENT AND TO PROCEED UNDER EXISTING CONTRACTS OR TO CONTRACT WITH THIRD PARTIES TO COMPLETE SUCH REPLACEMENT AND TO APPLY THE REPLACEMENT RESERVE FUND TOWARD THE LABOR AND MATERIALS NECESSARY TO COMPLETE SUCH REPLACEMENT, AND TO EXERCISE ANY AND ALL OTHER REMEDIES AVAILABLE TO LENDER UPON AN EVENT OF DEFAULT HEREUNDER. (D)                                 IN ORDER TO FACILITATE LENDER’S COMPLETION OR MAKING OF THE REPLACEMENTS PURSUANT TO SECTION 7.3.3(C) ABOVE, BORROWER GRANTS LENDER THE RIGHT TO ENTER ONTO THE PROPERTY AND PERFORM ANY AND ALL WORK AND LABOR NECESSARY TO COMPLETE OR MAKE THE REPLACEMENTS AND/OR EMPLOY WATCHMEN TO PROTECT THE PROPERTY FROM DAMAGE, SUBJECT TO THE RIGHTS OF TENANTS.  ALL 70 -------------------------------------------------------------------------------- SUMS SO EXPENDED BY LENDER, TO THE EXTENT NOT FROM THE REPLACEMENT RESERVE FUND, SHALL BE DEEMED TO HAVE BEEN ADVANCED UNDER THE LOAN TO BORROWER AND SECURED BY THE MORTGAGE.  FOR THIS PURPOSE BORROWER CONSTITUTES AND APPOINTS LENDER ITS TRUE AND LAWFUL ATTORNEY IN FACT WITH FULL POWER OF SUBSTITUTION TO COMPLETE OR UNDERTAKE THE REPLACEMENTS IN THE NAME OF BORROWER.  SUCH POWER OF ATTORNEY SHALL BE DEEMED TO BE A POWER COUPLED WITH AN INTEREST AND CANNOT BE REVOKED BUT SHALL ONLY BE EFFECTIVE FOLLOWING AN EVENT OF DEFAULT.  BORROWER EMPOWERS SAID ATTORNEY IN FACT AS FOLLOWS:  (I) TO USE ANY FUNDS IN THE REPLACEMENT RESERVE ACCOUNT FOR THE PURPOSE OF MAKING OR COMPLETING THE REPLACEMENTS; (II) TO MAKE SUCH ADDITIONS, CHANGES AND CORRECTIONS TO THE REPLACEMENTS AS SHALL BE NECESSARY OR DESIRABLE TO COMPLETE THE REPLACEMENTS; (III) TO EMPLOY SUCH CONTRACTORS, SUBCONTRACTORS, AGENTS, ARCHITECTS AND INSPECTORS AS SHALL BE REQUIRED FOR SUCH PURPOSES; (IV) TO PAY, SETTLE OR COMPROMISE ALL EXISTING BILLS AND CLAIMS WHICH ARE OR MAY BECOME LIENS AGAINST THE PROPERTY, OR AS MAY BE NECESSARY OR DESIRABLE FOR THE COMPLETION OF THE REPLACEMENTS, OR FOR CLEARANCE OF TITLE; (V) TO EXECUTE ALL APPLICATIONS AND CERTIFICATES IN THE NAME OF BORROWER WHICH MAY BE REQUIRED BY ANY OF THE CONTRACT DOCUMENTS; (VI) TO PROSECUTE AND DEFEND ALL ACTIONS OR PROCEEDINGS IN CONNECTION WITH THE PROPERTY OR THE REHABILITATION AND REPAIR OF THE PROPERTY; AND (VII) TO DO ANY AND EVERY ACT WHICH BORROWER MIGHT DO IN ITS OWN BEHALF TO FULFILL THE TERMS OF THIS AGREEMENT. (E)                                  NOTHING IN THIS SECTION 7.3.3 SHALL:  (I) MAKE LENDER RESPONSIBLE FOR MAKING OR COMPLETING THE REPLACEMENTS; (II) REQUIRE LENDER TO EXPEND FUNDS IN ADDITION TO THE REPLACEMENT RESERVE FUND TO MAKE OR COMPLETE ANY REPLACEMENT; (III) OBLIGATE LENDER TO PROCEED WITH THE REPLACEMENTS; OR (IV) OBLIGATE LENDER TO DEMAND FROM BORROWER ADDITIONAL SUMS TO MAKE OR COMPLETE ANY REPLACEMENT. (F)                                    BORROWER SHALL PERMIT LENDER AND LENDER’S AGENTS AND REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, LENDER’S ENGINEER, ARCHITECT, OR INSPECTOR) OR THIRD PARTIES MAKING REPLACEMENTS PURSUANT TO THIS SECTION 7.3.3 TO ENTER ONTO THE PROPERTY DURING NORMAL BUSINESS HOURS (SUBJECT TO THE RIGHTS OF TENANTS UNDER THEIR LEASES) TO INSPECT THE PROGRESS OF ANY REPLACEMENTS AND ALL MATERIALS BEING USED IN CONNECTION THEREWITH, TO EXAMINE ALL PLANS AND SHOP DRAWINGS RELATING TO SUCH REPLACEMENTS WHICH ARE OR MAY BE KEPT AT THE PROPERTY, AND TO COMPLETE ANY REPLACEMENTS MADE PURSUANT TO THIS SECTION 7.3.3.  BORROWER SHALL CAUSE ALL CONTRACTORS AND SUBCONTRACTORS TO COOPERATE WITH LENDER OR LENDER’S REPRESENTATIVES OR SUCH OTHER PERSONS DESCRIBED ABOVE IN CONNECTION WITH INSPECTIONS DESCRIBED IN THIS SECTION 7.3.3(F) OR THE COMPLETION OF REPLACEMENTS PURSUANT TO THIS SECTION 7.3.3. (G)                                 LENDER MAY REQUIRE AN INSPECTION OF THE PROPERTY AT BORROWER’S EXPENSE PRIOR TO MAKING A MONTHLY DISBURSEMENT IN EXCESS OF $100,000 FROM THE REPLACEMENT RESERVE ACCOUNT IN ORDER TO VERIFY COMPLETION OF THE REPLACEMENTS FOR WHICH REIMBURSEMENT IS SOUGHT.  LENDER MAY REQUIRE THAT SUCH INSPECTION BE CONDUCTED BY AN APPROPRIATE INDEPENDENT QUALIFIED PROFESSIONAL SELECTED BY LENDER AND/OR MAY REQUIRE A COPY OF A CERTIFICATE OF COMPLETION BY AN INDEPENDENT QUALIFIED PROFESSIONAL ACCEPTABLE TO LENDER PRIOR TO THE DISBURSEMENT OF ANY AMOUNTS FROM THE REPLACEMENT RESERVE ACCOUNT.  BORROWER SHALL PAY THE EXPENSE OF THE INSPECTION AS REQUIRED HEREUNDER, WHETHER SUCH INSPECTION IS CONDUCTED BY LENDER OR BY AN INDEPENDENT QUALIFIED PROFESSIONAL. (H)                                 THE REPLACEMENTS AND ALL MATERIALS, EQUIPMENT, FIXTURES, OR ANY OTHER ITEM COMPRISING A PART OF ANY REPLACEMENT SHALL BE CONSTRUCTED, INSTALLED OR COMPLETED, AS APPLICABLE, 71 -------------------------------------------------------------------------------- FREE AND CLEAR OF ALL MECHANIC’S, MATERIALMAN’S OR OTHER LIENS (EXCEPT FOR THOSE LIENS EXISTING ON THE DATE OF THIS AGREEMENT WHICH HAVE BEEN APPROVED IN WRITING BY LENDER). (I)                                     BEFORE EACH DISBURSEMENT IN EXCESS OF $100,000 FROM THE REPLACEMENT RESERVE ACCOUNT, LENDER MAY REQUIRE BORROWER TO PROVIDE LENDER WITH A SEARCH OF TITLE TO THE PROPERTY EFFECTIVE TO THE DATE OF THE DISBURSEMENT, WHICH SEARCH SHOWS THAT NO MECHANIC’S OR MATERIALMEN’S LIENS OR OTHER LIENS OF ANY NATURE HAVE BEEN PLACED AGAINST THE PROPERTY SINCE THE DATE OF RECORDATION OF THE RELATED MORTGAGE AND THAT TITLE TO THE PROPERTY IS FREE AND CLEAR OF ALL LIENS (OTHER THAN THE LIEN OF THE RELATED MORTGAGE AND ANY OTHER LIENS PREVIOUSLY APPROVED IN WRITING BY LENDER, IF ANY). (J)                                     ALL REPLACEMENTS SHALL COMPLY WITH ALL APPLICABLE LEGAL REQUIREMENTS OF ALL GOVERNMENTAL AUTHORITIES HAVING JURISDICTION OVER THE PROPERTY AND APPLICABLE INSURANCE REQUIREMENTS INCLUDING, WITHOUT LIMITATION, APPLICABLE BUILDING CODES, SPECIAL USE PERMITS, ENVIRONMENTAL REGULATIONS, AND REQUIREMENTS OF INSURANCE UNDERWRITERS. (K)                                  IN ADDITION TO ANY INSURANCE REQUIRED UNDER THE LOAN DOCUMENTS, BORROWER SHALL PROVIDE OR CAUSE TO BE PROVIDED WORKMEN’S COMPENSATION INSURANCE, BUILDER’S RISK, AND PUBLIC LIABILITY INSURANCE AND OTHER INSURANCE TO THE EXTENT REQUIRED UNDER APPLICABLE LAW IN CONNECTION WITH A PARTICULAR REPLACEMENT.  ALL SUCH POLICIES SHALL BE IN FORM AND AMOUNT REASONABLY SATISFACTORY TO LENDER.  ALL SUCH POLICIES WHICH CAN BE ENDORSED WITH STANDARD MORTGAGEE CLAUSES MAKING LOSS PAYABLE TO LENDER OR ITS ASSIGNS SHALL BE SO ENDORSED.  CERTIFIED COPIES OF SUCH POLICIES SHALL BE DELIVERED TO LENDER. 7.3.4                        FAILURE TO MAKE REPLACEMENTS. (A)                                  IT SHALL BE AN EVENT OF DEFAULT UNDER THIS AGREEMENT IF BORROWER FAILS TO COMPLY WITH ANY PROVISION OF THIS SECTION 7.3.3 AND SUCH FAILURE IS NOT CURED WITHIN THIRTY (30) DAYS AFTER NOTICE FROM LENDER; PROVIDED, HOWEVER, IF SUCH FAILURE IS NOT CAPABLE OF BEING CURED WITHIN SAID THIRTY (30) DAY PERIOD, THEN PROVIDED THAT BORROWER COMMENCES ACTION TO COMPLETE SUCH CURE AND THEREAFTER DILIGENTLY PROCEEDS TO COMPLETE SUCH CURE, SUCH THIRTY (30) DAY PERIOD SHALL BE EXTENDED FOR SUCH TIME AS IS REASONABLY NECESSARY FOR BORROWER, IN THE EXERCISE OF DUE DILIGENCE, TO CURE SUCH FAILURE, BUT SUCH ADDITIONAL PERIOD OF TIME SHALL NOT EXCEED NINETY (90) DAYS.  UPON THE OCCURRENCE OF SUCH AN EVENT OF DEFAULT, LENDER MAY USE THE REPLACEMENT RESERVE FUND (OR ANY PORTION THEREOF) FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO COMPLETION OF THE REPLACEMENTS AS PROVIDED IN SECTION 7.3.3, OR FOR ANY OTHER REPAIR OR REPLACEMENT TO THE PROPERTY OR TOWARD PAYMENT OF THE DEBT IN SUCH ORDER, PROPORTION AND PRIORITY AS LENDER MAY DETERMINE IN ITS SOLE DISCRETION.  LENDER’S RIGHT TO WITHDRAW AND APPLY THE REPLACEMENT RESERVE FUND SHALL BE IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES PROVIDED TO LENDER UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. (B)                                 NOTHING IN THIS AGREEMENT SHALL OBLIGATE LENDER TO APPLY ALL OR ANY PORTION OF THE REPLACEMENT RESERVE FUND ON ACCOUNT OF AN EVENT OF DEFAULT TO PAYMENT OF THE DEBT OR IN ANY SPECIFIC ORDER OR PRIORITY. 72 -------------------------------------------------------------------------------- 7.3.5        BALANCE IN THE REPLACEMENT RESERVE ACCOUNT.  THE INSUFFICIENCY OF ANY BALANCE IN THE REPLACEMENT RESERVE ACCOUNT SHALL NOT RELIEVE BORROWER FROM ITS OBLIGATION TO FULFILL ALL PRESERVATION AND MAINTENANCE COVENANTS IN THE LOAN DOCUMENTS. 7.3.6        INDEMNIFICATION.  BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE PERFORMANCE OF THE REPLACEMENTS UNLESS THE SAME ARE SOLELY DUE TO GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER.  BORROWER SHALL ASSIGN TO LENDER ALL RIGHTS AND CLAIMS BORROWER MAY HAVE AGAINST ALL PERSONS OR ENTITIES SUPPLYING LABOR OR MATERIALS IN CONNECTION WITH THE REPLACEMENTS; PROVIDED, HOWEVER, THAT LENDER MAY NOT PURSUE ANY SUCH RIGHT OR CLAIM UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED. SECTION 7.4             ROLLOVER RESERVE. 7.4.1        DEPOSITS TO ROLLOVER RESERVE FUND.  BORROWER SHALL PAY TO LENDER ON THE CLOSING DATE THE SUM OF $4,519,898.90, WHICH AMOUNTS SHALL BE DEPOSITED WITH AND HELD BY LENDER FOR TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS AND WHICH AMOUNTS INCLUDE THE OUTSTANDING TENANT IMPROVEMENTS AND OUTSTANDING LEASING COMMISSIONS LISTED IN SCHEDULE II; EXCEPT THAT UP TO $1,175,000 MAY BE USED IN BORROWER’S DISCRETION TO FUND GENERAL CAPITAL IMPROVEMENTS TO THE PROPERTY.  ADDITIONALLY, BORROWER SHALL DEPOSIT WITH LENDER ANY LEASE TERMINATION FEES.  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS THE “ROLLOVER RESERVE FUND”. 7.4.2        WITHDRAWAL OF ROLLOVER RESERVE FUNDS.  LENDER SHALL MAKE DISBURSEMENTS FROM THE ROLLOVER RESERVE FUND FOR TENANT IMPROVEMENT, LEASING COMMISSION OBLIGATIONS, AND SUBJECT TO THE LIMIT SET FORTH IN SECTION 7.4.1 CAPITAL IMPROVEMENTS OBLIGATIONS, INCURRED BY BORROWER.  ALL SUCH EXPENSES SHALL BE APPROVED BY LENDER IN ITS COMMERCIALLY REASONABLE DISCRETION, EXCEPT THAT LENDER’S APPROVAL OF SUCH EXPENSES SHALL NOT BE REQUIRED (A) IF LENDER HAS SEPARATELY APPROVED (BUT WAS NOT DEEMED TO HAVE APPROVED) THE RELATED LEASE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.1.20 OF THIS AGREEMENT OR (B) WITH RESPECT TO TENANT IMPROVEMENT EXPENSES THAT ARE LESS THAN $30.00 PER SQUARE FOOT, PROVIDED BORROWER DELIVERS AN OFFICER’S CERTIFICATE CERTIFYING THAT THE APPLICABLE LEASE IS CONSISTENT WITH THEN CURRENT MARKET TERMS FOR THE MARKET IN WHICH THE PROPERTY IS LOCATED AND FOR A TERM OF NOT LESS THAN FIVE (5) YEARS.  LENDER SHALL MAKE DISBURSEMENTS AS REQUESTED BY BORROWER ON A MONTHLY BASIS IN INCREMENTS OF NO LESS THAN $5,000.00 UPON DELIVERY BY BORROWER OF LENDER’S STANDARD FORM OF DRAW REQUEST ACCOMPANIED BY COPIES OF PAID INVOICES FOR THE AMOUNTS REQUESTED AND, IF REQUIRED BY LENDER, LIEN WAIVERS AND RELEASES FROM ALL PARTIES FURNISHING MATERIALS AND/OR SERVICES IN CONNECTION WITH THE REQUESTED PAYMENT.  IF (I) THE COST OF ANY TENANT IMPROVEMENT OR CAPITAL IMPROVEMENT EXCEEDS $100,000, (II) THE CONTRACTOR PERFORMING SUCH TENANT IMPROVEMENT REQUIRES PERIODIC PAYMENTS PURSUANT TO THE TERMS OF A WRITTEN CONTRACT AND (III) LENDER HAS APPROVED IN WRITING IN ADVANCE SUCH PERIODIC PAYMENTS, A REQUEST FOR REIMBURSEMENT FROM THE ROLLOVER RESERVE FUND MAY BE MADE, UPON DELIVERY BY BORROWER OF LENDER’S STANDARD FORM OF DRAW REQUEST ACCOMPANIED BY COPIES OF INVOICES FOR THE AMOUNTS REQUESTED, AFTER COMPLETION OF A PORTION OF THE WORK UNDER SUCH CONTRACT, PROVIDED (A) SUCH CONTRACT REQUIRES PAYMENT UPON COMPLETION OF SUCH PORTION OF THE WORK, (B) THE MATERIALS FOR WHICH THE REQUEST IS MADE ARE ON SITE AT THE PROPERTY AND ARE 73 -------------------------------------------------------------------------------- PROPERLY SECURED OR HAVE BEEN INSTALLED IN THE PROPERTY, (C) ALL OTHER CONDITIONS IN THIS AGREEMENT FOR DISBURSEMENT HAVE BEEN SATISFIED, (D) FUNDS REMAINING IN THE ROLLOVER RESERVE FUND ARE, IN LENDER’S JUDGMENT, SUFFICIENT TO COVER TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS, AND (E) IF REQUIRED BY LENDER, EACH CONTRACTOR OR SUBCONTRACTOR RECEIVING PAYMENTS UNDER SUCH CONTRACT SHALL PROVIDE A WAIVER OF LIEN WITH RESPECT TO AMOUNTS WHICH HAVE BEEN PAID TO THAT CONTRACTOR OR SUBCONTRACTOR.  LENDER MAY REQUIRE AN INSPECTION OF THE PROPERTY AT BORROWER’S EXPENSE PRIOR TO MAKING A MONTHLY DISBURSEMENT IN ORDER TO VERIFY COMPLETION (OR PARTIAL COMPLETION, IN THE CASE OF PERIODIC PAYMENTS) OF IMPROVEMENTS FOR WHICH REIMBURSEMENT IS SOUGHT.  ANY LEASE TERMINATION FEE SHALL BE APPLIED FIRST TO TENANT IMPROVEMENT AND LEASING COMMISSION OBLIGATIONS INCURRED IN CONNECTION WITH THE RELETTING OF THE SPACE FOR WHICH SUCH LEASE TERMINATION FEE WAS PAID PURSUANT TO A LEASE APPROVED BY LENDER IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND ANY REMAINING PORTION OF SUCH LEASE TERMINATION FEE SHALL BE RELEASED TO BORROWER PROVIDED THAT NO EVENT OF DEFAULT EXISTS AND LENDER SHALL HAVE RECEIVED A TENANT ESTOPPEL CERTIFICATE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO LENDER. SECTION 7.5             RESERVED SECTION 7.6             LEASE OBLIGATION FUND.  ON THE CLOSING DATE, BORROWER SHALL DEPOSIT WITH LENDER THE AMOUNT OF ONE HUNDRED SEVENTY-NINE THOUSAND EIGHT HUNDRED SIXTY-ONE AND 51/100 DOLLARS ($179,861.51) AS A RESERVE FOR FREE RENT TENANT ALLOWANCES SET FORTH ON SCHEDULE VI HERETO (THE “LEASE OBLIGATIONS”).  AMOUNTS SO DEPOSITED SHALL HEREINAFTER BE REFERRED TO AS THE “LEASE OBLIGATION FUND”.  LENDER SHALL DISBURSE TO BORROWER THE LEASE OBLIGATION FUNDS AS SET FORTH ON SCHEDULE VI HERETO UPON DELIVERY BY BORROWER OF LENDER’S STANDARD FORM OF DRAW REQUEST. SECTION 7.7             RESERVE FUNDS, GENERALLY.  BORROWER GRANTS TO LENDER A FIRST-PRIORITY PERFECTED SECURITY INTEREST IN EACH OF THE RESERVE FUNDS AND ANY AND ALL MONIES NOW OR HEREAFTER DEPOSITED IN EACH RESERVE FUND AS ADDITIONAL SECURITY FOR PAYMENT OF THE DEBT.  UNTIL EXPENDED OR APPLIED IN ACCORDANCE HEREWITH, THE RESERVE FUNDS SHALL CONSTITUTE ADDITIONAL SECURITY FOR THE DEBT.  UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY, IN ADDITION TO ANY AND ALL OTHER RIGHTS AND REMEDIES AVAILABLE TO LENDER, APPLY ANY SUMS THEN PRESENT IN ANY OR ALL OF THE RESERVE FUNDS TO THE PAYMENT OF THE DEBT IN ANY ORDER IN ITS SOLE DISCRETION.  THE RESERVE FUNDS SHALL NOT CONSTITUTE TRUST FUNDS AND MAY BE COMMINGLED WITH OTHER MONIES HELD BY LENDER.  AMOUNTS DEPOSITED IN THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND SHALL BEAR INTEREST AT THE THIRTY DAY MONEY MARKET RATE PUBLISHED BY THE BANK USED BY LENDER TO HOLD ESCROW DEPOSITS, AND SHALL BE HELD AND RELEASED BY LENDER, AND USED BY BORROWER, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.  LENDER SHALL BE ENTITLED TO A SERVICING FEE IN THE AMOUNT OF .25% PER ANNUM MULTIPLIED BY THE AVERAGE DAILY BALANCE ON DEPOSIT IN THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND (BUT IN NO EVENT SHALL LENDER BE ENTITLED TO A SERVICING FEE IN AN AMOUNT GREATER THAN THE AMOUNT OF INTEREST EARNED THEREON), AND LENDER IS HEREBY AUTHORIZED TO DEDUCT SUCH SERVICING FEE FROM THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND ON A MONTHLY BASIS.  ALL INTEREST OR OTHER INCOME IN CONNECTION WITH THE DEPOSIT OR PLACEMENT OF THE REPLACEMENT RESERVE FUND AND THE ROLLOVER RESERVE FUND, LESS THE SERVICING FEE, SHALL BE REPORTED UNDER BORROWER’S TAX IDENTIFICATION NUMBER, AND SHALL ONLY BE DISBURSED AS SET FORTH IN THIS AGREEMENT.  ALL INTEREST ON ANY RESERVE FUND OTHER THAN THE REPLACEMENT RESERVE FUND OR ROLLOVER RESERVE FUND SHALL NOT BE ADDED TO OR BECOME A PART THEREOF AND SHALL BE THE SOLE PROPERTY OF AND SHALL BE PAID TO LENDER.  BORROWER 74 -------------------------------------------------------------------------------- SHALL BE RESPONSIBLE FOR PAYMENT OF ANY FEDERAL, STATE OR LOCAL INCOME OR OTHER TAX APPLICABLE TO THE INTEREST EARNED ON THE RESERVE FUNDS CREDITED OR PAID TO BORROWER.  BORROWER SHALL NOT, WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF LENDER, FURTHER PLEDGE, ASSIGN OR GRANT ANY SECURITY INTEREST IN ANY RESERVE FUND OR THE MONIES DEPOSITED THEREIN OR PERMIT ANY LIEN OR ENCUMBRANCE TO ATTACH THERETO, OR ANY LEVY TO BE MADE THEREON, OR ANY UCC-1 FINANCING STATEMENTS, EXCEPT THOSE NAMING LENDER AS THE SECURED PARTY, TO BE FILED WITH RESPECT THERETO.  LENDER SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED ON THE INVESTMENT OF ANY FUNDS CONSTITUTING THE RESERVE FUNDS.  BORROWER SHALL INDEMNIFY LENDER AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, SUITS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, OBLIGATIONS AND COSTS AND EXPENSES (INCLUDING LITIGATION COSTS AND REASONABLE ATTORNEYS FEES AND EXPENSES) ARISING FROM OR IN ANY WAY CONNECTED WITH THE PERFORMANCE OF THE OBLIGATIONS FOR WHICH THE RESERVE FUNDS WERE ESTABLISHED.  BORROWER SHALL ASSIGN TO LENDER ALL RIGHTS AND CLAIMS BORROWER MAY HAVE AGAINST ALL PERSONS OR ENTITIES SUPPLYING LABOR, MATERIALS OR OTHER SERVICES WHICH ARE TO BE PAID FROM OR SECURED BY THE RESERVE FUNDS; PROVIDED, HOWEVER, THAT LENDER MAY NOT PURSUE ANY SUCH RIGHT OR CLAIM UNLESS AN EVENT OF DEFAULT HAS OCCURRED AND REMAINS UNCURED. SECTION 7.8             LETTER OF CREDIT RIGHTS.  ANY LETTER OF CREDIT DELIVERED TO LENDER PURSUANT TO THIS AGREEMENT SHALL BE HELD BY LENDER AS ADDITIONAL SECURITY FOR THE LOAN.  LENDER SHALL HAVE THE RIGHT TO DRAW UPON ANY LETTER OF CREDIT IMMEDIATELY AND WITHOUT FURTHER NOTICE: (A)           UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT; (B)           IF BORROWER FAILS TO DELIVER TO LENDER, NO LESS THAN THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF ANY LETTER OF CREDIT (INCLUDING ANY RENEWAL OR EXTENSION THEREOF), A RENEWAL OR EXTENSION OF SUCH LETTER OF CREDIT OR A REPLACEMENT LETTER OF CREDIT; OR (C)           IF THE INSTITUTION ISSUING THE LETTER OF CREDIT CEASES TO BE AN ELIGIBLE INSTITUTION AND BORROWER FAILS TO DELIVER TO LENDER A REPLACEMENT LETTER OF CREDIT FROM AN ELIGIBLE INSTITUTION WITHIN THIRTY (30) DAYS OF THE DATE THAT BORROWER IS NOTIFIED OR OTHERWISE BECOMES AWARE THAT SUCH INSTITUTION CEASED TO BE AN ELIGIBLE INSTITUTION. SECTION 7.9             APPLICATION OF LETTER OF CREDIT PROCEEDS.  IN THE EVENT OF A DRAW UPON A LETTER OF CREDIT DUE TO THE EXISTENCE OF AN EVENT OF DEFAULT, LENDER MAY APPLY SUCH AMOUNTS IN SUCH ORDER AND IN SUCH AMOUNTS AS LENDER SHALL ELECT, IN ITS SOLE AND ABSOLUTE DISCRETION, TO PAYMENT OF THE DEBT.  IN THE EVENT OF A DRAW UPON A LETTER OF CREDIT DUE TO THE OCCURRENCE OF AN EVENT DESCRIBED IN SECTION 7.8(B) OR (C) ABOVE, LENDER SHALL DEPOSIT THE PROCEEDS OF SUCH LETTER OF CREDIT INTO A RESERVE ACCOUNT DESIGNATED BY LENDER AND SUCH PROCEEDS SHALL BE HELD AND RELEASED IN THE SAME MANNER APPLICABLE TO THE RELEASE OF THE LETTER OF CREDIT. VIII.                         DEFAULTS. SECTION 8.1             EVENT OF DEFAULT. (A)           EACH OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN EVENT OF DEFAULT HEREUNDER (AN “EVENT OF DEFAULT”): (I)          IF ANY PORTION OF THE DEBT IS NOT PAID WHEN DUE; 75 -------------------------------------------------------------------------------- (II)         IF ANY OF THE TAXES OR OTHER CHARGES ARE NOT PAID PRIOR TO THE DATE WHEN THE SAME BECOME DELINQUENT, EXCEPT TO THE EXTENT THAT BORROWER IS CONTESTING SAME IN ACCORDANCE WITH THE TERMS OF SECTION 5.1.2 HEREOF, OR THERE ARE SUFFICIENT FUNDS IN THE TAX AND INSURANCE ESCROW FUND TO PAY SUCH TAXES OR OTHER CHARGES AND LENDER FAILS TO OR REFUSES TO RELEASE THE SAME FROM THE TAX AND INSURANCE ESCROW FUND; (III)        IF THE POLICIES ARE NOT KEPT IN FULL FORCE AND EFFECT, OR IF CERTIFIED COPIES OF THE POLICIES ARE NOT DELIVERED TO LENDER WITHIN TEN (10) DAYS OF REQUEST; (IV)        IF BORROWER TRANSFERS OR ENCUMBERS ANY PORTION OF THE PROPERTY WITHOUT LENDER’S PRIOR WRITTEN CONSENT (TO THE EXTENT SUCH CONSENT IS REQUIRED) OR OTHERWISE VIOLATES THE PROVISIONS OF THIS AGREEMENT AND ARTICLE 6 OF THE MORTGAGE; (V)         IF ANY MATERIAL REPRESENTATION OR WARRANTY MADE BY BORROWER HEREIN OR IN ANY OTHER LOAN DOCUMENT, OR IN ANY REPORT, CERTIFICATE, FINANCIAL STATEMENT OR OTHER INSTRUMENT, AGREEMENT OR DOCUMENT FURNISHED TO LENDER SHALL HAVE BEEN FALSE OR MISLEADING IN ANY MATERIAL RESPECT AS OF THE DATE THE REPRESENTATION OR WARRANTY WAS MADE; (VI)        IF BORROWER, PRINCIPAL OR GUARANTOR SHALL MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS; (VII)       IF A RECEIVER, LIQUIDATOR OR TRUSTEE SHALL BE APPOINTED FOR BORROWER, PRINCIPAL OR GUARANTOR OR IF BORROWER, PRINCIPAL OR GUARANTOR SHALL BE ADJUDICATED A BANKRUPT OR INSOLVENT, OR IF ANY PETITION FOR BANKRUPTCY, REORGANIZATION OR ARRANGEMENT PURSUANT TO FEDERAL BANKRUPTCY LAW, OR ANY SIMILAR FEDERAL OR STATE LAW, SHALL BE FILED BY OR AGAINST, CONSENTED TO, OR ACQUIESCED IN BY, BORROWER, PRINCIPAL OR GUARANTOR, OR IF ANY PROCEEDING FOR THE DISSOLUTION OR LIQUIDATION OF BORROWER, PRINCIPAL OR GUARANTOR SHALL BE INSTITUTED; PROVIDED, HOWEVER, IF SUCH APPOINTMENT, ADJUDICATION, PETITION OR PROCEEDING WAS INVOLUNTARY AND NOT CONSENTED TO BY BORROWER, PRINCIPAL OR GUARANTOR, UPON THE SAME NOT BEING DISCHARGED, STAYED OR DISMISSED WITHIN ONE HUNDRED EIGHTY (180) DAYS; (VIII)      IF BORROWER ATTEMPTS TO ASSIGN ITS RIGHTS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY INTEREST HEREIN OR THEREIN IN CONTRAVENTION OF THE LOAN DOCUMENTS; (IX)        IF BORROWER BREACHES ANY OF ITS RESPECTIVE NEGATIVE COVENANTS CONTAINED IN SECTION 5.2 OR ANY COVENANT CONTAINED IN SECTION 4.1.30 HEREOF; (X)         WITH RESPECT TO ANY TERM, COVENANT OR PROVISION SET FORTH HEREIN WHICH SPECIFICALLY CONTAINS A NOTICE REQUIREMENT OR GRACE PERIOD, IF BORROWER SHALL BE IN DEFAULT UNDER SUCH TERM, COVENANT OR CONDITION AFTER THE GIVING OF SUCH NOTICE OR THE EXPIRATION OF SUCH GRACE PERIOD; 76 -------------------------------------------------------------------------------- (XI)        IF ANY OF THE ASSUMPTIONS CONTAINED IN THE INSOLVENCY OPINION DELIVERED TO LENDER IN CONNECTION WITH THE LOAN, OR IN ANY ADDITIONAL INSOLVENCY OPINION DELIVERED SUBSEQUENT TO THE CLOSING OF THE LOAN, IS OR SHALL BECOME UNTRUE IN ANY MATERIAL RESPECT; (XII)       INTENTIONALLY OMITTED; (XIII)      IF BORROWER SHALL CONTINUE TO BE IN DEFAULT UNDER ANY OF THE TERMS, COVENANTS OR CONDITIONS OF SECTION 9.1 HEREOF (UNLESS BORROWER IS UNABLE TO SATISFY SUCH TERM, COVENANTS OR CONDITIONS DUE TO CIRCUMSTANCES BEYOND ITS CONTROL, SUCH AS THE UNAVAILABILITY OF INFORMATION REQUESTED BY LENDER), OR WILLFULLY FAILS TO COOPERATE WITH LENDER IN CONNECTION WITH A SECURITIZATION PURSUANT TO THE PROVISIONS OF SECTION 9.1 HEREOF, FOR FIVE (5) BUSINESS DAYS AFTER NOTICE TO BORROWER FROM LENDER; (XIV)      IF BORROWER SHALL CONTINUE TO BE IN DEFAULT UNDER ANY OF THE OTHER TERMS, COVENANTS OR CONDITIONS OF THIS AGREEMENT NOT SPECIFIED IN SUBSECTIONS (I) TO (XIII) ABOVE OR SUBSECTION (XV) BELOW, FOR TEN (10) DAYS AFTER NOTICE TO BORROWER FROM LENDER, IN THE CASE OF ANY DEFAULT WHICH CAN BE CURED BY THE PAYMENT OF A SUM OF MONEY, OR FOR THIRTY (30) DAYS AFTER NOTICE FROM LENDER IN THE CASE OF ANY OTHER DEFAULT; PROVIDED, HOWEVER, THAT IF SUCH NON MONETARY DEFAULT IS SUSCEPTIBLE OF CURE BUT CANNOT REASONABLY BE CURED WITHIN SUCH THIRTY (30) DAY PERIOD AND PROVIDED FURTHER THAT BORROWER SHALL HAVE COMMENCED TO CURE SUCH DEFAULT WITHIN SUCH THIRTY (30) DAY PERIOD AND THEREAFTER DILIGENTLY AND EXPEDITIOUSLY PROCEEDS TO CURE THE SAME, SUCH THIRTY (30) DAY PERIOD SHALL BE EXTENDED FOR SUCH TIME AS IS REASONABLY NECESSARY FOR BORROWER IN THE EXERCISE OF DUE DILIGENCE TO CURE SUCH DEFAULT, SUCH ADDITIONAL PERIOD NOT TO EXCEED ONE HUNDRED EIGHTY  (180) DAYS; OR (XV)       IF THERE SHALL BE DEFAULT UNDER ANY OF THE OTHER LOAN DOCUMENTS BEYOND ANY APPLICABLE CURE PERIODS CONTAINED IN SUCH DOCUMENTS, WHETHER AS TO BORROWER OR THE PROPERTY, OR IF ANY OTHER SUCH EVENT SHALL OCCUR OR CONDITION SHALL EXIST, IF THE EFFECT OF SUCH EVENT OR CONDITION IS TO ACCELERATE THE MATURITY OF ANY PORTION OF THE DEBT OR TO PERMIT LENDER TO ACCELERATE THE MATURITY OF ALL OR ANY PORTION OF THE DEBT. (B)           UPON THE OCCURRENCE OF AN EVENT OF DEFAULT (OTHER THAN AN EVENT OF DEFAULT DESCRIBED IN CLAUSES (VI), (VII) OR (VIII) ABOVE) AND AT ANY TIME THEREAFTER LENDER MAY, IN ADDITION TO ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO IT PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR AT LAW OR IN EQUITY, LENDER MAY TAKE SUCH ACTION, WITHOUT NOTICE OR DEMAND, THAT LENDER DEEMS ADVISABLE TO PROTECT AND ENFORCE ITS RIGHTS AGAINST BORROWER AND THE PROPERTY, INCLUDING, WITHOUT LIMITATION, DECLARING THE DEBT TO BE IMMEDIATELY DUE AND PAYABLE, AND LENDER MAY ENFORCE OR AVAIL ITSELF OF ANY OR ALL RIGHTS OR REMEDIES PROVIDED IN THE LOAN DOCUMENTS AGAINST BORROWER AND ANY OR ALL OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ALL RIGHTS OR REMEDIES AVAILABLE AT LAW OR IN EQUITY; AND UPON ANY EVENT OF DEFAULT DESCRIBED IN CLAUSES (VI), (VII) OR (VIII) ABOVE, THE DEBT AND OTHER OBLIGATIONS OF BORROWER HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL IMMEDIATELY AND AUTOMATICALLY BECOME DUE AND PAYABLE, WITHOUT NOTICE 77 -------------------------------------------------------------------------------- OR DEMAND, AND BORROWER HEREBY EXPRESSLY WAIVES ANY SUCH NOTICE OR DEMAND, ANYTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT TO THE CONTRARY NOTWITHSTANDING. SECTION 8.2             REMEDIES. (A)           UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, ALL OR ANY ONE OR MORE OF THE RIGHTS, POWERS, PRIVILEGES AND OTHER REMEDIES AVAILABLE TO LENDER AGAINST BORROWER UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED BY, OR APPLICABLE TO, BORROWER OR AT LAW OR IN EQUITY MAY BE EXERCISED BY LENDER AT ANY TIME AND FROM TIME TO TIME, WHETHER OR NOT ALL OR ANY OF THE DEBT SHALL BE DECLARED DUE AND PAYABLE, AND WHETHER OR NOT LENDER SHALL HAVE COMMENCED ANY FORECLOSURE PROCEEDING OR OTHER ACTION FOR THE ENFORCEMENT OF ITS RIGHTS AND REMEDIES UNDER ANY OF THE LOAN DOCUMENTS WITH RESPECT TO ALL OR ANY PART OF THE PROPERTY.  ANY SUCH ACTIONS TAKEN BY LENDER SHALL BE CUMULATIVE AND CONCURRENT AND MAY BE PURSUED INDEPENDENTLY, SINGULARLY, SUCCESSIVELY, TOGETHER OR OTHERWISE, AT SUCH TIME AND IN SUCH ORDER AS LENDER MAY DETERMINE IN ITS SOLE DISCRETION, TO THE FULLEST EXTENT PERMITTED BY LAW, WITHOUT IMPAIRING OR OTHERWISE AFFECTING THE OTHER RIGHTS AND REMEDIES OF LENDER PERMITTED BY LAW, EQUITY OR CONTRACT OR AS SET FORTH HEREIN OR IN THE OTHER LOAN DOCUMENTS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWER AGREES THAT IF AN EVENT OF DEFAULT IS CONTINUING (I) LENDER IS NOT SUBJECT TO ANY “ONE ACTION” OR “ELECTION OF REMEDIES” LAW OR RULE (TO THE EXTENT WAIVEABLE BY BORROWER), AND (II) ALL LIENS AND OTHER RIGHTS, REMEDIES OR PRIVILEGES PROVIDED TO LENDER SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL LENDER HAS EXHAUSTED ALL OF ITS REMEDIES AGAINST THE PROPERTY AND THE MORTGAGE HAS BEEN FORECLOSED, SOLD AND/OR OTHERWISE REALIZED UPON IN SATISFACTION OF THE DEBT OR THE DEBT HAS BEEN PAID IN FULL. (B)           WITH RESPECT TO BORROWER AND THE PROPERTY, NOTHING CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT SHALL BE CONSTRUED AS REQUIRING LENDER TO RESORT TO THE PROPERTY FOR THE SATISFACTION OF ANY OF THE DEBT IN ANY PREFERENCE OR PRIORITY TO ANY OTHER PROPERTY, AND LENDER MAY SEEK SATISFACTION OUT OF THE PROPERTY, OR ANY PART THEREOF, IN ITS ABSOLUTE DISCRETION IN RESPECT OF THE DEBT.  IN ADDITION, TO THE EXTENT PERMITTED BY APPLICABLE LAW, LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME TO PARTIALLY FORECLOSE THE MORTGAGE IN ANY MANNER AND FOR ANY AMOUNTS SECURED BY THE MORTGAGE THEN DUE AND PAYABLE AS DETERMINED BY LENDER IN ITS SOLE DISCRETION INCLUDING, WITHOUT LIMITATION, THE FOLLOWING CIRCUMSTANCES:  (I) IN THE EVENT BORROWER DEFAULTS BEYOND ANY APPLICABLE GRACE PERIOD IN THE PAYMENT OF ONE OR MORE SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST, LENDER MAY FORECLOSE THE MORTGAGE TO RECOVER SUCH DELINQUENT PAYMENTS OR (II) IN THE EVENT LENDER ELECTS TO ACCELERATE LESS THAN THE ENTIRE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN, LENDER MAY FORECLOSE THE MORTGAGE TO RECOVER SO MUCH OF THE PRINCIPAL BALANCE OF THE LOAN AS LENDER MAY ACCELERATE AND SUCH OTHER SUMS SECURED BY THE MORTGAGE AS LENDER MAY ELECT.  NOTWITHSTANDING ONE OR MORE PARTIAL FORECLOSURES, THE PROPERTY SHALL REMAIN SUBJECT TO THE MORTGAGE TO SECURE PAYMENT OF SUMS SECURED BY THE MORTGAGE AND NOT PREVIOUSLY RECOVERED. (C)           LENDER SHALL HAVE THE RIGHT FROM TIME TO TIME TO SEVER THE NOTE AND THE OTHER LOAN DOCUMENTS INTO ONE OR MORE SEPARATE NOTES, MORTGAGES AND OTHER SECURITY DOCUMENTS (THE “SEVERED LOAN DOCUMENTS”) IN SUCH DENOMINATIONS AS LENDER SHALL DETERMINE IN ITS SOLE DISCRETION FOR PURPOSES OF EVIDENCING AND ENFORCING ITS RIGHTS AND REMEDIES PROVIDED HEREUNDER.  BORROWER SHALL EXECUTE AND DELIVER TO LENDER FROM TIME TO TIME, PROMPTLY AFTER THE REQUEST OF LENDER, A SEVERANCE AGREEMENT AND SUCH OTHER DOCUMENTS AS LENDER SHALL REQUEST IN ORDER TO EFFECT THE SEVERANCE DESCRIBED IN THE PRECEDING SENTENCE, ALL IN FORM AND SUBSTANCE REASONABLY 78 -------------------------------------------------------------------------------- SATISFACTORY TO LENDER.  BORROWER HEREBY ABSOLUTELY AND IRREVOCABLY APPOINTS LENDER FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT AS ITS TRUE AND LAWFUL ATTORNEY, COUPLED WITH AN INTEREST, IN ITS NAME AND STEAD TO MAKE AND EXECUTE ALL DOCUMENTS NECESSARY OR DESIRABLE TO EFFECT THE AFORESAID SEVERANCE, BORROWER RATIFYING ALL THAT ITS SAID ATTORNEY SHALL DO BY VIRTUE THEREOF; PROVIDED, HOWEVER, LENDER SHALL NOT MAKE OR EXECUTE ANY SUCH DOCUMENTS UNDER SUCH POWER UNTIL THREE (3) DAYS AFTER NOTICE HAS BEEN GIVEN TO BORROWER BY LENDER OF LENDER’S INTENT TO EXERCISE ITS RIGHTS UNDER SUCH POWER.  BORROWER SHALL BE OBLIGATED TO PAY ANY COSTS OR EXPENSES INCURRED IN CONNECTION WITH THE PREPARATION, EXECUTION, RECORDING OR FILING OF THE SEVERED LOAN DOCUMENTS IN CONNECTION WITH AN EVENT OF DEFAULT AND THE SEVERED LOAN DOCUMENTS SHALL NOT CONTAIN ANY REPRESENTATIONS, WARRANTIES OR COVENANTS NOT CONTAINED IN THE LOAN DOCUMENTS AND ANY SUCH REPRESENTATIONS AND WARRANTIES CONTAINED IN THE SEVERED LOAN DOCUMENTS WILL BE GIVEN BY BORROWER ONLY AS OF THE CLOSING DATE. SECTION 8.3             REMEDIES CUMULATIVE; WAIVERS. THE RIGHTS, POWERS AND REMEDIES OF LENDER UNDER THIS AGREEMENT SHALL BE CUMULATIVE AND NOT EXCLUSIVE OF ANY OTHER RIGHT, POWER OR REMEDY WHICH LENDER MAY HAVE AGAINST BORROWER PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR EXISTING AT LAW OR IN EQUITY OR OTHERWISE.  LENDER’S RIGHTS, POWERS AND REMEDIES MAY BE PURSUED SINGULARLY, CONCURRENTLY OR OTHERWISE, AT SUCH TIME AND IN SUCH ORDER AS LENDER MAY DETERMINE IN LENDER’S SOLE DISCRETION.  NO DELAY OR OMISSION TO EXERCISE ANY REMEDY, RIGHT OR POWER ACCRUING UPON AN EVENT OF DEFAULT SHALL IMPAIR ANY SUCH REMEDY, RIGHT OR POWER OR SHALL BE CONSTRUED AS A WAIVER THEREOF, BUT ANY SUCH REMEDY, RIGHT OR POWER MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS MAY BE DEEMED EXPEDIENT.  A WAIVER OF ONE DEFAULT OR EVENT OF DEFAULT WITH RESPECT TO BORROWER SHALL NOT BE CONSTRUED TO BE A WAIVER OF ANY SUBSEQUENT DEFAULT OR EVENT OF DEFAULT BY BORROWER OR TO IMPAIR ANY REMEDY, RIGHT OR POWER CONSEQUENT THEREON. IX.                                SPECIAL PROVISIONS SECTION 9.1             SECURITIZATION. 9.1.1        SALE OF NOTES AND SECURITIZATION.  BORROWER ACKNOWLEDGES AND AGREES THAT LENDER MAY SELL ALL OR ANY PORTION OF THE LOAN AND THE LOAN DOCUMENTS, OR ISSUE ONE OR MORE PARTICIPATIONS THEREIN, OR CONSUMMATE ONE OR MORE PRIVATE OR PUBLIC SECURITIZATIONS OF RATED SINGLE- OR MULTI-CLASS SECURITIES (THE “SECURITIES”) SECURED BY OR EVIDENCING OWNERSHIP INTERESTS IN ALL OR ANY PORTION OF THE LOAN AND THE LOAN DOCUMENTS OR A POOL OF ASSETS THAT INCLUDE THE LOAN AND THE LOAN DOCUMENTS (SUCH SALES, PARTICIPATIONS AND/OR SECURITIZATIONS, COLLECTIVELY, A “SECURITIZATION”).  BORROWER IRREVOCABLY WAIVES ALL RIGHTS, IF ANY, TO PROHIBIT DISCLOSURES REQUIRED BY LAW OR THE RATING AGENCIES OR THEN CURRENT MARKET STANDARDS AS REASONABLY DETERMINED BY LENDER IN CONNECTION WITH ANY SECURITIZATION, INCLUDING, WITHOUT LIMITATION, ANY RIGHT OF PRIVACY.  LENDER AND EACH RATING AGENCY SHALL BE ENTITLED TO RELY ON THE INFORMATION SUPPLIED BY, OR ON BEHALF OF, BORROWER AND BORROWER INDEMNIFIES AND HOLDS HARMLESS THE INDEMNIFIED PARTIES, THEIR AFFILIATES AND EACH PERSON WHO CONTROLS SUCH PERSONS WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT OF 1933, AS AMENDED FROM TIME TO TIME, OR SECTION 20 OF THE SECURITIES EXCHANGE ACT OF 1934, AS SAME MAY BE AMENDED FROM TIME TO TIME, FOR, FROM AND AGAINST ANY CLAIMS, DEMANDS, PENALTIES, FINES, LIABILITIES, SETTLEMENTS, DAMAGES, COSTS AND EXPENSES OF WHATEVER KIND OR NATURE, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE, WHETHER INCURRED OR IMPOSED WITHIN OR OUTSIDE THE JUDICIAL PROCESS, INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND 79 -------------------------------------------------------------------------------- DISBURSEMENTS THAT ARISE OUT OF OR ARE BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF ANY MATERIAL FACT CONTAINED IN SUCH INFORMATION OR ARISE OUT OF OR ARE BASED UPON THE OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE STATED IN SUCH INFORMATION OR NECESSARY IN ORDER TO MAKE THE STATEMENTS IN SUCH INFORMATION, OR IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING (BORROWER’S INDEMNITY UNDER THIS SECTION 9.1.1, WITH RESPECT TO THIRD PARTY INFORMATION AND/OR REPORTS, SHALL BE LIMITED TO THE EXTENT OF BORROWER’S KNOWLEDGE THAT SUCH INFORMATION AND/OR REPORTS TO BE UNTRUE OR INACCURATE AS OF THE TIME SUCH INFORMATION AND/OR REPORTS ARE DELIVERED TO LENDER).  AT THE REQUEST OF LENDER, AND TO THE EXTENT NOT ALREADY REQUIRED TO BE PROVIDED BY OR ON BEHALF OF BORROWER UNDER THIS AGREEMENT, BORROWER SHALL USE REASONABLE EFFORTS TO PROVIDE INFORMATION NOT IN THE POSSESSION OF LENDER OR WHICH MAY BE REASONABLY REQUIRED BY LENDER OR TAKE OTHER ACTIONS REASONABLY REQUIRED BY LENDER, IN EACH CASE IN ORDER TO SATISFY THE MARKET STANDARDS TO WHICH LENDER CUSTOMARILY ADHERES OR WHICH MAY BE REASONABLY REQUIRED BY PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES IN CONNECTION WITH ANY SUCH SECURITIZATION INCLUDING, WITHOUT LIMITATION, TO: (A)           PROVIDE ADDITIONAL AND/OR UPDATED PROVIDED INFORMATION, TOGETHER WITH APPROPRIATE VERIFICATION AND/OR CONSENTS RELATED TO THE PROVIDED INFORMATION THROUGH LETTERS OF AUDITORS OR OPINIONS OF COUNSEL OF INDEPENDENT ATTORNEYS REASONABLY ACCEPTABLE TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (B)           ASSIST IN PREPARING DESCRIPTIVE MATERIALS FOR PRESENTATIONS TO ANY OR ALL OF THE RATING AGENCIES, AND WORK WITH, AND IF REQUESTED, SUPERVISE, THIRD-PARTY SERVICE PROVIDERS ENGAGED BY BORROWER AND APPROVED BY LENDER, PRINCIPAL AND THEIR RESPECTIVE AFFILIATES TO OBTAIN, COLLECT, AND DELIVER INFORMATION REQUESTED OR REQUIRED BY LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (C)           DELIVER (I) UPDATED OPINIONS OF COUNSEL AS TO NON CONSOLIDATION, DUE EXECUTION AND ENFORCEABILITY WITH RESPECT TO THE PROPERTY, BORROWER, THE PRINCIPAL AND THEIR RESPECTIVE AFFILIATES AND THE LOAN DOCUMENTS AND (II) REVISED ORGANIZATIONAL DOCUMENTS FOR BORROWER, WHICH COUNSEL OPINIONS AND ORGANIZATIONAL DOCUMENTS SHALL BE REASONABLY SATISFACTORY TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (D)           IF REQUIRED BY ANY PROSPECTIVE INVESTOR AND/OR ANY RATING AGENCY, USE COMMERCIALLY REASONABLE EFFORTS TO DELIVER SUCH ADDITIONAL TENANT ESTOPPEL LETTERS, SUBORDINATION AGREEMENTS OR OTHER AGREEMENTS FROM PARTIES TO AGREEMENTS THAT AFFECT THE PROPERTY, WHICH ESTOPPEL LETTERS, SUBORDINATION AGREEMENTS OR OTHER AGREEMENTS SHALL BE REASONABLY SATISFACTORY TO LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES; (E)           MAKE SUCH REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE OF THE SECURITIZATION WITH RESPECT TO THE PROPERTY, BORROWER, PRINCIPAL, GUARANTOR AND THE LOAN DOCUMENTS AS MAY BE REASONABLY REQUESTED BY LENDER, PROSPECTIVE INVESTORS AND/OR THE RATING AGENCIES AND CONSISTENT WITH THE FACTS COVERED BY SUCH REPRESENTATIONS AND WARRANTIES AS THEY EXIST ON THE DATE THEREOF, INCLUDING THE REPRESENTATIONS AND WARRANTIES MADE IN THE LOAN DOCUMENTS; (F)            EXECUTE SUCH AMENDMENTS TO THE LOAN DOCUMENTS AND ORGANIZATIONAL DOCUMENTS AS MAY BE REASONABLY REQUESTED BY THE HOLDER OF THE NOTE OR THE RATING AGENCIES OR 80 -------------------------------------------------------------------------------- OTHERWISE TO EFFECT THE SECURITIZATION; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE REQUIRED TO MODIFY OR AMEND ANY LOAN DOCUMENT IF SUCH MODIFICATION OR AMENDMENT WOULD (I) CHANGE THE INITIAL WEIGHTED INTEREST RATE, THE STATED MATURITY OR THE AMORTIZATION OF PRINCIPAL SET FORTH IN THE NOTE, OR (II) MODIFY OR AMEND ANY OTHER MATERIAL TERM OF THE LOAN; (G)           IF REQUESTED BY LENDER, REVIEW ANY INFORMATION REGARDING THE PROPERTY, BORROWER, PRINCIPAL, GUARANTOR, MANAGER AND THE LOAN WHICH IS CONTAINED IN A PRELIMINARY OR FINAL PRIVATE PLACEMENT MEMORANDUM, PROSPECTUS, PROSPECTUS SUPPLEMENT (INCLUDING ANY AMENDMENT OR SUPPLEMENT TO EITHER THEREOF), OR OTHER DISCLOSURE DOCUMENT TO BE USED BY LENDER OR ANY AFFILIATE THEREOF; AND (H)           SUPPLY TO LENDER SUCH DOCUMENTATION, FINANCIAL STATEMENTS AND REPORTS IN FORM AND SUBSTANCE REQUIRED IN ORDER TO COMPLY WITH ANY APPLICABLE SECURITIES LAWS. 9.1.2        LOAN COMPONENTS.  BORROWER COVENANTS AND AGREES THAT IN CONNECTION WITH ANY SECURITIZATION OF THE LOAN, UPON LENDER’S REQUEST BORROWER SHALL DELIVER ONE OR MORE NEW COMPONENT NOTES TO REPLACE THE ORIGINAL NOTE OR MODIFY THE ORIGINAL NOTE TO REFLECT MULTIPLE COMPONENTS OF THE LOAN OR CREATE ONE OR MORE MEZZANINE LOANS (INCLUDING AMENDING BORROWER’S ORGANIZATIONAL STRUCTURE TO PROVIDE FOR ONE OR MORE MEZZANINE BORROWERS AND EXECUTE ADDITIONAL LOAN DOCUMENTS WITH RESPECT TO SUCH MEZZANINE LOANS) (EACH A “RESIZING EVENT”).  LENDER AGREES THAT SUCH NEW NOTES OR MODIFIED NOTE OR MEZZANINE NOTES SHALL HAVE THE SAME INITIAL WEIGHTED AVERAGE COUPON AS THE ORIGINAL NOTE PRIOR TO SUCH RESIZING EVENT AND SHALL OTHERWISE COMPLY WITH THE PROVISIONS OF SECTION 9.1.1(F). 9.1.3        SECURITIZATION COSTS.  ALL REASONABLE THIRD PARTY COSTS AND EXPENSES INCURRED BY BORROWER IN CONNECTION WITH BORROWER’S COMPLYING WITH REQUESTS MADE UNDER THIS SECTION 9.1 (INCLUDING, WITHOUT LIMITATION, THE FEES AND EXPENSES OF THE RATING AGENCIES) SHALL BE PAID BY LENDER. SECTION 9.2             REGULATION A/B.  (A)   BORROWER COVENANTS AND AGREES THAT, UPON LENDER’S WRITTEN REQUEST THEREFOR IN CONNECTION WITH A SECURITIZATION, BORROWER SHALL, AT BORROWER’S SOLE COST AND EXPENSE, PROMPTLY DELIVER (I) AUDITED FINANCIAL STATEMENTS OF GUARANTOR AND RELATED DOCUMENTATION PREPARED BY AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT THAT SATISFY SECURITIES LAWS AND REQUIREMENTS FOR USE IN A PUBLIC REGISTRATION STATEMENT (WHICH MAY INCLUDE UP TO THREE (3) YEARS OF HISTORICAL AUDITED FINANCIAL STATEMENTS) AND (II) IF, AT THE TIME ONE OR MORE DISCLOSURE DOCUMENTS ARE BEING PREPARED IN CONNECTION WITH A SECURITIZATION, LENDER EXPECTS THAT BORROWER ALONE OR BORROWER AND ONE OR MORE OF ITS AFFILIATES COLLECTIVELY, OR THE PROPERTY ALONE OR THE PROPERTY AND ANY OTHER PARCEL(S) OF REAL PROPERTY, TOGETHER WITH IMPROVEMENTS THEREON AND PERSONAL PROPERTY RELATED THERETO, THAT IS “RELATED”, WITHIN THE MEANING OF THE DEFINITION OF SIGNIFICANT OBLIGOR, TO THE PROPERTY (A “RELATED PROPERTY”) COLLECTIVELY, WILL BE A SIGNIFICANT OBLIGOR, BORROWER SHALL FURNISH TO LENDER UPON REQUEST (I) THE SELECTED FINANCIAL DATA OR, IF APPLICABLE, NET OPERATING INCOME, REQUIRED UNDER ITEM 1112(B)(1) OF REGULATION AB AND MEETING THE REQUIREMENTS THEREOF, IF LENDER EXPECTS THAT THE PRINCIPAL AMOUNT OF THE LOAN, TOGETHER WITH ANY LOANS MADE TO AN AFFILIATE OF BORROWER OR SECURED BY A RELATED PROPERTY THAT IS INCLUDED IN A SECURITIZATION WITH THE LOAN (A “RELATED LOAN”), AS OF THE CUT-OFF DATE FOR SUCH SECURITIZATION MAY, OR IF THE PRINCIPAL AMOUNT OF THE LOAN TOGETHER WITH ANY RELATED LOANS AS OF THE CUT-OFF DATE FOR SUCH SECURITIZATION AND AT ANY TIME DURING WHICH THE LOAN AND ANY RELATED 81 -------------------------------------------------------------------------------- LOANS ARE INCLUDED IN A SECURITIZATION DOES, EQUAL OR EXCEED TEN PERCENT (10%) (BUT LESS THAN TWENTY PERCENT (20%)) OF THE AGGREGATE PRINCIPAL AMOUNT OF ALL MORTGAGE LOANS INCLUDED OR EXPECTED TO BE INCLUDED, AS APPLICABLE, IN THE SECURITIZATION OR (II) THE FINANCIAL STATEMENTS REQUIRED UNDER ITEM 1112(B)(2) OF REGULATION AB AND MEETING THE REQUIREMENTS THEREOF, IF LENDER EXPECTS THAT THE PRINCIPAL AMOUNT OF THE LOAN TOGETHER WITH ANY RELATED LOANS AS OF THE CUT-OFF DATE FOR SUCH SECURITIZATION MAY, OR IF THE PRINCIPAL AMOUNT OF THE LOAN TOGETHER WITH ANY RELATED LOANS AS OF THE CUT-OFF DATE FOR SUCH SECURITIZATION AND AT ANY TIME DURING WHICH THE LOAN AND ANY RELATED LOANS ARE INCLUDED IN A SECURITIZATION DOES, EQUAL OR EXCEED TWENTY PERCENT (20%) OF THE AGGREGATE PRINCIPAL AMOUNT OF ALL MORTGAGE LOANS INCLUDED OR EXPECTED TO BE INCLUDED, AS APPLICABLE, IN THE SECURITIZATION.  SUCH FINANCIAL DATA OR FINANCIAL STATEMENTS SHALL BE FURNISHED TO LENDER WITHIN TEN (10) BUSINESS DAYS AFTER NOTICE FROM LENDER IN CONNECTION WITH THE PREPARATION OF DISCLOSURE DOCUMENTS FOR THE SECURITIZATION AND, WITH RESPECT TO THE DATA OR FINANCIAL STATEMENTS REQUIRED PURSUANT TO CLAUSE (II) HEREOF, (A) NOT LATER THAN THIRTY (30) DAYS AFTER THE END OF EACH FISCAL QUARTER OF BORROWER AND (B) NOT LATER THAN SEVENTY-FIVE (75) DAYS AFTER THE END OF EACH FISCAL YEAR; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE OBLIGATED TO FURNISH FINANCIAL DATA OR FINANCIAL STATEMENTS PURSUANT TO CLAUSES (A) OR (B) OF THIS SENTENCE WITH RESPECT TO ANY PERIOD FOR WHICH A FILING PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934 IN CONNECTION WITH OR RELATING TO THE SECURITIZATION IS NOT REQUIRED. (B)           NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS SECTION 9.2, BORROWER’S OBLIGATIONS WITH RESPECT TO THE DELIVERY OF INFORMATION (I) REGARDING THE PROPERTY WITH RESPECT TO PERIODS PREDATING BORROWER’S ACQUISITION OF THE PROPERTY, (II) RELATING TO TENANTS OF THE PROPERTY, OR (III) OTHERWISE RELATING TO PERSONS OR PROPERTY NOT OWNED BY BORROWER OR WITHIN THE REASONABLE CONTROL (OR IN THE CONTROL OF ONE OR MORE OF ITS AFFILIATES) SHALL BE LIMITED TO USING COMMERCIALLY REASONABLE EFFORTS, IN CONSULTATION WITH LENDER, TO (A) ENFORCE BORROWER’S CONTRACTUAL RIGHTS, IF ANY, TO THE DELIVERY OF SUCH INFORMATION (E.G. BY ITS SELLER, PURSUANT TO THE APPLICABLE PURCHASE AND SALE AGREEMENT, OR BY A TENANT PURSUANT TO ITS LEASE) OR (B) OTHERWISE OBTAIN SUCH INFORMATION. SECTION 9.3             EXCULPATION.  SUBJECT TO THE QUALIFICATIONS BELOW, LENDER SHALL NOT ENFORCE THE LIABILITY AND OBLIGATION OF BORROWER TO PERFORM AND OBSERVE THE OBLIGATIONS CONTAINED IN THE NOTE, THIS AGREEMENT, THE MORTGAGE OR THE OTHER LOAN DOCUMENTS BY ANY ACTION OR PROCEEDING WHEREIN A MONEY JUDGMENT SHALL BE SOUGHT AGAINST BORROWER, EXCEPT THAT LENDER MAY BRING A FORECLOSURE ACTION, AN ACTION FOR SPECIFIC PERFORMANCE OR ANY OTHER APPROPRIATE ACTION OR PROCEEDING TO ENABLE LENDER TO ENFORCE AND REALIZE UPON ITS INTEREST UNDER THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS, OR IN THE PROPERTY, THE RENTS FOLLOWING AN EVENT OF DEFAULT, OR ANY OTHER COLLATERAL GIVEN TO LENDER PURSUANT TO THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT, EXCEPT AS SPECIFICALLY PROVIDED HEREIN, ANY JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE ENFORCEABLE AGAINST BORROWER ONLY TO THE EXTENT OF BORROWER’S INTEREST IN THE PROPERTY, IN THE RENTS FOLLOWING AN EVENT OF DEFAULT AND IN ANY OTHER COLLATERAL GIVEN TO LENDER, AND LENDER, BY ACCEPTING THE NOTE, THIS AGREEMENT, THE MORTGAGE AND THE OTHER LOAN DOCUMENTS, AGREES THAT IT SHALL NOT SUE FOR, SEEK OR DEMAND ANY DEFICIENCY JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION OR PROCEEDING UNDER OR BY REASON OF OR UNDER OR IN CONNECTION WITH THE NOTE, THIS AGREEMENT, THE MORTGAGE OR THE OTHER LOAN DOCUMENTS.  THE PROVISIONS OF THIS SECTION SHALL NOT, HOWEVER, (A) CONSTITUTE A WAIVER, RELEASE OR IMPAIRMENT OF ANY OBLIGATION EVIDENCED OR SECURED BY ANY OF THE LOAN DOCUMENTS; (B) IMPAIR THE RIGHT OF LENDER TO NAME BORROWER AS A PARTY DEFENDANT IN ANY ACTION OR SUIT FOR FORECLOSURE AND SALE UNDER THE MORTGAGE; (C) AFFECT THE VALIDITY OR ENFORCEABILITY OF OR ANY GUARANTY MADE IN CONNECTION WITH THE LOAN OR 82 -------------------------------------------------------------------------------- ANY OF THE RIGHTS AND REMEDIES OF LENDER THEREUNDER; (D) IMPAIR THE RIGHT OF LENDER TO OBTAIN THE APPOINTMENT OF A RECEIVER; (E) IMPAIR THE ENFORCEMENT OF THE ASSIGNMENT OF LEASES FOLLOWING AN EVENT OF DEFAULT; (F) CONSTITUTE A PROHIBITION AGAINST LENDER COMMENCING ANY OTHER APPROPRIATE ACTION OR PROCEEDING IN ORDER FOR LENDER TO EXERCISE ITS REMEDIES AGAINST THE PROPERTY.  IN ADDITION, THE FOREGOING SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF LENDER TO ENFORCE THE LIABILITY AND OBLIGATION OF BORROWER, BY MONEY JUDGMENT OR OTHERWISE, TO THE EXTENT OF ANY LOSS, DAMAGE, COST, EXPENSE, LIABILITY, CLAIM OR OTHER OBLIGATION INCURRED BY LENDER (INCLUDING ATTORNEYS’ FEES AND COSTS REASONABLY INCURRED) ARISING OUT OF OR IN CONNECTION WITH THE FOLLOWING: (I)          THE MISAPPLICATION OR MISAPPROPRIATION OF RENTS; (II)         THE MISAPPLICATION OR MISAPPROPRIATION OF INSURANCE PROCEEDS OR AWARDS; (III)        BORROWER’S FAILURE TO RETURN OR TO REIMBURSE LENDER FOR ALL PERSONAL PROPERTY (OTHER THAN PERSONAL PROPERTY NOT MATERIAL TO THE OPERATION OR VALUE OF THE PROPERTY) TAKEN FROM THE PROPERTY BY OR ON BEHALF OF BORROWER AND NOT REPLACED WITH PERSONAL PROPERTY OF THE SAME UTILITY AND OF THE SAME OR GREATER VALUE; (IV)        ANY ACT OF ACTUAL WASTE OR ARSON BY BORROWER, ANY PRINCIPAL, AFFILIATE, GENERAL PARTNER OR MEMBER THEREOF OR BY GUARANTOR; (V)         ANY FEES OR COMMISSIONS PAID BY BORROWER TO ANY PRINCIPAL, AFFILIATE, GENERAL PARTNER OR MEMBER OF BORROWER OR ANY GUARANTOR IN VIOLATION OF THE TERMS OF THIS GUARANTY, THE OTHER LOAN DOCUMENTS; (VI)        BORROWER’S FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 9.4 OF THE MORTGAGE; OR (VII)       ANY FRAUD, WILLFUL MISCONDUCT OR INTENTIONAL MATERIAL MISREPRESENTATION BY BORROWER, PRINCIPAL, GUARANTOR OR ANY OF THEIR RESPECTIVE AFFILIATES IN CONNECTION WITH THE LOAN; OR (VIII)      ANY BREACH OR DEFAULT OF ANY MATERIAL PROVISION OF SECTION 4.1.30 OF THIS AGREEMENT (OTHER THAN BREACHES OF THE REQUIREMENTS SET FORTH IN CLAUSES (XII) OR (XXIII) OF THE DEFINITION OF SPECIAL PURPOSE ENTITY). Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower in the event or: (i) a voluntary breach or default under Section 5.2.10 of this Agreement, (ii) Borrower or Principal filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (iii) Borrower or 83 -------------------------------------------------------------------------------- Principal filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (iv) Borrower or Principal consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower, Principal or any portion of the Property; or (v) Borrower or Principal making an assignment for the benefit of creditors. SECTION 9.4             MATTERS CONCERNING MANAGER.  IF (A) AN EVENT OF DEFAULT HAS OCCURRED, (B) MANAGER SHALL BECOME BANKRUPT OR INSOLVENT, (C) A CHANGE IN CONTROL OF 50% OR MORE OF THE OWNERSHIP OF MANAGER (NOTICE OF WHICH CHANGE OF CONTROL BORROWER AGREES TO GIVE TO LENDER PROMPTLY UPON RECEIPT OF KNOWLEDGE THEREOF) OR (D) A DEFAULT OCCURS UNDER THE PROPERTY MANAGEMENT AGREEMENT AND CONTINUES BEYOND ALL APPLICABLE NOTICE AND CURE PERIODS, BORROWER SHALL, AT THE REQUEST OF LENDER, TERMINATE THE PROPERTY MANAGEMENT AGREEMENT AND REPLACE THE MANAGER WITH A QUALIFYING MANAGER PURSUANT TO A REPLACEMENT MANAGEMENT AGREEMENT, IT BEING UNDERSTOOD AND AGREED THAT THE MANAGEMENT FEE FOR SUCH QUALIFYING MANAGER SHALL NOT EXCEED THEN PREVAILING MARKET RATES. SECTION 9.5             SERVICER.  AT THE OPTION OF LENDER, THE LOAN MAY BE SERVICED BY A SERVICER/TRUSTEE (ANY SUCH SERVICER/TRUSTEE, TOGETHER WITH ITS AGENTS, NOMINEES OR DESIGNEES, ARE COLLECTIVELY REFERRED TO AS “SERVICER”) SELECTED BY LENDER AND LENDER MAY DELEGATE ALL OR ANY PORTION OF ITS RESPONSIBILITIES UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO THE SERVICER PURSUANT TO A SERVICING AGREEMENT (THE “SERVICING AGREEMENT”) BETWEEN LENDER AND SERVICER.  BORROWER SHALL BE RESPONSIBLE FOR ANY REASONABLE SET-UP FEES OR ANY OTHER INITIAL COSTS RELATING TO OR ARISING UNDER THE SERVICING AGREEMENT; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE RESPONSIBLE FOR PAYMENT OF THE MONTHLY SERVICING FEE DUE TO SERVICER UNDER THE SERVICING AGREEMENT. X.                                    MISCELLANEOUS SECTION 10.1           SURVIVAL.  THIS AGREEMENT AND ALL COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES MADE HEREIN AND IN THE CERTIFICATES DELIVERED PURSUANT HERETO SHALL SURVIVE THE MAKING BY LENDER OF THE LOAN AND THE EXECUTION AND DELIVERY TO LENDER OF THE NOTE, AND SHALL CONTINUE IN FULL FORCE AND EFFECT SO LONG AS ALL OR ANY OF THE DEBT IS OUTSTANDING AND UNPAID UNLESS A LONGER PERIOD IS EXPRESSLY SET FORTH HEREIN OR IN THE OTHER LOAN DOCUMENTS.  WHENEVER IN THIS AGREEMENT ANY OF THE PARTIES HERETO IS REFERRED TO, SUCH REFERENCE SHALL BE DEEMED TO INCLUDE THE LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF SUCH PARTY.  ALL COVENANTS, PROMISES AND AGREEMENTS IN THIS AGREEMENT, BY OR ON BEHALF OF BORROWER, SHALL INURE TO THE BENEFIT OF THE LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF LENDER. SECTION 10.2           LENDER’S DISCRETION.  WHENEVER PURSUANT TO THIS AGREEMENT, LENDER EXERCISES ANY RIGHT GIVEN TO IT TO APPROVE OR DISAPPROVE, OR ANY ARRANGEMENT OR TERM IS TO BE SATISFACTORY TO LENDER, THE DECISION OF LENDER TO APPROVE OR DISAPPROVE OR TO DECIDE WHETHER ARRANGEMENTS OR TERMS ARE SATISFACTORY OR NOT SATISFACTORY SHALL (EXCEPT AS IS OTHERWISE SPECIFICALLY HEREIN PROVIDED) BE IN THE SOLE DISCRETION OF LENDER AND SHALL BE FINAL AND CONCLUSIVE. 84 -------------------------------------------------------------------------------- SECTION 10.3           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED (WITHOUT REGARD TO ANY CONFLICT OF LAWS OR PRINCIPLES) AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. SECTION 10.4           MODIFICATION, WAIVER IN WRITING.  NO MODIFICATION, AMENDMENT, EXTENSION, DISCHARGE, TERMINATION OR WAIVER OF ANY PROVISION OF THIS AGREEMENT, OR OF THE NOTE, OR OF ANY OTHER LOAN DOCUMENT, NOR CONSENT TO ANY DEPARTURE BY BORROWER THEREFROM, SHALL IN ANY EVENT BE EFFECTIVE UNLESS THE SAME SHALL BE IN A WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT IS SOUGHT, AND THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE, AND FOR THE PURPOSE, FOR WHICH GIVEN.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, NO NOTICE TO, OR DEMAND ON BORROWER, SHALL ENTITLE BORROWER TO ANY OTHER OR FUTURE NOTICE OR DEMAND IN THE SAME, SIMILAR OR OTHER CIRCUMSTANCES. SECTION 10.5           DELAY NOT A WAIVER.  NEITHER ANY FAILURE NOR ANY DELAY ON THE PART OF LENDER IN INSISTING UPON STRICT PERFORMANCE OF ANY TERM, CONDITION, COVENANT OR AGREEMENT, OR EXERCISING ANY RIGHT, POWER, REMEDY OR PRIVILEGE HEREUNDER, OR UNDER THE NOTE OR UNDER ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT GIVEN AS SECURITY THEREFOR, SHALL OPERATE AS OR CONSTITUTE A WAIVER THEREOF, NOR SHALL A SINGLE OR PARTIAL EXERCISE THEREOF PRECLUDE ANY OTHER FUTURE EXERCISE, OR THE EXERCISE OF ANY OTHER RIGHT, POWER, REMEDY OR PRIVILEGE.  IN PARTICULAR, AND NOT BY WAY OF LIMITATION, BY ACCEPTING PAYMENT AFTER THE DUE DATE OF ANY AMOUNT PAYABLE UNDER THIS AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT, LENDER SHALL NOT BE DEEMED TO HAVE WAIVED ANY RIGHT EITHER TO REQUIRE PROMPT PAYMENT WHEN DUE OF ALL OTHER AMOUNTS DUE UNDER THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR TO DECLARE A DEFAULT FOR FAILURE TO EFFECT PROMPT PAYMENT OF ANY SUCH OTHER AMOUNT. SECTION 10.6           NOTICES.  ALL NOTICES, CONSENTS, APPROVALS AND REQUESTS REQUIRED OR PERMITTED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT SHALL BE GIVEN IN WRITING AND SHALL BE EFFECTIVE FOR ALL PURPOSES IF HAND DELIVERED OR SENT BY (A) CERTIFIED OR REGISTERED UNITED STATES MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED OR (B) EXPEDITED PREPAID DELIVERY SERVICE, EITHER COMMERCIAL OR UNITED STATES POSTAL SERVICE, WITH PROOF OF ATTEMPTED DELIVERY, AND BY TELECOPIER (WITH ANSWER BACK ACKNOWLEDGED), ADDRESSED AS FOLLOWS (OR AT SUCH OTHER ADDRESS AND PERSON AS SHALL BE DESIGNATED FROM TIME TO TIME BY ANY PARTY HERETO, AS THE CASE MAY BE, IN A WRITTEN NOTICE TO THE OTHER PARTIES HERETO IN THE MANNER PROVIDED FOR IN THIS SECTION): If to Lender: Wachovia Bank, National Association   Commercial Real Estate Services   8739 Research Drive URP 4   NC 1075   Charlotte, North Carolina  28262   Loan Number: 502858632   Attention: Portfolio Management   Fax No.: (704) 715-0036 85 --------------------------------------------------------------------------------   With a copy to: Proskauer Rose LLP   1585 Broadway   New York, New York 10036   Attention: David J. Weinberger, Esq.     If to Borrower: c/o Behringer Harvard Funds   15601 Dallas Parkway, Suite 600   Addison, Texas 75001   Attention: Gerald J. Reihsen, III     With a copy to: Luce, Forward, Hamilton & Scripps LLP   600 West Broadway   Suite 2600   San Diego, CA 92101-3391   Attention: Darryl Steinhause, Esq.   A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day. SECTION 10.7           TRIAL BY JURY. BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER AND LENDER. SECTION 10.8           HEADINGS.  THE ARTICLE AND/OR SECTION HEADINGS AND THE TABLE OF CONTENTS IN THIS AGREEMENT ARE INCLUDED HEREIN FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS AGREEMENT FOR ANY OTHER PURPOSE. SECTION 10.9           SEVERABILITY.  WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT. SECTION 10.10         PREFERENCES.  LENDER SHALL HAVE THE CONTINUING AND EXCLUSIVE RIGHT TO APPLY OR REVERSE AND REAPPLY ANY AND ALL PAYMENTS BY BORROWER DURING THE EXISTENCE OF AN 86 -------------------------------------------------------------------------------- EVENT OF DEFAULT TO ANY PORTION OF THE OBLIGATIONS OF BORROWER HEREUNDER.  TO THE EXTENT BORROWER MAKES A PAYMENT OR PAYMENTS TO LENDER, WHICH PAYMENT OR PROCEEDS OR ANY PART THEREOF ARE SUBSEQUENTLY INVALIDATED, DECLARED TO BE FRAUDULENT OR PREFERENTIAL, SET ASIDE OR REQUIRED TO BE REPAID TO A TRUSTEE, RECEIVER OR ANY OTHER PARTY UNDER ANY BANKRUPTCY LAW, STATE OR FEDERAL LAW, COMMON LAW OR EQUITABLE CAUSE, THEN, TO THE EXTENT OF SUCH PAYMENT OR PROCEEDS RECEIVED, THE OBLIGATIONS HEREUNDER OR PART THEREOF INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE IN FULL FORCE AND EFFECT, AS IF SUCH PAYMENT OR PROCEEDS HAD NOT BEEN RECEIVED BY LENDER. SECTION 10.11         WAIVER OF NOTICE.  BORROWER SHALL NOT BE ENTITLED TO ANY NOTICES OF ANY NATURE WHATSOEVER FROM LENDER EXCEPT WITH RESPECT TO MATTERS FOR WHICH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY LENDER TO BORROWER AND EXCEPT WITH RESPECT TO MATTERS FOR WHICH BORROWER IS NOT, PURSUANT TO APPLICABLE LEGAL REQUIREMENTS, PERMITTED TO WAIVE THE GIVING OF NOTICE.  BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO RECEIVE ANY NOTICE FROM LENDER WITH RESPECT TO ANY MATTER FOR WHICH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS DO NOT SPECIFICALLY AND EXPRESSLY PROVIDE FOR THE GIVING OF NOTICE BY LENDER TO BORROWER. SECTION 10.12         REMEDIES OF BORROWER.  IN THE EVENT THAT A CLAIM OR ADJUDICATION IS MADE THAT LENDER OR ITS AGENTS HAVE ACTED UNREASONABLY OR UNREASONABLY DELAYED ACTING IN ANY CASE WHERE BY LAW OR UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, LENDER OR SUCH AGENT, AS THE CASE MAY BE, HAS AN OBLIGATION TO ACT REASONABLY OR PROMPTLY, BORROWER AGREES THAT NEITHER LENDER NOR ITS AGENTS SHALL BE LIABLE FOR ANY MONETARY DAMAGES, AND BORROWER’S SOLE REMEDIES SHALL BE LIMITED TO COMMENCING AN ACTION SEEKING INJUNCTIVE RELIEF OR DECLARATORY JUDGMENT.  THE PARTIES HERETO AGREE THAT ANY ACTION OR PROCEEDING TO DETERMINE WHETHER LENDER HAS ACTED REASONABLY SHALL BE DETERMINED BY AN ACTION SEEKING DECLARATORY JUDGMENT. SECTION 10.13         EXPENSES; INDEMNITY. (A)           BORROWER COVENANTS AND AGREES TO PAY OR, IF BORROWER FAILS TO PAY, TO REIMBURSE, LENDER UPON RECEIPT OF WRITTEN NOTICE FROM LENDER FOR ALL REASONABLE COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED BY LENDER IN CONNECTION WITH (I) THE PREPARATION, NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND ALL THE COSTS OF FURNISHING ALL OPINIONS BY COUNSEL FOR BORROWER (INCLUDING WITHOUT LIMITATION ANY OPINIONS REQUESTED BY LENDER AS TO ANY LEGAL MATTERS ARISING UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS WITH RESPECT TO THE PROPERTY); (II) BORROWER’S ONGOING PERFORMANCE OF AND COMPLIANCE WITH BORROWER’S RESPECTIVE AGREEMENTS AND COVENANTS CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON ITS PART TO BE PERFORMED OR COMPLIED WITH AFTER THE CLOSING DATE, INCLUDING, WITHOUT LIMITATION, CONFIRMING COMPLIANCE WITH ENVIRONMENTAL AND INSURANCE REQUIREMENTS; (III) LENDER’S ONGOING PERFORMANCE AND COMPLIANCE WITH ALL AGREEMENTS AND CONDITIONS CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON ITS PART TO BE PERFORMED OR COMPLIED WITH AFTER THE CLOSING DATE; (IV) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY AND ADMINISTRATION OF ANY CONSENTS, AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY OTHER DOCUMENTS OR MATTERS REASONABLY REQUESTED BY LENDER; (V) SECURING BORROWER’S COMPLIANCE WITH ANY REQUESTS MADE PURSUANT TO THE PROVISIONS OF THIS AGREEMENT; (VI) THE FILING 87 -------------------------------------------------------------------------------- AND RECORDING FEES AND EXPENSES, TITLE INSURANCE AND REASONABLE FEES AND EXPENSES OF COUNSEL FOR PROVIDING TO LENDER ALL REQUIRED LEGAL OPINIONS, AND OTHER SIMILAR EXPENSES INCURRED IN CREATING AND PERFECTING THE LIEN IN FAVOR OF LENDER PURSUANT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; (VII) ENFORCING OR PRESERVING ANY RIGHTS, IN RESPONSE TO THIRD PARTY CLAIMS OR THE PROSECUTING OR DEFENDING OF ANY ACTION OR PROCEEDING OR OTHER LITIGATION, IN EACH CASE AGAINST, UNDER OR AFFECTING BORROWER, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE PROPERTY, OR ANY OTHER SECURITY GIVEN FOR THE LOAN; AND (VIII) ENFORCING ANY OBLIGATIONS OF OR COLLECTING ANY PAYMENTS DUE FROM BORROWER UNDER THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR WITH RESPECT TO THE PROPERTY (INCLUDING ANY FEES INCURRED BY SERVICER IN CONNECTION WITH THE TRANSFER OF THE LOAN TO A SPECIAL SERVICER PRIOR TO A DEFAULT OR EVENT OF DEFAULT) OR IN CONNECTION WITH ANY REFINANCING OR RESTRUCTURING OF THE CREDIT ARRANGEMENTS PROVIDED UNDER THIS AGREEMENT IN THE NATURE OF A “WORK OUT” OR OF ANY INSOLVENCY OR BANKRUPTCY PROCEEDINGS; PROVIDED, HOWEVER, THAT BORROWER SHALL NOT BE LIABLE FOR THE PAYMENT OF ANY SUCH COSTS AND EXPENSES TO THE EXTENT THE SAME ARISE BY REASON OF THE GROSS NEGLIGENCE, ILLEGAL ACTS, FRAUD OR WILLFUL MISCONDUCT OF LENDER. (B)           BORROWER SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER FROM AND AGAINST ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL FOR LENDER IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING COMMENCED OR THREATENED, WHETHER OR NOT LENDER SHALL BE DESIGNATED A PARTY THERETO), THAT MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST LENDER IN ANY MANNER RELATING TO OR ARISING OUT OF (I) ANY BREACH BY BORROWER OF ITS OBLIGATIONS UNDER, OR ANY MATERIAL MISREPRESENTATION BY BORROWER CONTAINED IN, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR (II) THE USE OR INTENDED USE OF THE PROCEEDS OF THE LOAN (COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”); PROVIDED, HOWEVER, THAT BORROWER SHALL NOT HAVE ANY OBLIGATION TO LENDER HEREUNDER TO THE EXTENT THAT SUCH INDEMNIFIED LIABILITIES ARISE FROM THE GROSS NEGLIGENCE, ILLEGAL ACTS, FRAUD OR WILLFUL MISCONDUCT OF LENDER.  TO THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, DEFEND AND HOLD HARMLESS SET FORTH IN THE PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY, BORROWER SHALL PAY THE MAXIMUM PORTION THAT IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW TO THE PAYMENT AND SATISFACTION OF ALL INDEMNIFIED LIABILITIES INCURRED BY LENDER. (C)           BORROWER COVENANTS AND AGREES TO PAY FOR OR, IF BORROWER FAILS TO PAY, TO REIMBURSE LENDER FOR, ANY FEES AND EXPENSES INCURRED BY ANY RATING AGENCY IN CONNECTION WITH ANY RATING AGENCY REVIEW OF THE LOAN, THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ANY CONSENT, APPROVAL, WAIVER OR CONFIRMATION OBTAINED FROM SUCH RATING AGENCY PURSUANT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND LENDER SHALL BE ENTITLED TO REQUIRE PAYMENT OF SUCH FEES AND EXPENSES AS A CONDITION PRECEDENT TO THE OBTAINING OF ANY SUCH CONSENT, APPROVAL, WAIVER OR CONFIRMATION. SECTION 10.14         SCHEDULES INCORPORATED.  THE SCHEDULES ANNEXED HERETO ARE HEREBY INCORPORATED HEREIN AS A PART OF THIS AGREEMENT WITH THE SAME EFFECT AS IF SET FORTH IN THE BODY HEREOF. SECTION 10.15         OFFSETS, COUNTERCLAIMS AND DEFENSES.  ANY ASSIGNEE OF LENDER’S INTEREST IN AND TO THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL TAKE THE SAME FREE AND CLEAR OF ALL OFFSETS, COUNTERCLAIMS OR DEFENSES WHICH ARE UNRELATED TO SUCH DOCUMENTS 88 -------------------------------------------------------------------------------- WHICH BORROWER MAY OTHERWISE HAVE AGAINST ANY ASSIGNOR OF SUCH DOCUMENTS, AND NO SUCH UNRELATED COUNTERCLAIM OR DEFENSE SHALL BE INTERPOSED OR ASSERTED BY BORROWER IN ANY ACTION OR PROCEEDING BROUGHT BY ANY SUCH ASSIGNEE UPON SUCH DOCUMENTS AND ANY SUCH RIGHT TO INTERPOSE OR ASSERT ANY SUCH UNRELATED OFFSET, COUNTERCLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING IS HEREBY EXPRESSLY WAIVED BY BORROWER. SECTION 10.16         NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES. (A)           BORROWER AND LENDER INTEND THAT THE RELATIONSHIPS CREATED HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS BE SOLELY THAT OF BORROWER AND LENDER.  NOTHING HEREIN OR THEREIN IS INTENDED TO CREATE A JOINT VENTURE, PARTNERSHIP, TENANCY-IN-COMMON, OR JOINT TENANCY RELATIONSHIP BETWEEN BORROWER AND LENDER NOR TO GRANT LENDER ANY INTEREST IN THE PROPERTY OTHER THAN THAT OF MORTGAGEE, BENEFICIARY OR LENDER. (B)           THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE SOLELY FOR THE BENEFIT OF LENDER AND BORROWER AND NOTHING CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO CONFER UPON ANYONE OTHER THAN LENDER AND BORROWER ANY RIGHT TO INSIST UPON OR TO ENFORCE THE PERFORMANCE OR OBSERVANCE OF ANY OF THE OBLIGATIONS CONTAINED HEREIN OR THEREIN.  ALL CONDITIONS TO THE OBLIGATIONS OF LENDER TO MAKE THE LOAN HEREUNDER ARE IMPOSED SOLELY AND EXCLUSIVELY FOR THE BENEFIT OF LENDER AND NO OTHER PERSON SHALL HAVE STANDING TO REQUIRE SATISFACTION OF SUCH CONDITIONS IN ACCORDANCE WITH THEIR TERMS OR BE ENTITLED TO ASSUME THAT LENDER WILL REFUSE TO MAKE THE LOAN IN THE ABSENCE OF STRICT COMPLIANCE WITH ANY OR ALL THEREOF AND NO OTHER PERSON SHALL UNDER ANY CIRCUMSTANCES BE DEEMED TO BE A BENEFICIARY OF SUCH CONDITIONS, ANY OR ALL OF WHICH MAY BE FREELY WAIVED IN WHOLE OR IN PART BY LENDER IF, IN LENDER’S SOLE DISCRETION, LENDER DEEMS IT ADVISABLE OR DESIRABLE TO DO SO. SECTION 10.17         PUBLICITY.  ALL NEWS RELEASES, PUBLICITY OR ADVERTISING BY BORROWER OR ITS AFFILIATES THROUGH ANY MEDIA INTENDED TO REACH THE GENERAL PUBLIC WHICH REFERS TO THE LOAN DOCUMENTS OR THE FINANCING EVIDENCED BY THE LOAN DOCUMENTS, TO LENDER OR ANY OF ITS AFFILIATES SHALL BE SUBJECT TO THE PRIOR WRITTEN APPROVAL OF LENDER. SECTION 10.18         WAIVER OF MARSHALLING OF ASSETS.  TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, WAIVES ALL RIGHTS TO A MARSHALLING OF THE ASSETS OF BORROWER, BORROWER’S PARTNERS AND OTHERS WITH INTERESTS IN BORROWER, AND OF THE PROPERTY, OR TO A SALE IN INVERSE ORDER OF ALIENATION IN THE EVENT OF FORECLOSURE OF THE MORTGAGE, AND AGREES NOT TO ASSERT ANY RIGHT UNDER ANY LAWS PERTAINING TO THE MARSHALLING OF ASSETS, THE SALE IN INVERSE ORDER OF ALIENATION, HOMESTEAD EXEMPTION, THE ADMINISTRATION OF ESTATES OF DECEDENTS, OR ANY OTHER MATTERS WHATSOEVER TO DEFEAT, REDUCE OR AFFECT THE RIGHT OF LENDER UNDER THE LOAN DOCUMENTS TO A SALE OF THE PROPERTY FOR THE COLLECTION OF THE DEBT WITHOUT ANY PRIOR OR DIFFERENT RESORT FOR COLLECTION OR OF THE RIGHT OF LENDER TO THE PAYMENT OF THE DEBT OUT OF THE NET PROCEEDS OF THE PROPERTY IN PREFERENCE TO EVERY OTHER CLAIMANT WHATSOEVER. SECTION 10.19         WAIVER OF COUNTERCLAIM.  BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS. 89 -------------------------------------------------------------------------------- SECTION 10.20         CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.  IN THE EVENT OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS, THE PROVISIONS OF THIS AGREEMENT SHALL CONTROL.  THE PARTIES HERETO ACKNOWLEDGE THAT THEY WERE REPRESENTED BY COMPETENT COUNSEL IN CONNECTION WITH THE NEGOTIATION, DRAFTING AND EXECUTION OF THE LOAN DOCUMENTS AND THAT SUCH LOAN DOCUMENTS SHALL NOT BE SUBJECT TO THE PRINCIPLE OF CONSTRUING THEIR MEANING AGAINST THE PARTY WHICH DRAFTED SAME.  BORROWER ACKNOWLEDGES THAT, WITH RESPECT TO THE LOAN, BORROWER SHALL RELY SOLELY ON ITS OWN JUDGMENT AND ADVISORS IN ENTERING INTO THE LOAN WITHOUT RELYING IN ANY MANNER ON ANY STATEMENTS, REPRESENTATIONS OR RECOMMENDATIONS OF LENDER OR ANY PARENT, SUBSIDIARY OR AFFILIATE OF LENDER.  LENDER SHALL NOT BE SUBJECT TO ANY LIMITATION WHATSOEVER IN THE EXERCISE OF ANY RIGHTS OR REMEDIES AVAILABLE TO IT UNDER ANY OF THE LOAN DOCUMENTS OR ANY OTHER AGREEMENTS OR INSTRUMENTS WHICH GOVERN THE LOAN BY VIRTUE OF THE OWNERSHIP BY IT OR ANY PARENT, SUBSIDIARY OR AFFILIATE OF LENDER OF ANY EQUITY INTEREST ANY OF THEM MAY ACQUIRE IN BORROWER, AND BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO RAISE ANY DEFENSE OR TAKE ANY ACTION ON THE BASIS OF THE FOREGOING WITH RESPECT TO LENDER’S EXERCISE OF ANY SUCH RIGHTS OR REMEDIES.  BORROWER ACKNOWLEDGES THAT LENDER ENGAGES IN THE BUSINESS OF REAL ESTATE FINANCINGS AND OTHER REAL ESTATE TRANSACTIONS AND INVESTMENTS WHICH MAY BE VIEWED AS ADVERSE TO OR COMPETITIVE WITH THE BUSINESS OF BORROWER OR ITS AFFILIATES. SECTION 10.21         BROKERS AND FINANCIAL ADVISORS.  BORROWER HEREBY REPRESENTS THAT IT HAS DEALT WITH NO FINANCIAL ADVISORS, BROKERS, UNDERWRITERS, PLACEMENT AGENTS, AGENTS OR FINDERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OTHER THAN NORTHMARQ CAPITAL.  BORROWER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, COSTS AND EXPENSES OF ANY KIND (INCLUDING LENDER’S REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN ANY WAY RELATING TO OR ARISING FROM A CLAIM BY ANY PERSON THAT SUCH PERSON ACTED ON BEHALF OF BORROWER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREIN.  THE PROVISIONS OF THIS SECTION 10.21 SHALL SURVIVE THE EXPIRATION AND TERMINATION OF THIS AGREEMENT AND THE PAYMENT OF THE DEBT. SECTION 10.22         PRIOR AGREEMENTS.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND THERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS OR UNDERSTANDINGS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, ARE SUPERSEDED BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND UNLESS SPECIFICALLY SET FORTH IN A WRITING CONTEMPORANEOUS HEREWITH THE TERMS, CONDITIONS AND PROVISIONS OF SUCH PRIOR AGREEMENT DO NOT SURVIVE EXECUTION OF THIS AGREEMENT. SECTION 10.23         TRANSFER OF LOAN.  IN THE EVENT THAT LENDER TRANSFERS THE LOAN, BORROWER SHALL CONTINUE TO MAKE PAYMENTS AT THE PLACE SET FORTH IN THE NOTE (AND ITS OBLIGATION TO MAKE SUCH PAYMENTS SHALL BE DEEMED SATISFIED UPON THE MAKING OF SUCH PAYMENTS) UNTIL SUCH TIME THAT BORROWER IS NOTIFIED IN WRITING BY LENDER THAT PAYMENTS ARE TO BE MADE AT ANOTHER PLACE. SECTION 10.24         JOINT AND SEVERAL LIABILITY.  IF BORROWER CONSISTS OF MORE THAN ONE (1) PERSON THE OBLIGATIONS AND LIABILITIES OF EACH PERSON SHALL BE JOINT AND SEVERAL. (THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.) 90 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.     BORROWER:       BEHRINGER HARVARD ELDRIDGE PLACE LP, a Delaware limited partnership           By:         Name: Gerald J. Reihsen, III       Title: Secretary             LENDER:       WACHOVIA BANK, NATIONAL ASSOCIATION, a banking association chartered under the laws of the United States of America           By:         Name:       Title:     -------------------------------------------------------------------------------- SCHEDULE I [Reserved] I-1 -------------------------------------------------------------------------------- SCHEDULE II Rent Roll / Expansion Options / Outstanding Leasing Commissions / Outstanding Tenant Improvements / Existing Sublease Agreements   (See Attached) II-1 -------------------------------------------------------------------------------- SCHEDULE III (Required Repairs—Deadlines For Completion)   None III-1 -------------------------------------------------------------------------------- SCHEDULE IV (Organizational Chart of Borrower)   (See Attached) IV-1 -------------------------------------------------------------------------------- SCHEDULE V (Exceptions to Representations)   Section 4.1.4 – Pending Litigation Ken Jackson slip and fall issue – date of incident – December 21, 2005 Section 4.1.22 – Certificates of Occupancy No Certificate Occupancy exists for CA Richards – Suite 280 in Eldridge One Schedule II disclosures include the following exceptions: ·                                          Expansion Options ·                                          Free Rent ·                                          Outstanding Leasing Commissions ·                                          Outstanding Tenant Improvements ·                                          Existing Subleases See Section II of Loan Agreement for these detailed schedules IV-1 -------------------------------------------------------------------------------- SCHEDULE VI (Lease Obligations)   (See Attached) -------------------------------------------------------------------------------- EXHIBIT A Form of SNDA [Property] Loan No.                                  SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT This Subordination, Non-Disturbance and Attornment Agreement (the “Agreement”) is dated as of the                     day of                            , 200  , between WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“Lender”), and                                            , a                                     (“Tenant”). RECITALS A.                                   Tenant is the tenant under a certain lease (the “Lease”) dated                                           , with                                                                                      , a                                                        (“Landlord”) or its predecessor in interest, of premises described in the Lease (the “Premises”) located in a certain [shopping center/office building/warehouse/industrial park/hotel] known as                                                                 located in                                                                          and more particularly described in Exhibit A attached hereto and made a part hereof (such [shopping center/office building/ warehouse/ industrial park/hotel], including the Premises, is hereinafter referred to as the “Property”). B.                                     This Agreement is being entered into in connection with a mortgage loan (the “Loan”) being made by Lender to Landlord, to be secured by, among other things:  (a) a first priority mortgage, deed of trust or deed to secure debt on and of the Property (the “Mortgage”) to be recorded with the registry or clerk of the county in which the Property is located; and (b) a first priority assignment of leases and rents on the Property (the “Assignment of Leases and Rents”) to be recorded.  The Mortgage and the Assignment of Leases and Rents are hereinafter collectively referred to as the “Security Documents”. C.                                     Tenant acknowledges that Lender will rely on this Agreement in making the Loan to Landlord. AGREEMENT For mutual consideration, including the mutual covenants and agreements set forth below, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1.                                       Tenant agrees that the Lease is and shall be**[, at the option of the Lender upon notice to Tenant, at any time and from time to time, either]** subject and subordinate**[, or superior,]** to the Security Documents and to all present or future advances under the obligations secured thereby and all renewals, amendments, modifications, consolidations, replacements and extensions of the secured obligations and the Security Documents, to the full -------------------------------------------------------------------------------- extent of all amounts secured by the Security Documents from time to time.  [Such options of the Lender may be exercised an unlimited number of times.]  [If subordinated, said] [Said] subordination is to have the same force and effect as if the Security Documents and such renewals, modifications, consolidations, replacements and extensions thereof had been executed, acknowledged, delivered and recorded prior to the Lease, any amendments or modifications thereof and any notice thereof. 2.                                       Lender agrees that, if the Lender exercises any of its rights under the Security Documents, including an entry by Lender pursuant to the Mortgage or a foreclosure of the Mortgage, Lender shall not disturb Tenant’s right of quiet possession of the Premises under the terms of the Lease so long as Tenant is not in default beyond any applicable grace period of any term, covenant or condition of the Lease. 3.                                       Tenant agrees that, in the event of a foreclosure of the Mortgage by Lender or the acceptance of a deed in lieu of foreclosure by Lender or any other succession of Lender to fee ownership, Tenant will attorn to and recognize Lender as its landlord under the Lease for the remainder of the term of the Lease (including all extension periods which have been or are hereafter exercised) upon the same terms and conditions as are set forth in the Lease, and Tenant hereby agrees to pay and perform all of the obligations of Tenant pursuant to the Lease. 4.                                       Tenant agrees that, in the event Lender succeeds to the interest of Landlord under the Lease, Lender shall not be: (a)                                  liable for any act or omission of any prior Landlord (including, without limitation, the then defaulting Landlord), or (b)                                 subject to any defense or offsets which Tenant may have against any prior Landlord (including, without limitation, the then defaulting Landlord), or (c)                                  bound by any payment of rent or additional rent which Tenant might have paid for more than one month in advance of the due date under the Lease to any prior Landlord (including, without limitation, the then defaulting Landlord), or (d)                                 bound by any obligation to make any payment to Tenant which was required to be made prior to the time Lender succeeded to any prior Landlord’s interest, or (e)                                  accountable for any monies deposited with any prior Landlord (including security deposits), except to the extent such monies are actually received by Lender, or (f)                                    bound by any surrender, termination, amendment or modification of the Lease made without the consent of Lender. 5.                                       Tenant agrees that, notwithstanding any provision hereof to the contrary, the terms of the Mortgage shall continue to govern with respect to the disposition of any insurance proceeds or eminent domain awards, and any obligations of Landlord to restore the real estate of which the Premises are a part shall, insofar as they apply to Lender, be limited to insurance 4 -------------------------------------------------------------------------------- proceeds or eminent domain awards received by Lender after the deduction of all costs and expenses incurred in obtaining such proceeds or awards. 6.                                       Tenant hereby agrees to give to Lender copies of all notices of Landlord default(s) under the Lease in the same manner as, and whenever, Tenant shall give any such notice of default to Landlord, and no such notice of default shall be deemed given to Landlord unless and until a copy of such notice shall have been so delivered to Lender.  Lender shall have the right to remedy any Landlord default under the Lease, or to cause any default of Landlord under the Lease to be remedied, and for such purpose Tenant hereby grants Lender such additional period of time as may be reasonable to enable Lender to remedy, or cause to be remedied, any such default in addition to the period given to Landlord for remedying, or causing to be remedied, any such default.  Tenant shall accept performance by Lender of any term, covenant, condition or agreement to be performed by Landlord under the Lease with the same force and effect as though performed by Landlord.  No Landlord default under the Lease shall exist or shall be deemed to exist (i) as long as Lender, in good faith, shall have commenced to cure such default within the above referenced time period and shall be prosecuting the same to completion with reasonable diligence, subject to force majeure, or (ii) if possession of the Premises is required in order to cure such default, or if such default is not susceptible of being cured by Lender, as long as Lender, in good faith, shall have notified Tenant that Lender intends to institute proceedings under the Security Documents, and, thereafter, as long as such proceedings shall have been instituted and shall be prosecuted with reasonable diligence.  In the event of the termination of the Lease by reason of any default thereunder by Landlord, upon Lender’s written request, given within thirty (30) days after any such termination, Tenant, within fifteen (15) days after receipt of such request, shall execute and deliver to Lender or its designee or nominee a new lease of the Premises for the remainder of the term of the Lease upon all of the terms, covenants and conditions of the Lease. Lender shall have the right, without Tenant’s consent, to foreclose the Mortgage or to accept a deed in lieu of foreclosure of the Mortgage or to exercise any other remedies under the Security Documents. 7.                                       Tenant hereby consents to the Assignment of Leases and Rents from Landlord to Lender in connection with the Loan.  Tenant acknowledges that the interest of the Landlord under the Lease is to be assigned to Lender solely as security for the purposes specified in said assignments, and Lender shall have no duty, liability or obligation whatsoever under the Lease or any extension or renewal thereof, either by virtue of said assignments or by any subsequent receipt or collection of rents thereunder, unless Lender shall specifically undertake such liability in writing or unless Lender or its designee or nominee becomes, and then only with respect to periods in which Lender or its designee or nominee becomes, the fee owner of the Premises.  Tenant agrees that upon receipt of a written notice from Lender of a default by Landlord under the Loan, Tenant will thereafter, if requested by Lender, pay rent to Lender in accordance with the terms of the Lease. 8.                                       The Lease shall not be assigned by Tenant, modified, amended or terminated (except a termination that is permitted in the Lease without Landlord’s consent) without Lender’s prior written consent in each instance 9.                                       Any notice, election, communication, request or other document or demand required or permitted under this Agreement shall be in writing and shall be deemed delivered on 5 -------------------------------------------------------------------------------- the earlier to occur of (a) receipt or (b) the date of delivery, refusal or nondelivery indicated on the return receipt, if deposited in a United States Postal Service Depository, postage prepaid, sent certified or registered mail, return receipt requested, or if sent via a recognized commercial courier service providing for a receipt, addressed to Tenant or Lender, as the case may be, at the following addresses: If to Tenant:     with a copy to:     If to Lender:   Wachovia Bank, National Association 301 South College Street—NC0166 Charlotte, North Carolina 28288-0166 Attention: Real Estate Capital Markets, Commercial Real Estate Finance   with a copy to:   Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: David J. Weinberger, Esq.   10.                                 The term “Lender” as used herein includes any successor or assign of the named Lender herein, including without limitation, any co-lender at the time of making the Loan, any purchaser at a foreclosure sale and any transferee pursuant to a deed in lieu of foreclosure, and their successors and assigns, and the terms “Tenant” and “Landlord” as used herein include any successor and assign of the named Tenant and Landlord herein, respectively; provided, however, that such reference to Tenant’s or Landlord’s successors and assigns shall not be construed as Lender’s consent to any assignment or other transfer by Tenant or Landlord. 11.                                 If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to be enforceable, or if such modification is not practicable, such provision shall be deemed 6 -------------------------------------------------------------------------------- deleted from this Agreement, and the other provisions of this Agreement shall remain in full force and effect, and shall be liberally construed in favor of Lender. 12.                                 Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing executed by the party against which enforcement of the termination, amendment, supplement, waiver or modification is sought. 13.                                 This Agreement shall be construed in accordance with the laws of the state of in which the Property is located. 14.                                 The person executing this Agreement on behalf of Tenant is authorized by Tenant to do so and execution hereof is the binding act of Tenant enforceable against Tenant. *   *   *   *   * 7 -------------------------------------------------------------------------------- Witness the execution hereof  as of the date first above written. WACHOVIA BANK, NATIONAL ASSOCIATION     By:         Name:     Title:         TENANT:         By:         Name:     Title:   The undersigned Landlord hereby consents to the foregoing Agreement and confirms the facts stated in the foregoing Agreement. LANDLORD:     By:         Name:     Title:     [ADD APPROPRIATE ACKNOWLEDGMENT] --------------------------------------------------------------------------------

Exhibit 10.92 CONSULTANCY AGREEMENT This Agreement is entered into on November 20, 2006 by and between Xfone, Inc. (“Xfone”), with offices at Britannia House, 960 High Road, London N12 9RY, United Kingdom, and Crestview Capital Partners, LLC (“Crestview”) with offices at 95 Revere Drive, Suite A, Northbrook, IL 60062. The Services 1.  During the term of this Agreement, Xfone will engage Crestview as its strategic consultant on United States capital markets for microcap public companies. Crestview's Obligations 2.  Crestview shall assist and advise Xfone in connection with Xfone's public trading market activities in the United States. Crestview shall not undertake any fund raising activities whatsoever for Xfone. Crestview is not obligated to devote any specific amount of time to providing advice and consultation to Xfone. 3.  Crestview shall have no authority to impose, incur or create any debt, liability or obligation in the name of, on behalf of, and/or for the account of Xfone. 4.  Crestview shall not, other than with the prior written consent of Xfone, during the term of this Agreement, and at any time after its termination or expiration, for any reason whatsoever, disclose directly or indirectly to any third party, and shall only use for the purposes of this Agreement, any information relating to Xfone (including its subsidiaries and affiliated entites), of whatever nature, which Xfone may deem to be confidential and which Crestview has or shall become possessed of. The foregoing provisions shall not prevent the disclosure or use by Crestview of any information which is or hereafter, through no fault of Crestview, becomes public knowledge or to the extent permitted by law. Xfone shall not provide Crestview with any information which Xfone believes would constitute material, non-public information about Xfone, without Crestview’s express prior consent in each such instance. 5.  Crestview will not serve during the term of this Agreement other companies whose interests are adverse to those of Xfone and/or its subsidiaries and/or affiliated entites, including third parties with whom Xfone and/or its subsidiaries and/or affiliated entites compete. Noting in this Section 5 shall preclude Crestview or any of its affiliates from investing in any competitor of Xfone. Non-Exclusivity 6.  Xfone reserves the right to appoint or retain any third party to provide services similar to those rendered by Crestview pursuant to this Agreement.   Crestview's Compensation and Reimbursment 7.  In return for its services pursuant to this Agreement, Crestview will be granted 117,676 warrants to purchase restricted shares of Xfone's common stock, registered in the name of Crestview Capital Master, LLC (the "Warrants"). The Warrants will be exercisable pursuant to the following terms: Vesting - 29,419 warrants immediately, 29,419 warrants on February 10, 2007, 29,419 warrants on May 10, 2007, and 29,419 warrants on August 10, 2007; Exercise Price - $3.50; Term - five (5) years. The shares underlying the Warrants shall have piggy-back registration rights. The grant of the Warrants shall be subject to obtaining the approval of the American Stock Exchange and the Tel Aviv Stock Exchange for listing the shares underlying the Warrants, which the Company undertakes to make its best efforts in order to accomplish on a timely basis. 8.  Any out-of-pocket expenses incurred by Crestview in connection with its services hereunder will be reimbursed by Xfone. Crestview shall not incur any such expenses without the express prior written permission of Xfone. Independent Contractor 9.  Xfone and Crestview agree that Crestview shall act solely as an independent contractor. Neither Crestview nor any person representing Crestview shall be construed as having entered into relationship of employer and employee with Xfone. Effective Date and Term 10.  The effective date of this Agreement shall be November 20, 2006. The term of this Agreement shall be one (1) year from the effective date. Indemnification 11.  Xfone agrees to indemnify and hold Crestview, its affiliates, control persons, officers, employees and agents (collectively, the “Indemnified Persons”) harmless from and against all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys’ and accountants’ fees) joint and several, arising out of the performance of this Agreement, whether or not Crestview is a party to such dispute. This indemnity shall not apply, however, where a court of competent jurisdiction has made a final determination that Crestview engaged in gross negligence or willful misconduct in the performance of its services hereunder which gave rise to the loss, claim, damage, liability, cost or expense sought to be recovered hereunder (but pending any such final determination, the indemnification and reimbursement provision of this Agreement shall apply and Xfone shall perform its obligations hereunder to reimburse Crestview for its expenses). Such indemnification shall be limited to $170,000.   12.   If for any reason the foregoing indemnification is unavailable to Crestview or such other Indemnified Person or insufficient to hold it harmless, then Xfone shall contribute to the amount paid or payable by Crestview or such other Indemnified Person as a result of such loss, claim, damage, or liability in such proportion as is appropriate to reflect not only the relative benefits received by Xfone and its shareholders on the one hand and Crestview or such other Indemnified Person on the other hand, as well as any relevant equitable considerations; provided that in no event will the aggregate contribution by Crestview and any other Indemnified Person hereunder exceed the amount of fees actually received by Crestview pursuant to this Agreement. The reimbursement, indemnity and contribution obligations of Xfone under this paragraph shall be in addition to any liability which Xfone may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of Xfone, Crestview and any other Indemnified Person. 13.  Crestview agrees to indemnify and hold Xfone, its affiliates, control persons, officers, employees and agents (collectively, the “Indemnified Persons”) harmless from and against all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys’ and accountants’ fees) joint and several, arising out of Crestview’s performance of this Agreement, whether or not Xfone is a party to such dispute. This indemnity shall not apply, however, where a court of competent jurisdiction has made a final determination that Xfone engaged in gross negligence or willful misconduct in connection with this Agreement which gave rise to the loss, claim, damage, liability, cost or expense sought to be recovered hereunder (but pending any such final determination, the indemnification provision of this Agreement shall apply). Such indemnification shall be limited to $170,000. 14.  If for any reason the foregoing indemnification is unavailable to Xfone or such other Indemnified Person or insufficient to hold it harmless, then Crestview shall contribute to the amount paid or payable by Xfone or such other Indemnified Person as a result of such loss, claim, damage, or liability in such proportion as is appropriate to reflect not only the relative benefits received by Crestview on the one hand and Xfone and its shareholders or such other Indemnified Person on the other hand, as well as any relevant equitable considerations; provided that in no event will the aggregate contribution by Xfone and any other Indemnified Person hereunder exceed the amount of fees actually received by Crestview pursuant to this Agreement. The reimbursement, indemnity and contribution obligations of Crestview under this paragraph shall be in addition to any liability which Crestview may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of Crestview, Xfone and any other Indemnified Person. 15.  The provisions of Sections 11-14 shall survive the termination and expiration of this Agreement. Amendment 16.       This Agreement may not be changed or modified except by a written document executed and signed by both parties. Severability 17.  Various provisions and sub-provisions of this Agreement are severable and if any provision or sub-provision or part thereof is held to be unenforceable by any court of competent jurisdiction, then such enforceability shall not affect the validity or enforceability of the remaining provisions or sub-provisions or parts thereof in this Agreement. Governing Law and Exclusive Jurisdiction 18.  The laws of the State of New York will govern this Agreement and any dispute arising hereunder will be exclusively referred to the competent court in New York. IN WITNESS WHEREOF, the parties executed this Agreement as of the Date written above.           Xfone, Inc.               By:   /s/ Guy Nissenson   -------------------------------------------------------------------------------- Guy Nissenson   CEO         Crestview Capital Partners, LLC               By:   /s/ Robert Hoyt   -------------------------------------------------------------------------------- Robert Hoyt   Managing Member  

Exhibit 10.16 NOTE February 17, 2006 FOR VALUE RECEIVED, each of the undersigned (each a “Borrower” and collectively the “Borrowers”) hereby promises, jointly and severally, to pay to WORLD OMNI FINANCIAL CORP. or registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Revolving Loan from time to time made by the Lender to Sonic Automotive, Inc. (the “Company”) under the Credit Agreement, the principal amount of each New Vehicle Floorplan Loan from time to time made by the Lender to the Company or any New Vehicle Borrower under the Credit Agreement, and the principal amount of each Used Vehicle Floorplan Loan from time to time made by the Lender to the Company under that certain Credit Agreement, dated as of February 17, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the Company, certain Subsidiaries of the Company from time to time party thereto, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer, Revolving Swing Line Lender, New Vehicle Swing Line Lender, and Used Vehicle Swing Line Lender. Each Borrower promises, jointly and severally, to pay interest on the unpaid principal amount of each Loan from the date of such Revolving Loan, New Vehicle Floorplan Loan or Used Vehicle Floorplan Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement. Except as otherwise provided in Section 2.04(f) of the Credit Agreement with respect to Revolving Swing Line Loans, Section 2.08(h) with respect to New Vehicle Floorplan Swing Line Loans, and Section 2.13(f) with respect to Used Vehicle Floorplan Swing Line Loans, all payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement. This Note is one of the Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. This Note is also entitled to the benefits of the Guaranties and is secured by the Collateral. Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall (if required by the Credit Agreement) become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement. Revolving Loans, New Vehicle Floorplan Loans and Used Vehicle Floorplan Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Revolving Loans, New Vehicle Floorplan Loans and Used Vehicle Floorplan Loans and payments with respect thereto. -------------------------------------------------------------------------------- Each Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.   SONIC AUTOMOTIVE, INC. By:   /s/ Greg Young Name:   Greg Young Title:   Vice President/Chief Accounting Officer AVALON FORD, INC. CAPITOL CHEVROLET AND IMPORTS, INC. FAA AUTO FACTORY, INC. FAA BEVERLY HILLS, INC. FAA CAPITOL N, INC. FAA CONCORD H, INC. FAA CONCORD T, INC. FAA DUBLIN N, INC. FAA DUBLIN VWD, INC. FAA LAS VEGAS H, INC. FAA POWAY T, INC. FAA SAN BRUNO, INC. FAA SANTA MONICA V, INC. FAA SERRAMONTE, INC. FAA SERRAMONTE H, INC. FAA SERRAMONTE L, INC. FAA STEVENS CREEK, INC. FORT MYERS COLLISION CENTER, LLC FRANCISCAN MOTORS, INC. KRAMER MOTORS INCORPORATED MARCUS DAVID CORPORATION MOUNTAIN STATES MOTORS CO., INC. ONTARIO L, LLC PHILPOTT MOTORS, LTD. RIVERSIDE NISSAN, INC. SANTA CLARA IMPORTED CARS, INC. SONIC AUTOMOTIVE – 1400 AUTOMALL DRIVE, COLUMBUS, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- SONIC AUTOMOTIVE – 1455 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1500 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE 5260 PEACHTREE INDUSTRIAL BLVD., LLC SONIC AUTOMOTIVE – 6008 N. DALE MABRY, FL, INC. SONIC AUTOMOTIVE – 9103 E. INDEPENDENCE, NC, LLC SONIC ADVANTAGE PA, L.P. SONIC – ANN ARBOR IMPORTS, INC. SONIC – BETHANY H, INC. SONIC – BUENA PARK H, INC. SONIC – CADILLAC D, L.P. SONIC – CALABASAS A, INC. SONIC – CALABASAS V, INC. SONIC – CAPITOL IMPORTS, INC. SONIC – CARROLLTON V, L.P. SONIC – CLEAR LAKE VOLKSWAGEN, L.P. SONIC – CREST H, LLC SONIC – DENVER T, INC. SONIC – DOWNEY CADILLAC, INC. SONIC – ENGLEWOOD M, INC. SONIC – FM VW, INC. SONIC – FORT WORTH T, L.P. SONIC – FREELAND, INC. SONIC – HARBOR CITY H, INC. SONIC – HOUSTON V, L.P SONIC – JERSEY VILLAGE VOLKSWAGEN, L.P. SONIC – LAKE NORMAN DODGE, LLC SONIC – LLOYD NISSAN, INC. SONIC – LUTE RILEY, L.P. SONIC – MANHATTAN FAIRFAX, INC. SONIC – MASSEY CHEVROLET, INC. SONIC – MESQUITE HYUNDAI, L.P. SONIC MOMENTUM JVP, L.P. SONIC MOMENTUM VWA, L.P. SONIC MONTGOMERY B, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- SONIC – NEWSOME OF FLORENCE, INC. SONIC – NORTH CHARLESTON, INC. SONIC – OKLAHOMA T, INC. SONIC – ROCKVILLE IMPORTS, INC. SONIC – ROCKVILLE MOTORS, INC. SONIC – SERRAMONTE I, INC. SONIC – SHOTTENKIRK, INC. SONIC – STEVENS CREEK B, INC. SONIC – UNIVERSITY PARK A, L.P. SONIC – VOLVO LV, LLC SONIC – WEST COVINA T, INC. SONIC – WILLIAMS BUICK, INC. SONIC – WILLIAMS IMPORTS, INC. SONIC – WILLIAMS MOTORS, LLC SONIC – 2185 CHAPMAN RD., CHATTANOOGA, LLC SPEEDWAY CHEVROLET, INC. VILLAGE IMPORTED CARS, INC. WINDWARD, INC. WRANGLER INVESTMENTS, INC. By:   /s/ Joseph O’Connor Name:   Joseph O’Connor Title:   Assistant Treasurer -------------------------------------------------------------------------------- ACKNOWLEDGEMENT OF EXECUTION ON BEHALF OF Certain Subsidiaries of Sonic Automotive, Inc. STATE OF    North Carolina     COUNTY OF    Mecklenburg     Before me, the undersigned, a Notary Public in and for said County and State on this    15th    day of February, 2006, personally appeared Joseph O’Connor, known to be the Assistant Treasurer of each of the entities listed on Exhibit A hereto (collectively, the “Companies”), who is personally known to me or who has produced                                          as identification, being by me duly sworn, and that by authority duly given by, and as the act of, each of the Companies, the foregoing Note was signed by him as said Assistant Treasurer on behalf of each of the Companies. Witness my hand and official seal this    15th    day of February, 2006.   /s/ Kelli Rutledge-Cody Notary Public (NOTARY SEAL) My commission expires:    June 17, 2008     NOTE Notary Page -------------------------------------------------------------------------------- EXHIBIT A AVALON FORD, INC. CAPITOL CHEVROLET AND IMPORTS, INC. FAA AUTO FACTORY, INC. FAA BEVERLY HILLS, INC. FAA CAPITOL N, INC. FAA CONCORD H, INC. FAA CONCORD T, INC. FAA DUBLIN N, INC. FAA DUBLIN VWD, INC. FAA LAS VEGAS H, INC. FAA POWAY T, INC. FAA SAN BRUNO, INC. FAA SANTA MONICA V, INC. FAA SERRAMONTE, INC. FAA SERRAMONTE H, INC. FAA SERRAMONTE L, INC. FAA STEVENS CREEK, INC. FORT MYERS COLLISION CENTER, LLC FRANCISCAN MOTORS, INC. KRAMER MOTORS INCORPORATED MARCUS DAVID CORPORATION MOUNTAIN STATES MOTORS CO., INC. ONTARIO L, LLC PHILPOTT MOTORS, LTD. RIVERSIDE NISSAN, INC. SANTA CLARA IMPORTED CARS, INC. SONIC AUTOMOTIVE – 1400 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1455 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE – 1500 AUTOMALL DRIVE, COLUMBUS, INC. SONIC AUTOMOTIVE 5260 PEACHTREE INDUSTRIAL BLVD., LLC SONIC AUTOMOTIVE – 6008 N. DALE MABRY, FL, INC. SONIC AUTOMOTIVE – 9103 E. INDEPENDENCE, NC, LLC SONIC ADVANTAGE PA, L.P. SONIC – ANN ARBOR IMPORTS, INC. SONIC – BETHANY H, INC. SONIC – BUENA PARK H, INC. SONIC – CADILLAC D, L.P. SONIC – CALABASAS A, INC. SONIC – CALABASAS V, INC. SONIC – CAPITOL IMPORTS, INC. SONIC – CARROLLTON V, L.P. SONIC – CLEAR LAKE VOLKSWAGEN, L.P. SONIC – CREST H, LLC -------------------------------------------------------------------------------- SONIC – DENVER T, INC. SONIC – DOWNEY CADILLAC, INC. SONIC – ENGLEWOOD M, INC. SONIC – FM VW, INC. SONIC – FORT WORTH T, L.P. SONIC – FREELAND, INC. SONIC – HARBOR CITY H, INC. SONIC – HOUSTON V, L.P SONIC – JERSEY VILLAGE VOLKSWAGEN, L.P. SONIC – LAKE NORMAN DODGE, LLC SONIC – LLOYD NISSAN, INC. SONIC – LUTE RILEY, L.P. SONIC – MANHATTAN FAIRFAX, INC. SONIC – MASSEY CHEVROLET, INC. SONIC – MESQUITE HYUNDAI, L.P. SONIC MOMENTUM JVP, L.P. SONIC MOMENTUM VWA, L.P. SONIC MONTGOMERY B, INC. SONIC – NEWSOME OF FLORENCE, INC. SONIC – NORTH CHARLESTON, INC. SONIC – OKLAHOMA T, INC. SONIC – ROCKVILLE IMPORTS, INC. SONIC – ROCKVILLE MOTORS, INC. SONIC – SERRAMONTE I, INC. SONIC – SHOTTENKIRK, INC. SONIC – STEVENS CREEK B, INC. SONIC – UNIVERSITY PARK A, L.P. SONIC – VOLVO LV, LLC SONIC – WEST COVINA T, INC. SONIC – WILLIAMS BUICK, INC. SONIC – WILLIAMS IMPORTS, INC. SONIC – WILLIAMS MOTORS, LLC SONIC – 2185 CHAPMAN RD., CHATTANOOGA, LLC SPEEDWAY CHEVROLET, INC. VILLAGE IMPORTED CARS, INC. WINDWARD, INC. WRANGLER INVESTMENTS, INC.   -------------------------------------------------------------------------------- ACKNOWLEDGEMENT OF EXECUTION ON BEHALF OF Certain Subsidiaries of Sonic Automotive, Inc. STATE OF     Texas     COUNTY OF     Tarrant     Before me, the undersigned, a Notary Public in and for said County and State on this     16th     day of February, 2006, personally appeared Greg Young, known to be the Vice President/Chief Accounting Officer of Sonic Automotive, Inc., who is personally known to me or who has produced     Drivers License     as identification, being by me duly sworn, and that by authority duly given by, and as the act of, Sonic Automotive, Inc., the foregoing Note was signed by him as said Vice President/Chief Accounting Officer on behalf of Sonic Automotive, Inc. Witness my hand and official seal this     16th     day of February, 2006.   /s/ Kevin Alderman Notary Public (NOTARY SEAL) My commission expires:     6/18/08     NOTE Notary Page

  Exhibit 10.1 (LIFELINE CELL TECHNOLOGY LOGO) [c70133c7013300.gif] November 1, 2006 To: Kenneth C. Aldrich From: International Stem Cell Corporation Dear Ken: The following sets for the terms of your proposed employment with International Stem Cell Corporation (“ISCC”). ISCC hereby offers you employment with ISCC on the terms and conditions set forth below, such employment to commence November 1, 2006. As referred to herein, “ISCC” shall include the public entity of which ISCC expects to become a wholly owned subsidiary (the “Parent”) through a pending “reverse merger takeover (the “RTO”) and Lifeline Cell Technology, LLC, as the context requires.   1.   You will be Executive Vice President and Assistant Secretary of ISCC and Lifeline and report directly to the Boards of Directors of those entities. Your duties and responsibilities will include the function of forming and chairing at Strategic Advisory Committee and all the responsibilities related there to, together with such other functions as the Board may delegate to you. Responsibilities may be added, removed or otherwise modified, as the Board deems necessary.     2.   You will serve on the Boards of both ISCC and Lifeline.     3.   You will receive a base salary of $180,000, payable semi-monthly. Your status will be salary exempt. You will be entitled to 15 days paid vacation each year, accruing on a monthly basis. You will be eligible for coverage under such group health plan and other benefits as the Company provides to comparable employees.     4.   Employment with ISCC or Parent is at the mutual consent of the employee and the company. Accordingly, while the company has every hope that employment relationships will be mutually beneficial and rewarding, employees and the company retain the right to terminate the employment relationship at will, at any time, with or without cause. Please note that no individual has the authority to make any contrary agreement or representation. Accordingly, this constitutes a final and fully binding integrated agreement with respect to the at-will nature of the employment relationship.     5.   You agree to abide by the Company’s policies and procedures, including those set forth in a Company Employee Handbook when such document is drafted. You will be required to sign the signature page of this Employee Handbook when it is completed.     --------------------------------------------------------------------------------   (LIFELINE CELL TECHNOLOGY LOGO) [c70133c7013300.gif]   6.   For a period of one year after your termination of employment for any reason, you agree not to, directly or indirectly, hire, attempt to hire, induce or entice the hire of or interview for hire any employee of ISCC or Lifeline or any former employee who had been an employee at any time during the one year period prior to your termination.     7.   You further agree that you will upon termination of employment, return to ISCC and Lifeline all books, records, computer files, manuals, customer lists and other written, typed, printed, or electronic materials, whether furnished by ISCC or Lifeline or prepared by you, which contain any information relating to the ISCC or Lifeline businesses, and you further agree that you will neither make nor retain copies of such materials after termination of employment.     8.   If you voluntary terminate your employment under this Agreement, you will not, for a period of one year after you are no longer employed by ISCC or Lifeline, solicit customers of ISCC or Lifeline directly or indirectly, either as a proprietor, stockholder, partner, officer, employee, or otherwise of any other entity engaged in the stem cell business in the United States, producing and/or selling same or substantially similar products and services as ISCC or Lifeline produces and/or sells at such time your employment with ISCC and/or Lifeline may terminate.     9.   In the event of any lawsuit or charge filed with an administrative agency, or other form of litigation brought against or involving you as a result of alleged activity, negligence, or any other conduct by you in connection with your duties and responsibilities on behalf of ISCC or Lifeline, ISCC shall provide and pay for legal defense on your behalf, as well as indemnify you against any judgment or other liability that may result from such proceedings unless such activity or conduct represented willful misconduct on your part.     10.   You will be required to sign an Employee Proprietary Information Agreement as well as the necessary tax and benefit enrollment forms before starting full time employment. You will also be required to provide proof of your identity and authorization to work in the United States as required by Federal immigration laws.     11.   Ken, we look forward to you joining our effort and hope the opportunity will be mutually rewarding. To confirm that you agree to the terms stated in this letter, please sign, date and return the enclosed copy of this letter. Sincerely, International Stem Cell Corporation     --------------------------------------------------------------------------------   (LIFELINE CELL TECHNOLOGY LOGO) [c70133c7013300.gif] By:   /S/ JEFFREY KRSTICH    Jeffrey Krstich CEO This will acknowledge my acceptance of this offer of employment.       /S/KENNETH C. ALDRICH     Kenneth C. Aldrich   Date: November 1, 2006    

  EXHIBIT 10.40 (f) CONFIDENTIAL TREATMENT  REQUESTED PURSUANT TO RULE 24b-2   Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934. The omitted materials have been filed separately with the Securities and Exchange Commission.    CONFIDENTIAL   AMENDMENT No. 6 TO LETTER AGREEMENT DCT-015/2004 This Amendment No. 6 to Letter Agreement DCT-015/2004, dated as of October 18, 2005 (“Amendment No. 6”) relates to the Letter Agreement DCT-015/2004 (the “Letter Agreement”) between Embraer - Empresa Brasileira de Aeronáutica S.A. (“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19, 2004 and which concerns the Purchase Agreement DCT-014/2004 (the “Purchase Agreement”), as amended from time to time (collectively referred to herein as “Agreement”). This Amendment No. 6 is between Embraer and Buyer, collectively referred to herein as the “Parties”.   This Amendment No. 6 sets forth additional agreements between Embraer and Buyer relative to exercise of 5 Conditional Aircraft into 5 Firm Aircraft (as per Amendment No. 13 to the Purchase Agreement dated as of the date hereof), and [*].   Except as otherwise provided for herein all terms of the Letter Agreement shall remain in full force and effect. All capitalized terms used in this Amendment No. 6 that are not defined herein shall have the meaning given in the Letter Agreement. In the event of any conflict between this Amendment No. 6 and the Letter Agreement the terms, conditions and provisions of this Amendment No. 6 shall control.   NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged Embraer and Buyer hereby agree as follows: 1.   Spare Parts Credit: 1.1   Article 1(ii) of the Letter Agreement shall be deleted and replaced by the following :   "(ii) Spare Parts Credit: Embraer will provide a spart parts (except for engines, engine related parts and APU), ground support equipment and test equipment credit of [*]. This [*] credit shall be made available to Buyer upon [*]. If for any reason [*], then [*] Buyer shall [*]. The [*] credit with respect to an Aircraft shall only be made available to Buyer in the event there is [*]. If [*] credit is not so made available to Buyer because [*] such credit shall be made available at such time thereafter [*]. Any portion of such credit which remains unused [*] shall be deemed to have been waived by Buyer, and no further compensation shall be due from Embraer to Buyer for such [*] credit(s). Such [*] credit(s) shall be applied [*]."   2. Aircraft     2.1 [*] 3. [*]       3.1 [*]       3.2 [*] 4. Schedule 5       4.1 Schedule 5 to the Letter Agreement is amended to [*]       4.2 Schedule 5 to the Letter Agreement is amended to [*] and to [*]       4.3 [*] of Schedule 5 to the Letter Agreement is amended by [*] 5. [*] Aircraft   For all purposes of the Purchase Agreement and the Letter Agreement (and the exhibits, schedules and attachments to either of the foregoing), the term [*] shall mean [*] 6. [*] [*].   7. Miscellaneous   All other provisions of the Letter Agreement which have not been specifically amended or modified by this Amendment No. 6 shall remain valid in full force and effect without any change. _____ *Confidential   --------------------------------------------------------------------------------     CONFIDENTIAL   IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have entered into and executed this Amendment No. 6 to Letter Agreement to be effective as of the date first written above.       EMBRAER - Empresa Brasileira de Aeronáutica S.A.     REPUBLIC AIRLINE INC.         /s/ Horacio Aragones Forjaz     /s/ Bryan Bedford --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name: Horacio Aragones Forjaz Title: Executive Vice President Corporate Communication     Name: Bryan Bedford Title: President           /s/ Jose Luis D. Molina       --------------------------------------------------------------------------------     Name: Jose Luis D. Molina Title: Director of Contracts - Airline Market     Date: October 18, 2005     Date: October 18, 2005 Place: San Jose Dos Campos, S.P.     Place: Indianapolis, IN         Witness: /s/ Fernando Bueno     Witness /s/ Lars-Erik Arnell Name: Fernando Bueno      Name: Lars-Erik Arnell    --------------------------------------------------------------------------------     

STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. AND YANG LAN STUDIO LTD. DATED August 15, 2006 -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of the 15th day of August, 2006 between Broadcast International, Inc., a corporation organized and existing under the laws of the State of Utah (“Broadcast International” or the “Company”) and Yang Lan Studio Ltd., a Hong Kong Corporation (“Investor”). PRELIMINARY STATEMENT: WHEREAS, the Investor wishes to purchase from the Company, upon the terms and subject to the conditions of this Agreement, 666,667 shares of the Company’s common stock, $0.05 par value per share (the “Stock”), for the Purchase Price set forth in Section 2.1(a) hereof.  In addition, the Company will issue to the Investor Four Common Stock Purchase Warrants (the “Warrants”) to purchase up to an additional 5,500,000 shares of common stock of the Company at exercise prices as stated in the Warrants; and WHEREAS, the parties intend to memorialize the purchase and sale of such Stock and the Warrants. NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS 1.1 Incorporation by Reference. The foregoing recitals and the Exhibits and Schedules attached hereto and referred to herein, are hereby acknowledged to be true and accurate, and are incorporated herein by this reference. 1.2 Superseder. This Agreement, to the extent that it is inconsistent with any other instrument or understanding among the parties governing the affairs of the Company, shall supersede such instrument or understanding to the fullest extent permitted by law.  A copy of this Agreement shall be filed at the Company’s principal office. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 1 OF 27 -------------------------------------------------------------------------------- 1.3 Certain Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings (all capitalized terms used in this Agreement that are not defined in this Article 1 shall have the meanings set forth elsewhere in this Agreement): 1.3.1 “1933 Act” means the Securities Act of 1933, as amended. 1.3.2 “1934 Act” means the Securities Exchange Act of 1934, as amended. 1.3.3 “Affiliate” means a Person or Persons directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Person(s) in question.  The term “control,” as used in the immediately preceding sentence, means, with respect to a Person that is a corporation, the right to the exercise, directly or indirectly, of more than 50 percent of the voting rights attributable to the shares of such controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such controlled Person. 1.3.4 “Articles” means the Articles of Incorporation of the Company, as the same may be amended from time to time. 1.3.5 “Closing” shall mean the Closing of the transactions contemplated by this Agreement on the Closing Date. 1.3.6 “Closing Date” means the date on which the payment of the Purchase Price (as defined herein) by the Investor to the company is completed pursuant to this Agreement to purchase the Stock and Warrants, which shall occur on or before August 18, 2006. 1.3.7 “Common Stock” means shares of common stock of the Company, par value $0.05 per share. 1.3.8 "Escrow Agreement" shall mean the Escrow Agreement among the Company, the Investor and DLA Piper Rudnick Gray Cary U.S. LLP, as Escrow Agent, attached hereto as Exhibit C. 1.3.9 "Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise of any securities issued hereunder, and (c) securities issued pursuant to acquisitions or strategic transactions, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 2 OF 27 -------------------------------------------------------------------------------- 1.3.10 "Material Adverse Effect" shall mean any adverse effect on the business, operations, properties or financial condition of the Company that is material and adverse to the Company and its subsidiaries and affiliates, taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its material obligations under this Agreement or the Registration Rights Agreement or to perform its obligations under any other material agreement. 1.3.11 “Utah Act” means the Utah Revised Business Corporation Act, as amended. 1.3.12 “Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity. 1.3.13 “Purchase Price” means the One Million ($1,000,000.00) US Dollars paid by the Investor to the Company for the Stock and the Warrants. 1.3.14 “Registration Rights Agreement" shall mean the registration rights agreement between the Investor and the Company attached hereto as Exhibit A. 1.3.15 "Registration Statement" shall mean the registration statement under the 1933 Act to be filed with the Securities and Exchange Commission for the registration of the Shares pursuant to the Registration Rights Agreement attached hereto as Exhibit A. 1.3.16 “SEC” means the Securities and Exchange Commission. 1.3.17 "SEC Documents" shall mean the Company's latest Form 10-K or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the Proxy Statement for its latest fiscal year as of the time in question until such time as the Company no longer has an obligation to maintain the effectiveness of a Registration Statement as set forth in the Registration Rights Agreement. 1.3.18 "Shares" shall mean, collectively, the shares of Common Stock of the Company issued hereunder and those shares of Common Stock issuable to the Investor upon exercise of the Warrants. 1.3.19 “Subsequent Financing” shall mean any offer and sale of shares of Common Stock or debt that is initially convertible into shares of Common Stock or otherwise senior or superior to the Common Stock. 1.3.20 “Transaction Documents” shall mean this Agreement, all Schedules and Exhibits attached hereto and all other documents and instruments to be executed and delivered by the parties in order to consummate the transactions contemplated hereby, including, but not limited to the documents listed in Sections 3.2 and 3.3 hereof. 1.3.21 “Warrants” shall mean the Common Stock Purchase Warrants in the form attached hereto Exhibit B. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 3 OF 27 -------------------------------------------------------------------------------- ARTICLE II SALE AND PURCHASE OF BROADCAST INTERNATIONAL, INC, STOCK AND WARRANTS PURCHASE PRICE 2.1 Sale of Stock and Issuance of Warrants.   (a) Upon the terms and subject to the conditions set forth herein, and in accordance with applicable law, the Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, on the Closing Date 666,667 shares of Stock and the Warrants for the (the “Purchase Price”) of One Million Dollars ($1,000,000.00).  The Purchase Price shall be paid by the Investor to the Company on the Closing Date by a wire transfer or check of the Purchase Price into escrow to be held by the escrow agent pursuant to the terms of the Escrow Agreement.  The Company shall cause the Stock and the Warrants to be issued to the Investor upon the release of the Purchase Price to the Company by the escrow agent pursuant to the terms of the Escrow Agreement.  The Company shall register the shares of Common Stock pursuant to the terms and conditions of a Registration Rights Agreement attached hereto as Exhibit A. (b) Upon execution and delivery of this Agreement and the Company’s receipt of the Purchase Price from the Escrow Agent pursuant to the terms of the Escrow Agreement, the Company shall issue to the Investor the Warrants to purchase an aggregate of 5,500,000 shares of Common Stock at exercise prices as stated in the Warrants, all pursuant to the terms and conditions of the form of Warrants attached hereto as Exhibit B;            (c)         The Sale and Purchase of Stock and Warrants herein is conditional upon: (i)  execution of Stock Exchange Agreement by and between the Company and Sun Media Investment Holding Ltd.; (ii) execution of Technology License regarding YL Studio Technology by and between the Company and the Investor; and (iii) execution of Technology License Agreement regarding IPTV Platform Technology by and between the Company and Broadvision Global Limited. 2.2 Purchase Price.  The Purchase Price shall be delivered by the Investor in the form of a check or wire transfer made payable to the Company in United States Dollars from the Investor to the escrow agent pursuant to the Escrow Agreement on the Closing Date. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 4 OF 27 -------------------------------------------------------------------------------- ARTICLE III CLOSING DATE AND DELIVERIES AT CLOSING 3.1 Closing Date. The closing of the transactions contemplated by this Agreement (the “Closing”), unless expressly determined herein, shall be held at the offices of the Company, at 5:00 P.M. local time, on the Closing Date or on such other date and at such other place as may be mutually agreed by the parties, including closing by facsimile with originals to follow.   3.2 Deliveries by the Company.  In addition to and without limiting any other provision of this Agreement, the Company agrees to deliver, or cause to be delivered, to the escrow agent under the Escrow Agreement, the following: (a) At or prior to Closing, an executed Agreement with all exhibits and schedules attached hereto; (b) At or prior to Closing, an executed Warrant in the name of the Investor in the form attached hereto as Exhibit B; (c) The executed Registration Rights Agreement; (d) Certifications in form and substance acceptable to the Company and the Investor from any and all brokers or agents involved in the transactions contemplated hereby as to the amount of commission or compensation payable to such broker or agent as a result of the consummation of the transactions contemplated hereby and from the Company or Investor, as appropriate, to the effect that reasonable reserves for any other commissions or compensation that may be claimed by any broker or agent have been set aside; (e) Evidence of approval of the Board of Directors and Shareholders of the Company of the Transaction Documents and the transactions contemplated hereby; (f) Certificate of the President and the Secretary of the Company as requested by the Investor; (g) Certificate of Existence or Authority to Transact Business of the Company issued by the Secretary of State for Utah; (h) An opinion from the Company’s counsel concerning the Transaction Documents and the transactions contemplated hereby in form and substance reasonably acceptable to Investor; (i) Stock Certificate in the name of Investor evidencing the Stock; (j) The executed Escrow Agreement; and (k) Copies of all executive employment agreements, all past and present financing documentation or other documentation where stock could potentially be issued or issued as payment, all past and present litigation documents and historical financials. (l) Such other documents or certificates as shall be reasonably requested by Investor or its counsel. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 5 OF 27 -------------------------------------------------------------------------------- 3.3 Deliveries by Investor.  In addition to and without limiting any other provision of this Agreement, the Investor agrees to deliver, or cause to be delivered, to the escrow agent under the Escrow Agreement, the following: (a) A deposit in the amount of the Investor Funds; (b) The executed Agreement with all Exhibits and Schedules attached hereto; (c) The executed Registration Rights Agreement; (d) The executed Escrow Agreement; and (e) Such other documents or certificates as shall be reasonably requested by the Company or its counsel. In the event any document provided to the other party in Paragraphs 3.2 and 3.3 herein are provided by facsimile, the party shall forward an original document to the other party within seven (7) business days. 3.4 Further Assurances.  The Company and the Investor shall, upon request, on or after the Closing Date, cooperate with each other (specifically, the Company shall cooperate with the Investor, and the Investor shall cooperate with the Company) by furnishing any additional information, executing and delivering any additional documents and/or other instruments and doing any and all such things as may be reasonably required by the parties or their counsel to consummate or otherwise implement the transactions contemplated by this Agreement. 3.5 Waiver.  The Investor may waive any of the requirements of Section 3.2 of this Agreement, and the Company at its discretion may waive any of the provisions of Section 3.3 of this Agreement.  The Investor may also waive any of the requirements of the Company under the Escrow Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BROADCAST INTERNATIONAL, INC. The Company represents and warrants to the Investor as of the date hereof and as of Closing (which warranties and representations shall survive the Closing regardless of what examinations, inspections, audits and other investigations the Investor has heretofore made or may hereinafter make with respect to such warranties and representations) as follows: 4.1 Organization and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah, and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and is duly qualified to do business in any other jurisdiction by virtue of the nature of the businesses conducted by it or the ownership or leasing of its properties, except STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 6 OF 27 -------------------------------------------------------------------------------- where the failure to be so qualified will not, when taken together with all other such failures, have a Material Adverse Effect on the business, operations, properties, assets, financial condition or results of operation of the Company and its subsidiaries taken as a whole. 4.2 Articles of Incorporation and By-Laws.  The complete and correct copies of the Company’s Articles and By-Laws, as amended or restated to date which have been filed with the Securities and Exchange Commission  are a complete and correct copy of such document as in effect on the date hereof and as of the Closing Date. 4.3 Capitalization. 4.3.1 The authorized and outstanding capital stock of the Company is set forth in The Company’s Annual Report on Form 10-KSB, filed on March 31, 2006 with the Securities and Exchange Commission and updated on all subsequent SEC Documents.  All shares of capital stock have been duly authorized and are validly issued, and are fully paid and no assessable, and free of preemptive rights. 4.3.2 As of the date of this Agreement, the authorized capital stock of the Company consists of 40,000,000 shares of common Stock ($.05 par value) of which approximately 24,048,275 share of common Stock are issued and outstanding.  As of Closing, following the issuance by the Company of the Stock to the Investor, the authorized capital stock of the Company will consist of 40,000,000 shares of Common Stock ($.05 par value) of which approximately 25,398,275 shares of stock shall be issued and outstanding.  All outstanding shares of capital stock have been duly authorized and are validly issued, and are fully paid and nonassessable and free of preemptive rights.  All shares of capital stock described above to be issued have been duly authorized and when issued, will be validly issued, fully paid and nonassessable and free of preemptive rights. Schedule 4.3.2 hereby contains all shares and derivatives currently and potentially outstanding.  The company hereby represents that any and all shares and current potentially dilutive events have been included in Schedule 4.3.2, including employment agreements, acquisition, consulting agreements, debts, payments, financing or business relationships that could be paid in equity, derivatives or resulting in additional equity issuances that could potentially occur. 4.3.3 Except pursuant to this Agreement and as set forth in Schedule 4.3 hereto, and as set forth in the Company’s SEC Documents, filed with the SEC, as of the date hereof and as of the Closing Date, there are not now outstanding options, warrants, rights to subscribe for, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any class of capital stock of the Company, or agreements, understandings or arrangements to which the Company is a party, or by which the Company is or may be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to subscribe for, calls or commitment of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of any class of its capital stock.  The Company agrees to inform the Investors in writing of any additional warrants granted prior to the Closing Date. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 7 OF 27 -------------------------------------------------------------------------------- 4.3.4 The Company on the Closing Date (i) will have full right, power, and authority to sell, assign, transfer, and deliver, by reason of record and beneficial ownership, to the Investor, the Stock hereunder, free and clear of all liens, charges, claims, options, pledges, restrictions, and encumbrances whatsoever; and (ii) upon exercise of the Warrants, the Investor will acquire good and marketable title to the shares issuable thereunder, free and clear of all liens, charges, claims, options, pledges, restrictions, and encumbrances whatsoever, except as otherwise provided in this Agreement as to the limitation on the voting rights of such shares in certain circumstances. 4.4 Authority. The Company has all requisite corporate power and authority to execute and deliver this Agreement, the Stock, and the Warrants, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company is necessary to authorize this Agreement or to consummate the transactions contemplated hereby except as disclosed in this Agreement.  This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 4.5 No Conflict; Required Filings and Consents. The execution and delivery of this Agreement by the Company does not, and the performance by the Company of their respective obligations hereunder will not:  (i) conflict with or violate the Articles or By-Laws of the Company; (ii) conflict with, breach or violate any federal, state, foreign or local law, statute, ordinance, rule, regulation, order, judgment or decree (collectively, "Laws") in effect as of the date of this Agreement and applicable to the Company; or (iii) result in any breach of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, give to any other entity any right of termination, amendment, acceleration or cancellation of, require payment under, or result  in the creation of a lien or encumbrance on any of the properties or assets of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by the Company or any of its properties or assets is bound.  Excluding from the foregoing are such violations, conflicts, breaches, defaults, terminations, accelerations, creations of liens, or incumbency that would not, in the aggregate, have a Material Adverse Effect. 4.6 Report and Financial Statements. The Company’s Annual Report on Form 10-KSB, filed on March 31, 2006 with the SEC contains the audited financial statements of the Company.  The Company has previously provided to the Investor the audited financial statements of the Company as of December 31, 2005 (collectively, the “Financial Statements”). Each of the balance sheets contained in or incorporated by reference into any such Financial Statements (including the related notes and schedules thereto) fairly presented the financial position of the Company, as of its date, and each of the statements of income and changes in stockholders’ equity and cash flows or equivalent statements in such Financial Statements (including any STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 8 OF 27 -------------------------------------------------------------------------------- related notes and schedules thereto) fairly presents, changes in stockholders’ equity and changes in cash flows, as the case may be, of the Company, for the periods to which they relate, in each case in accordance with United States generally accepted accounting principles (“U.S. GAAP”) consistently applied during the periods involved, except in each case as may be noted therein, subject to normal year-end audit adjustments in the case of unaudited statements.  The books and records of the Company have been, and are being, maintained in all material respects in accordance with U.S. GAAP and any other applicable legal and accounting requirements and reflect only actual transaction.   4.7 Compliance with Applicable Laws. The Company is not in violation of, or, to the knowledge of the Company is under investigation with respect to or has been given notice or has been charged with the violation of any Law of a governmental agency, except for violations which individually or in the aggregate do not have a Material Adverse Effect.   4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or Commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. 4.9 SEC Documents. The Company acknowledges that the Company is a publicly held company and has made available to the Investor after demand true and complete copies of any requested SEC Documents. The Company has registered its Common Stock pursuant to Section 12(g) of the 1934 Act, and the Common Stock is quoted and traded on the OTC Bulletin Board of the National Association of Securities Dealers, Inc.  The Company has received no notice, either oral or written, with respect to the continued quotation or trading of the Common Stock on the OTC Bulletin Board. The Company has not provided to the Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act, and rules and regulations of the SEC promulgated thereunder and the SEC Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.10 Litigation. To the knowledge of the Company, no litigation, claim, or other proceeding before any court or governmental agency is pending or to the knowledge of the Company, threatened against the Company, the prosecution or outcome of which may have a Material Adverse Effect. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 9 OF 27 -------------------------------------------------------------------------------- 4.11 Exemption from Registration. Subject to the accuracy of the Investor’s representations in Article V, except as required pursuant to the Registration Rights Agreement, the sale of the Common Stock and Warrants by the Company to the Investor will not require registration under the 1933 Act, but may require registration under Utah State securities law if applicable to the Investor.  Upon exercise of the Warrants in accordance with their terms, the shares underlying the Warrants will be duly and validly issued, fully paid, and non-assessable.  The Company is issuing the Stock and the Warrants in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under the 1933 Act, and/or Section 4(2) and Regulation S of the 1933 Act. 4.12 No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its Affiliates nor, to the knowledge of the Company, any Person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D as promulgated by the SEC under the 1933 Act) or general advertising with respect to the sale of the Stock or Warrants, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Stock or Warrants, under the 1933 Act, except as required herein. 4.13 No Material Adverse Effect. Except as set forth in Schedule 4.13 attached hereto, since December 31 2005, no event or circumstance resulting in a Material Adverse Effect has occurred or exists with respect to the Company. No material supplier or customer has given notice, oral or written, that it intends to cease or reduce the volume of its business with the Company from historical levels. Since June 30, 2004, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, prospects, operations or financial condition, that, under any applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in writing to the Investor. 4.14 Material Non-Public Information. The Company has not disclosed to the Investors any material non-public information that (i) if disclosed, would reasonably be expected to have a material effect on the price of the Common Stock or (ii) according to applicable law, rule or regulation, should have been disclosed publicly by the Company prior to the date hereof but which has not been so disclosed. 4.15 Internal Controls And Procedures. The Company maintains books and records and internal accounting controls which provide reasonable assurance that (i) all transactions to which the Company or any subsidiary is a party or by which its properties are bound are executed with management's authorization; (ii) the recorded accounting of the Company's consolidated assets is compared with existing assets at regular intervals; (iii) access to the Company's consolidated assets is permitted only in accordance with management's authorization; and (iv) all transactions to which the Company or any subsidiary is a party or by which its properties are bound are recorded as necessary to permit preparation of the financial statements of the Company in accordance with U.S. generally accepted accounting principles. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 10 OF 27 -------------------------------------------------------------------------------- 4.16 Full Disclosure.  No representation or warranty made by the Company in this Agreement and no certificate or document furnished or to be furnished to the Investor pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. 4.17  Independent Board.  As of the date of this Agreement, the Board of Directors of the Company consists of a minimum of five directors with a majority being independent as defined by the NASD.  At the Closing, the Board of Directors of the Company shall consist of Seven directors, four of whom shall be independent.  As of the date of this Agreement, the Audit and Compensation Committees of the Board of Directors of the Company are comprised, and at the Closing will be comprised, of independent directors. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE INVESTORS   The Investor represents and warrants to the Company that: 5.1 Organization and Standing of the Investor. The Investor is a corporation  duly formed, validly existing and in good standing under the laws of Hong Kong.  The Investor was not formed for the purpose of investing solely in the Stock, the Warrants or the shares of Common Stock which are the subject of this Agreement. 5.2 Authorization and Power. The Investor has the requisite power and authority to enter into and perform this Agreement and to purchase the securities being sold to it hereunder. The execution, delivery and performance of this Agreement by the Investor and the consummation by the Investor of the transactions contemplated hereby have been duly authorized by all necessary partnership action where appropriate. This Agreement and the Registration Rights Agreement have been duly executed and delivered by the Investor and at the Closing shall constitute valid and binding obligations of the Investor enforceable against the Investor in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. 5.3 No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Investor of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Investor's charter documents or bylaws where appropriate or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument to which the STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 11 OF 27 -------------------------------------------------------------------------------- Investor is a party, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to the Investor or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a Material Adverse Effect on such Investor). The Investor is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of such Investor’s obligations under this Agreement or to purchase the securities from the Company in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein. 5.4 Financial Risks. The Investor acknowledges that such Investor is able to bear the financial risks associated with an investment in the securities being purchased by the Investor from the Company and that it has been given full access to such records of the Company and the subsidiaries and to the officers of the Company and the subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation. The Investor is capable of evaluating the risks and merits of an investment in the securities being purchased by the Investor from the Company by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and the Investor is capable of bearing the entire loss of its investment in the securities being purchased by the Investor from the Company. 5.5 Accredited Investor. The Investor is (i) an “accredited investor” as that term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the securities being purchased by the Investor from the Company. 5.6 Brokers. Except as set forth in Schedule 4.8, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or Commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Investor. 5.7 Knowledge of Company. The Investor and such Investor’s advisors, if any, have been, upon request, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the securities being purchased by the Investor from the Company.  The Investor and such Investor’s advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 12 OF 27 -------------------------------------------------------------------------------- 5.8 Risk Factors. The Investor understands that such Investor’s investment in the securities being purchased by the Investor from the Company involves a high degree of risk.  The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the securities being purchased by the Investor from the Company. The Investor warrants that such Investor is able to bear the complete loss of such Investor’s investment in the securities being purchased by the Investor from the Company. 5.9 Full Disclosure. No representation or warranty made by the Investor in this Agreement and no certificate or document furnished or to be furnished to the Company pursuant to this Agreement contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading. Except as set forth or referred to in this Agreement, Investor does not have any agreement or understanding with any person relating to acquiring, holding, voting or disposing of any equity securities of the Company. ARTICLE VI COVENANTS OF THE COMPANY 6.1 Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect according to the provisions of the Registration Rights Agreement and the Company shall comply in all material respects with the terms thereof. 6.2 Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, shares of Common Stock for the purpose of enabling the Company to issue the shares of Common Stock underlying the Warrants. Provided, however, the parties hereto acknowledge that if all of the issuance of stock were to be effected immediately, there would not be sufficient authorized capital available to satisfy all such issuances.  Therefore, the Company shall undertake to increase its authorized capital in order to satisfy all such potential issuances. 6.3 Compliance with Laws. The Company hereby agrees to comply in all respects with the Company's reporting, filing and other obligations under the Laws. 6.4 Exchange Act Registration. The Company (a) will continue its obligation to report to the SEC under Section 13 of the 1934 Act and will use its best efforts to comply in all respects with its reporting and filing obligations under the 1934 Act, and will not take any action or file any document (whether or not permitted by the 1934 Act or the rules thereunder) to terminate or suspend any such registration or to terminate or suspend its reporting and filing obligations under the 1934 until the Investors have disposed of all of their Shares. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 13 OF 27 -------------------------------------------------------------------------------- 6.5 Corporate Existence; Conflicting Agreements. The Company will take all steps necessary to preserve and continue the corporate existence of the Company. The Company shall not enter into any agreement, the terms of which agreement would restrict or impair the right or ability of the Company to perform any of its obligations under this Agreement or any of the other agreements attached as exhibits hereto. 6.6 Convertible Debt. At such time as the Investor has exercised warrants sufficient to provide the Company with proceeds of such exercises in excess of $10 million , the Company shall pre pay all of its  convertible debt or force the conversion of such convertible debt to common stock   and in such event for a period of three years from the closing the Company will not issue any convertible debt. 6.7 Debt Limitation. The Company agrees for three years after Closing not to enter into any new borrowings of more than three times as much as the sum of the EBITDA from recurring operations over the past four quarters. 6.8 Reset Equity Deals.  At such time as the Investor has exercised warrants sufficient to provide the Company with proceeds from such exercises in excess of $10 million , the Company shall cause to be cancelled any and all reset features related to any shares outstanding that could result in additional shares being issued. For a period of three years from the closing the Company will not enter into any transactions that have any reset features that could result in additional shares being issued, without the consent of the Investor. 6.9 Independent Directors. The Company shall have caused the appointment of the majority of the board of directors to be qualified independent directors, as defined by the NASD, before Closing.  If at any time after Closing the board shall not be composed in the majority of qualified independent directors, the Company shall pay to the Investors, pro rata, as liquidated damages and not as a penalty, an amount equal to eighteen percent (18%) of the Purchase Price per annum, payable monthly in cash or Stock at the option of the Investor. Provided, however, the Company shall have 30 days following the time that the Board does not have a majority of independent directors to appoint sufficient independent directors to restore the Board’s independence before any damages shall accrue and in any event, such payment of liquidated damages shall continue only so long as the Board is not comprised of a majority of independent directors. The parties agree that the only damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages.  Nothing shall preclude the Investor from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement.  The parties hereto agree that the liquidated damages provided for in this Section 6.10 constitute a reasonable estimate of the damages that may be incurred by the Investor by reason of the failure of the Company to appoint at least two independent directors in accordance with the provision hereof. 6.10 Independent Directors Become Majority of Audit and Compensation Committees.  The Company will cause the appointment of a majority of outside directors to the audit and compensation committees of the board of directors before Closing.  If at any time after Closing STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 14 OF 27 -------------------------------------------------------------------------------- such independent directors do not compose the majority of the audit and compensation committees, the Company shall pay to the Investors, pro rata, as liquidated damages and not as a penalty, an amount equal to eighteen percent (18%) of the Purchase Price per annum, payable monthly in cash or Stock at the option of the Investor.  The parties agree that the only damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages.  Nothing shall preclude the Investor from pursuing other remedies or obtaining specific performance or other equitable relief with respect to this Agreement.   6.11 Use of Proceeds. The Company will use the proceeds from the sale of the Stock and the Warrants (excluding amounts paid by the Company for legal and administrative fees in connection with the sale of such securities) for Fees, working capital and acquisitions. 6.12 Right of First Refusal. The Investor shall have the right to participate in any subsequent funding by the Company on a pro rata basis at One Hundred percent (100%) of the offering price. 6.13 Price Adjustment. From the date that the Investor has exercised warrants sufficient to provide the Company with proceeds from such exercises in excess of $10 million until such time as the Investor holds no warrants , if the Company closes on the sale of a note or notes, shares of Common Stock, or shares of any class of Stock at a price per share of Common Stock, or with a conversion right to acquire Common Stock at a price per share of Common Stock, that is less than the Purchase Price (as adjusted to the capitalization per share as of the Closing Date, following any stock splits, stock dividends, or the like) (collectively, the “Subsequent Purchase Price”), the Company shall make a post-Closing adjustment in the Purchase Price so that the effective price per share paid by the Investor is reduced to being equivalent to such lower purchase price after taking into account any prior exercises of the Warrant. 6.14 Insider Selling. The earliest any “Insiders” can start selling their shares in the public market shall be two years from Closing. Insiders shall include all officers and directors of the Company. Bruno Wu, Leon Frenkle and the Investor shall not be considered “Insiders”. 6.15 Employment and Consulting Contracts. For three years after the Closing Company must have a unanimous opinion from the Compensation Committee of the Board of Directors that any awards other than salary are usual, appropriate and reasonable for any officer, director, employee or consultant holding a similar position in other fully reporting public companies with independent majority boards with similar market capitalizations in the same industry with securities listed on the OTCBB, ASE, NYSE or NASDAQ. 6.16 Subsequent Equity Sales.  From the date that the Investor has exercised warrants sufficient to provide the Company with proceeds from such exercises in excess of $10 million until such time as the Investor holds no warrants, the Company shall be prohibited from effecting or entering into an agreement to effect any Subsequent Financing involving a “Variable Rate Transaction” or an “MFN Transaction” (each as defined below).  The term “Variable Rate STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 15 OF 27 -------------------------------------------------------------------------------- Transaction” shall mean a transaction in which the Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock.  The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering.  Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages. Notwithstanding the foregoing, this Section 6.18 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction or MFN Transaction shall be an Exempt Issuance. 6.17 Amendment to Certificate of Incorporation.  At or before the annual meeting of the stockholders of the Company held after October 1, 2007 and in the event all of the A and B Warrants are exercised prior to such meeting, the Board of Directors shall propose and submit to the holders of the Common Stock for approval, an amendment to the Articles of Incorporation that provides substantially as follows:   “The terms and conditions of any rights, options and warrants approved by the Board of Directors may provide that any or all of such terms and conditions may be waived or amended only with the consent of the holders of a designated percentage of a designated class or classes of capital stock of the Corporation (or a designated group or groups of holders within such class or classes, including but not limited to disinterested holders), and the applicable terms and conditions of any such rights, options or warrants so conditioned may not be waived or amended absent such consent.”. 6.18 Stock Splits. All forward and reverse stock splits shall effect all equity and derivative holders proportionately. 6.19  Retention of Investor Relations / Public Relations.  The Company must retain Telperion Business Consultants  within 30 days after Closing Date as one of the Company’s investor relations firms for compensation of no less than $10,000 per month. If at any time after 30 days from the Closing, the Company shall not have retained an investor relations and public relations firm, the Company shall pay to the Investors, pro rata, as liquidated damages and not as a penalty, an amount equal to twenty eight percent (28%) per annum of the Purchase Price for the Shares still held by the Investor on such date, payable monthly in cash.  The parties agree that the only damages payable for a violation of the terms of this Agreement with respect to which STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 16 OF 27 -------------------------------------------------------------------------------- liquidated damages are expressly provided shall be such liquidated damages Closing Date.  The parties hereto agree that the liquidated damages provided for in this Section 6.23 constitute a reasonable estimate of the damages that may be incurred by the Investor. Nothing shall preclude the Investor from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. ARTICLE VII COVENANTS OF THE INVESTOR 7.1 Compliance with Law. The Investor's trading activities with respect to shares of the Company's Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and rules and regulations of any public market on which the Company's Common Stock is listed.   7.2 Transfer Restrictions. The Investor’s acknowledge that (1) the Stock, Warrants and shares underlying the Warrants have not been registered under the provisions of the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Investor shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Stock, Warrants and shares underlying the Warrants to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; and (2) any sale of the Stock, Warrants and shares underlying the Warrants made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such securities under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder. 7.3 Restrictive Legend. The Investor acknowledges and agrees that the Stock, the Warrants and the Shares underlying the Warrants, and, until such time as the Shares underlying the Warrants have been registered under the 1933 Act and sold in accordance with an effective Registration Statement, certificates and other instruments representing any of the Shares, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such securities): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT." STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 17 OF 27 -------------------------------------------------------------------------------- 7.4 Amendment to Articles of Incorporation. Investor hereby agrees to vote any shares of capital stock that it may own directly or beneficially, for the amendment to the Articles of Incorporation referenced in Section 6.2.  Pending adoption of such amendment, Investor hereby agrees for itself and its successors and assigns that neither this Section 7.4 or Section 6.2 above, or any restriction on exercise of the Warrant shall be amended, modified or waived without the consent of the holders of a majority of the shares of Common Stock held by Persons who are not Affiliates of the Company, or the Investor or Affiliates of the Investor. ARTICLE VIII CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS The obligation of the Company to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date, of the following conditions: 8.1 No Termination. This Agreement shall not have been terminated pursuant to Article X hereof. 8.2 Representations True and Correct. The representations and warranties of the Investor contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date. 8.3 Compliance with Covenants. The Investor shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date. 8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby. ARTICLE IX CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS The obligation of the Investors to consummate the transactions contemplated hereby shall be subject to the fulfillment, on or prior to Closing Date unless specified otherwise, of the following conditions: STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 18 OF 27 -------------------------------------------------------------------------------- 9.1 No Termination. This Agreement shall not have been terminated pursuant to Article X hereof. 9.2 Representations True and Correct. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on as of the Closing Date. 9.3 Compliance with Covenants . The Company shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied by it prior to or at the Closing Date. 9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending by any public authority or individual or entity before any court or administrative body to restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions contemplated hereby or to recover any damages or obtain other relief as a result of the transactions proposed hereby. ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10. Termination. This Agreement may be terminated at any time prior to the Closing Date 10.1.1 by mutual written consent of the Investor and the Company; 10.1.2 by the Company upon a material breach of any representation, warranty, covenant or agreement on the part of the Investor set forth in this Agreement, or the Investor upon a material breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, or if any representation or warranty of the Company or the Investor, respectively, shall have become untrue, in either case such that any of the conditions set forth in Article VIII or Article IX hereof would not be satisfied (a "Terminating Breach"), and such breach shall, if capable of cure, not have been cured within five (5) business days after receipt by the party in breach of a notice from the non-breaching party setting forth in detail the nature of such breach. 10. Effect of Termination. Except as otherwise provided herein, in the event of the termination of this Agreement pursuant to Section 10.1 hereof, there shall be no liability on the part of the Company or the Investor or any of their respective officers, directors, agents or other representatives and all rights and obligations of any party hereto shall cease; provided that in the event of a Terminating Breach, the breaching party shall be liable to the STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 19 OF 27 -------------------------------------------------------------------------------- non-breaching party for all costs and expenses incurred by the non-breaching party not to exceed $50,000.00. 10.3 Amendment. This Agreement may be amended by the parties hereto any time prior to the Closing Date by an instrument in writing signed by the parties hereto. 10.4 Waiver. At any time prior to the Closing Date, the Company or the Investor, as appropriate, may: (a) extend the time for the performance of any of the obligations or other acts of other party or; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto which have been made to it or them; or (c) waive compliance with any of the agreements or conditions contained herein for its or their benefit.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound hereby. ARTICLE XI GENERAL PROVISIONS 11. Transaction Costs. Except as otherwise provided herein, each of the parties shall pay all of his or its costs and expenses (including attorney fees and other legal costs and expenses and accountants’ fees and other accounting costs and expenses) incurred by that party in connection with this Agreement. 11.2 Indemnification. The Investor agrees to indemnify, defend and hold the Company (following the Closing Date) and its officers and directors harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of or result from any breach of this Agreement by such Investor or failure by such Investor to perform with respect to any of its representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement.  The Company agrees to indemnify, defend and hold the Investor harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out of, result from or relate to any breach of this Agreement or failure by the Company to perform with respect to any of its representations, warranties or covenants contained in this Agreement or in any exhibit or other instrument furnished or to be furnished under this Agreement.  In no event shall the Company or the Investors be entitled to recover consequential or punitive damages resulting from a breach or violation of this Agreement nor shall any party have any liability hereunder in the event of gross negligence or willful misconduct of the indemnified party.  In the event of a breach of this Agreement by the Company, the Investor shall be entitled to pursue a remedy of specific performance upon tender into the Court an STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 20 OF 27 -------------------------------------------------------------------------------- amount equal to the Purchase Price hereunder. The indemnification by the Investor shall be limited to $50,000.00. 11.3 Headings. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits, Warrants and documents referred to herein) constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.   11.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows: If to the Company: Broadcast International Inc 7050 Union Park Ave. Suite 600 Salt Lake City UT 84047 Attention: Rodney Tiede With a copy to: Broadcast International Inc 7050 Union Park Ave. Suite 600 Salt Lake City UT 84047 Attn:  Reed Benson, Esq. STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 21 OF 27 -------------------------------------------------------------------------------- If to the Investor: Yang Lan Studio Ltd. Anson Xu #387, Yongjia Road Shanghai, 20031 P.R. China 11.6 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any such term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 11.7 Binding Effect. All the terms and provisions of this Agreement whether so expressed or not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective administrators, executors, legal representatives, heirs, successors and assignees. 11.8 Preparation of Agreement. This Agreement shall not be construed more strongly against any party regardless of who is responsible for its preparation.  The parties acknowledge each contributed and is equally responsible for its preparation. 11.9 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah, without giving effect to applicable principles of conflicts of law. 11.10 Jurisdiction. This Agreement shall be exclusively governed by and construed in accordance with the laws of the State of Utah. If any action is brought among the parties with respect to this Agreement or otherwise, by way of a claim or counterclaim, the parties agree that in any such action, and on all issues, the parties irrevocably waive their right to a trial by jury. Exclusive jurisdiction and venue for any such action shall be the Federal Courts serving the State of Utah. In the event suit or action is brought by any party under this Agreement to enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate court. 11.11 Preparation and Filing of Securities and Exchange Commission filings. The Investor shall reasonably assist and cooperate with the Company in the preparation of all filings with the SEC after the Closing Date due after the Closing Date.   STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 22 OF 27 -------------------------------------------------------------------------------- 11.12 Further Assurances, Cooperation. Each party shall, upon reasonable request by the other party, execute and deliver any additional documents necessary or desirable to complete the transactions herein pursuant to and in the manner contemplated by this Agreement.  The parties hereto agree to cooperate and use their respective best efforts to consummate the transactions contemplated by this Agreement. 11.13 Survival. The representations, warranties, covenants and agreements made herein shall survive the Closing of the transaction contemplated hereby. 11.14 Third Parties. Except as disclosed in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties hereto and their respective administrators, executors, legal representatives, heirs, successors and assignees.  Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement. 11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall nay single or partial exercise of any such right preclude other or further exercise thereof or of any other right.  All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 11.16 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.   [SIGNATURES ON FOLLOWING PAGE] STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 23 OF 27 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Investors and the Company have as of the date first written above executed this Agreement. THE COMPANY: BROADCAST INTERNATIONAL, INC /s/ Rodney M. Tiede By: Rodney M. Tiede Title: President INVESTOR: YANG LAN STUDIO LTD. /s/ Bruno Wu By: Bruno Wu Title: President STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 24 OF 27 -------------------------------------------------------------------------------- Exhibit A Registration Rights Agreement STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 25 OF 27 -------------------------------------------------------------------------------- Exhibit B Warrants STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 26 OF 27 -------------------------------------------------------------------------------- Exhibit C Escrow Agreement STOCK PURCHASE AGREEMENT BETWEEN BROADCAST INTERNATIONAL, INC. CORPORATION AND YANG LAN STUDIO LTD PAGE 27 OF 27

THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.   Principal Amount $454,545.46     Issue Date: May 31, 2006 Purchase Price $400,000.00 CONVERTIBLE NOTE FOR VALUE RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter called "Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT, Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax: 011-42-32323196 (the "Holder") or order, without demand, the sum of FOUR HUNDRED FIFTY-FOUR THOUSAND FIVE HUNDRED FORTY-FIVE DOLLARS AND FORTY-SIX CENTS ($454,545.46), on May 31, 2007 (the "Maturity Date"), if not retired sooner. This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: ARTICLE I GENERAL PROVISIONS 1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period and during the pendency of any other Event of Default (as defined below) a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2 Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. Unless previously converted into Common Stock in accordance with Article II hereof, the Note shall be payable in full on the Maturity Date, provided, that if an Event of Default has occurred, the Borrower may extend the Maturity Date up to an amount of time equal to the pendency of the Event of Default. Such extension must be on notice in writing. -------------------------------------------------------------------------------- THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.   Principal Amount $113,636.37     Issue Date: May 31, 2006 Purchase Price $100,000.00 CONVERTIBLE NOTE FOR VALUE RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter called "Borrower"), hereby promises to pay to IROQUOIS MASTER FUND LTD., 641 Lexington Avenue, New York, NY 10022 (the "Holder") or order, without demand, the sum of ONE HUNDRED AND THIRTEEN THOUSAND SIX HUNDRED AND THIRTY-SIX DOLLARS AND THIRTY-SEVEN CENTS ($113,636,37), on May 31, 2007 (the "Maturity Date"), if not retired sooner. This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: ARTICLE I GENERAL PROVISIONS 1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period and during the pendency of any other Event of Default (as defined below) a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2 Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. Unless previously converted into Common Stock in accordance with Article II hereof, the Note shall be payable in full on the Maturity Date, provided, that if an Event of Default has occurred, the Borrower may extend the Maturity Date up to an amount of time equal to the pendency of the Event of Default. Such extension must be on notice in writing. -------------------------------------------------------------------------------- THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.   Principal Amount $227,272.73     Issue Date: May 31, 2006 Purchase Price $200,000.00 CONVERTIBLE NOTE FOR VALUE RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter called "Borrower"), hereby promises to pay to BRISTOL INVESTMENT FUND, LTD., Caledonian House, Jennett Street, George Town, Grand Cayman, Cayman Islands, Fax: (310) 696-0334 (the "Holder") or order, without demand, the sum of TWO HUNDRED AND TWENTY-SEVEN THOUSAND TWO HUNDRED AND SEVENTY-TWO DOLLARS AND SEVENTY-THREE CENTS ($227,272.73), on May 31, 2007 (the "Maturity Date"), if not retired sooner. This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: ARTICLE I GENERAL PROVISIONS 1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period and during the pendency of any other Event of Default (as defined below) a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2 Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. Unless previously converted into Common Stock in accordance with Article II hereof, the Note shall be payable in full on the Maturity Date, provided, that if an Event of Default has occurred, the Borrower may extend the Maturity Date up to an amount of time equal to the pendency of the Event of Default. Such extension must be on notice in writing. -------------------------------------------------------------------------------- THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESS ENERGY INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.   Principal Amount $227,272.73     Issue Date: May 31, 2006 Purchase Price $200,000.00 CONVERTIBLE NOTE FOR VALUE RECEIVED, NESS ENERGY INTERNATIONAL, INC., a Washington corporation (hereinafter called "Borrower"), hereby promises to pay to ELLIS INTERNATIONAL LTD., 53rd Street Urbanizacion Obarrio, Swiss Tower, 16th Floor, Panama, Republic of Panama, Fax: (516) 887-8990 (the "Holder") or order, without demand, the sum of TWO HUNDRED AND TWENTY-SEVEN THOUSAND TWO HUNDRED AND SEVENTY-TWO DOLLARS AND SEVENTY-THREE CENTS ($227,272.73), on May 31, 2007 (the "Maturity Date"), if not retired sooner. This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: This Note has been entered into pursuant to the terms of a subscription agreement between the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and shall be governed by the terms of such Subscription Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. The following terms shall apply to this Note: ARTICLE I GENERAL PROVISIONS 1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace period to pay any monetary amounts due under this Note, after which grace period and during the pendency of any other Event of Default (as defined below) a default interest rate of fifteen percent (15%) per annum shall apply to the amounts owed hereunder. 1.2 Conversion Privileges. The Conversion Privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default. Unless previously converted into Common Stock in accordance with Article II hereof, the Note shall be payable in full on the Maturity Date, provided, that if an Event of Default has occurred, the Borrower may extend the Maturity Date up to an amount of time equal to the pendency of the Event of Default. Such extension must be on notice in writing. -------------------------------------------------------------------------------- ARTICLE II CONVERSION RIGHTS The Holder shall have the right to convert the principal and any interest due under this Note into Shares of the Borrower's Common Stock, no par value per share (“Common Stock”) as set forth below. 2.1. Conversion into the Borrower's Common Stock. (a) The Holder shall have the right from and after the date of the issuance of this Note and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note, at the election of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully paid and nonassessable shares of Common Stock as such stock exists on the date of issuance of this Note, or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified, at the conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein. Upon delivery to the Borrower of a completed Notice of Conversion, a form of which is annexed hereto, Borrower shall issue and deliver to the Holder within three (3) business days after the Conversion Date (such third day being the “Delivery Date”) that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. At the election of the Holder, the Borrower will deliver accrued but unpaid interest on the Note, if any, through the Conversion Date directly to the Holder on or before the Delivery Date (as defined in the Subscription Agreement). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted by the Conversion Price. (b)  Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be $0.155. (c)  The Conversion Price and number and kind of shares or other securities to be issued upon conversion determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance. B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes that may be issued or outstanding, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event..   D. Share Issuance. So long as this Note is outstanding, if the Borrower shall issue or agree to issue any shares of Common Stock except for the Excepted Issuances (as defined in the Subscription Agreement) for a consideration less than the Conversion Price in effect at the time of such issue, then, and thereafter successively upon each such issue, the Conversion Price shall be reduced to such other lower issue price. For purposes of this adjustment, the issuance of any security carrying the right to convert such security into shares of Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Conversion Price upon the issuance of the above-described security and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the then applicable Maximum Base Price. The reduction of the Conversion Price described in this paragraph is in addition to other rights of the Holder described in this Note and the Subscription Agreement. (d) Whenever the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment. (e) During the period the conversion right exists, Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock issuable upon the full conversion of this Note and as described in the Subscription Agreement. Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note. 2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid. 2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Borrower on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of only 4.99% and aggregate conversion by the Holder may exceed 4.99%. The Holder shall have the authority and obligation to determine whether the restriction contained in this Section 2.3 will limit any conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the Notes are convertible shall be the responsibility and obligation of the Holder. The Holder may waive the conversion limitation described in this Section 2.3, in whole or in part, upon and effective after 61 days prior written notice to the Borrower to increase such percentage to up to 9.99%. The Holder may allocate which of the equity of the Borrower deemed beneficially owned by the Holder shall be included in the 4.99% amount or up to 9.99% amount as described above. 2.4 Optional Redemption of Principal Amount. Provided an Event of Default or an event which with the passage of time or the giving of notice could become an Event of Default has not occurred, whether or not such Event of Default has been cured, the Borrower will have the option of prepaying the outstanding Principal amount of this Note ("Optional Redemption"), in whole or in part, by paying to the Holder a sum of money equal to one hundred and twenty percent (120%) of the Principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the Holder arising under this Note or any Transaction Document through the Redemption Payment Date as defined below (the "Redemption Amount"). Borrower’s election to exercise its right to prepay must be by notice in writing (“Notice of Redemption”). A Notice of Redemption may be given only within five days after the closing price of the Common Stock as reported by Bloomberg L.P. for the Principal Market is less than $0.155 for five consecutive trading days (“Lookback Period”). The Notice of Redemption shall specify the date for such Optional Redemption (the "Redemption Payment Date"), which date shall be thirty (30) days after the date of the Notice of Redemption (the "Redemption Period"). A Notice of Redemption may not be given or fulfilled unless the Registration Statement (as defined in the Subscription Agreement) has been effective for the unrestricted public resale of the Registrable Securities (as defined in the Subscription Agreement) each day during the Lookback Period and through the Redemption Payment Date. The amount of Note principal included in a Notice of Redemption shall be reduced to an amount that would not cause the Holder to exceed the limitation described in Section 2.3 of this Note if the amount of Note Principal being redeemed was instead converted pursuant to Section 3.1. A Notice of Redemption shall not be effective with respect to any portion of the Principal Amount for which the Holder has a pending election to convert or for which a Conversion Notice is given during the Redemption Period. On the Redemption Payment Date, the Redemption Amount shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then (i) such Notice of Redemption will be null and void, (ii) Borrower will have no right to deliver another Notice of Redemption, and (iii) Borrower’s failure may be deemed by Holder to be a non-curable Event of Default. A Notice of Redemption may not be given nor may the Borrower effectuate a Redemption without the consent of the Holder, if at any time during the Redemption Period an Event of Default or an Event which with the passage of time or giving of notice could become an Event of Default (whether or not such Event of Default has been cured), has occurred. A Notice of Redemption must be given to all Holders of Notes similar to this Note, in proportion to the amount of Note Principal held by all Holders of such Notes. Except as described in this Section 2.4, the Note may not be paid prior to the Maturity Date without the consent of the Holder.                                                      ARTICLE III                                 EVENT OF DEFAULT The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment, or grace period, all of which hereby are expressly waived, except as set forth below: 3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of principal, interest or other sum due under this Note when due and such failure continues for a period of ten (10) days after the due date. The ten (10) day period described in this Section 3.1 is the same ten (10) day period described in Section 1.1 hereof. 3.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of the Subscription Agreement or this Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder. 3.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in the Subscription Agreement, or in any agreement, statement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date. 3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of forty-five (45) days. 3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower and if instituted against Borrower are not dismissed within 45 days of initiation. 3.7  Delisting. Delisting of the Common Stock from the OTC Bulletin Board (“Bulletin Board”) or Principal Market; failure to comply with the requirements for continued listing on the Bulletin Board for a period of five consecutive trading days; or notification from the Bulletin Board or any Principal Market that the Borrower is not in compliance with the conditions for such continued listing on the Bulletin Board or other Principal Market. 3.8 Non-Payment. A default by the Borrower under any one or more obligations in an aggregate monetary amount in excess of $100,000 for more than twenty days after the due date, unless the Borrower is contesting the validity of such obligation in good faith. 3.9 Stop Trade. A Securities and Exchange Commission or judicial stop trade order or Principal Market trading suspension that lasts for five or more consecutive trading days. 3.10 Failure to Deliver Common Stock or Replacement Note. Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note and Sections 7 and 11 of the Subscription Agreement, or, if required, a replacement Note. 3.11 Non-Registration Event. The occurrence of a Non-Registration Event as described in Section 11.4 of the Subscription Agreement. 3.12 Reservation Default. Failure by the Borrower to have reserved for issuance upon conversion of the Note the amount of Common stock as set forth in this Note and the Subscription Agreement. 3.13 Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties, or the occurrence of a material event of default under any such other agreement which is not cured after any required notice and/or cure period. ARTICLE IV                    MISCELLANEOUS 4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Borrower to: Ness Energy International, Inc., 4201 East Interstate 20, Willow Park, TX 76087, Attn: JF Hoover, CFO, telecopier: (817) 597-4303, with a copy by telecopier only to: Kevin Woltjen, Woltjen Law Firm, 4144 North Central Expressway, Suite 410, Dallas, TX 75204, telecopier: (214) 742-5545, and (ii) if to the Holder, to the name, address and telecopy number set forth on the front page of this Note, with a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575. 4.3 Amendment Provision. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Borrower may not assign any of its obligations under this Note without the consent of the Holder. 4.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees. 4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. 4.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 4.8 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of the Borrower with respect to the shares of Common Stock to be received by Holder after delivery by the Holder of a Conversion Notice to the Borrower. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the ____ day of May, 2006.   NESS ENERGY INTERNATIONAL, INC.   By:________________________________ Name: Title:   WITNESS: ______________________________________ --------------------------------------------------------------------------------                   NOTICE OF CONVERSION (To be executed by the Registered Holder in order to convert the Note) The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by Ness Energy International, Inc. on May 31, 2006 into Shares of Common Stock of Ness Energy International, Inc. (the "Borrower") according to the conditions set forth in such Note, as of the date written below. Date of Conversion:____________________________________________________________________ Conversion Price:______________________________________________________________________ Shares To Be Delivered:_________________________________________________________________ Signature:____________________________________________________________________________ Print Name:__________________________________________________________________________ Address:_____________________________________________________________________________ ____________________________________________________________________________

EXHIBIT 10.1 SELECTIVE SEVERANCE PROGRAM NOTIFICATION LETTER To:    Karen Narwold           Date:   March 27, 2006              Wilmington, DE              Due to the GrafTech Corporate LOB relocation, your position has been restructured and relocated. Your employment with the Company will terminate on June 30, 2006. Between April 30, 2006 and June 30, 2006, you will not be required to report to the office except upon mutual agreement with the Company.         As a result, you are eligible for a severance allowance and other benefits under UCAR Carbon’s Selective Severance Program (“Program”).                  If you elect to participate in the Selective Severance Program, you will be eligible for Program benefits as follows:   o A severance allowance provided — equal to 12 month’s pay.   o Severance payments under this Program will be made on all regular paydays occurring on or before March 15, 2007, provided, however, that on or before March 15, 2007 you will be paid a lump sum payment equal to the then unpaid severance allowance, reduced to reflect a discount for accelerating the payment of severance that otherwise would have been paid after March 15, 2007, computed as of the date of payment using a 7.19% annual interest rate.   o The amount payable will be calculated on the basis of your base salary in effect on the date your employment terminates, including extended hours pay and shift differential, if any, but excluding all overtime premiums and variable pay.   o One third (i.e., 16,667 shares) of the restricted stock granted to you in August 2005 shall be fully vested effective as of the last day of your employment, but in no event later than June 30, 2006.   o The “Frozen Non-Qualified Benefit” (as defined in the UCAR Carbon Compensation Deferral Plan (“Deferral Plan”) shall be paid to you on the last day of your employment, but in no event later than June 30, 2006. If the distribution of the Frozen Non-Qualified Benefit is affected by Section 409A of the Internal Revenue Code, to the extent you incur an excise tax or other penalty in relation thereto, the Company will hold you harmless (on an after-tax basis) therefrom.   o Medical coverage for you and your dependents — since you are not eligible to retire, you will be permitted to continue group medical coverage for up to twelve (12) months under the same premium arrangements as active employees and for an additional six (6) months at COBRA rates, or until eligible for coverage under another group plan or until re-employed, if earlier. The continuation of medical coverage for employees terminated under SSP will be coordinated with applicable state and federal laws. Any such continuation of medical coverage will be included as part of the continuation of benefits under the Comprehensive – 2 –   Omnibus Budget Reconciliation Act (COBRA). Basic Life Insurance will continue for six (6) months at no cost to you. After six months, you may convert the group life policy to a private policy.   o Dental coverage for you and eligible dependents — you will be permitted to continue group dental coverage for up to twelve (12) months under the same premium arrangements as active employees and for an additional six (6) months at COBRA rates, or until eligible for coverage under another group plan or until re-employed, if earlier. The continuation of dental coverage for employees terminated under SSP will be coordinated with applicable state and federal laws. Any such continuation of dental coverage will be included as part of the continuation of benefits under the Comprehensive Omnibus Budget Reconciliation Act (COBRA).   o Life Insurance coverage for retirees and for employees not eligible to retire under this Program will not include active employee disability provisions.   o  Outplacement Service is available. Please inform your manager, at the time you sign the release, if you are interested in this benefit.         Eligibility for the above benefits is subject to the following:   o You are expected to work through April 30, 2006, or such later date as mutually agreed between you and the Company; provided, however, that such date shall not be later than June 30, 2006. In the event that the Company hires your successor prior to June 30, 2006 and requests that you cease work at that time, the Company will continue to pay you your base salary as an employee of the Company through June 30, 2006.   o  You must execute the attached Release witnessed by your manager and return it to your manager NO LATER THAN April 30, 2006, which is approximately forty-five (45) days after you receive this letter and the Release. You are advised to review the Release with an attorney.         You will not receive Program benefits if you:   o Terminate employment voluntarily prior to the designated last day of work. In such case, you will be considered a Voluntary Quit and not eligible for this Program’s or any other program’s severance benefit.   o Are discharged for unsatisfactory work performance.   o Do not sign the Release or elect in writing to revoke the Release within seven (7) calendar days after its execution.         After you have executed the Release and begin to receive Program benefits, those benefits will immediately cease if you are employed prior to the expiration of the Program benefits by any business or affiliate owned by GrafTech International Ltd. – 3 –         The cessation of Program benefits for either reason stated above will not affect the continued validity and enforceability of the Release.         If you elect not to participate in the Selective Severance Program described above, you will remain eligible for other benefits prescribed by law. GRAFTECH INTERNATIONAL LTD. By:  /s/ Craig S. Shular                                                        Craig S. Shular President and CEO GrafTech International Ltd. SELECTIVE SEVERANCE PROGRAM RELEASE         In consideration, but subject to my receipt, of Selective Severance Program benefits as described in the Selective Severance Program Notification Letter (“Notification Letter”) to me dated March 27, 2006 and the execution of the Addendum to this Release, I release and discharge UCAR Carbon Company Inc. (the “Company”), its parents and subsidiaries, and its and their successors, directors, officers, employees and agents (collectively, the “Releasees”) from all claims and causes of action whatsoever (whether known or unknown) arising out of my employment or separation from employment (“Claims”) as of the date of this Release. Claims include, but are not limited to, claims arising under the Age Discrimination in Employment Act (“ADEA”) and other federal, state, and local laws prohibiting age, race, sex, religious, national origin, disability or other unlawful discrimination. I am not releasing claims for my pension, deferred compensation and other benefits payable in the ordinary course and not granted me under the Selective Severance Program. I hereby acknowledge and agree that, by accepting any portion of the Selective Severance Program benefits described in the Notification Letter at any time on or after the effective date of the termination of my employment, the release and discharge of the Releasees from all Claims is renewed and restated effective as of such effective date.         I understand that, if I later assert any claim or cause of action covered by this Release, I will forfeit all the Selective Severance Program benefits and must reimburse the Company for all such benefits received. I agree to further reimburse the Company for all reasonable attorneys’ fees and costs it incurs to obtain such reimbursement. I understand that this forfeiture of benefits and reimbursement provision does not apply to any claim or cause of action under the ADEA.         I agree that, when reasonably requested to do so by the Company, I will cooperate in any legal disputes and/or proceedings and/or business matters relating to issues and/or incidents that took place during the term of my employment, to the extent permitted by my new employer. I acknowledge that such cooperation may include, without limitation, appearances in court or discovery proceedings. I understand that, if I fail to so cooperate with the Company, I will forfeit all the Selective Severance Program benefits and must reimburse the Company for all such benefits received. If the Company makes such a request, I understand that the Company will reimburse me for reasonable travel, lodging, meal and similar out-of-pocket expenses, and lost pay if any, incurred by me (and that are not reimbursed or paid by a third party) in connection therewith upon submission of appropriate supporting documentation.         I have carefully read and fully understand all the provisions of the Notification Letter and this Release, and I have signed this Release knowingly and voluntarily. I acknowledge that I have been given at least forty-five (45) days to review and consider this Release and accompanying material, that I have been advised to consult with an attorney, that I have had any questions answered to my satisfaction, and have not relied upon any representation or statement, written or oral, not set forth in this Release or the Notification Letter. I acknowledge that this Release and the Notification Letter contain the entire understanding between the Company and me and supersedes all prior agreements and understandings, if any, regarding the subject matter of this Release and the Notification Letter. If any provision of this Release is deemed to be invalid, the remainder of the release is enforceable in all other respects.         I acknowledge receipt of Attachment A, which contains additional information regarding those eligible and those not selected for the Selective Severance Program benefits due to the GrafTech Corporate LOB restructuring and initiative to reduce overhead costs.         Finally, I understand that I can revoke this Release, but only by doing so in writing within a period of seven (7) calendar days following its execution. March 28, 2006 /s/ Karen G. Narwold ——————————————————   —————————————————— Date Signature of Employee       Karen G. Narwold     ——————————————————   Print Name of Employee       /s/ Edward Yocum     ——————————————————   Witness IF YOU HAVE QUESTIONS CONCERNING THE SELECTIVE SEVERANCE PROGRAM BENEFITS OFFERED TO YOU OR THIS RELEASE, YOU MAY WISH TO CONSULT YOUR BENEFITS ADMINISTRATOR, TAX CONSULTANT, AND/OR ACCOUNTANT BEFORE YOU SIGN IT. SIGNING THIS DOCUMENT WAIVES CERTAIN LEGAL RIGHTS, AND YOU ARE THEREFORE ALSO ADVISED TO CONSULT AN ATTORNEY BEFORE SIGNING IT. – 5 – ATTACHMENT A         UCAR Carbon Company Inc. (“UCAR Carbon”) hereby informs you that you will be released from employment with the company due to the GrafTech Graphite Corporate LOB restructuring and initiative to reduce overhead costs and thereby improve the cashflow of the global organization during 2006. You are eligible for a severance allowance and other benefits under the Selective Severance Program. The following information is provided to you in accordance with law.   (a) Severance has been offered to the employees of UCAR Carbon whose employment is being terminated as a result of the GrafTech Corporate LOB restructuring and initiative to reduce overhead costs and thereby improve the cashflow of the global organization.   (b) The eligibility factors for severance are as follows: you must be an employee of UCAR Carbon whose employment is being terminated as a result of the restructuring.   (c) The time limits are as follows: you must submit a signed Agreement no later than April 30, 2006.   (d) The job titles and ages of all individuals who were and were not selected for termination and offered Selective Severance Program benefits for signing a Release are as follows: Job Title Selected Not Selected Age   General Counsel       1     0     46   ADDENDUM TO SELECTIVE SEVERANCE PROGRAM RELEASE   Terms used in this Addendum (the “Addendum”) to the Selective Severance Program Release (the “Release”) and not otherwise defined herein shall have the meaning ascribed to such term in the Release. 1. UCAR Carbon Company Inc. (the “Company”) agrees, on behalf of itself and the Releasees, that, upon the execution of the Release by Karen Narwold (“Employee”), the Releasees hereby waive any claims (asserted or non-asserted) that the Releasees may have against Employee, arising out of Employee’s employment, including any claims the Releasees may have under any contract or under any federal, state, or local statute, regulation, rule, ordinance or order or under any theory of fiduciary duty, agency or tort law. 2. As an inducement to Employee to enter into the Release, the Releasees release, acquit and forever discharge Employee from any and all charges, complaints, claims, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, which any of the Releasees now has, owns, holds or claims to have, own or hold, from the beginning of time until the date hereof, against the Employee. The Company hereby acknowledges and agrees, on behalf of itself that, by Employee’s accepting any portion of the Selective Severance Program benefits described in the Notification Letter at any time on or after the effective date of the termination of the Employee’s employment, this release and discharge of Employee is renewed and restated effective as of such effective date. Notwithstanding anything herein to the contrary, the Releasees do not waive or release any claims with respect to the right to enforce the Release and this Addendum. 3. Employee hereby represents and warrants that, to the best of the knowledge of Employee after reasonable due inquiry, there are no material outstanding, threatened or potential claims that the Company has or may have against Employee that are being waived or release under this Addendum. Employee further acknowledges and agrees that, by accepting any portion of the Selective Severance Program benefits described in the Notification Letter at any time on or after the effective date of the termination of Employee’s employment, this representation and warranty is renewed and restated effective as of such effective date. 4. Employee represents and warrants that she has not commenced or caused to be commenced any civil action or administrative proceedings against the Company and agrees that she will not cause such civil action or administrative proceedings to be commenced in the future for any matter within the scope of the Release and this Addendum. Notwithstanding anything herein to the contrary, Employee does not waive or release any claims with respect to the right to enforce her right to the benefits under the terms of the Selective Severance Program and this Addendum to the Release. 5. This Addendum will be effective only upon the expiration of the 7 calendar day revocation period provided to the Employee in the last paragraph of the Release. – 7 – The Company or its affiliates (and their respective successors) shall continue to cover Employee under the directors and officers insurance policy or policies of the Company or its affiliate, in the same manner and to the same extent as active officers of GrafTech International Ltd. (or its successor) are covered by such policy or policies and to indemnify and advance expenses to Employee in accordance with Article V of the Amended and Restated By-Laws of GrafTech International Ltd., attached hereto as Appendix A, for claims made prior to the later of March 31, 2012 or the applicable statute of limitations. UCAR Carbon Company Inc.                 /s/ C. S. Shular                 Craig S. Shular CEO & President                   /s/ Karen G. Narwold                 Karen Narwold                   March 20, 2006                 Date                      March 28, 2006                      Date – 8 – Appendix A to Addendum Article V of the GrafTech International Ltd. By-Laws INDEMNIFICATION   Section 1.  Indemnification.   (a) Each person who is or was made a party or is threatened to be made a party to, or is or was involved (including, without limitation, involvement as a witness) in, any action, suit or proceeding, whether civil (including, without limitation, arbitral), criminal, administrative or investigative (a “proceeding”), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner, member, manager, employee, agent or trustee of another corporation or of a partnership, joint venture, limited liability company, trust or other entity or enterprise (including, without limitation, a direct or indirect subsidiary of the Corporation and an employee benefit plan of the Corporation or any of its subsidiaries), whether the basis of such proceeding is alleged action or inaction in an official capacity as an officer or director or in any other capacity while so serving, shall be indemnified by the Corporation for and held harmless by the Corporation from and against, to the fullest extent authorized by the Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader or greater rights to indemnification than the Law prior to such amendment permitted the Corporation to provide), all expenses, liabilities and losses reasonably incurred or suffered by such person in connection therewith; provided, however, that except as provided herein with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board.   (b) Such right to indemnification shall include the right of such a director, officer, partner, member, manager, employee, agent or trustee to be paid the expenses incurred in preparing for, participating (including, without limitation, participation as a witness) in, defending and settling or otherwise resolving a proceeding (collectively called the “defense of a proceeding”) in advance of its final disposition to the fullest extent authorized by the Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader or greater rights to indemnification than the Law prior to such amendment permitted the Corporation to provide); provided, however, that, if the Law requires, the payment of such expenses incurred by a director or officer of the Corporation in his capacity as a director or officer   of the Corporation (and not in any other capacity in which service was or is rendered by such person while a director or officer of the Corporation, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation. Such an undertaking shall not and shall not be deemed to require repayment if such director or officer is entitled to be indemnified by the Corporation for any reason or on any basis. No collateral shall be required to secure performance by such person of his obligations under such an undertaking. An undertaking delivered to the Corporation shall be sufficient regardless of the prospective ability of the person delivering such undertaking to perform his obligations thereunder.   (c) Such right to indemnification may be granted to any other employee or agent of the Corporation or its subsidiaries if, and to the extent, authorized by the Board, the Chief Executive Officer (or, if the position of Chief Executive Officer is vacant, the President) or the General Counsel.   (d) If a claim under this Article V is not paid in full by the Corporation within thirty (30) days after a written demand therefor has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid all expenses of prosecuting such suit. It shall be a defense to any such suit (other than a suit brought to enforce a claim for expenses incurred in the defense of a proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board, independent legal counsel to the Corporation or the stockholders) to have made a determination prior to the commencement of such suit that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Law nor an actual determination by the Corporation (including the Board, independent legal counsel to the Corporation or the stockholders) that the claimant has not met such applicable standard of conduct shall be a defense to such suit or create a presumption in such suit that the claimant has not met the applicable standard of conduct.   Section 2.  Indemnification Not Exclusive.         The indemnification of any person under this Article V, or the right of any person to indemnification under this Article V, shall not limit or restrict in any way the power of the – 10 – Corporation to indemnify or pay expenses for such person in any other manner permitted by law or be deemed exclusive of, or invalidate, any other right which such person may have or acquire under any law, agreement, vote of stockholders or disinterested directors, or otherwise.   Section 3.  Successors.         The right of any person to indemnification under this Article V shall (i) survive and continue as to a person who has ceased to be such an officer, director, partner, member, manager, employee, agent or trustee, (ii) inure to the benefit of the heirs, distributees, beneficiaries, executors, administrators and other legal representatives of such person, (iii) not be impaired, eliminated or otherwise adversely affected after such cessation due to any action or inaction by the Corporation, the Board or the stockholders (including, without limitation, amendment of these By-Laws (including, without limitation, a modification or repeal of this Article V) or the Certificate of Incorporation or a merger, consolidation, recapitalization, reorganization or sale of assets of the Corporation or any of its subsidiaries), with respect to any claim, proceeding or suit which arose or transaction, matter, event or condition which occurred or existed before such cessation, (iv) be a contract right, enforceable as such, and (v) be binding upon all successors of the Corporation.         For purposes of this Article V, a “successor” of the Corporation includes (i) any person who acquires a majority of the assets or businesses of the Corporation and its subsidiaries (on a consolidated basis) in a single transaction or a series of related transactions, (ii) any person with whom the Corporation merges or consolidates (unless the Corporation is the survivor of such merger or consolidation) and (iii) any person who is the ultimate parent of any person with whom the Corporation merges or consolidates where the Corporation is the survivor of such merger or consolidation (unless the person with whom the Corporation merges or consolidates was, prior to such merger or consolidation, more creditworthy and had a larger market capitalization than the Corporation prior to such merger or consolidation). For purposes of the preceding sentence, “merger,” “consolidation” and like terms shall include binding share exchanges and similar transactions.         The Board shall, as a condition precedent to any transaction described in the preceding paragraph, require the successor to irrevocably and unconditionally assume the obligations contemplated by this Article V.   Section 4.   Insurance.         The Corporation may purchase and maintain insurance on behalf of any person who is or was such an officer, director, partner, member, manager, employee, agent or trustee against any liability asserted against such person as such an officer, director, partner, member, manager, employee, agent or trustee or arising out of such person’s status as such an officer, director, partner, member, manager, employee, agent or trustee, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article V or applicable law.         The Corporation shall not, without prior approval of the Board (and, as to each director and executive officer of the Corporation who ceased to be a director or executive officer within three (3) years prior to the effective date thereof, the prior approval of each such director and executive officer), reduce or eliminate in any material respect, or fail to renew, any such insurance then in effect. A reduction in insurance includes, without limitation, an increase in deductibles or co-payments, a reduction in the aggregate amount of insurance or an addition of exclusions from coverage or other reduction in scope of coverage. – 11 –   Section 5.  Definition of Certain Terms.   (a) For purposes of this Article V: references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; any service as a director, officer, fiduciary, employee or agent of the Corporation or any of its subsidiaries which imposes duties on, or involves services by, such director, officer, fiduciary, employee or agent with respect to an employee benefit plan, its trusts, its participants or its beneficiaries (including, without limitation, service as a member of any committee that manages, administers or performs similar functions with respect to any employee benefit plan, trust, participant or beneficiary) shall be deemed to be service covered by Section 1(a) of this Article V; references to “indemnification” and like terms shall include holding harmless and payment of expenses as provided herein; and references to “proceedings” included all related appeals of any kind.   (b) For the purposes of this Article V and the Law, a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, its trusts, its participants or its beneficiaries shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation.”   (c) For the purposes of this Article V: references to “expenses” shall include all attorneys’ fees, retainers, court costs, transcript costs, expert fees, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and other disbursements or expenses of the types customarily incurred in connection with the defense of a proceeding or prosecution of a suit, all costs relating to any appeal bond and all federal, state, local or foreign taxes, charges, duties and similar imposts and assessments incurred or assessed as a result of the actual or deemed receipt of any expenses under this Article V; and references to “liabilities and losses” shall include judgments, fines, amounts paid or to be paid in settlement, and assessments, and all federal, state, local or foreign taxes, charges, duties and similar imposts and assessments incurred or assessed as a result of the actual or deemed receipt of any liabilities or losses under this Article V.

  Exhibit 10.42 EXECUTION VERSION FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT      This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is dated as of August 28, 2006, by and among PEROT SYSTEMS CORPORATION, a Delaware corporation (the "Borrower”), the LENDERS party hereto (the “Lenders”) and JPMORGAN CHASE BANK, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”). RECITALS      A. The Borrower, the Lenders, the Administrative Agent, KeyBank National Association, SunTrust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents, and Wachovia Bank, N.A., as Documentation Agent, are parties to an Amended and Restated Credit Agreement dated as of March 3, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used but not defined herein have the meanings set forth in the Credit Agreement.      B. The Borrower has notified the Administrative Agent and the Lenders that the quarterly financial statements to be delivered by the Borrower pursuant to Section 5.01(b) of the Credit Agreement for the Borrower’s fiscal quarter ended June 30, 2006 (the “2Q 2006 Financials”) may indicate that the Borrower did not comply with clause (i) of the definition of “Minimum Recourse Coverage” for the period of four consecutive fiscal quarters ended on such date (the “Covenant Departure”).      C. The Borrower has requested that the Lenders consent to the Covenant Departure and waive the requirement under Section 5.11(b) of the Credit Agreement, resulting from the Covenant Departure, for the Borrower to cause one or more Domestic Subsidiaries to become Guarantors within 10 days after delivery of the 2Q 2006 Financials.      D. The Borrower has further requested that the Lenders agree to amend the Credit Agreement in certain respects, as more particularly set forth herein.      E. The Lenders are willing to provide the requested consent and waiver, and to so amend the Credit Agreement, subject to the terms and conditions and in reliance upon the representations and warranties of the Borrower set forth herein.      NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lenders agree as follows:      SECTION 1. Limited Waiver and Limited Consent. Subject to the terms and conditions set forth in this Amendment, and in reliance upon the representations and warranties of the Borrower made herein, the Lenders hereby consent to the Covenant Departure and waive the requirement under Section 5.11(b) of the Credit Agreement, resulting from the Covenant Departure, for the Borrower to cause one or more Domestic Subsidiaries to become Guarantors within 10 days after delivery of the 2Q 2006 Financials; provided that such consent and waiver   --------------------------------------------------------------------------------   shall apply only to the failure to comply with clause (i) of the definition of “Minimum Recourse Coverage” with respect to the period of four consecutive fiscal quarters of the Borrower ended June 30, 2006, and the resulting requirement under Section 5.11(b) for Borrower to cause one or more Domestic Subsidiaries to become Guarantors within 10 days after delivery of its financial statements for the period ended June 30, 2006. The foregoing consent and waiver is limited as described in the immediately preceding sentence, and shall not apply to any failure to comply with Sections 5.11(a) and 5.11(b) of the Credit Agreement in respect of any other period or under any other circumstance, nor to any failure to comply with any other provision of the Credit Agreement or any other Credit Document under any circumstance.      SECTION 2. Amendments to Credit Agreement. Subject to the terms and conditions set forth in this Amendment, and in reliance upon the representations and warranties of the Borrower made herein, the Lenders and the Borrower hereby amend the Credit Agreement as follows:      (a) Section 1.01 (Defined Terms) of the Credit Agreement is hereby amended by replacing “March 2, 2010” with “August 28, 2011” in the definition of “Maturity Date” therein.      (b) Section 1.01 (Defined Terms) of the Credit Agreement is hereby further amended by adding a new definition of “First Amendment Effective Date” in the appropriate alphabetical position therein, such new definition to read as follows:      ““First Amendment Effective Date” means August 28, 2006.”      (c) Section 1.01 (Defined Terms) of the Credit Agreement is hereby further amended by deleting the definitions of “Applicable Rate”, “Consolidated EBIT” and “Consolidated EBITDA” therein in their entirety and replacing them with the following:      ““Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the facility fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread”, “Eurodollar Spread” or “Facility Fee Rate”, as the case may be, based upon the Debt/EBITDA Ratio applicable on such date (calculated in accordance with Section 6.08(a)), as follows:                               Level:   Debt/EBITDA Ratio:   ABR Spread   Eurodollar Spread   Facility Fee Rate IV   Greater than or equal to 2.00 to 1.00     0.250 %     1.000 %     0.200 % III   Less than 2.00 to 1.00, but greater than or equal to 1.50 to 1.00     0.000 %     0.750 %     0.150 % II   Less than 1.50 to 1.00, but greater than or equal to 1.00 to 1.00     0.000 %     0.625 %     0.125 % I   Less than 1.00 to 1.00     0.000 %     0.500 %     0.100 % 2 --------------------------------------------------------------------------------   On the First Amendment Effective Date and continuing through and including the day immediately preceding the first Adjustment Date occurring after the First Amendment Effective Date, the ABR Spread shall be 0.000%, the Eurodollar Spread shall be 0.500%, and the Facility Fee Rate shall be 0.100% per annum, and for each period thereafter beginning on an Adjustment Date and ending on the day immediately preceding the next succeeding Adjustment Date, the Applicable Rate shall be as set forth opposite the applicable Debt/EBITDA Ratio in the table above, as determined at the end of the most recently ended fiscal quarter prior to the applicable Adjustment Date in accordance with the definition of “Adjustment Date”; provided, however, that if the Borrower fails to furnish to the Administrative Agent the financial statements of the Borrower and related certificate of a Financial Officer of the Borrower with respect to any fiscal quarter within the time periods specified in Section 5.01(a) or 5.01(b), as applicable, then the Applicable Rate prescribed in Level IV above shall apply as of the date such financial statements were required to be delivered until the day immediately preceding the date such financial statements and compliance certificate are so delivered. Notwithstanding the foregoing, if either S&P or Moody’s have at any time after the Effective Date established ratings with respect to Index Debt of the Borrower, the “Applicable Rate” shall instead at all times thereafter be equal to the applicable percentage rate per annum set forth on the table below, based upon the ratings by S&P and Moody’s, respectively, applicable at such time to the Index Debt:                   Index Debt Rating:   Index Debt Rating:             S&P   Moody’s   ABR Spread   Eurodollar Spread   Facility Fee Rate Greater than or equal to A-   Greater than or equal to A3   0.000%   0.300%   0.070% BBB+   Baa1   0.000%   0.400%   0.080% BBB   Baa2   0.000%   0.500%   0.100% BBB-   Baa3   0.000%   0.625%   0.125% less than BBB-   less than Baa3   0.000%   0.875%   0.175% provided, however, that if at any time the Facility Usage is greater than 50% of the aggregate amount of the Lender’s Commitments at such time, then the Applicable Margin with respect to Eurodollar Loans determined with reference to the table above will be increased 0.125%. 3 --------------------------------------------------------------------------------   For purposes of the foregoing, (a) if either Moody’s or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating as set forth in the bottom row of the table above; (b) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall fall within different categories, the Applicable Margin shall be based on the higher of the two ratings unless one of the two ratings is two or more categories lower than the other, in which case the Applicable Rate shall be determined by reference to the category next above that of the lower of the two ratings; and (c) if the ratings established or deemed to have been established by Moody’s and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency, irrespective of when notice of such change shall have been furnished by the Borrower to the Administrative Agent and the Lenders. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend the definition of “Applicable Rate” to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation.” ““Consolidated EBIT” means, for any period, on a consolidated basis for the Borrower and its Subsidiaries, the sum of the amounts for such period, without duplication, of: (a) Consolidated Net Income, plus (b) charges against income for foreign, federal, state, and local taxes, to the extent deducted in computing Consolidated Net Income, plus (c) Consolidated Interest Expense, plus (d) extraordinary or non-recurring non-cash losses to the extent deducted in computing Consolidated Net Income, plus (e) non-cash stock compensation expense recorded in accordance with FASB Statement 123R, which the Borrower adopted as of January 1, 2006, to the extent deducted in computing Consolidated Net Income, minus (f) extraordinary or non-recurring non-cash gains to the extent included in computing Consolidated Net Income, calculated on a rolling four-quarter basis for covenant compliance purposes.” ““Consolidated EBITDA” means, for any period, on a consolidated basis for the Borrower and its Subsidiaries, the sum of the amounts for such period, without duplication, of: (a) Consolidated Net Income, plus (b) charges against income for foreign, federal, state, and local taxes, to the extent deducted in computing Consolidated Net Income, plus (c) Consolidated Interest Expense, plus (d) depreciation expense, to the extent deducted in computing Consolidated Net Income, plus (e) amortization expense, including, without limitation, amortization of goodwill, other intangible assets and Transaction Expenses, to the extent deducted in computing Consolidated Net Income, plus (f) extraordinary or non-recurring non-cash losses to the extent deducted in computing Consolidated Net Income, plus (g) non-cash stock compensation expense recorded in accordance with FASB Statement 123R, which the Borrower adopted as of 4 --------------------------------------------------------------------------------   January 1, 2006, to the extent deducted in computing Consolidated Net Income, minus (h) extraordinary or non-recurring non-cash gains to the extent included in computing Consolidated Net Income, calculated on a rolling four-quarter basis for covenant compliance purposes.” No term, covenant or provision of the Credit Agreement or any other Credit Document is intended to be amended hereby except to the extent specifically set forth above in this Section 1.      SECTION 3. Conditions to Effectiveness. This Amendment shall become effective as of the date first set forth above when and if each of the conditions set forth in this Section 3 shall have been satisfied:      (a) Amendment. This Amendment shall have been duly executed and delivered by the Borrower, each Guarantor, the Administrative Agent and each Lender.      (b) Board Resolutions. The Administrative Agent shall have received a copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of (i) this Amendment and the Credit Agreement as amended hereby and (ii) any related agreements, in each case certified by the Secretary or Assistant Secretary of the Borrower as of the date hereof, together with a certificate of the Secretary or Assistant Secretary of the Borrower as to the incumbency and signature of the officers of the Borrower executing such Credit Documents and any certificate or other documents to be delivered by them pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary.      (c) Organization. The Administrative Agent shall have received (i) a copy of the Certificate of Incorporation of the Borrower certified as of a recent date by the Secretary of State of the State of Delaware and (ii) a copy of the bylaws of the Borrower certified by the Secretary or Assistant Secretary thereof; provided that in lieu of providing such Certificate of Incorporation and bylaws, such Secretary or Assistant Secretary may certify that there have been no amendments or other modifications thereto on or after the Effective Date.      (d) Officer’s Certificate. The Administrative Agent shall have received an executed certificate of an officer of the Borrower, satisfactory in form and substance to the Administrative Agent, certifying that (i) the representations and warranties contained herein, in the Credit Agreement and in the other Credit Documents to which the Borrower is a party are true and correct in all respects on and as of the date hereof, except to the extent that any such representation or warranty relates to a specific earlier date (in which case such representation or warranty was true and correct in all respects on and as of such earlier date); (ii) the Borrower is in compliance with all of the terms and provisions set forth herein, in the Credit Agreement and in the other Credit Documents to which it is a party; (iii) no Default or Event of Default has occurred and is continuing, and no material adverse change has occurred since the Effective Date in the business, assets, liabilities, operations or condition, financial or otherwise, of the Borrower or the Borrower’s subsidiaries; and (iv) the Borrower is, both before and after giving effect to the transactions contemplated by this Amendment, Solvent.      (e) Absence of Default. No Default or Event of Default shall have occurred and be continuing, and no material adverse change shall have occurred since the Effective Date in the 5 --------------------------------------------------------------------------------   business, assets, liabilities, operations or condition, financial or otherwise, of the Borrower or the Borrower’s subsidiaries.      (f) Legal Restraints/Litigation. As of the date hereof, there shall be no: (i) litigation, investigation or proceeding (judicial or administrative) pending or threatened against the Borrower or its assets, by any agency, division or department of any county, city, state or federal government arising out of this Amendment, the Credit Agreement as amended hereby or the other Credit Documents; (ii) injunction, writ or restraining order restraining or prohibiting the financing arrangements contemplated under this Amendment, the Credit Agreement as amended hereby or the other Credit Documents; or (iii) suit, action, investigation or proceeding (judicial or administrative) pending against the Borrower or its assets, which, if adversely determined, could have a material adverse effect on the business, assets, liabilities, operations or condition, financial or otherwise, of the Borrower or the Borrower’s subsidiaries.      (g) Fees. The Borrower shall have paid (i) to the Administrative Agent, for its own account or for that of the Lenders, as applicable, fees payable in the amounts and at the times separately agreed upon in writing between the Borrower and the Administrative Agent and (ii) to counsel to the Administrative Agent, its fees, charges, and expenses to the extent reflected in a statement of such counsel rendered to the Borrower on or prior to the date hereof.      SECTION 4. Representations and Warranties. As a material inducement to the Lenders to enter into this Amendment, the Borrower hereby represents and warrants to the Lenders as follows (in each case after giving effect to this Amendment):      (a) Authorization; Enforceability. Execution, delivery and performance by the Borrower of this Amendment and the Credit Agreement as amended hereby have been duly authorized by all necessary corporate action. This Amendment has been duly executed and delivered by the Borrower. This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.      (b) Representations and Warranties The representations and warranties of the Borrower and its Subsidiaries set forth in the Credit Agreement and the other Credit Documents are true and correct in all material respects on and as of the date of execution and delivery of this Amendment (other than representations and warranties that by the specific terms thereof apply only as of an earlier date, which representations and warranties shall be true and correct on and as of such earlier date).      (c) No Default or Event of Default. On and as of the date of execution and delivery of this Amendment by the parties hereto, and immediately after giving effect thereto, no Default or Event of Default has occurred or is continuing.      SECTION 5. Miscellaneous.      (a) Ratification and Confirmation. The terms, provisions, conditions and covenants of the Credit Agreement, as amended by the amendments expressly set forth above, and the other 6 --------------------------------------------------------------------------------   Credit Documents remain in full force and effect and are hereby ratified and confirmed, and the execution, delivery and performance of this Amendment shall not in any manner operate as a waiver of, consent to or, except as expressly set forth herein, amendment of any term, provision, condition or covenant thereof.      (b) Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.      (c) APPLICABLE LAW. THE LAWS OF THE STATE OF TEXAS (OTHER THAN CONFLICT-OF-LAW PROVISIONS THEREOF) SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION THEREOF.      (d) Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of this Amendment may be made by facsimile or electronic transmission of a duly executed counterpart copy hereof.      (e) Affirmation of Obligations. Notwithstanding that such consent is not required under the Guaranty Agreement, each of the Guarantors consents to the execution, delivery and performance of this Amendment and the Credit Agreement as amended hereby. As a material inducement to the undersigned Lenders to enter into this Amendment, each of the Guarantors (i) acknowledges and confirms the continuing existence, validity and effectiveness of the Guaranty Agreement and (ii) agrees that the execution, delivery and performance of this Amendment and the Credit Agreement as amended hereby shall not in any way release, diminish, impair, reduce or otherwise affect its obligations thereunder.      (f) FINAL AGREEMENT. THIS AMENDMENT, THE CREDIT AGREEMENT AS AMENDED HEREBY AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [Remainder of this page blank; signature pages follow] 7 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.               PEROT SYSTEMS CORPORATION               By:   /s/ Russell Freeman                   Name: Russell Freeman         Title:   Vice President & CFO               By:   /s/ Elizabeth Whitmer                   Name: Elizabeth Whitmer         Title:   Treasurer               JPMORGAN CHASE BANK, as Administrative Agent and as a Lender               By:   /s/ Mae Reeves                   Name: Mae Reeves         Title:   Vice President               KEYBANK NATIONAL ASSOCIATION, as a Lender               By:                     Name:         Title:               SUNTRUST BANK, as a Lender               By:   /s/ Daniel S. Komitor                   Name: Daniel S. Komitor         Title:   Director Signature Page to First Amendment to Amended and Restated Credit Agreement   --------------------------------------------------------------------------------                 WELLS FARGO BANK, N.A., as a Lender               By:   /s/ Zach Johnson                   Name: Zach Johnson         Title: Senior Vice President               WACHOVIA BANK, N.A., as a Lender               By:   /s/ Julia Harman                   Name: Julia Harman         Title: Vice President               COMERICA BANK, as a Lender               By:   /s/ Mark B. Grover                   Name: Mark B. Grover         Title: First Vice President               AMEGY BANK NATIONAL ASSOCIATION, as a Lender               By:   /s/ Melinda N. Jackson                   Name: Melinda N. Jackson         Title: Senior Vice President               BANK OF TEXAS, N.A., as a Lender               By:   /s/ Ryan Suchala                   Name: Ryan Suchala         Title: Vice President Signature Page to First Amendment to Amended and Restated Credit Agreement   --------------------------------------------------------------------------------                 THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Lender               By:   /s/ D. Barnell                   Name: D. Barnell         Title: VP & Manager               BANK HAPOALIM B.M., as a Lender               By:   /s/ Helen H. Gateson                   Name: Helen H. Gateson         Title: Vice President                         By:   /s/ Charles McLaughlin                   Name: Charles McLaughlin         Title: Senior Vice President               MIZUHO CORPORATE BANK, LTD., as a Lender               By:   /s/ Bertram H. Tang                   Name: Bertram H. Tang         Title: Senior Vice President & Team Leader Signature Page to First Amendment to Amended and Restated Credit Agreement   --------------------------------------------------------------------------------   SUBSIDIARY GUARANTORS (for purposes of Section 5(e) hereof):           PEROT SYSTEMS HEALTHCARE SERVICES, LLC               By:   /s/ Rex C. Mills           Name: Rex C. Mills         Title: Assistant Secretary               PS CONNECTICUT, LLC               By:   /s/ Thomas D. Williams           Name: Thomas D. Williams         Title: Vice President               ADVANCED RECEIVABLES STRATEGY, INC.               By:   /s/ Thomas D. Williams           Name: Thomas D. Williams         Title: Vice President               PEROT SYSTEMS GOVERNMENT SERVICES, INC.               By:   Charles N. Bell           Name: Charles N. Bell         Title: Assistant Secretary     Signature Page to First Amendment to Amended and Restated Credit Agreement  

Exhibit 10.13   LOAN SALE AGREEMENT   This Loan Sale Agreement (the “Agreement”) is made as of January 20, 2006, between WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA (“Seller”), and OPTA CORPORATION, a Delaware corporation, formerly known as LOTUS PACIFIC, INC. (“Buyer”).   RECITALS:   A.                                   Pursuant to a Credit and Security Agreement dated as of July 21, 2003, (as thereafter amended, supplemented or modified, the “Credit Agreement”) and a Revolving Note dated July 21, 2003 (as thereafter amended, supplemented or modified, the “Note”), OPTA SYSTEMS, LLC, a Delaware limited liability company (the “Borrower”) is indebted to Seller for a secured revolving loan (the “Loan”) in the original principal amount of Twenty Million Dollars ($20,000,000.00). The Credit Agreement was amended by the First Amended Forbearance Agreement that was executed by Borrower and Lender on July 22, 2005, by the Letter Agreement that was executed by Borrower and Lender on July 26, 2005, the Second Amended Forbearance Agreement that was executed by Borrower and Lender on August 25, 2006, the Third Amended Forbearance Agreement that was executed by Borrower and Lender as of October 13, 2005, and by the Letter Agreement that was executed by Borrower and Lender on January 12, 2006 (collectively, the “Forbearance Agreement”).   B.                                     The Loan is secured by a security interest in substantially all of Borrower’s personal property (other than intellectual property). The agreements, documents, and instruments securing the Loan (including the Credit Agreement) are referred to individually and collectively as the “Security Documents”. The Loan is guaranteed by Buyer, (in its capacity as guarantor, the “Guarantor”) pursuant to a Guaranty by Corporation, dated July 16, 2003 (the “Guaranty”). The Note, the Security Documents, the Guaranty and all other agreements, documents, and instruments evidencing, securing, or otherwise relating to the Loan, are sometimes herein referred to individually as a “Loan Document” and collectively as the “Loan Documents.”  Capitalized terms not otherwise defined herein shall have the same meanings ascribed to them in the Loan Documents.   C.                                     Buyer desires to purchase and Seller desires to sell the Loan.   NOW, THEREFORE, for good and valuable consideration, Seller and Buyer agree as follows:   1.                                       Purchase and Sale. Subject to the terms and conditions of this Agreement, Buyer agrees to purchase the Loan from Seller, and Seller agrees to sell the Loan to Buyer, without recourse, representation, or warranty of any kind, express or implied, except as stated in Paragraph 7 hereof.   2.                                       Purchase Price. Buyer shall pay the Purchase Price to Seller for the Loan. The Purchase Price (the “Purchase Price”) shall be equal to all amounts due and owing by Borrower to Lender pursuant to the Loan Documents, including Forbearance Fees of $155,000.00 due to Lender pursuant to the Forbearance Agreement and $8,700.00 in legal and audit fees and expenses incurred by Seller in connection with the Loan and the legal fees incurred in the   --------------------------------------------------------------------------------   preparation and negotiation of this Agreement and the incidental documents hereto, less the amounts due and owing to Participant pursuant to the Participation Agreement, dated July    , 2005, by and between Seller and Buyer, as thereafter amended, supplemented or modified (the “Participation Agreement”). The amount of the Purchase Price and the calculation thereof are set forth on Exhibit A hereto.   3.                                       Closing. The consummation of the sale and purchase pursuant to this Agreement (the “Closing”) is contemplated to occur on January 20, 2006, or on such other date as the parties shall mutually agree (the “Closing Date”). At the Closing, the following payments and actions shall be made and taken or occur simultaneously, and shall be concurrent conditions to Closing:   (a)                                  Lender shall deliver to Wells Fargo Bank, N.A. (“Bank”), pursuant to the Deposit Account Control Agreement, dated as of July 26, 2005 (“Control Agreement”), among Seller, Buyer and Bank, a written notice to debit the Account (as defined in the Control Agreement) in the amount of the Purchase Price and to deliver such amount to or upon the order of Seller. The notice shall further notify the Bank, in accordance with Section 7 of the Control Agreement, that upon payment of the Purchase Price to Seller, the Control Agreement and security interest of Seller in the Account is terminated. The Account and any funds thereafter remaining shall be under the exclusive dominion and control of Buyer.   (b)                                 The Participation Agreement shall be terminated.   (c)                                  The contents of the Lockbox, Remittances and Account Funds (each as defined in the Lockbox and Collection Account Agreement, dated as of July 21, 2003 among Borrower, Seller and Bank, shall be directed to Buyer, in accordance with the Amended and Restated Lockbox and Collection Account Agreement of even date herewith, and Section 15 below.   (d)                                 Buyer shall be the successor to Seller with respect to the right of Lender under the Subordination Agreements (including the Subordination Agreement dated as of July 26, 2005 executed in TCL Multimedia Technology Holdings Limited) and Lender hereby acknowledges that it shall have no further rights or benefits thereunder.   If the Closing has not occurred by close of business on the Closing Date, then, unless otherwise agreed by Buyer and Seller in writing, either party may terminate this Agreement and each party shall have the rights and remedies against the other under applicable law.   4.                                       Purchase and Sale, Servicing.   (a)                                  Effective upon the Closing, and subject to and conditioned upon the terms, covenants, limitations, and conditions contained herein, Seller does hereby sell, assign, transfer and convey to Buyer, its successors and assigns, without recourse, representation or warranty of any kind, express or implied except as set forth in Paragraph 7 hereof, all of the right, title, and interest of Seller in, to and under the Loan, the Loan Documents, and the Collateral and all   2 --------------------------------------------------------------------------------   security for the Loan, and does hereby grant and delegate to Buyer, its successors and assigns, any and all duties and obligations of Seller under the Loan Documents from and after Closing.   (b)                                 Effective upon Closing, Buyer assumes all of the obligations and liabilities of Seller under or in connection with the Loan or the Loan Documents, of every kind or nature whatsoever.   (c)                                  With respect to all periods after the Closing, Buyer shall assume complete responsibility for all servicing and administration of the Loan previously conducted by Seller or any other person, including, but not limited to, the collection of all payments thereunder and Seller shall have no further servicing administrative or other responsibilities with respect to the Loan after the Closing (provided that if Seller receives any payments with respect to the Loan after the Closing, Seller will forward those payments to Buyer).   (d)                                 Promptly after the date of Closing, Buyer shall notify the obligor(s) of Borrower, to the extent necessary, of the sale of the Loan to Buyer and direct that all payments on and communications regarding the Loan be sent to Buyer.   5.                                       Seller’s Closing Documents. At the Closing, as identified in Section 3(a), Seller shall deliver to Buyer the following documents (collectively “Seller’s Closing Documents”):   (a)                                  The original Note and copies of all other Loan Documents, as more particularly described in Exhibit B attached hereto.   (b)                                 The Allonge and Endorsement(s) (in the form attached hereto as Exhibit C) to the Note, duly executed by Seller, which Allonge and Endorsement(s) shall be attached to the original Note.   (c)                                  An Assignment of Loan Documents in the form attached hereto as Exhibit D.   (d)                                 The UCC financing statement amendment(s) in the form(s) attached hereto as Exhibit E, assigning to Buyer all rights of Seller as Secured Party for each Uniform Commercial Code Financing Statement related to the Loan. Buyer is authorized to file the assignment(s) following the Closing.   (e)                                  A written Notice of Assignment of the Loan duly executed by Seller instructing Borrower to remit all payments to Buyer or its agents.   (f)                                    The Consent and Agreement of Borrower and Guarantor in the form attached hereto as Exhibit F.   6.                                       Buyer’s Closing Documents. At the Closing, Buyer shall deliver to Seller a fully executed copy of this Agreement and any incidental documents to which Borrower or Guarantor is a party.   3 --------------------------------------------------------------------------------   7.                                       Representations and Warranties of Seller. BUYER ACKNOWLEDGES AND AGREES THAT THE SALE DESCRIBED HEREIN IS MADE ON AN AS IS BASIS WITHOUT RECOURSE, REPRESENTATION, OR WARRANTY OF ANY KIND BY SELLER, WHETHER EXPRESS OR IMPLIED (EXCEPT AS SPECIFICALLY SET FORTH BELOW), INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY REGARDING THE LOAN, THE COLLECTABILITY OF THE LOAN, THE EXISTENCE OF ANY DEFAULTS WITH RESPECT TO THE LOAN, THE VALIDITY OR ENFORCEABILITY OF THE LOAN DOCUMENTS OR ANY SECURITY THEREFOR, OR ANY OTHER MATTERS. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT BUYER HAS NOT RELIED ON ANY INFORMATION FROM SELLER IN PURCHASING THE LOAN, AND BUYER HAS MADE ITS OWN CREDIT DECISION WITH RESPECT THERETO. Notwithstanding the foregoing, however, Seller hereby represents and warrants to Buyer as follows:   (a)                                  Seller is a division of Wells Fargo Bank, NA, a national banking association validly existing under the laws of the United States of America.   (b)                                 Seller has, and at all relevant times has had, the full power and authority to execute, deliver and perform this Agreement and to enter into and consummate the transactions contemplated by this Agreement. Seller has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement and this Agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.   (c)                                  Except for the participation interest of Buyer (pursuant to the Participation Agreement), Seller is the owner and holder of the Loan and the other rights and interests purported to be transferred pursuant to this Agreement free and clear of all liens, encumbrances or other rights in favor of any third party, has full right and authority, subject to no interest of participation of, or agreement with any other party, to sell and assign the Loan and such other rights and interests pursuant to this Agreement, and Seller has not pledged, assigned or otherwise previously transferred the Loan or any of such other rights and interests.   (d)                                 The outstanding principal balance of the Loan as of January 19, 2006 is $2,189,148.13. To the best of Seller’s knowledge, information, and belief, Borrower has no existing defenses, set-offs or offsets against enforcement of the Loan and the Loan Documents by Seller or any amounts payable thereunder.   (e)                                  Seller has not modified or amended the Loan except as disclosed in the Recitals to this Agreement or in Exhibit B attached hereto.   (h)                                 The Loan Documents listed on Exhibit B attached hereto, are the only documents, instruments and agreements governing the terms of the Loan.   4 --------------------------------------------------------------------------------   (i)                                     To the best of Seller’s knowledge, information, and belief, no event has occurred and condition exists that constitutes, or that with the giving of notice of the lapse of time or both, would constitute a default by Seller under the Loan Documents.   8.                                       Representations and Warranties of Buyer. Buyer hereby represents and warrants to Seller:   (a)                                  Buyer is a corporation duly organized and validly existing under the laws of the State of Delaware.   (b)                                 Buyer has, and at all relevant times has had, the full power and authority to execute, deliver and perform and to enter into and consummate all transactions contemplated by this Agreement. Buyer has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement, and this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms.   (c)                                  Buyer has made such examination, review and investigation of the Loan Documents and the Loan, and of any and all facts and circumstances necessary to evaluate the Loan Documents and the Loan it has deemed necessary or appropriate. Except for the representations and warranties specifically and expressly made by Seller in Section 7 above: (a) Buyer has been and will continue to be solely responsible for Buyer’s own independent investigations as to all aspects of the transactions contemplated hereby including, but not limited to: (i) with respect to Borrower and Guarantor, the authorization, execution, legality, validity, effectiveness, genuineness, enforceability, collectability or sufficiency of the Loan and the Loan Documents; (ii) the adequacy, condition or existence of any collateral, or the attachment, perfection or priority of any security interest or lien held by Seller, in connection with the Loan Documents and the Loan; and (iii) the status, affairs, financial condition, operations, prospects, business, property, assets and creditworthiness of Borrower and Guarantor, of any of the obligations or liabilities of Borrower, and any actions taken or to be taken under or in connection with the Loan and the Loan Documents; and (b)  Buyer has not relied upon any expressed or implied, written or oral, representation, warranty or other statement by or on behalf of Seller concerning any of the foregoing or otherwise with respect to the Loan or the Loan Documents, except for such representations and warranties of Seller as are specifically and expressly provided in this Agreement.   (d)                                 Buyer is acquiring the Loan and Loan Documents without any view either to participate in (other than as described in this Agreement), or to sell the Loan and Loan Documents in connection with, any public distribution thereof, and Buyer has no intention of making any distribution of the Loan and Loan Documents in a manner which would violate applicable securities laws; provided, however, that nothing in this Agreement shall restrict or limit in any way Buyer’s   5 --------------------------------------------------------------------------------   ability and right to dispose of all or part of the Loan and Loan Documents in accordance with such laws if at some future time Buyer deems it advisable to do so; and, provided, further, that Buyer and any party acquiring all or any portion of the Loan and Loan Documents or any proceeds thereof from Buyer, other than Seller or any successor, must agree in writing to be bound by (or continue to be bound by) this Section 8(d).   (e)                                  Buyer’s performance of its duties and obligations under this Agreement will not conflict with, result in a breach of or default under, or be adversely affected by, any agreements, instruments, decrees, judgments, injunctions, orders, writs, laws, rules or regulations, or any determination or award of any arbitrator, to which Buyer is a party or by which it may be bound.   9.                                       Reimbursement of Seller’s Costs and Expenses. Buyer will reimburse Seller for all of its costs and expenses (including attorneys’ fees) incurred, whether before of after Closing, in relation to this Agreement.   10.                                 Absence of Broker Involvement. Each party hereto represents and warrants to the other that it has not employed any broker or finder in connection with the transactions contemplated by this Agreement. Each party shall indemnify, defend and hold the other harmless for, from and against any and all liability and expense, including attorneys’ fees arising from any claim by any broker, agent or finder for commissions, finder’s fees or similar charges, because of any act of such party.   11.                                 Confidentiality. Buyer and its representatives shall hold in strictest confidence all data and information obtained with respect to Seller or its business, whether obtained before or after the execution and delivery of this Agreement, and shall not use such data or information or disclose the same to others.   12.                                 Buyer’s Waivers. Buyer, all successors or assignees thereof and all subsequent transferees of the Loan, hereby waive any right or cause of action they may now or in the future have against the Seller, and its affiliates, employees, agents, officers, representatives, successors and assigns, as a result of the purchase of the Loan; provided, however, that this waiver shall not extend to any liability of Seller arising from Seller’s failure to perform its obligations in accordance with the terms of this Agreement.   13.                                 Miscellaneous.   (a)                                  Any notice or other communication required or permitted hereunder will be in writing and personally delivered; sent by telecopier, telefax, or facsimile transmission; or sent by prepaid overnight courier service; and addressed to the relevant party at its address set forth below, or at such other address as such party may, by written notice, designate as its address for purposes of notice hereunder:   If to Seller, at:   6 --------------------------------------------------------------------------------   Wells Fargo Business Credit, Inc. Attn: Darcy Della Flora 100 West Washington Street, 15th Floor MACS4101-158 Phoenix, Arizona 85003 Telephone: (602) 378-2469 Fax: (602) 378-6215   with a copy to:   John R. Clemency, Esq. Greenberg Traurig, LLP 2375 East Camelback Road, Suite 700 Phoenix, Arizona 85016 Telephone: (602) 445-8575 Fax: (602) 445-8680   If to Buyer, at:   Opta Corporation 1350 Old Bayshore Highway, Suite 600 Burlingame, California 94010 Attention: Vincent Yan Tel. (650) 579-3610 Fax (650) 579-3606   with a copy to:   John M. Iino Reed Smith LLP 1901 Avenue of the Stars, Suite 700 Los Angeles, California 90067 Tel. (310) 734-5251 Fax (310) 734-5299   Notice will be presumed to have been received upon delivery by overnight mail, by hand-delivery, or upon communication during regular hours of the recipient by facsimile, telecopier, or telefax.   (b)                                 No delay or omission by either party hereto in exercising any right or power arising from any default by the other party hereto shall be construed as a waiver of such default or as an acquiescence therein, nor shall any single or partial exercise thereof preclude any further exercise thereof or the exercise of any other right or power arising from any default by the other party hereto. No waiver of any breach of any of the covenants or conditions contained in this Agreement shall be construed to be a waiver of or an acquiescence in or a consent to any previous or subsequent breach of the same or of any other condition or covenant.   7 --------------------------------------------------------------------------------   (c)                                  This Agreement is made for the sole benefit of Seller and Buyer and their respective successors and permitted assigns, and no other person or persons shall have any rights or remedies under or by reason of this Agreement or any right to the exercise of any right or power of either party hereto or arising from any default by either party hereto.   (d)                                 In the event any legal action is undertaken in order to enforce or interpret any provision of this Agreement, the prevailing party in such legal action, as determined by the court, shall be entitled to receive from the other party the prevailing party’s reasonable attorneys’ fees and court costs.   (e)                                  Time is hereby declared to be of the essence of this Agreement and of every part hereof. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and the masculine shall include the feminine and the neuter and vice versa.   (f)                                    Prior to Closing, this Agreement shall not be assigned by either party without the written consent of the other party, which consent may be withheld in such other party’s sole discretion.   (g)                                 This Agreement constitutes the entire understanding between the parties hereto with respect to the subject matter hereof, superseding all prior written or oral understandings, and may not be terminated, modified or amended in any way except by a written agreement signed by each of the parties hereto.   (h)                                 This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same document.   (i)                                     This Agreement will be governed by and will be construed in accordance with the laws of the State of Arizona, without giving effect to any conflicts of law principles. Buyer and Seller agree that the exclusive venue for any litigation or disputes arising under or with respect to this Agreement or any documents executed in connection herewith will be in Maricopa County, Arizona.   (j)                                     Buyer and Seller hereby acknowledge, confirm and agree that Buyer shall have no claims against Seller, and Seller shall have no liability whatsoever as a result of or otherwise in connection with any notice of default of Borrower under the Loan, or notice of sale or bankruptcy of Borrower.   (k)                                  Effective upon the Closing, Seller and Buyer each hereby covenant and agree to execute and deliver all such documents and instruments, and to take such further actions as may be reasonably necessary or appropriate, from time to time, to carry out the intent and purpose of this Agreement and to consummate the transactions contemplated hereby; provided, however, that all such documents and instruments executed, and actions taken, by Seller shall be without recourse to Seller, or, except as specifically and expressly provided in this Agreement, without representation or warranty of any kind or nature whatsoever by Seller.   8 --------------------------------------------------------------------------------   (l)                                     In addition to and not in limitation of Buyer’s obligations pursuant to Section 4, Buyer hereby agrees to indemnify, defend and hold harmless Seller for, from and against any loss, damage, claim, cost, or expense (including reasonable attorneys’ fees and costs) arising as a consequence of a breach of any obligations or representations or warranties by Buyer hereunder. Seller hereby agrees to indemnify, defend and hold harmless Buyer for, from and against any loss, damage, claim, cost, or expense (including reasonable attorneys’ fees and costs) arising as a consequence of a breach of any obligations or representations or warranties by Seller hereunder. The foregoing indemnity obligations in this Section 13(l), and the representations, warranties, covenants and agreements of Buyer and Seller hereunder, shall survive the Closing.   14.                                 WAIVER OF JURY TRIAL. BUYER AND SELLER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE LOAN OR THE LOAN DOCUMENTS.   15.                                 Transition of Control of Lockbox. Borrower has directed certain of its obligors to wire transfer their remittances to the existing Lender Account, as defined in the Lockbox Agreement. As an accommodation to Buyer, Seller will keep open the existing Lender Account, Seller’s Account No. 4945088508 (“Seller’s Account”) for 60 calendar days from the date of this Amendment. During this 60 day period (i) Buyer will notify all obligors of Borrower to direct future wires to the account identified as the Lender’s Account in the Amended and Restated Lockbox Agreement; and (ii) Seller will once each day deliver any remittances received in Seller’s Account to the account of Buyer specified in (i) above. At the end of the 60 day period, Seller will close the Seller’s Account.   Notwithstanding any contrary provision of this Amendment or any other document or agreement, Buyer agrees to indemnify Seller for, from and against any losses, liabilities, damages, claims (including, but not limited to, third party claims), demands, obligations, actions, suits, judgments, penalties, costs or expenses, including but not limited to attorneys’ fees, fees or charges of the Depository Bank or Lockbox Processor, charges relating to unpaid items or ACH overdrafts in the Seller’s Account (collectively “Losses and Liabilities”) suffered or incurred by Seller as a result of, or in connection with, Seller’s agreement to keep open Seller’s Account for the 60 day transition period as provided in this Amendment. Buyer’s indemnification obligations pursuant to this paragraph shall include any liabilities charged to Seller’s Account resulting from unpaid items, ACH overdrafts, or similar charges that were incurred prior to the Closing, but not yet processed, as well as any such charge incurred after the Closing. Buyer’s obligations to Seller under this paragraph shall survive sale and assignment of the Loan and Loan Documents pursuant to this Agreement.   [Signature pages follow.]   9 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the day and year first above written.     SELLER:       WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA       By: By: /s/ Darcy Della Flora     Title: Vice President           BUYER:       OPTA CORPORATION, a Delaware corporation           By: /s/ Vincent Yan     President and CEO   10 --------------------------------------------------------------------------------   EXHIBIT A   Purchase Price Calculation   --------------------------------------------------------------------------------   EXHIBIT B   Index of Loan Documents   1)   2)   --------------------------------------------------------------------------------   EXHIBIT C   Form of Allonge and Endorsement to Note   --------------------------------------------------------------------------------   ALLONGE AND ENDORSEMENT   This Allonge and Endorsement is attached to and made a physical part of the Replacement Revolving Note, dated May 26, 2004, in the stated principal amount of $40,000,000.00, made by OPTA SYSTEMS, LLC, a Delaware limited liability company, in favor of WELLS FARGO BUSINESS CREDIT, a division of WELLS FARGO BANK, NA, (formerly known as Wells Fargo Business Credit, Inc.) (the “Note”). The undersigned is the holder and owner of the Note.   The Note is hereby endorsed as follows:   “Pay to the order of OPTA CORPORATION without recourse, warranty or representation by the undersigned of any kind, express or implied, except as expressed in that Loan Sale Agreement, dated as of January 20, 2006, between the undersigned and OPTA CORPORATION.”   Dated:  January 27, 2006     WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA           By: By: /s/ Darcy Della Flora     Title: Vice President   --------------------------------------------------------------------------------   ALLONGE AND ENDORSEMENT   This Allonge and Endorsement is attached to and made a physical part of the Revolving Note, dated July 21, 2003, in the stated principal amount of $20,000,000.00, made by OPTA SYSTEMS, LLC, a Delaware limited liability company, in favor of WELLS FARGO BUSINESS CREDIT, a division of WELLS FARGO BANK, NA, (formerly known as Wells Fargo Business Credit, Inc.) (the “Note”). The undersigned is the holder and owner of the Note.   The Note is hereby endorsed as follows:   “Pay to the order of OPTA CORPORATION without recourse, warranty or representation by the undersigned of any kind, express or implied, except as expressed in that Loan Sale Agreement, dated as of January 20, 2006, between the undersigned and OPTA CORPORATION.”   Dated:  January 27, 2006     WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA           By: By: /s/ Darcy Della Flora     Title: Vice President   --------------------------------------------------------------------------------   EXHIBIT D   Assignment of Loan Documents   --------------------------------------------------------------------------------   ASSIGNMENT OF LOAN DOCUMENTS   For valuable consideration, receipt of which is hereby acknowledged, in accordance with, and subject to, the Loan Sale Agreement, dated as of January 20, 2006, by and between WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA (“Seller”), and OPTA CORPORATION, a Delaware corporation (“Buyer”), Seller hereby sells, transfers and assigns to Buyer all of Seller’s right, title and interest in, to and under the Loan Documents described in Schedule I attached hereto and incorporated herein by this reference.   Dated as of January 27, 2006     WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA           By: By: /s/ Darcy Della Flora     Title: Vice President   --------------------------------------------------------------------------------   SCHEDULE I   Loan Documents   --------------------------------------------------------------------------------   EXHIBIT E   Assignment of UCC Financing Statement(s)   --------------------------------------------------------------------------------   UCC FINANCING STATEMENT AMENDMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY   A. NAME & PHONE OF CONTACT AT FILER [optional]           B. SEND ACKNOWLEDGMENT TO: (Name and Address)                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1a. INITIAL FINANCING STATEMENT FILE #   31396491, filed 6/3/03   1b. o This FINANCING STATEMENT AMENDMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS.       2. o TERMINATION: Effectiveness of the Financing Statement identified above is terminated with respect to security interest(s) of the Secured party authorizing this Termination Statement.       3. o CONTINUATION: Effectiveness of the Financing Statement identified above with respect to security interest(s) of the Secured Party authorizing this Continuation Statement is continued for the additional period provided by applicable law.       4. ýASSIGNMENT: (full or partial): Give name of assignee in item 7a or 7b and address of assignee in item 7c; and also give name of assignor in item 9.       5. AMENDMENT (PARTY INFORMATION): This Amendment affects o Debtor or o Secured Party of record. Check only one of these two boxes. Also check one of the following three boxes and provide appropriate information in items 6 and/or 7.      o CHANGE name and/or address: Please refer to the detailed instructions in regard to changing the name/address of a party. o DELETE name: Give record name to be deleted in item 6a or 6b. o ADD name: Complete item 7a or 7b, and also item 7c; also complete items 7d-7g (if applicable).       6. CURRENT RECORD INFORMATION   6a. ORGANIZATION’S NAME     OR     6b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX             7. CHANGED (NEW) OR ADDED INFORMATION: OR 7a. ORGANIZATION’S NAME Opta Corporation 7b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX             7c. MAILING ADDRESS 1350 Old Bayshore Highway, Suite 600 CITY Burlingame STATE CA POSTAL CODE   94010 COUNTRY   USA       7d. SEE INSTRUCTIONS ADD’L INFO REORGANIZATION  DEBTOR 7e. TYPE OF ORGANIZATION 7f. JURISDICTION OF ORGANIZATION 7g. ORGANIZATIONAL ID #, if any   o  NONE       8. AMENDMENT (COLLATERAL CHANGE): check only one box.   Describe collateral o deleted or o added, or give entire o restated collateral description, or describe collateral o assigned.       9.          NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT (name of assignor, if this is an Assignment). If this is an Amendment authorized by a Debtor which adds collateral or adds the authorizing Debtor, or if this is a Termination authorized by a Debtor, check here o and enter name of DEBTOR authorizing this Amendment.   9a. ORGANIZATION’S NAME OR Wells Fargo Business Credit, Inc.       9b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX         10. OPTIONAL FILER REFERENCE DATA File with DE Secretary of State (Debtor is Opta Systems, LLC)   FILING OFFICE COPY – NATIONAL UCC FINANCING STATEMENT AMENDMENT (FORM UCC3) (REV. 05/22/02)   --------------------------------------------------------------------------------   UCC FINANCING STATEMENT AMENDMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY   A. NAME & PHONE OF CONTACT AT FILER [optional]           B. SEND ACKNOWLEDGMENT TO: (Name and Address)                   THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1a. INITIAL FINANCING STATEMENT FILE #        2003-0935619, Recorded 7/16/2003   1b. ý This FINANCING STATEMENT AMENDMENT is to be filed (for record) (or recorded) in the REAL ESTATE RECORDS.       2. o TERMINATION: Effectiveness of the Financing Statement identified above is terminated with respect to security interests(s) of the Secured Party authorizing this Termination Statement.       3. o CONTINUATION: Effectiveness of the Financing Statement identified above with respect to security interest(s) of the Secured Party authorizing this Continuation Statement is continued for the additional period provided by applicable law.       4. ý ASSIGNMENT (full or partial): Give name of assignee in item 7a or 7b and address of assignee in item 7c; and also give name of assignor in item 9.   5. AMENDMENT (PARTY INFORMATION): This Amendment affects o Debtor or o Secured Party of record. Check only one of these two boxes. Also check one of the following three boxes and provide appropriate information in items 6 and/or 7.    o CHANGE name and/or address: Give current record name in item 6a or 6b; also give new name (if name change) in item 7a or 7b and/or new address (if address change) in item 7c. o DELETE name: Give record name to be deleted in item 6a or 6b. o ADD name: Complete item 7a or 7b, and also item 7c; also complete items 7d-7g (if applicable).       6. CURRENT RECORD INFORMATION:   6a. ORGANIZATION’S NAME     OR     6b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX       7. CHANGED (NEW) OR ADDED INFORMATION:   7a. ORGANIZATION’S NAME Opta Corporation OR     7b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX       7c. MAILING ADDRESS 1350 Old Bayshore Highway, Suite 600 CITY   Burlingame STATE   CA POSTAL CODE   94010 COUNTRY   USA       7d. TAX ID #:  SSN OR EIN ADD’L INFO REORGANIZATION  DEBTOR   7e. TYPE OF ORGANIZATION   7f. JURISDICTION OF ORGANIZATION   7g. ORGANIZATIONAL ID #, if any   o  NONE       8. AMENDMENT (COLLATERAL CHANGE): check only one box. Describe collateral o deleted or o added, or give entire o restated collateral description, or describe collateral o   assigned.       9.          NAME OF SECURED PARTY OF RECORD AUTHORIZING THIS AMENDMENT (name of assignor, if this is an Assignment). If this is an Amendment authorized by a Debtor which adds collateral or adds the authorizing Debtor, or if this is a Termination authorized by a Debtor, check here o and enter name of DEBTOR authorizing this Amendment.   9a. ORGANIZATION’S NAME OR Wells Fargo Business Credit, Inc.       9b. INDIVIDUAL’S LAST NAME FIRST NAME MIDDLE NAME SUFFIX     10. OPTIONAL FILER REFERENCE DATA       Record Maricopa County, AZ Recorder. Debtor is Opta Systems, LLC.   FILING OFFICE COPY – NATIONAL UCC FINANCING STATEMENT AMENDMENT (FORM UCC3) (REV. 07/29/98)   --------------------------------------------------------------------------------   EXHIBIT F   Consent and Agreement of Borrower and Guarantor   --------------------------------------------------------------------------------   CONSENT AND AGREEMENT OF BORROWER AND GUARANTOR   The undersigned acknowledges that it is the borrower or guarantor (each, an “Obligor”) with respect to the loan (the “Loan”) from WELLS FARGO BUSINESS CREDIT, a division of Wells Fargo Bank, NA (“Existing Lender”) to OPTA SYSTEMS, LLC, a Delaware limited liability company, which Loan is evidenced by, among other documents, the Revolving Note, dated July 21, 2003 in the stated principal amount of $20,000,000.00 (the “Note”).   Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan Sale Agreement (the “Agreement”) of even date herewith between Existing Lender and OPTA CORPORATION, a Delaware corporation (“Lender”). The following statements are made with the knowledge that Lender, as purchaser of the Note and the Loan, is relying on them in connection with its purchase of the Loan from Existing Lender and that Lender and Lender’s successors and assigns may rely on them for that purpose. The undersigned hereby certifies to Lender, that:   1.                                       Obligor is a party to certain of the Loan Documents.   2.                                       The Loan Documents are unmodified except as reflected in the Agreement and in full force and effect.   3.                                       The outstanding principal balance of the Loan as of January 27, 2006 is $2,189,148.13.   4.                                       No event has occurred and no condition exists that constitutes, or that with the giving of notice or the lapse of time or both, would constitute, a default by Existing Lender in connection with the Loan. Obligors have no defenses, set-offs or offsets, of any kind, against the enforcement of the Loan or any amounts payable thereunder.   5.                                       Obligor consents to Lender’s purchase of the Loan and agrees that Lender shall have all rights and remedies granted to Existing Lender under the Note and other Loan Documents.   6.                                       The undersigned is duly authorized to execute this certificate on behalf of Obligor. The execution, delivery and performance of this certificate by Obligor have been duly authorized by all necessary company or trust action, as applicable.   7.                                       No consent of any person or entity is necessary to Obligor’s execution, delivery and performance of this agreement, or if such consent is required, it has been obtained.   8.                                       The making, execution, delivery and performance of the Loan Documents to which Obligor is a party have been duly authorized by Obligor. The Loan Documents constitute legal, valid and binding obligations, enforceable against Obligor in accordance with their respective terms.   --------------------------------------------------------------------------------   9.                                       This agreement may be executed in one or more counterparts, each of which shall be an original, but which together shall constitute but one and the same document. Signatures may be given by facsimile or other electronic transmission, and such signatures shall be fully binding on the party sending the same.   [Signature page follows.]   --------------------------------------------------------------------------------   Dated as of January 20, 2006.         OBLIGOR:       OPTA SYSTEMS, LLC, a Delaware limited liability company           By: /s/Chris Porter     Senior Vice President           OPTA CORPORATION, a Delaware corporation           By: /s/ Vincent Yan     President and CEO   --------------------------------------------------------------------------------

Exhibit 10.5   COMMON STOCK PURCHASE AGREEMENT COMMON STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of December 1, 2006, by and between NEOPROBE CORPORATION, a Delaware corporation (the “Company”), and FUSION CAPITAL FUND II, LLC, an Illinois limited liability company (the “Buyer”). Capitalized terms used herein and not otherwise defined herein are defined in Section 10 hereof. WHEREAS: Subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Buyer, and the Buyer wishes to buy from the Company, up to Six Million Dollars ($6,000,000) of the Company's common stock, par value $0.001 per share (the “Common Stock”). The shares of Common Stock to be purchased hereunder are referred to herein as the "Purchase Shares." In addition, as set forth in Section 1 (g) hereof, the Company may, in its sole discretion, at any time after the date hereof and until 30 days after such date as the Available Amount is equal to $0, deliver an irrevocable written notice to the Buyer stating that the Company elects to enter into a second Common Stock Purchase Agreement with the Buyer for the purchase of an additional Six Million Dollars ($6,000,000) of Common Stock. NOW THEREFORE, the Company and the Buyer hereby agree as follows: 1.  PURCHASE OF COMMON STOCK. Subject to the terms and conditions set forth in this Agreement, the Company has the right to sell to the Buyer, and the Buyer has the obligation to purchase from the Company, Purchase Shares as follows: (a) Commencement of Purchases of Common Stock. The purchase and sale of Purchase Shares hereunder shall occur from time to time upon written notices by the Company to the Buyer on the terms and conditions as set forth herein following the satisfaction of the conditions (the “Commencement”) as set forth in Sections 6 and 7 below (the date of satisfaction of such conditions, the "Commencement Date"). (b) The Company’s Right to Require Purchases. Any time on or after the Commencement Date, the Company shall have the right but not the obligation to direct the Buyer by its delivery to the Buyer of Base Purchase Notices from time to time to buy Purchase Shares (each such purchase a “Base Purchase”) in any amount up to Fifty Thousand Dollars ($50,000.00) per Base Purchase Notice (the “Base Purchase Amount”) at the Purchase Price on the Purchase Date. The Company may deliver multiple Base Purchase Notices to the Buyer so long as at least four (4) Business Days have passed since the most recent Base Purchase was completed. Notwithstanding the forgoing, any time on or after the Commencement Date, the Company shall also have the right but not the obligation by its delivery to the Buyer of Block Purchase Notices from time to time to direct the Buyer to buy Purchase Shares (each such purchase a “Block Purchase”) in any amount up to One Million Dollars ($1,000,000.00) per Block Purchase Notice at the Block Purchase Price on the Purchase Date as provided herein. For a Block Purchase Notice to be valid the following conditions must be met: (1) the Block Purchase Amount shall not exceed One Hundred Thousand Dollars ($100,000) per Block Purchase Notice, (2) the Company must deliver the Purchase Shares before 11:00 a.m. eastern time on the Purchase Date and (3) the Sale Price of the Common Stock must not be below $0.30 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the Purchase Date, the date of the delivery of the Block Purchase Notice and during the Business Day prior to the delivery of the Block Purchase Notice. The Block Purchase Amount may be increased to up to Two Hundred Fifty Thousand Dollars ($250,000.00) per Block Purchase Notice if the Sale Price of the Common Stock is not below $0.60 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the Purchase Date, the date of the delivery of the Block Purchase Notice and during the Business Day prior to the delivery of the Block Purchase Notice. The Block Purchase Amount may be increased to up to Five Hundred Thousand Dollars ($500,000.00) per Block Purchase Notice if the Sale Price of the Common Stock is not below $0.80 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the Purchase Date, the date of the delivery of the Block Purchase Notice and during the Business Day prior to the delivery of the Block Purchase Notice. The Block Purchase Amount may be increased to up to One Million Dollars ($1,000,000.00) per Block Purchase Notice if the Sale Price of the Common Stock is not below $1.20 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) during the Purchase Date, the date of the delivery of the Block Purchase Notice and during the Business Day prior to the delivery of the Block Purchase Notice. As used herein, the term “Block Purchase Price” shall mean the lesser of (i) the lowest Sale Price of the Common Stock on the Purchase Date or (ii) the lowest Purchase Price during the previous eight (8) Business Days prior to the date that the valid Block Purchase Notice was received by the Buyer. However, if at any time during the Purchase Date, the date of the delivery of the Block Purchase Notice or during the Business Day prior to the delivery of the Block Purchase Notice, the Sale Price of the Common Stock is below the applicable Block Purchase threshold price, such Block Purchase shall be void and the Buyer’s obligations to buy Purchase Shares in respect of that Block Purchase Notice shall be terminated. Thereafter, the Company shall again have the right to submit a Block Purchase Notice as set forth herein by delivery of a new Block Purchase Notice only if the Sale Price of the Common Stock is above the applicable Block Purchase threshold price during the date of the delivery of the Block Purchase Notice and during the Business Day prior to the delivery of the Block Purchase Notice. The Company may deliver multiple Block Purchase Notices to the Buyer so long as at least three (3) Business Days have passed since the most recent Block Purchase was completed. --------------------------------------------------------------------------------   (c) Payment for Purchase Shares. The Buyer shall pay to the Company an amount equal to the Purchase Amount with respect to such Purchase Shares as full payment for such Purchase Shares via wire transfer of immediately available funds on the same Business Day that the Buyer receives such Purchase Shares if they are received by the Buyer before 11:00 a.m. eastern time or if received by the Buyer after 11:00 a.m. eastern time, the next Business Day. The Company shall not issue any fraction of a share of Common Stock upon any purchase. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up or down to the nearest whole share. All payments made under this Agreement shall be made in lawful money of the United States of America or wire transfer of immediately available funds to such account as the Company may from time to time designate by written notice in accordance with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day that is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day.   (d) Purchase Price Floor. The Company and the Buyer shall not effect any sales under this Agreement on any Purchase Date where the Purchase Price for any purchases of Purchase Shares would be less than the Floor Price. “Floor Price” means $0.20, which shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. -2- --------------------------------------------------------------------------------   (e) Records of Purchases. The Buyer and the Company shall each maintain records showing the remaining Available Amount at any give time and the dates and Purchase Amounts for each purchase or shall use such other method, reasonably satisfactory to the Buyer and the Company. (f) Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock to the Buyer made under this Agreement. (g) Option for Second Tranche; Second Common Stock Purchase Agreement. The Company may, in its sole discretion, at any time after the date hereof and until 30 days after such date as the Available Amount is equal to $0 (the “Second Tranche Expiration Date”), deliver an irrevocable written notice (the “Second Tranche Notice”) to the Buyer stating that the Company elects to enter into an additional Common Stock Purchase Agreement (the “Second Common Stock Purchase Agreement”) with the Buyer for the purchase of Six Million Dollars ($6,000,000) of additional Common Stock. It is agreed and acknowledged by the parties hereto that entering into the Second Common Stock Purchase Agreement shall be at the option of the Company in its sole discretion until such time as the Company shall have delivered the Second Tranche Notice to the Buyer. The Buyer shall not be obligated to enter into the Second Common Stock Purchase Agreement unless the Company has delivered the Second Tranche Notice prior to the Second Tranche Expiration Date. The Second Common Stock Purchase Agreement may not be entered into until the aggregate Available Amount under this Agreement is fully used to buy Purchase Shares hereunder. Upon delivery of the Second Tranche Notice to the Buyer prior to the Second Tranche Expiration Date, the Buyer and the Company shall be obligated to enter into the Second Common Stock Purchase Agreement no later than the date that is 10 Trading Days after the Second Tranche Expiration Date. If the Buyer and the Company have not entered into the Second Common Stock Purchase Agreement by the date that is 10 Trading Days after the Second Tranche Expiration Date, the Buyer shall not be obligated to enter into such additional Common Stock Purchase Agreement. The terms and conditions of the Second Common Stock Purchase Agreement shall be in form and substance identical in all respects to this Agreement, provided, however, that for purposes of the Second Common Stock Purchase Agreement, the Company shall not issue any Commitment Shares to the Buyer and this Section 1(g) shall be omitted.  2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents and warrants to the Company that as of the date hereof and as of the Commencement Date: (a) Investment Purpose. The Buyer is entering into this Agreement and acquiring the Commitment Shares, (as defined in Section 4(e) hereof) (this Agreement, the Purchase Shares and the Commitment Shares are collectively referred to herein as the "Securities"), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof; provided however, by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term.   (b) Accredited Investor Status. The Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. (c) Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. -3- --------------------------------------------------------------------------------   (d) Information. The Buyer has been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been reasonably requested by the Buyer, including, without limitation, the SEC Documents (as defined in Section 3(f) hereof). The Buyer understands that its investment in the Securities involves a high degree of risk. The Buyer (i) is able to bear the economic risk of an investment in the Securities including a total loss, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Securities and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial condition and business of the Company and others matters related to an investment in the Securities. Neither such inquiries nor any other due diligence investigations conducted by the Buyer or its representatives shall modify, amend or affect the Buyer's right to rely on the Company's representations and warranties contained in Section 3 below. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. (e) No Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities. (f) Transfer or Sale. The Buyer understands that except as provided in the Registration Rights Agreement (as defined in Section 4(a) hereof): (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder or (B) an exemption exists permitting such Securities to be sold, assigned or transferred without such registration; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. (g) Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Buyer and is a valid and binding agreement of the Buyer enforceable against the Buyer in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. (h) Residency. The Buyer is a resident of the State of Illinois. (i) No Prior Short Selling. The Buyer represents and warrants to the Company that at no time prior to the date of this Agreement has any of the Buyer, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is defined in Section 242.200 of Regulation SHO of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock. -4- -------------------------------------------------------------------------------- 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that as of the date hereof and as of the Commencement Date: (a) Organization and Qualification. The Company and its "Subsidiaries" (which for purposes of this Agreement means any entity in which the Company, directly or indirectly, owns 50% or more of the voting stock or capital stock or other similar equity interests) are corporations duly organized and validly existing in good standing under the laws of the jurisdiction in which they are incorporated, and have the requisite corporate power and authority to own their properties and to carry on their business as now being conducted. Each of the Company and its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing could not reasonably be expected to have a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any material adverse effect on any of: (i) the business, properties, assets, operations, results of operations or financial condition of the Company and its Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the Company to perform its obligations under the Transaction Documents (as defined in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on Schedule 3(a). (b) Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and each of the other agreements entered into by the parties on the Commencement Date and attached hereto as exhibits to this Agreement (collectively, the "Transaction Documents"), and to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Commitment Shares and the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement, have been duly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its shareholders, (iii) this Agreement has been, and each other Transaction Document shall be on the Commencement Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies. The Board of Directors of the Company has approved the resolutions (the “Signing Resolutions”) substantially in the form as set forth as Exhibit C-1 attached hereto to authorize this Agreement and the transactions contemplated hereby. The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any respect other than by the resolutions set forth in Exhibit C-2 attached hereto regarding the registration statement referred to in Section 4 hereof. The Company has delivered to the Buyer a certificate of its Secretary containing a true and correct copy of the Signing Resolutions as adopted by the Board of Directors of the Company. No other approvals or consents of the Company’s Board of Directors and/or shareholders is necessary under applicable laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize the execution and delivery of this Agreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Commitment Shares and the issuance of the Purchase Shares. -5- --------------------------------------------------------------------------------   (c) Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 150,000,000 shares of Common Stock, of which as of the date hereof, 58,690,046 shares are issued and outstanding, none are held as treasury shares, 6,982,973 shares are reserved for issuance pursuant to the Company's stock option plans of which only approximately 1,627,500 shares remain available for future grants and 39,229,376 shares are issuable and reserved for issuance pursuant to securities (other than stock options issued pursuant to the Company's stock option plans) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 5,000,000 shares of Preferred Stock, $0.001 par value, none of which as of the date hereof are issued and outstanding. All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement), (v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. The Company has furnished to the Buyer true and correct copies of the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), and the Company's By-laws, as amended and as in effect on the date hereof (the "By-laws"), and summaries of the terms of all securities convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of the holders thereof in respect thereto. (d) Issuance of Securities. If the Company has elected to issue the Initial Commitment Shares in lieu of paying the Initial Commitment Fee, 720,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) have been duly authorized and reserved for issuance as Initial Commitment Shares in accordance with Section 4(e) of this Agreement and 720,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) have been duly authorized and reserved for issuance as Additional Commitment Shares in accordance with Section 4(e) this Agreement.  Upon issuance in accordance with the terms hereof, the Commitment Shares shall be (i) validly issued, fully paid and non-assessable and (ii) free from all taxes, liens and charges with respect to the issue thereof. 12,000,000 shares of Common Stock have been duly authorized and reserved for issuance upon purchase under this Agreement.  Upon issuance and payment therefor in accordance with the terms and conditions of this Agreement, the Purchase Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. -6- --------------------------------------------------------------------------------   (e) No Conflicts. Except as disclosed in Schedule 3(e), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Purchase Shares) will not (i) result in a violation of the Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable to the Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments, accelerations, cancellations and violations under clause (ii), which could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 3(e), neither the Company nor its Subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any Certificate of Designation, Preferences and Rights of any outstanding series of preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Except as disclosed in Schedule 3(e), neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations or amendments which could not reasonably be expected to have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or effected on or prior to the Commencement Date. Except as listed in Schedule 3(e), since October 31, 2005, the Company has not received nor delivered any notices or correspondence from or to the Principal Market. The Principal Market has not commenced any delisting proceedings against the Company. (f) SEC Documents; Financial Statements. Except as disclosed in Schedule 3(f), since January 1, 2005, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the "SEC Documents"). As of their respective dates (except as they have been correctly amended), the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC (except as they may have been properly amended), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates (except as they have been properly amended), the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as listed in Schedule 3(f), the Company has received no notices or correspondence from the SEC since January 1, 2005. The SEC has not commenced any enforcement proceedings against the Company or any of its subsidiaries. -7- --------------------------------------------------------------------------------   (g) Absence of Certain Changes. Except as disclosed in Schedule 3(g), since September 30, 2006, there has been no material adverse change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.  (h) Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse Effect. A description of each action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body which, as of the date of this Agreement, is pending or threatened in writing against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, is set forth in Schedule 3(h). (i) Acknowledgment Regarding Buyer's Status. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Buyer or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Buyer's purchase of the Securities. The Company further represents to the Buyer that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors. (j) No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities. -8- --------------------------------------------------------------------------------   (k) Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth on Schedule 3(k), none of the Company's material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth on Schedule 3(k), there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect. (l) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in each of the three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (m) Title. The Company and its Subsidiaries do not own any real property. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(m) or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. (n) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole. (o) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. -9- --------------------------------------------------------------------------------   (p) Tax Status. The Company and each of its Subsidiaries has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. (q) Transactions With Affiliates. Except as set forth on Schedule 3(q) and other than the grant or exercise of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has an interest or is an officer, director, trustee or partner. (r) Application of Takeover Protections. The Company and its board of directors have taken or will take prior to the Commencement Date all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and the Buyer's ownership of the Securities. (s) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 4. COVENANTS. (a) Filing of Form 8-K and Registration Statement. The Company agrees that it shall, within the time required under the 1934 Act file a Report on Form 8-K disclosing this Agreement and the transaction contemplated hereby. The Company shall also file within twenty (20) Business Days from the date hereof a new registration statement covering only the sale of the Commitment Shares and Purchase Shares in accordance with the terms of the Registration Rights Agreement between the Company and the Buyer, dated as of the date hereof (“Registration Rights Agreement”). After such registration statement is declared effective by the SEC, the Company agrees and acknowledges that any sales by the Company to the Buyer pursuant to this Agreement are sales of the Company's equity securities in a transaction that is registered under the 1933 Act. -10- --------------------------------------------------------------------------------   (b) Blue Sky. The Company shall take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify (i) the initial sale of the Commitment Shares and any Purchase Shares to the Buyer under this Agreement and (ii) any subsequent resale of the Commitment Shares and any Purchase Shares by the Buyer, in each case, under applicable securities or "Blue Sky" laws of the states of the United States in such states as is reasonably requested by the Buyer from time to time, and shall provide evidence of any such action so taken to the Buyer. (c) Listing. The Company shall promptly secure the listing of all of the Purchase Shares and Commitment Shares upon each national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all such securities from time to time issuable under the terms of the Transaction Documents. The Company shall maintain the Common Stock's authorization for quotation on the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action that would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall promptly, and in no event later than the following Business Day, provide to the Buyer copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section. (d) Limitation on Short Sales and Hedging Transactions. The Buyer agrees that beginning on the date of this Agreement and ending on the date of termination of this Agreement as provided in Section 11(k), the Buyer and its agents, representatives and affiliates shall not in any manner whatsoever enter into or effect, directly or indirectly, any (i) "short sale" (as such term is defined in Section 242.200 of Regulation SHO of the 1934 Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock. (e) Issuance of Commitment Shares; Limitation on Sales of Commitment Shares. On or before December 15, 2006, the Company shall pay to the Buyer, as consideration for the Buyer entering into this Agreement, a commitment fee of $360,000 (the “Initial Commitment Fee”). The Company may pay the Initial Commitment Fee in cash, or in lieu of a cash payment, issue to the Buyer 720,000 shares of Common Stock (the "Initial Commitment Shares") valued at $0.50 per share. In connection with each purchase of Purchase Shares hereunder, the Company agrees to issue to the Buyer a number of shares of Common Stock (the “Additional Commitment Shares” and together with the Initial Commitment Shares, the “Commitment Shares”) equal to the product of (x) 720,000 and (y) the Purchase Amount Fraction. The “Purchase Amount Fraction” shall mean a fraction, the numerator of which is the Purchase Amount purchased by the Buyer with respect to such purchase of Purchase Shares and the denominator of which is Six Million Dollars ($6,000,000). The Additional Commitment Shares shall be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. The Initial Commitment Shares shall be issued in certificated form and (subject to Section 5 hereof) shall bear the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. -11- --------------------------------------------------------------------------------   The Buyer agrees that the Buyer shall not transfer or sell the Commitment Shares until the earlier of 480 Business Days (24 Monthly Periods) from the date hereof or the date on which this Agreement has been terminated, provided, however, that such restrictions shall not apply: (i) in connection with any transfers to or among affiliates (as defined in the 1934 Act) who agree to be bound by the transfer restrictions set forth in this paragraph, (ii) in connection with any pledge in connection with a bona fide loan or margin account, (iii) in the event that the Commencement does not occur on or before March 15, 2007, due to the failure of the Company to satisfy the conditions set forth in Section 7 or (iv) if an Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default, including any failure by the Company to timely issue Purchase Shares under this Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment Shares to a third party in order to settle a sale made by the Buyer where the Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer under this Agreement so long as the Buyer maintains ownership of the same overall number of shares of Common Stock by "replacing" the Commitment Shares so transferred with Purchase Shares when the Purchase Shares are actually issued by the Company to the Buyer. (f) Due Diligence. The Buyer shall have the right, from time to time as the Buyer may reasonably deem appropriate, to perform reasonable due diligence on the Company during normal business hours. The Company and its officers and employees shall provide information and reasonably cooperate with the Buyer in connection with any reasonable request by the Buyer related to the Buyer's due diligence of the Company, including, but not limited to, any such request made by the Buyer in connection with (i) the filing of the registration statement described in Section 4(a) hereof and (ii) the Commencement. Each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party. 5. TRANSFER AGENT INSTRUCTIONS. On or before December 15, 2006, the Company shall either (i) pay to the Buyer the Initial Commitment Fee, or (ii) deliver to the Transfer Agent a letter in the form as set forth as Exhibit E attached hereto with respect to the issuance of the Initial Commitment Shares. On the Commencement Date, the Company shall cause any restrictive legend on the Initial Commitment Shares  to be removed and all of the Purchase Shares and Additional Commitment Shares, to be issued under this Agreement shall be issued without any restrictive legend unless the Buyer expressly consents otherwise. The Company shall issue irrevocable instructions to the Transfer Agent, and any subsequent transfer agent, to issue Purchase Shares in the name of the Buyer for the Purchase Shares (the "Irrevocable Transfer Agent Instructions"). The Company warrants to the Buyer that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to the Transfer Agent with respect to the Purchase Shares and that the Commitment Shares and the Purchase Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement subject to the provisions of Section 4(e) in the case of the Commitment Shares. -12- -------------------------------------------------------------------------------- 6. CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK UNDER THIS AGREEMENT. The right of the Company hereunder to commence sales of the Purchase Shares is subject to the satisfaction of each of the following conditions on or before the Commencement Date (the date that the Company may begin sales): (a) The Buyer shall have executed each of the Transaction Documents and delivered the same to the Company; (b) A registration statement covering the sale of all of the Commitment Shares and Purchase Shares shall have been declared effective under the 1933 Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the SEC. 7. CONDITIONS TO THE BUYER'S OBLIGATION TO MAKE PURCHASES OF SHARES OF COMMON STOCK. The obligation of the Buyer to buy Purchase Shares under this Agreement is subject to the satisfaction of each of the following conditions on or before the Commencement Date (the date that the Company may begin sales) and once such conditions have been initially satisfied, there shall not be any ongoing obligation to satisfy such conditions after the Commencement has occurred: (a) The Company shall have executed each of the Transaction Documents and delivered the same to the Buyer; (b) The Company shall have issued to the Buyer the InitialCommitment Shares and shall have removed the restrictive transfer legend from the certificate representing the InitialCommitment Shares; (c) The Common Stock shall be authorized for quotation on the Principal Market, no suspension of trading in the Common Stock shall be pending or threatened by the SEC or the Principal Market and the Purchase Shares and the Commitment Shares shall be approved for listing upon the Principal Market; (d) The Buyer shall have received the opinions of the Company's legal counsel dated as of the Commencement Date substantially in the form of Exhibit A attached hereto; (e) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. The Buyer shall have received a certificate, executed by the CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached hereto as Exhibit B; -13- --------------------------------------------------------------------------------   (f) The Board of Directors of the Company shall have adopted resolutions in the form attached hereto as Exhibit C which shall be in full force and effect without any amendment or supplement thereto as of the Commencement Date; (g) As of the Commencement Date, the Company shall have reserved out of its authorized and unissued Common Stock, (A) solely for the purpose of effecting purchases of Purchase Shares hereunder, 12,000,000 shares of Common Stock and (B) as Additional Commitment Shares in accordance with Section 4(e) hereof, 720,000 shares of Common Stock; (h) The Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall have been delivered to and acknowledged in writing by the Company and the Company's Transfer Agent; (i) The Company shall have delivered to the Buyer a certificate evidencing the incorporation and good standing of the Company in the State of Delaware issued by the Secretary of State of the State of Delaware as of a date within ten (10) Business Days of the Commencement Date; (j) The Company shall have delivered to the Buyer a certified copy of the Certificate of Incorporation as certified by the Secretary of State of the State of Delaware within ten (10) Business Days of the Commencement Date; (k) The Company shall have delivered to the Buyer a secretary's certificate executed by the Secretary of the Company, dated as of the Commencement Date, in the form attached hereto as Exhibit D; (l) A registration statement covering the sale of all of the Commitment Shares and Purchase Shares shall have been declared effective under the 1933 Act by the SEC and no stop order with respect to the registration statement shall be pending or threatened by the SEC. The Company shall have prepared and delivered to the Buyer a final and complete form of prospectus, dated and current as of the Commencement Date, to be used by the Buyer in connection with any sales of any Commitment Shares or any Purchase Shares, and to be filed by the Company one Business Day after the Commencement Date. The Company shall have made all filings under all applicable federal and state securities laws necessary to consummate the issuance of the Commitment Shares and the Purchase Shares pursuant to this Agreement in compliance with such laws; (m) No Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default has occurred; (n) On or prior to the Commencement Date, the Company shall take all necessary action, if any, and such actions as reasonably requested by the Buyer, in order to render inapplicable any control share acquisition, business combination, shareholder rights plan or poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Buyer as a result of the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Securities and the Buyer's ownership of the Securities; and -14- --------------------------------------------------------------------------------   (o) The Company shall have provided the Buyer with the information reasonably requested by the Buyer in connection with its due diligence requests made prior to, or in connection with, the Commencement, in accordance with the terms of Section 4(g) hereof. 8. INDEMNIFICATION. In consideration of the Buyer's execution and delivery of the Transaction Documents and acquiring the Securities hereunder and in addition to all of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Buyer and all of its affiliates, shareholders, officers, directors, employees and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the "Indemnitees") from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly and primarily result from the gross negligence or willful misconduct of the Indemnitee. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 9. EVENTS OF DEFAULT. An "Event of Default" shall be deemed to have occurred at any time as any of the following events occurs: (a) while any registration statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of such registration statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to the Buyer for sale of all of the Registrable Securities (as defined in the Registration Rights Agreement) in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period; (b) the suspension from trading or failure of the Common Stock to be listed on the Principal Market for a period of three (3) consecutive Business Days; -15- --------------------------------------------------------------------------------   (c) the delisting of the Company’s Common Stock from the Principal Market, provided, however, that the Common Stock is not immediately thereafter trading on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market, or the American Stock Exchange; (d) the failure for any reason by the Transfer Agent to issue Purchase Shares to the Buyer within five (5) Business Days after the applicable Purchase Date which the Buyer is entitled to receive; (e) the Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach could have a Material Adverse Effect and except, in the case of a breach of a covenant which is reasonably curable, only if such breach continues for a period of at least ten (10) Business Days; (f) if any Person commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law ; (g) if the Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, (E) becomes insolvent, or (F) is generally unable to pay its debts as the same become due; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company or any Subsidiary; or (i) a change in the business, properties, operations, financial condition or results of operations of the Company and its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. In addition to any other rights and remedies under applicable law and this Agreement, including the Buyer termination rights under Section 11(k) hereof, so long as an Event of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default, has occurred and is continuing, or so long as the Purchase Price is below the Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of Common Stock under this Agreement. If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any Person. No such termination of this Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. -16- --------------------------------------------------------------------------------   10. CERTAIN DEFINED TERMS. For purposes of this Agreement, the following terms shall have the following meanings: (a) “1933 Act” means the Securities Act of 1933, as amended. (b) “Available Amount” means initially Six Million Dollars ($6,000,000) in the aggregate which amount shall be reduced by the Purchase Amount each time the Buyer purchases shares of Common Stock pursuant to Section 1 hereof. (c) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. (d)  “Base Purchase Notice” shall mean an irrevocable written notice from the Company to the Buyer directing the Buyer to buy up to the Base Purchase Amount in Purchase Shares as specified by the Company therein at the applicable Purchase Price on the Purchase Date. (e) “Block Purchase Amount” shall mean such Block Purchase Amount as specified by the Company in a Block Purchase Notice subject to Section 1(b) hereof. (f) “Block Purchase Notice” shall mean an irrevocable written notice from the Company to the Buyer directing the Buyer to buy the Block Purchase Amount in Purchase Shares as specified by the Company therein at the Block Purchase Price as of the Purchase Date subject to Section 1 hereof.   (d) “Business Day” means any day on which the Principal Market is open for trading including any day on which the Principal Market is open for trading for a period of time less than the customary time. (e) “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market as reported by the Principal Market, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by the Principal Market. (f) “Confidential Information” means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as "Confidential," "Proprietary" or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) business days after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure. -17- --------------------------------------------------------------------------------   (g) “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. (h) “Maturity Date” means the date that is 480 Business Days (24 Monthly Periods) from the Commencement Date.   (i) “Monthly Period” means each successive 20 Business Day period commencing with the Commencement Date. (j) “Person” means an individual or entity including any limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. (k) “Principal Market” means the Nasdaq OTC Bulletin Board; provided however, that in the event the Company’s Common Stock is ever listed or traded on the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange or the American Stock Exchange, than the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded. (l) “Purchase Amount” means, with respect to any particular purchase made hereunder, the portion of the Available Amount to be purchased by the Buyer pursuant to Section 1 hereof as set forth in a valid Base Purchase Notice or a valid Block Purchase Notice which the Company delivers to the Buyer. (m) “Purchase Date” means with respect to any particular purchase made hereunder, the Business Day after receipt by the Buyer of a valid Base Purchase Notice or a valid Block Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section 1 hereof. (n) “Purchase Price” means the lower of the (A) the lowest Sale Price of the Common Stock on the Purchase Date and (B) the arithmetic average of the three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12) consecutive Business Days ending on the Business Day immediately preceding such Purchase Date (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction). (o) “Sale Price” means, any trade price for the shares of Common Stock on the Principal Market as reported by the Principal Market. (q) “SEC” means the United States Securities and Exchange Commission. (r) “Transfer Agent” means the transfer agent of the Company as set forth in Section 11(f) hereof or such other person who is then serving as the transfer agent for the Company in respect of the Common Stock. -18- --------------------------------------------------------------------------------   11. MISCELLANEOUS. (a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Chicago, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. (b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature. (c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. (d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. (e) Entire Agreement. With the exception of the Mutual Nondisclosure Agreement between the parties dated as of October 24, 2006, this Agreement supersedes all other prior oral or written agreements between the Buyer, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. The Company acknowledges and agrees that is has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in this Agreement. (f) Notices. Any notices, consents or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: -19- --------------------------------------------------------------------------------   If to the Company: Neoprobe Corporation 425 Metro Place North, Suite 300 Dublin, OH 43017 Telephone: 614-793-7500 Facsimile: 614-793-7522 Attention:  Chief Financial Officer With a copy to: Porter Wright Morris & Arthur 41 South High Street, Suite 2900 Columbus, OH 43215 Telephone: (614) 227-2136 Facsimile:  (614) 227-2100 Attention:  William J. Kelly If to the Buyer: Fusion Capital Fund II, LLC 222 Merchandise Mart Plaza, Suite 9-112 Chicago, IL 60654 Telephone: 312-644-6644 Facsimile: 312-644-6244 Attention: Steven G. Martin If to the Transfer Agent: Continental Stock Transfer & Trust Company 2 Broadway New York, NY 10004 Telephone:  212-509-4000 Facsimile: 212-509-5150 Attention:  William F. Seegraber or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, and recipient facsimile number or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. (g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer, including by merger or consolidation. The Buyer may not assign its rights or obligations under this Agreement. -20- --------------------------------------------------------------------------------   (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. (i) Publicity. The Buyer shall have the right to approve before issuance any press release, SEC filing or any other public disclosure made by or on behalf of the Company whatsoever with respect to, in any manner, the Buyer, its purchases hereunder or any aspect of this Agreement or the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or other public disclosure (including any filings with the SEC) with respect to such transactions as is required by applicable law and regulations so long as the Company and its counsel consult with the Buyer in connection with any such press release or other public disclosure and provide the Buyer a copy thereof at least two (2) Business Days prior to its release.. The Company agrees and acknowledges that its failure to fully comply with this provision constitutes a material adverse effect on its ability to perform its obligations under this Agreement. (j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (k) Termination. This Agreement may be terminated only as follows: (i) By the Buyer any time an Event of Default exists without any liability or payment to the Company. However, if pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors, (any of which would be an Event of Default as described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall automatically terminate without any liability or payment to the Company without further action or notice by any Person. No such termination of this Agreement under this Section 11(k)(i) shall affect the Company's or the Buyer's obligations under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. (ii) In the event that the Commencement shall not have occurred, the Company shall have the option to terminate this Agreement for any reason or for no reason without liability of any party to any other party. (iii) In the event that the Commencement shall not have occurred on or before March 15, 2006, due to the failure to satisfy the conditions set forth in Sections 6 and 7 above with respect to the Commencement, the nonbreaching party shall have the option to terminate this Agreement at the close of business on such date or thereafter without liability of any party to any other party. (iv) If by the Maturity Date for any reason or for no reason the full Available Amount under this Agreement has not been purchased as provided for in Section 1 of this Agreement, by the Buyer without any liability or payment to the Company. -21- --------------------------------------------------------------------------------   (v)  At any time after the Commencement Date, the Company shall have the option to terminate this Agreement for any reason or for no reason by delivering notice (a “Company Termination Notice”) to the Buyer electing to terminate this Agreement without any liability or payment to the Buyer. The Company Termination Notice shall not be effective until one (1) Business Day after it has been received by the Buyer. (vi) This Agreement shall automatically terminate on the date that the Company sells and the Buyer purchases the full Available Amount as provided herein, without any action or notice on the part of any party. Except as set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections 9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this Agreement pursuant to this Section 11(k) shall be effected by written notice from the Company to the Buyer, or the Buyer to the Company, as the case may be, setting forth the basis for the termination hereof. The representations and warranties of the Company and the Buyer contained in Sections 2, 3 and 5 hereof, the indemnification provisions set forth in Section 8 hereof and the agreements and covenants set forth in Section 11, shall survive the Commencement and any termination of this Agreement. No termination of this Agreement shall affect the Company's or the Buyer's rights or obligations (i) under the Registration Rights Agreement which shall survive any such termination or (ii) under this Agreement with respect to pending purchases and the Company and the Buyer shall complete their respective obligations with respect to any pending purchases under this Agreement. Notwithstanding anything in this Agreement to the contrary whatsoever, the Company shall not have the right to terminate this Agreement unless and until it has paid the Initial Commitment Fee or issued and delivered to the Buyer the Initial Commitment Shares and no termination of this Agreement by the Buyer or otherwise shall affect the Company's obligation to pay the Initial Commitment Fee or issue the Initial Commitment Shares to the Buyer on or before December 15, 2006. (l) No Financial Advisor, Placement Agent, Broker or Finder. The Company represents and warrants to the Buyer that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby. The Buyer represents and warrants to the Company that it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions contemplated hereby. The Company shall be responsible for the payment of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Buyer harmless against, any liability, loss or expense (including, without limitation, attorneys' fees and out of pocket expenses) arising in connection with any such claim. (m) No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. (n) Remedies, Other Obligations, Breaches and Injunctive Relief. The Buyer’s remedies provided in this Agreement shall be cumulative and in addition to all other remedies available to the Buyer under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Buyer contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Buyer's right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. -22- --------------------------------------------------------------------------------   (o) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in the hands of an attorney for enforcement or is enforced by the Buyer through any legal proceeding; or (ii) an attorney is retained to represent the Buyer in any bankruptcy, reorganization, receivership or other proceedings affecting creditors' rights and involving a claim under this Agreement; or (iii) an attorney is retained to represent the Buyer in any other proceedings whatsoever in connection with this Agreement, then the Company shall pay to the Buyer, as incurred by the Buyer, all reasonable costs and expenses including attorneys' fees incurred in connection therewith, in addition to all other amounts due hereunder. (p) Failure or Indulgence Not Waiver. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. * * * * *   -23- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock Purchase Agreement to be duly executed as of the date first written above.         THE COMPANY:       NEOPROBE CORPORATION               By:   /s/ David C. Bupp   -------------------------------------------------------------------------------- Name: David C. Bupp   Title: President and CEO           BUYER:       FUSION CAPITAL FUND II, LLC BY: FUSION CAPITAL PARTNERS, LLC BY: ROCKLEDGE CAPITAL CORPORATION               By:   /s/ Joshua B. Scheinfeld   -------------------------------------------------------------------------------- Name: Joshua B. Scheinfeld   Title: President -24- -------------------------------------------------------------------------------- SCHEDULES Schedule 3(a) Subsidiaries Schedule 3(c) Capitalization Schedule 3(e) Conflicts Schedule 3(f) 1934 Act Filings Schedule 3(g) Material Changes Schedule 3(h) Litigation Schedule 3(k) Intellectual Property Schedule 3(m) Liens Schedule 3(q) Certain Transactions EXHIBITS   Exhibit A Form of Company Counsel Opinion Exhibit B Form of Officer’s Certificate Exhibit C Form of Resolutions of Board of Directors of the Company Exhibit D Form of Secretary’s Certificate Exhibit E Form of Letter to Transfer Agent   --------------------------------------------------------------------------------   DISCLOSURE SCHEDULES Schedule 3(a) - Subsidiaries Schedule 3(c) - Capitalization Schedule 3(e) - No Conflicts Schedule 3(f) - 1934 Act Filings Schedule 3(g) - Absence of Certain Changes Schedule 3(h) - Litigation Schedule 3(k) - Intellectual Property Rights Schedule 3(m) - Title Schedule 3(q) - Transactions with Affiliates -------------------------------------------------------------------------------- EXHIBIT A FORM OF COMPANY COUNSEL OPINION Capitalized terms used herein but not defined herein, have the meaning set forth in the Common Stock Purchase Agreement. Based on the foregoing, and subject to the assumptions and qualifications set forth herein, we are of the opinion that: 1. The Company is a corporation existing and in good standing under the laws of the State of Delaware. The Company is qualified to do business as a foreign corporation and is in good standing in the States of Ohio [other?].   2. The Company has the corporate power to execute and deliver, and perform its obligations under, each Transaction Document to which it is a party. The Company has the corporate power to conduct its business as, to the best of our knowledge, it is now conducted, and to own and use the properties owned and used by it.   3. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Company. The execution and delivery of the Transaction Documents by the Company, the performance of the obligations of the Company thereunder and the consummation by it of the transactions contemplated therein have been duly authorized and approved by the Company's Board of Directors and no further consent, approval or authorization of the Company, its Board of Directors or its stockholders is required. The Transaction Documents to which the Company is a party have been duly executed and delivered by the Company and are the valid and binding obligations of the Company, enforceable against the Company in accordance with their terms except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, liquidation or similar laws relating to, or affecting creditor’s rights and remedies.   4. The execution, delivery and performance by the Company of the Transaction Documents, the consummation by the Company of the transactions contemplated thereby including the offering, sale and issuance of the Commitment Shares, and the Purchase Shares in accordance with the terms and conditions of the Common Stock Purchase Agreement, and fulfillment and compliance with terms of the Transaction Documents, does not and shall not: (i) conflict with, constitute a breach of or default (or an event which, with the giving of notice or lapse of time or both, constitutes or could constitute a breach or a default), under (a) the Certificate of Incorporation or the Bylaws of the Company, (b) any material agreement, note, lease, mortgage, deed or other material instrument to which to our knowledge the Company is a party or by which the Company or any of its assets are bound, (ii) result in any violation of any statute, law, rule or regulation applicable to the Company, or (iii) to our knowledge, violate any order, writ, injunction or decree applicable to the Company or any of its subsidiaries, except for conflicts, breaches, defaults or violations which could not reasonably be expected to have a Material Adverse Effect   5. The issuance of the Purchase Shares and Commitment Shares pursuant to the terms and conditions of the Transaction Documents has been duly authorized and the Commitment Shares are validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. ________ shares of Common Stock have been properly reserved for issuance under the Common Stock Purchase Agreement. When issued and paid for in accordance with the Common Stock Purchase Agreement, the Purchase Shares shall be validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. 720,000 shares of Common Stock have been properly reserved for issuance as Additional Commitment Shares under the Common Stock Purchase Agreement. When issued in accordance with the Common Stock Purchase Agreement, the Additional Commitment Shares shall be validly issued, fully paid and non-assessable, to our knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. To our knowledge, the execution and delivery of the Registration Rights Agreement do not, and the performance by the Company of its obligations thereunder shall not, give rise to any rights of any other person for the registration under the 1933 Act of any shares of Common Stock or other securities of the Company which have not been waived.   --------------------------------------------------------------------------------   6. As of the date hereof, the authorized capital stock of the Company consists of _______ shares of common stock, par value $______ per share, of which to our knowledge __________ shares are issued and outstanding. Except as set forth on Schedule 3(c) of the Common Stock Purchase Agreement, to our knowledge, there are no outstanding shares of capital stock or other securities convertible into or exchangeable or exercisable for shares of the capital stock of the Company.   7. Assuming the accuracy of the representations and your compliance with the covenants made by you in the Transaction Documents, the offering, sale and issuance of the Commitment Shares to you pursuant to the Transaction Documents is exempt from registration under the 1933 Act and the securities laws and regulations of the State of Illinois, Ohio, Delaware.   8. Other than that which has been obtained and completed prior to the date hereof, no authorization, approval, consent, filing or other order of any federal or state governmental body, regulatory agency, or stock exchange or market, or any court, or, to our knowledge, any third party is required to be obtained by the Company to enter into and perform its obligations under the Transaction Documents or for the Company to issue and sell the Purchase Shares as contemplated by the Transaction Documents.   9. The Common Stock is registered pursuant to Section 12(g) of the 1934 Act. To our knowledge, since January 1, 2005, the Company has been in compliance with the reporting requirements of the 1934 Act applicable to it. To our knowledge, since January 1, 2005, the Company has not received any written notice from the Principal Market stating that the Company has not been in compliance with any of the rules and regulations (including the requirements for continued listing) of the Principal Market.   We further advise you that to our knowledge, except as disclosed on Schedule 3(h) in the Common Stock Purchase Agreement, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, any governmental agency, any stock exchange or market, or self-regulatory organization, which has been threatened in writing or which is currently pending against the Company, any of its subsidiaries, any officers or directors of the Company or any of its subsidiaries or any of the properties of the Company or any of its subsidiaries. In addition, we have participated in the preparation of the Registration Statement (SEC File #________) covering the sale of the Purchase Shares, the Commitment Shares including the prospectus dated ____________, contained therein and in conferences with officers and other representatives of the Company (including the Company’s independent auditors) during which the contents of the Registration Statement and related matters were discussed and reviewed and, although we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement, on the basis of the information that was developed in the course of the performance of the services referred to above, considered in the light of our understanding of the applicable law, nothing came to our attention that caused us to believe that the Registration Statement (other than the financial statements and schedules and the other financial and statistical data included therein, as to which we express no belief), as of their dates, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. -------------------------------------------------------------------------------- EXHIBIT B FORM OF OFFICER’S CERTIFICATE This Officer’s Certificate (“Certificate”) is being delivered pursuant to Section 7(e) of that certain Common Stock Purchase Agreement dated as of _________, (“Common Stock Purchase Agreement”), by and between NEOPROBE CORPORATION, a Delaware corporation (the “Company”), and FUSION CAPITAL FUND II, LLC (the “Buyer”). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Common Stock Purchase Agreement. The undersigned, ___________, ______________ of the Company, hereby certifies as follows: 1. I am the _____________ of the Company and make the statements contained in this Certificate; 2. The representations and warranties of the Company are true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 of the Common Stock Purchase Agreement, in which case, such representations and warranties are true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date); 3. The Company has performed, satisfied and complied in all material respects with covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. 4.  The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due. IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ___________.                                 -------------------------------------------------------------------------------- Name:   Title:    The undersigned as Secretary of NEOPROBE CORPORATION, a Delaware corporation, hereby certifies that ___________ is the duly elected, appointed, qualified and acting ________ of _________ and that the signature appearing above is his genuine signature.                                 -------------------------------------------------------------------------------- Secretary       --------------------------------------------------------------------------------   EXHIBIT C-1 FORM OF COMPANY RESOLUTIONS FOR SIGNING PURCHASE AGREEMENT UNANIMOUS WRITTEN CONSENT OF NEOPROBE CORPORATION Pursuant to Section ______ of the _________, the undersigned, being all of the directors of NEOPROBE CORPORATION, a Delaware corporation (the “Corporation”) do hereby consent to and adopt the following resolutions as the action of the Board of Directors for and on behalf of the Corporation and hereby direct that this Consent be filed with the minutes of the proceedings of the Board of Directors: WHEREAS, there has been presented to the Board of Directors of the Corporation a draft of the Common Stock Purchase Agreement (the “Purchase Agreement”) by and between the Corporation and Fusion Capital Fund II, LLC (“Fusion”), providing for the purchase by Fusion of up to Six Million Dollars ($6,000,000) of the Corporation’s common stock, par value $0.001 (the “Common Stock”); and WHEREAS, after careful consideration of the Purchase Agreement, the documents incident thereto and other factors deemed relevant by the Board of Directors, the Board of Directors has determined that it is advisable and in the best interests of the Corporation to engage in the transactions contemplated by the Purchase Agreement, including, but not limited to, the issuance of 720,000 shares of Common Stock to Fusion as a an initial commitment fee (the “Initial Commitment Shares”) and the sale of shares of Common Stock to Fusion up to the available amount under the Purchase Agreement (the "Purchase Shares"). Transaction Documents   NOW, THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase Agreement are hereby approved and ________________________________________ (the “Authorized Officers”) are severally authorized to execute and deliver the Purchase Agreement, and any other agreements or documents contemplated thereby including, without limitation, a registration rights agreement (the “Registration Rights Agreement”) providing for the registration of the shares of the Company’s Common Stock issuable in respect of the Purchase Agreement on behalf of the Corporation, with such amendments, changes, additions and deletions as the Authorized Officers may deem to be appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   FURTHER RESOLVED, that the terms and provisions of the Registration Rights Agreement by and among the Corporation and Fusion are hereby approved and the Authorized Officers are authorized to execute and deliver the Registration Rights Agreement (pursuant to the terms of the Purchase Agreement), with such amendments, changes, additions and deletions as the Authorized Officer may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   FURTHER RESOLVED, that the terms and provisions of the Form of Transfer Agent Instructions (the “Instructions”) are hereby approved and the Authorized Officers are authorized to execute and deliver the Instructions (pursuant to the terms of the Purchase Agreement), with such amendments, changes, additions and deletions as the Authorized Officers may deem appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and   --------------------------------------------------------------------------------   Execution of Purchase Agreement   FURTHER RESOLVED, that the Corporation be and it hereby is authorized to execute the Purchase Agreement providing for the purchase of common stock of the Corporation having an aggregate value of up to $6,000,000; and   Issuance of Common Stock   FURTHER RESOLVED, that the Corporation is hereby authorized to issue 720,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) to Fusion Capital Fund II, LLC as InitialCommitment Shares and that upon issuance of the Initial Commitment Shares pursuant to the Purchase Agreement, the Initial Commitment Shares shall be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation is hereby authorized to issue shares of Common Stock upon the purchase of Purchase Shares up to the available amount under the Purchase Agreement in accordance with the terms of the Purchase Agreement and that, upon issuance of the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation shall initially reserve __________ shares of Common Stock for issuance as Purchase Shares under the Purchase Agreement.   FURTHER RESOLVED, that the Corporation is hereby authorized to issue 720,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) in connection with the purchase of Purchase Shares (the “Additional Commitment Shares”) in accordance with the terms of the Purchase Agreement and that, upon issuance of the Additional Commitment Shares pursuant to the Purchase Agreement, the Additional Commitment Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and   FURTHER RESOLVED, that the Corporation shall initially reserve 720,000 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) for issuance as Additional Commitment Shares under the Purchase Agreement.   Approval of Actions   FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers are, and each of them hereby is, authorized and directed to proceed on behalf of the Corporation and to take all such steps as deemed necessary or appropriate, with the advice and assistance of counsel, to cause the Corporation to consummate the agreements referred to herein and to perform its obligations under such agreements; and   --------------------------------------------------------------------------------   FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized, empowered and directed on behalf of and in the name of the Corporation, to take or cause to be taken all such further actions and to execute and deliver or cause to be executed and delivered all such further agreements, amendments, documents, certificates, reports, schedules, applications, notices, letters and undertakings and to incur and pay all such fees and expenses as in their judgment shall be necessary, proper or desirable to carry into effect the purpose and intent of any and all of the foregoing resolutions, and that all actions heretofore taken by any officer or director of the Corporation in connection with the transactions contemplated by the agreements described herein are hereby approved, ratified and confirmed in all respects. IN WITNESS WHEREOF, the Board of Directors has executed and delivered this Consent effective as of __________, 2006. ______________________ ______________________ ______________________ being all of the directors of NEOPROBE CORPORATION    -------------------------------------------------------------------------------- EXHIBIT C-2 FORM OF COMPANY RESOLUTIONS APPROVING REGISTRATION STATEMENT UNANIMOUS WRITTEN CONSENT OF NEOPROBE CORPORATION Pursuant to Section ______ of the _________, the undersigned, being all of the directors of NEOPROBE CORPORATION, a Delaware corporation (the “Corporation”) do hereby consent to and adopt the following resolutions as the action of the Board of Directors for and on behalf of the Corporation and hereby direct that this Consent be filed with the minutes of the proceedings of the Board of Directors. WHEREAS, there has been presented to the Board of Directors of the Corporation a Common Stock Purchase Agreement (the “Purchase Agreement”) by and among the Corporation and Fusion Capital Fund II, LLC (“Fusion”), providing for the purchase by Fusion of up to Six Million Dollars ($6,000,000) of the Corporation’s common stock, par value $0.001 (the “Common Stock”); and WHEREAS, after careful consideration of the Purchase Agreement, the documents incident thereto and other factors deemed relevant by the Board of Directors, the Board of Directors has approved the Purchase Agreement and the transactions contemplated thereby and the Company has executed and delivered the Purchase Agreement to Fusion; and WHEREAS, in connection with the transactions contemplated pursuant to the Purchase Agreement, the Company has agreed to file a registration statement with the Securities and Exchange Commission (the “Commission”) registering the Commitment Shares (as defined in the Purchase Agreement) and the Purchase Shares (as herein defined in the Purchase Agreement) and to list the Commitment Shares and Purchase Shares as may be required;   WHEREAS, the management of the Corporation has prepared an initial draft of a Registration Statement on Form SB-2 (the “Registration Statement”) in order to register the sale of the Purchase Shares, and the Commitment Shares (collectively, the “Shares”); and   WHEREAS, the Board of Directors has determined to approve the Registration Statement and to authorize the appropriate officers of the Corporation to take all such actions as they may deem appropriate to effect the offering.   NOW, THEREFORE, BE IT RESOLVED, that the officers and directors of the Corporation be, and each of them hereby is, authorized and directed, with the assistance of counsel and accountants for the Corporation, to prepare, execute and file with the Commission the Registration Statement, which Registration Statement shall be filed substantially in the form presented to the Board of Directors, with such changes therein as the Chief Executive Officer of the Corporation or any Vice President of the Corporation shall deem desirable and in the best interest of the Corporation and its shareholders (such officer’s execution thereof including such changes shall be deemed to evidence conclusively such determination); and   FURTHER RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized and directed, with the assistance of counsel and accountants for the Corporation, to prepare, execute and file with the Commission all amendments, including post-effective amendments, and supplements to the Registration Statement, and all certificates, exhibits, schedules, documents and other instruments relating to the Registration Statement, as such officers shall deem necessary or appropriate (such officer’s execution and filing thereof shall be deemed to evidence conclusively such determination); and   --------------------------------------------------------------------------------   FURTHER RESOLVED, that the execution of the Registration Statement and of any amendments and supplements thereto by the officers and directors of the Corporation be, and the same hereby is, specifically authorized either personally or by the Authorized Officers as such officer’s or director’s true and lawful attorneys-in-fact and agents; and   FURTHER RESOLVED, that the Authorized Officers are hereby designated as “Agent for Service” of the Corporation in connection with the Registration Statement and the filing thereof with the Commission, and the Authorized Officers hereby are authorized to receive communications and notices from the Commission with respect to the Registration Statement; and   FURTHER RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized and directed to pay all fees, costs and expenses that may be incurred by the Corporation in connection with the Registration Statement; and   FURTHER RESOLVED, that it is desirable and in the best interest of the Corporation that the Shares be qualified or registered for sale in various states; that the officers of the Corporation be, and each of them hereby is, authorized to determine the states in which appropriate action shall be taken to qualify or register for sale all or such part of the Shares as they may deem advisable; that said officers be, and each of them hereby is, authorized to perform on behalf of the Corporation any and all such acts as they may deem necessary or advisable in order to comply with the applicable laws of any such states, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents, appointments of attorneys for service of process and resolutions; and the execution by such officers of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from the Corporation and the approval and ratification by the Corporation of the papers and documents so executed and the actions so taken; and   FURTHER RESOLVED, that if, in any state where the securities to be registered or qualified for sale to the public, or where the Corporation is to be registered in connection with the public offering of the Shares, a prescribed form of resolution or resolutions is required to be adopted by the Board of Directors, each such resolution shall be deemed to have been and hereby is adopted, and the Secretary is hereby authorized to certify the adoption of all such resolutions as though such resolutions were now presented to and adopted by the Board of Directors; and     FURTHER RESOLVED, that the officers of the Corporation with the assistance of counsel be, and each of them hereby is, authorized and directed to take all necessary steps and do all other things necessary and appropriate to effect the listing of the Shares as may be required.   Approval of Actions   FURTHER RESOLVED, that, without limiting the foregoing, the Authorized Officers are, and each of them hereby is, authorized and directed to proceed on behalf of the Corporation and to take all such steps as are deemed necessary or appropriate, with the advice and assistance of counsel, to cause the Corporation to take all such action referred to herein and to perform its obligations incident to the registration, listing and sale of the Shares; and   --------------------------------------------------------------------------------   FURTHER RESOLVED, that the Authorized Officers be, and each of them hereby is, authorized, empowered and directed on behalf of and in the name of the Corporation, to take or cause to be taken all such further actions and to execute and deliver or cause to be executed and delivered all such further agreements, amendments, documents, certificates, reports, schedules, applications, notices, letters and undertakings and to incur and pay all such fees and expenses as in their judgment shall be necessary, proper or desirable to carry into effect the purpose and intent of any and all of the foregoing resolutions, and that all actions heretofore taken by any officer or director of the Corporation in connection with the transactions contemplated by the agreements described herein are hereby approved, ratified and confirmed in all respects. IN WITNESS WHEREOF, the Board of Directors has executed and delivered this Consent effective as of __________, 2006. ______________________ ______________________ ______________________   being all of the directors of NEOPROBE CORPORATION    --------------------------------------------------------------------------------   EXHIBIT D FORM OF SECRETARY’S CERTIFICATE This Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section 7(k) of that certain Common Stock Purchase Agreement dated as of __________, (“Common Stock Purchase Agreement”), by and between NEOPROBE CORPORATION, a Delaware corporation (the “Company”) and FUSION CAPITAL FUND II, LLC (the “Buyer”), pursuant to which the Company may sell to the Buyer up to Six Million Dollars ($6,000,000) of the Company's Common Stock, par value $0.001 per share (the "Common Stock"). Terms used herein and not otherwise defined shall have the meanings ascribed to them in the Common Stock Purchase Agreement. The undersigned, ____________, Secretary of the Company, hereby certifies as follows: 1. I am the Secretary of the Company and make the statements contained in this Secretary’s Certificate. 2. Attached hereto as Exhibit A and Exhibit B are true, correct and complete copies of the Company’s bylaws (“Bylaws”) and Certificate of Incorporation (“Articles”), in each case, as amended through the date hereof, and no action has been taken by the Company, its directors, officers or shareholders, in contemplation of the filing of any further amendment relating to or affecting the Bylaws or Articles. 3. Attached hereto as Exhibit C are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the Company on _____________, at which a quorum was present and acting throughout. Such resolutions have not been amended, modified or rescinded and remain in full force and effect and such resolutions are the only resolutions adopted by the Company’s Board of Directors, or any committee thereof, or the shareholders of the Company relating to or affecting (i) the entering into and performance of the Common Stock Purchase Agreement, or the issuance, offering and sale of the Purchase Shares and the Commitment Shares and (ii) and the performance of the Company of its obligation under the Transaction Documents as contemplated therein. 4. As of the date hereof, the authorized, issued and reserved capital stock of the Company is as set forth on Exhibit D hereto. IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ____________.                                 -------------------------------------------------------------------------------- Secretary     The undersigned as ___________ of __________, a ________ corporation, hereby certifies that ____________ is the duly elected, appointed, qualified and acting Secretary of _________, and that the signature appearing above is his genuine signature.                                 --------------------------------------------------------------------------------       --------------------------------------------------------------------------------   EXHIBIT E FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE COMMITMENTS SHARES AT SIGNING OF THE PURCHASE AGREEMENT   [COMPANY LETTERHEAD] [DATE] [TRANSFER AGENT] __________________ __________________ __________________ Re: Issuance of Common Shares to Fusion Capital Fund II, LLC Dear ________, On behalf of _ NEOPROBE CORPORATION, a Delaware corporation, (the “Company”), you are hereby instructed to issue as soon as possible 720,000 shares of our common stock in the name of Fusion Capital Fund II, LLC. The share certificate should be dated as of the date hereof. I have included a true and correct copy of a unanimous written consent executed by all of the members of the Board of Directors of the Company adopting resolutions approving the issuance of these shares. The shares should be issued subject to the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. --------------------------------------------------------------------------------   The share certificate should be sent as soon as possible via overnight mail to the following address: Fusion Capital Fund II, LLC 222 Merchandise Mart Plaza, Suite 9-112 Chicago, IL 60654 Attention: Steven Martin Thank you very much for your help. Please call me at ______________ if you have any questions or need anything further.   NEOPROBE CORPORATION                 BY:           -------------------------------------------------------------------------------- [name]       [title]         --------------------------------------------------------------------------------  

Exhibit 10.5 AMENDMENT NO. 9 TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT This Amendment No. 9 to Amended and Restated Receivables Purchase Agreement (this "Amendment”) is dated as of August 31, 2006, among Avnet Receivables Corporation, a Delaware corporation (“Seller”), Avnet, Inc., a New York corporation (“Avnet”), as initial Servicer (the Servicer together with Seller, the “Seller Parties” and each a “Seller Party”), each Financial Institution signatory hereto (collectively, the “Financial Institutions”), each Company signatory hereto (the “Companies”) and JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA (Main Office Chicago)), as agent for the Purchasers (the “Agent”). RECITALS Each of the parties hereto entered into that certain Amended and Restated Receivables Purchase Agreement, dated as of February 6, 2002, and amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 1 thereto, dated as of June 26, 2002, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 2 thereto, dated as of November 25, 2002, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 3 thereto, dated as of December 9, 2002, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 4 thereto, dated as of December 12, 2002, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 5 thereto, dated as of June 23, 2003, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 6 thereto, dated as of August 15, 2003, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 7 thereto, dated as of August 3, 2005, and further amended such Amended and Restated Receivables Purchase Agreement pursuant to Amendment No. 8 thereto, dated as of August 1, 2006 (such Amended and Restated Receivables Purchase Agreement, as so amended, the “Purchase Agreement”). Each Seller Party has requested that the Agent and the Purchasers amend certain provisions of the Purchase Agreement, all as more fully described herein. Subject to the terms and conditions hereof, each of the parties hereto now desires to amend the Purchase Agreement as more particularly described herein. AGREEMENT NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions Used Herein. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth for such terms in, or incorporated by reference into, the Purchase Agreement. Section 2. Amendment. Subject to the terms and conditions set forth herein, the Purchase Agreement is hereby amended as follows: (a) The definition of “Eligible Receivable” appearing in Exhibit I to the Purchase Agreement is hereby amended by replacing the percentage “15%” appearing in clause (iv) of such definition with the percentage “30%.” (b) The definition of “Loss Horizon Factor” appearing in Exhibit I to the Purchase Agreement is hereby amended by amending and restating clause (i) of such definition in its entirety to read as follows:   (i)   the aggregate amount of Receivables, less the amount of such Receivables that are rebilled to the Obligor, originated during the four calendar month period then most recently ended, divided by   (c) The definition of Liquidity Termination Date” appearing in Exhibit I to the Purchase Agreement is hereby amended by amending and restating such definition in its entirety to read as follows: "Liquidity Termination Date” means August 30, 2007. (d) Schedule D to the Purchase Agreement is hereby deleted in its entirety and replaced with Annex A hereto. Section 3. Conditions to Effectiveness of this Amendment. This Amendment shall become effective as of the date hereof, upon the satisfaction of the conditions precedent that: (a) Amendment. The Agent shall have received, on or before the date hereof, executed counterparts of this Amendment, duly executed by each of the parties hereto. (b) Representations and Warranties. As of the date hereof, both before and after giving effect to this Amendment, all of the representations and warranties contained in the Purchase Agreement and in each other Transaction Document shall be true and correct in all material respects as though made on the date hereof (and by its execution hereof, each of Seller and the Servicer shall be deemed to have represented and warranted such). (c) No Amortization Event. As of the date hereof, both before and after giving effect to this Amendment, no Amortization Event or Potential Amortization Event shall have occurred and be continuing (and by its execution hereof, each of Seller and the Servicer shall be deemed to have represented and warranted such). (d) Amendment Fee. On or before the date hereof, each Financial Institution shall have received an Amendment Fee in an amount equal to .05% multiplied by such Financial Institution’s Commitment. Section 4. Miscellaneous. (a) Effect; Ratification. The amendments set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to, or an acknowledgment of, any amendment, waiver or modification of any other term or condition of the Purchase Agreement or of any other instrument or agreement referred to therein or (ii) prejudice any right or remedy which any Purchaser or the Agent may now have or may have in the future under or in connection with the Purchase Agreement, as amended hereby, or any other instrument or agreement referred to therein. Each reference in the Purchase Agreement to “this Agreement,” “herein,” “hereof” and words of like import and each reference in the other Transaction Documents to the Purchase Agreement or to the “Receivables Purchase Agreement” or to the “Purchase Agreement” shall mean the Purchase Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Purchase Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Purchase Agreement and each other instrument or agreement referred to therein, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. (b) Transaction Documents. This Amendment is a Transaction Document executed pursuant to the Purchase Agreement and shall be construed, administered and applied in accordance with the terms and provisions thereof. (c) Costs, Fees and Expenses. Without limiting Section 10.3 of the Purchase Agreement, Seller agrees to reimburse the Agent and the Purchasers upon demand for all reasonable and documented out-of-pocket costs, fees and expenses (including the reasonable fees and expenses of counsels to any of the Agent and the Purchasers) incurred in connection with the preparation, execution and delivery of this Amendment. (d) Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original and all of which when taken together shall constitute one and the same instrument. (e) Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of such provision in any other jurisdiction. (f) GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. (g) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AMENDMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. (h) Funding Agreement Consent. By its execution hereof, JPMorgan Chase Bank, N.A. (successor by merger to Bank One, NA (Main Office Chicago)), in its capacity as a party to any applicable Funding Agreement with or for the benefit of Preferred Receivables Funding Company LLC (formerly known as Preferred Receivables Funding Corporation) (“Prefco”), hereby (i) consents to Prefco’s execution of this Amendment and the transactions contemplated hereby, (ii) acknowledges that this Amendment has been made available to and has been reviewed by it, (iii) consents to this Amendment and (iv) deems this paragraph to satisfy any applicable requirements regarding this Amendment set forth in any such Funding Agreement. (Signature Pages Follow) 1 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first written above. AVNET RECEIVABLES CORPORATION, as Seller By: Name: Title: AVNET, INC., as Servicer By: Name: Title: PREFERRED RECEIVABLES FUNDING COMPANY LLC (formerly known as Preferred Receivables Funding Corporation), as a Company By: Name: Title: JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, NA (Main Office Chicago)), as a Financial Institution and as Agent By: Name: Title: 2 LIBERTY STREET FUNDING CORP., as a Company By: Name: Title: THE BANK OF NOVA SCOTIA, as a Financial Institution By: Name: Title: 3 AMSTERDAM FUNDING CORPORATION, as a Company By: Name: Title: ABN AMRO BANK N.V., as a Financial Institution By: Name: Title: By: Name: Title: 4 STARBIRD FUNDING CORPORATION, as a Company By: Name: Title: BNP PARIBAS, acting through its New York Branch, as a Financial Institution By: Name: Title: By: Name: Title: 5 Annex A SCHEDULE D PRICING GRID                   Rating of Long-Term         Debt of Avnet   Facility Fee   Program Fee Category 1                 BBB or higher by S&P                 or Baa2 or higher by                 Moody’s     0.125 %     0.175 % Category 2                                   BBB- by S&P or Baa3                 by Moody’s     0.175 %     0.225 % Category 3                                   BB+ by S&P or Ba1 by                 Moody’s     0.200 %     0.300 % Category 4                                   BB or lower by S&P or                 Ba2 or lower by                 Moody’s     0.300 %     0.400 % For purposes of the foregoing, (i) if no rating for Long-Term Debt shall be available from either Moody’s or S&P, such rating agency shall be deemed to have established a rating for the Long-Term Debt of Avnet which is one rating grade higher than the subordinated debt rating grade of Avnet, (ii) if no rating for Long-Term Debt or subordinated debt of Avnet shall be available from either Moody’s or S&P, each of the Facility Fee and the Program Fee shall be as set forth in Category 4, (iii) if the ratings established or deemed to have been established by Moody’s and S&P shall fall within different Categories, each of the Facility Fee and the Program Fee shall be based upon the numerically higher Category; provided, however, that if such ratings shall differ by more than one numerical Category, each of the Facility Fee and the Program Fee shall be based on the Category that is one numerical Category lower than the Category which is the numerically higher Category and (iv) if any rating established or deemed to have been established by Moody’s or S&P shall be changed (other than as a result of a change in the rating system of either Moody’s or S&P), such change shall be effective as of the date on which such change is first announced by the rating agency making such change. Each such change shall apply to all calculations involving any of the Facility Fee or the Program Fee during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of either Moody’s or S&P shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, in each case, prior to the Facility Termination Date, Avnet and the Agent shall negotiate in good faith to amend each of the Facility Fee and the Program Fee hereunder to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, each of the Facility Fee and the Program Fee shall be determined by reference to the rating most recently in effect prior to such change or cessation. 6

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  EXHIBIT 10.73 SUBORDINATION AND INTERCREDITOR AGREEMENT      THIS SUBORDINATION AND INTECREDITOR AGREEMENT is executed this 31st day of March, 2006, by ROCKFORD CORPORATION, an Arizona corporation (“Rockford”), ADVANCED INTEGRATION, LLC, an Oklahoma limited liability company (the “Borrower”) and STILLWATER NATIONAL BANK AND TRUST COMPANY (“SNB”). W I T N E S S E T H      WHEREAS, the Borrower, Rockford and Audio Innovations, Inc. (“Audio”) have entered into that certain Asset Purchase Agreement (the “Asset Purchase Agreement”) pursuant to which the Borrower is acquiring all of the business assets of Audio, except as specifically set forth therein (the “Audio Assets”); and      WHEREAS, SNB and the Borrower have entered into a Loan Agreement of even date herewith (the “SNB Loan Agreement”) pursuant to which SNB has loaned to the Borrower the sum of $750,000.00 (the “SNB Loan”) as evidenced by a Promissory Note in the principal face amount of $750,000.00 dated effective March 31, 2006, signed by the Borrower in favor of SNB (the “SNB Note”), which is secured by a certain Security Agreement (the “SNB Security Agreement”) covering all of the business assets of the Borrower, including but not limited to, the Audio Assets and any and all other accounts, inventory, equipment and general intangibles now owned or hereafter acquired by the Borrower (the “Collateral”); and      WHEREAS, Rockford has extended credit to the Borrower in the amount of $1,000,000.00 (the “Rockford Loan”) as evidenced by a certain Loan and Security Agreement between the Borrower and Rockford (the “Rockford Agreement”), which sum is secured by the Collateral; and      WHEREAS, this Agreement is executed and delivered to SNB by Rockford and the Borrower to induce SNB to make the SNB Loan to the Borrower, and in satisfaction of a material condition precedent thereto;      WHEREAS, Rockford has heretofore collected the payments of the accounts and account receivables of Audio, which accounts and account receivables (the “Accounts”) constitute a portion of the Collateral; and      WHEREAS, this Agreement is executed by SNB and Rockford in order to establish the relative priorities of the security interests of SNB and Rockford with respect to the Collateral; and      WHEREAS, this Agreement is also executed by SNB, Rockford and the Borrower to establish the terms and conditions surrounding the receipt, transmittal and disposition of the proceeds of the Accounts. 1 --------------------------------------------------------------------------------        NOW THEREFORE, in consideration of the recitals, the making of the SNB Loan to the Borrower by SNB, and the benefits to be derived by Rockford and the Borrower therefrom and other good and valuable consideration, it is agreed as follows:   1.   Subordination. Except as specifically set forth herein Rockford hereby subordinates any and all liens and security interests held by Rockford in the Collateral to the terms of the SNB Security Agreement, and all liens and security interests granted thereunder by the Borrower in favor of SNB covering the Collateral. Rockford agrees that except as specifically set forth herein, any and all liens and security interests of Rockford in the Collateral will be junior and inferior in priority to the liens and security interests created of SNB in the Collateral regardless of the order of filing of financing statements by SNB and Rockford with respect to the Collateral.     2.   Receipt and Transmittal of Account Proceeds. The Borrower shall notify each existing account debtor and instruct each account debtor to send all payments on the Accounts to SNB. Rockford agrees that upon any receipt by Rockford of any payments on the Accounts, Rockford will:   a.   if the payment is by instrument, mail such instrument and any accompanying remittance materials to SNB at P.O. Box 819, Stillwater, Oklahoma 74076, within a reasonable time after receipt by Rockford, but no later than five (5) business days after such receipt; or     b.   if the payment is by wire transfer, promptly transmit such funds to SNB by wire transfer in accordance with wiring instructions to be provided by SNB, and mail any associated remittance materials to SNB at P.O. Box 819, Stillwater, Oklahoma 74076, within a reasonable time thereafter, but no later than five (5) business days.   3.   Best Buy Accounts. Notwithstanding paragraph 1 above, SNB hereby subordinates any and all liens and security interests held by SNB in the accounts of the Borrower arising out of transactions with Best Buy Co., Inc. (“Best Buy”) or any successor or affiliate of Best Buy (including but not limited to accounts acquired as part of the Audio Assets), whether now existing or arising as the result of transactions occurring subsequent to the date of this Agreement (the “Best Buy Accounts”) to the terms of the Rockford Agreement, and all liens and security interests granted thereunder by the Borrower in favor of Rockford covering the Best Buy Accounts. SNB agrees that any and all of the liens and security interests of SNB in the Best Buy Accounts will be junior and inferior in priority to the liens and security interests of Rockford in the Best Buy Accounts regardless of the order of filing of financing statements by SNB and Rockford with respect to the Best Buy Accounts.     4.   Best Buy Proceeds. SNB, Rockford and the Borrower agree that subject to paragraph 5 below and notwithstanding the subordination of the liens and security interests of 2 --------------------------------------------------------------------------------         SNB in the Best Buy Accounts as set forth in paragraph 3 above, SNB may receive payments associated with the Best Buy Accounts (the “Best Buy Proceeds”) in the lockbox maintained by SNB pursuant to that certain Digital Lockbox Agreement by and among SNB and the Borrower, and thereafter apply the Best Buy Proceeds in payment of the SNB Note, or any other amount owing by the Borrower to SNB under the Loan Documents (as that term is defined in the SNB Loan Agreement).     5.   Default Under Rockford Agreement; Delivery of Best Buy Proceeds. SNB, Rockford and the Borrower agree that, upon receipt by SNB of written notice from Rockford of the occurrence of an event of default under the Rockford Agreement, SNB shall forward to Rockford any Best Buy Proceeds then in the possession of SNB and which have not been previously applied in payment of the SNB Note, and thereafter forward to Rockford any Best Buy Proceeds received by SNB. The manner of delivery of any such Best Buy Proceeds shall be:   a.   if the payment of the Best Buy Proceeds is by instrument, mail such instrument and any accompanying remittance materials to Rockford at the address set forth in paragraph 9 below, within a reasonable time after receipt by SNB, but no later than five (5) business days after such receipt; or     b.   if the payment of the Best Buy Proceeds is by wire transfer, promptly transmit such funds to Rockford by wire transfer in accordance with wiring instructions to be provided by Rockford, and mail any associated remittance materials to Rockford at the address set forth in paragraph 9 below, within a reasonable time thereafter, but no later than five (5) business days.   6.   Standard of Care; Interpleader. In the event of any dispute regarding the Best Buy Proceeds, SNB shall be and is hereby authorized, but not obligated, to deposit the Best Buy Proceeds into court and, upon such deposit, shall be discharged and relieved of any further obligation under paragraph 5 above. SNB shall have no obligation to take any action to enforce the Best Buy Accounts. The only responsibility of SNB hereunder shall be the receipt and delivery of the Best Buy Proceeds to Rockford in accordance with paragraph 5 above. Following an event of default under the Rockford Agreement and written notice thereof to SNB as set forth in paragraph 5 above. SNB’s only responsibility hereunder shall be the performance by SNB of the duties imposed by paragraph 5. SNB shall have no responsibility or obligation to determine any questions of fact or law     7.   Borrower’s Consent. The Borrower hereby consents to all of the terms and conditions of this Agreement. The Borrower agrees that Borrower will do nothing to revoke, alter or obstruct the performance of the terms and conditions of this Agreement.     8.   Venue. SNB, Rockford and the Borrower each agree that the exclusive venue for any action or proceeding of any kind by or against SNB, Rockford or Borrower arising 3 --------------------------------------------------------------------------------         out of or related to this Agreement, including but not limited to any interpleader filed by SNB pursuant hereto, shall be any state or federal court sitting in Oklahoma County, Oklahoma, as elected by SNB, and SNB, Rockford and Borrower each hereby submit to the jurisdiction of such courts.     9.   Notices. Any notice, demand or communication required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when delivered personally or by telefacsimile, receipt confirmed, to the party designated to receive such notice or on the date following the day sent by overnight courier or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the following addresses or to such other or additional addresses as any party might designate by written notice to the other party:               Borrower:   Advanced Integration, LLC         2805 East 6th Avenue         Stillwater, Oklahoma 74074               SNB:   Stillwater National Bank and Trust Company         608 South Main         Stillwater, Oklahoma 74074         Attn.: David Pitts, Senior Vice President               Rockford:   Rockford Corporation         600 S. Rockford Drive         Tempe, Arizona 85281         Attn.: W. Gary Suttle, President                   Rich Vasek, CFO   10.   Amendments. It is understood and agreed that the subordination agreements provided for in paragraphs 1 and 3 hereof will apply to all documents evidencing and securing the Rockford Loan and the SNB Indebtedness, together with all extensions, renewals, amendments, modifications, and increases thereof, together with all interest thereon.     11.   Governing Law. The laws of the State of Oklahoma will govern the enforceability and interpretation of this Agreement.     12.   Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto concerning the subject matter hereof, and supersedes and replaces all prior written and oral negotiations, understandings and agreements between the parties hereto with respect to the subject matter hereof.     13.   Binding Effect. This Agreement will be binding on and inure to the benefit of Rockford, SNB, and the Borrower, and on their respective heirs, personal 4 --------------------------------------------------------------------------------         representatives, successors and assigns. This Agreement has been executed effective the day first above written.                       ROCKFORD CORPORATION, an Arizona corporation                           By:             /s/ W. Gary Suttle                               Name:             W. Gary Suttle             Title:             President                               (“Rockford”)                               STILLWATER NATIONAL BANK AND TRUST COMPANY                               By:             /s/ David Pitts                               Name:             David Pitts             Title:             Senior Vice President                               (“SNB”)                               ADVANCED INTEGRATION, LLC, an Oklahoma             limited liability company                               By:             /s/ Steven E. Frazier                                   STEVEN E. FRAZIER, Member-Manager                               By:             /s/ Tommy D. Smith                                   TOMMY D. SMITH, Member-Manager                               (the “Borrower”)     5

REGISTRATION RIGHTS AGREEMENT This Agreement is made as of June 5, 2006, by and among Bekem Metals, Inc., a Utah corporation (the "Company"), and Aton Securities, Inc. ("Managing Placement Agent" or "MPA") for the benefit of those persons who shall become Holders and execute and deliver to the Company the Notice of Election to Register and Questionnaire attached hereto as Exhibit A. PREAMBLE The Company and the Managing Placement Agent desire to extend registration rights to the prospective Holders of the Company's common stock purchased in a private placement made by the Managing Placement Agent to its clients (the "Private Placement"). AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual agreements set forth herein, the Company and the Managing Placement Agent agree as follows: 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations thereunder, all as the same shall be in effect at the time. (c) "Holder" shall mean a holder of restricted common shares of Bekem Metals, Inc. purchased in the Private Placement or anyone to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement. (d) "Initiating Holders" shall mean any Holder or Holders of at least fifty-one percent (51%) of the Registrable Securities then outstanding. (e) "Partnership" and "Partner" shall include, as the context may require, a limited liability company and the member of members thereof. (f) "Private Placement" shall mean the Private Placement sale of a minimum of 4,000,000 and a maximum of up to 8,000,000 units, each unit shall be comprised of three common shares of restricted common stock of the Company and one redeemable warrant for one common share exercisable at any time within two years of purchase at a price of $2.00 per share issued pursuant to the Private Offering Memorandum, dated June 16, 2006, together with any shares -------------------------------------------------------------------------------- issued in the Private Placement pursuant to the over-allotment option and/or pursuant to the warrants issued to the Managing Placement Agent. (g) "Register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement, and compliance with applicable state securities laws of such states in which Holders notify the Company of their intention to offer Registrable Securities. (h) "Registrable Securities" shall mean the following to the extent the same have not been sold to the public (i) any and all shares of restricted common stock of the Company issued or issuable pursuant to the Private Placement. Notwithstanding the foregoing, Registrable Securities shall not include otherwise Registrable Securities (i) sold by a person in a transaction in which his rights under this Agreement are not properly assigned; or (ii) (A) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale or (B) the registration rights associated with such securities have been terminated pursuant to Section 12 of this Agreement. (i) "Rule 144" shall mean Rule 144 under the Securities Act or any successor or similar rule as may be enacted by the Commission from time to time, but shall not include Rule 144A. (j) "Rule 144A" shall mean Rule 144A under the Securities Act or any successor or similar rule as may be enacted by the Commission from time to time, but shall not include Rule 144. (k) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations thereunder, all as the same shall be in effect at the time. 2. Restrictions on Transferability. The Registrable Securities shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee of the Registrable Securities held by a Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. 3. Notice of Proposed Transfer. The Holder of each certificate representing Registrable Securities agrees to comply in all respects with the provisions of this Section 3. Each such Holder agrees not to make any disposition of all or any portion of any Registrable Securities unless and until: 2 -------------------------------------------------------------------------------- (a) There is in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or; (b) (i) Such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) If reasonably requested by the Company, such Holder shall furnish the Company with an opinion of counsel, reasonably satisfactory to the Company that such disposition shall not require registration of such shares under the Securities Act. It is agreed, however, that no such opinion will be required for Rule 144 or Rule 144A transactions, except in unusual circumstances. (c) Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder which is a partnership, to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will, or intestate succession of any partner to his spouse or siblings, lineal descendants or ancestors of such partner or spouse, provided that such transferee agrees in writing to be subject to all of the terms hereof to the same extent as if he were an original Holder hereunder. 4. Requested Registration. (a) If the Company shall receive from Initiating Holders a written request that the Company effect any registration with respect to all or at least 51% of the outstanding Registrable Securities, the Company shall: (i) promptly give written notice of the proposed registration to all other Holders; and (ii) as soon as practicable use its best efforts to register (including, without limitation, the execution of an undertaking to file post-effective amendments and any other governmental requirements) all Registrable Securities that the Holders request to be registered within thirty (30) days after receipt of such written notice from the Company; provided that the Company shall not be obligated to file a registration statement pursuant to this Section 4: (A) prior to 120 days after the closing of the Private Placement; (B) in any particular state in which the Company would be required to execute a general consent to service of process in effecting such registration; or 3 -------------------------------------------------------------------------------- (C) after the Company has effected one such registration pursuant to this Section 4 and such registration has been declared or ordered effective. Subject to the foregoing clauses (A) through (C), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practical, but in any event within ninety (90) days after receipt of the request or requests of the Initiating Holders and shall use reasonable best efforts to have such registration statement promptly declared effective by the Commission whether or not all Registrable Securities requested to be registered can be included; provided, however, that if the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed within such ninety (90) days period and it is therefore essential to defer the filing of such registration statement, the Company shall have an additional period of not more than ninety (90) days after the expiration of the initial ninety-day (90-day) period within which to file such registration statement; provided, that during such time the Company may not file a registration statement for securities to be issued and sold for its own account. (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request. In such event or if any underwriting is required by subsection 4(c), the Company shall include such information in the written notice referred to in subsection 4(a)(i). In either such event, if so requested in writing by the Company, the Initiating Holders shall negotiate with an underwriter selected by the Company with regard to the underwriting of such requested registration; provided, however, that if a majority in interest of the Initiating Holders have not agreed with such underwriter as to the terms and conditions of such underwriting within twenty (20) days following commencement of such negotiations, a majority in interest of the Initiating Holders may select an underwriter of their choice. The right of any Holder to registration pursuant to Section 4 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provisions of this Section 4, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, the Company shall so advise all Holders, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such Holders; provided, however, that securities to be included in such registration statement to be offered by the Company, its officers and employees shall be excluded from the registration statement prior to the exclusion of any Registrable Securities held by the Holders. If any Holder disapproves of the 4 -------------------------------------------------------------------------------- terms of the underwriting, he may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. If, by the withdrawal of such Registrable Securities, a greater number of Registrable Securities held by other Holders may be included in such registration (up to the limit imposed by the underwriters), the Company shall offer to all holders who have included Registrable Securities in the registration the right to include additional Registrable Securities in the same proportion used in determining the limitation as set forth above. Any Registrable Securities which are excluded from the underwriting by reason of the underwriter's marketing limitation or withdrawn from such underwriting shall be withdrawn from such registration. 5. Expenses of Registration. In addition to the fees and expenses contemplated by Section 6 hereof, all expenses incurred in connection with registration pursuant to Section 4 hereof, including without limitation all registration, filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company, and expenses of any special audits of the Company's financial statements incidental to or required by such registration, shall be borne by the Company, except that the Company shall not be required to pay underwriters' fees, discounts or commissions relating to Registrable Securities or fees of separate legal counsel of Holders. 6. Registration Procedures. In the case of registration effected by the Company pursuant to this Agreement, the Company will keep each Holder participating therein advised in writing as to the initiation of each registration and as to the completion thereof. At its expense the Company will: (a) keep such registration pursuant to Section 4 continuously effective for a period of one hundred twenty (120) days or such reasonable period necessary to permit the Holder or Holders to complete the distribution described in registration statement relating thereto, or until the expiration of one year from the date the shares were issued, whichever first occurs; (b) promptly prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act, and to keep such registration statement effective for that period of time specified in Section 6(a) above; (c) furnish such number of prospectuses and other documents incident thereto as a Holder from time to time may reasonably request; (d) use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable date; (e) subject to Section 4(a)(ii)(B), register or qualify such Registrable Securities for offer and sale under the securities or 5 -------------------------------------------------------------------------------- blue sky laws of such jurisdictions as a Holder or underwriter shall reasonably request in writing to the Company, and keep such registration or qualification effective during the period set forth in Section 6(a) above; (f) enter into such customer agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably, request in order to expedite or facilitate the disposition of such Registrable Securities); (g) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (h) if the offering is underwritten, at the request of any Holder of Registrable Securities to furnish on the date that Registrable Securities are delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated as of such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such Holder, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B), the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements or other financial data contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters or by such Holder or its counsel and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request; and (i) notify each Holder, at any time a prospectus covered by such registration statement is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in such 6 -------------------------------------------------------------------------------- registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and 7. Indemnification. (a) In the event of a registration of any of the Registrable Securities under the Securities Act pursuant to Section 4, the Company will indemnify and hold harmless each Holder of such Registrable Securities thereunder, each underwriter of such Registrable Securities thereunder and each other person, if any, who controls such Holder or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Holder, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violating by the Company of any rule or regulation promulgated under the Securities Act or any state securities law applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and will reimburse each such Holder, each of its officers, directors and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for the reasonable legal and any other reasonable expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by an instrument duly executed by such Holder or underwriter specifically for use therein. (b) Each Holder will, if Registrable Securities held by or issuable to such Holder are included in the securities as to which such registration is being effected, indemnify and hold harmless the Company, each of its directors and officers, each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company and each underwriter within the meaning of the Securities Act, and each other such Holder, each of its officers, directors and partners and each person controlling such Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other documents, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, partners, persons or underwriters for any reasonable legal or any other expenses 7 -------------------------------------------------------------------------------- incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or allege omission) is made in such registration statement, prospectus, offering, circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder specifically for use therein; provided, however, the total amount for which any Holder, its officers, directors and partners, and any person controlling such Holder, shall be liable under this Section 7(b) shall not in any event exceed the aggregate proceeds received by such Holder from the sale of Registrable Securities sold by such Holder in such registration. (c) Each party entitled to indemnification under this Section 7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claims as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations hereunder, unless such failure resulted in actual detriment to the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation. (d) Notwithstanding the foregoing, to the extent that the provisions on indemnification contained in the underwriting agreements entered into among the selling Holders, if any, the Company and the underwriters in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall be controlling as to the Registrable Securities included in the public offering; provided, however, that if, as a result of this Section 7(d), any Holder, its officers, directors, and partners and any person controlling such Holder is held liable for an amount which exceeds the aggregate proceeds received by such Holder from the sale of Registrable Securities included in a registration, as provided in Section 7(b) above, pursuant to such underwriting agreement (the "Excess Liability"), the Company shall reimburse any such Holder for such Excess Liability. (e) If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the 8 -------------------------------------------------------------------------------- relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relevant fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount any Holder shall be obligated to contribute pursuant to this Section 7(e) shall be limited to an amount equal to the proceeds to such Holder of the Restricted Securities sold pursuant to the registration statement which gives rise to such obligation to contribute (less the aggregate amount of any damages which the Holder has otherwise been required to pay in respect of such loss, claim, damage, liability or action or any substantially similar loss, claim, damage, liability or action arising from the sale of such Restricted Securities). (f) Survival of Indemnity. The indemnification provided by this Section 7 shall be a continuing right to indemnification and shall survive the registration and sale of any securities by any Person entitled to indemnification hereunder and the expiration or termination of this Agreement. 8. Lock Up Agreement. In consideration for the Company agreeing to is obligations under this Agreement, each Holder agrees in connection with any registration of the Company's securities (whether or not such Holder is participating in such registration) upon the request of the Company and the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as the Company and the underwriters may specify, so long as all Holders or stockholders holding more than one percent (1%) of the outstanding common stock and all officers and directors of the Company are bound by a comparable obligation provided, however, that nothing herein shall prevent any Holder that is a partnership or corporation from making a distribution of Registrable Securities to the partners or shareholders thereof that is otherwise in compliance with applicable securities laws, so long as such distributees agree to be so bound. 9. Information by Holder. The Holder or Holders of Registrable Securities included in any registration shall promptly furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holders or Holders as the Company may request in writing and as shall be required in connection with any registration referred to herein. 10. Rule 144 and 144A Reporting. With a view to making available to Holders of Registrable Securities the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to: 9 -------------------------------------------------------------------------------- (a) make and keep public information available, as those terms are understood and defined in Rule 144 and Rule 144A; (b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. 11. Subsequent Registration Rights. From and after the date this registration right is granted, the Company may, in its discretion, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to include such securities in any registration filed under Section 4 hereof. 12. Termination of Rights. (a) The rights of any particular Holder to cause the Company to register securities under Section 4 shall terminate with respect to such Holder at such time as such Holder is able to dispose of all of his Registrable Securities in one three-month period pursuant to the provisions of Rule 144. (b) Notwithstanding the provisions of paragraph (a) of this Section 12, all rights of any particular Holder under this Agreement, other than rights under Section 7, shall terminate at 5:00 P.M. Eastern time on the date one (1) year after the closing date of the Private Offering. 13. Representations and Warranties of the Company. The Company represents and warrants to the Holder as follows: (a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Articles of Organization or Bylaws of the Company or any agreement or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company. (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium laws and other laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of equitable remedies as such remedies may be limited by equitable principles of general applicability (regardless of whether enforcement is sought in a proceeding in equity or at law). 10 -------------------------------------------------------------------------------- 14. Miscellaneous. (a) Amendments. This Agreement may be amended only by a writing signed by the Holders of at least fifty-one percent (51%) of the Registrable Securities, as constituted from time to time. The Holders hereby consent to future amendments to this Agreement that permit future investors, other than employees, officers or directors of the Company, to be made parties hereto and to become Holders of Registrable Securities; provided, however, that no such future amendment may materially impair the rights of the Holders hereunder without obtaining the requisite consent of the Holders, as set forth above. For purposes of this Section, Registrable Securities held by the Company or beneficially owned by any officer or employee of the Company shall be disregarded and deemed not to be outstanding. (b) Counterparts. This Agreement may be executed in any number of counter parts, all of which shall constitute a single instrument. (c) Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and may be sent initially by facsimile transmission and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a Holder, at such Holder's address set forth on the books of the Company, or at such other address as such Holder shall be furnished to the Company in writing, or (b) if to any other holder of any Registrable Securities, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnished an address to the Company, then to and at the address of the last holder of such securities who has so furnished an address to the Company, or (c) if to the Company, one copy should be sent to the Company's current address, or at such other address as the Company shall have furnished to the Holders. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by first class, postage prepaid mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. (d) Nonpublic Information. Any other provisions of this agreement to the contrary notwithstanding, the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended for a period not to exceed 45 days (and for periods not exceeding, in the aggregate, 90 days during the term of this Agreement) if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed. 11 -------------------------------------------------------------------------------- (e) Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. (f) Dilution. If, and as often as, there is any change in the common stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Governing Law. This Agreement shall be governed by and construed under the laws of the State of Utah without regard to principles of conflict of law. (g) Governing Law. This Agreement shall be governed by and construed under the laws of the State of Utah without regard to principles of conflict of law. Dated as of the date first above written. Bekem Metals, Inc. Marat Cherdabayev, President Aton Securities, Inc. Michael Jordan, President 12

Exhibit 10.20 Execution Copy [g152681kgi001.gif]SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT (this “Amendment”), dated as of July 10, 2006, with an effective date determined in accordance with Section 3 below, is entered into by and among TEXAS ROADHOUSE, INC., as Borrower (the “Borrower”), the lenders from time to time party to the Credit Agreement referred to below (the “Lenders”) and BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”). Statement of Purpose Pursuant to that certain Credit Agreement dated as of October 8, 2004 (as amended, restated, supplemented or otherwise modified, the “Credit Agreement”) by and among the Borrower, the Lenders and the Administrative Agent, the Lenders have agreed to make, and have made, certain extensions of credit to the Borrower. The Borrower has requested that the Lenders amend the Credit Agreement as provided herein.  Subject to the terms and conditions set forth herein, the Lenders are willing to consent to such amendment. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: Section 1.              Definitions.  All capitalized terms used and not defined herein shall have the meanings assigned thereto in the Credit Agreement. Section 2.              Amendments. (a)           Section 1.01 of the Credit Agreement (“Defined Terms”) is hereby amended by deleting the definition of “Consolidated EBITDA” in its entirety and the following is substituted in lieu thereof: ““Consolidated EBITDA” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus the following to the extent deducted in calculating such Consolidated Net Income:  (a) Consolidated Interest Charges for such period, (b) the provision for federal, state, local and foreign income taxes payable (but not any tax loss or refund) by the Borrower and its Subsidiaries for such period, (c) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, and (d) any non-cash expense attributable to the grant of any stock options or restricted stock to any employee, director or consultant of the Borrower or its Subsidiaries.” (b)           Section 7.15(a) of the Credit Agreement (“Consolidated Tangible Net Worth”) is hereby deleted in its entirety and the following is substituted in lieu thereof: “(a)   [Intentionally Omitted].” -------------------------------------------------------------------------------- (c)           Section 7.17 of the Credit Agreement (“Restaurant Expenditure Limitations”) is hereby deleted in its entirety and the following is substituted in lieu thereof: “Section 7.17   [Intentionally Omitted].” (d)           Section 7.18 of the Credit Agreement (“Consolidated New Unit Pre-Opening Costs Limitations”) is hereby amended by deleting the amount “$250,000” and substituting in lieu thereof the amount “$400,000”. Section 3.              Effectiveness.  This Amendment shall become effective as of June 27, 2006, when, and only when, the Administrative Agent shall have received satisfactory evidence that this Amendment has been duly executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, in form and substance satisfactory to the Administrative Agent. Section 4.              Limited Effect.  Except as expressly provided in this Amendment, the Credit Agreement and each other Loan Document shall continue to be, and shall remain, in full force and effect and this Amendment shall not be deemed or otherwise construed (a) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document, (b) to prejudice any other right or remedies that the Administrative Agent or the Lenders, or any of them, may now have or may have in the future under or in connection with the Credit Agreement or the Loan Documents, as such documents may be amended, restated or otherwise modified from time to time, or (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Borrower or any other person, firm or corporation with respect to any waiver, amendment, modification or any other change to the Credit Agreement or the Loan Documents or any rights or remedies arising in favor of the Lenders or the Administrative Agent, or any of them, under or with respect to any such documents.  References in the Credit Agreement (including references to such Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein”, and “hereof”) and in any Loan Document to the Credit Agreement shall be deemed to be references to the Credit Agreement as amended hereby. Section 5.              Representations and Warranties/No Default.  By its execution hereof, and after giving effect to this Amendment, the Borrower hereby certifies that: (a)           each of the representations and warranties set forth in the Credit Agreement and the other Loan Documents is true and correct as of the date hereof as if fully set forth herein (other than representations and warranties which speak as of a specific date pursuant to the Credit Agreement, which representations and warranties shall have been true and correct as of such specific dates) and that as of the date hereof and after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing, and (b)           the execution, delivery and performance of this Amendment have been authorized by all requisite corporate action on the part of the Borrower. Section 6.              Expenses.  The Borrower shall pay all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel for -------------------------------------------------------------------------------- the Administrative Agent (including, without limitation, all fees and expenses of Kennedy Covington Lobdell & Hickman, L.L.P., as legal counsel to the Administrative Agent). Section 7.              Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of North Carolina. Section 8.              Counterparts.  This Amendment may be executed in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. Section 9.              Fax Transmission.  A facsimile, telecopy or other reproduction of this Amendment may be executed by one or more parties hereto, and an executed copy of this Amendment may be delivered by one or more parties hereto by facsimile or similar instantaneous electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.  At the request of any party hereto, all parties hereto agree to execute an original of this Amendment as well as any facsimile, telecopy or other reproduction hereof. [Signature Pages Follow] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.   TEXAS ROADHOUSE, INC.,     as Borrower                         By:   /s/ Scott M. Colosi     Name: Scott M. Colosi     Title: Chief Financial Officer   [Second Amendment Signature Page] --------------------------------------------------------------------------------     BANK OF AMERICA, N.A.,     as Administrative Agent                         By:   /s/ Anne M. Zeschke     Name: Anne M. Zeschke     Title: Assistant Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     BANK OF AMERICA, N.A.,     as a Lender, L/C Issuer and Swing Line Lender                         By:   /s/ Angelo G. Maragos     Name: Angelo G. Maragos     Title: Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     NATIONAL CITY BANK,     as a Lender                         By:   /s/ Thomas P. Crockett     Name: Thomas P. Crockett     Title: Senior Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     JPMORGAN CHASE BANK, N.A.,     as a Lender                         By:   /s/ Laura Dausman     Name: Laura Dausman     Title: Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     U.S. BANK NATIONAL ASSOCIATION,     as a Lender                         By:   /s/ David A. Wombwell     Name: David A. Wombwell     Title: SR. VP   [Second Amendment Signature Page] --------------------------------------------------------------------------------     PNC BANK, N.A.,     as a Lender                         By:   /s/ Julie S. Springer     Name: Julie S. Springer     Title: Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     FIFTH THIRD BANK, KENTUCKY, INC.,     as a Lender                         By:   /s/ Richard G. Whipple     Name: Richard G. Whipple     Title: Assistant Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     WACHOVIA BANK, NATIONAL ASSOCIATION, as a Lender                               By:   /s/ Mark S. Supple     Name: Mark S. Supple     Title: Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------     ROYAL BANK OF CANADA, as a Lender                               By:   /s/ Suzanne Kaicher     Name: Suzanne Kaicher     Title: Attorney-In-Fact         Royal Bank Of Canada   [Second Amendment Signature Page] --------------------------------------------------------------------------------     OLD NATIONAL BANK, as a Lender                               By:   /s/ Darrin McCauley     Name: Darrin McCauley     Title: Senior Vice President   [Second Amendment Signature Page] --------------------------------------------------------------------------------

EXHIBIT 10.2   SPECIAL BUSINESS PROVISIONS between Spirit AeroSystems, Inc. and LMI Aerospace, Inc. Spirit Aerosystems SBP-T6B2-YB001940       -------------------------------------------------------------------------------- TABLE OF CONTENTS TITLE PAGE TABLE OF CONTENTS AMENDMENT PAGE RECITAL PAGE 1.0 DEFINITIONS 10       2.0 CONTRACT FORMATION 13   2.1 Order 13     2.1.1 Issuance of Orders for Production Articles 13     2.1.2 Issuance of Orders for Products and Services Other Than Production Articles 13   2.2 Entire Agreement 14   2.3 Incorporated by Reference 14     2.3.1 Supporting Documentation and Priority 14     2.3.2 Revision of Documents 15     2.3.3 Compliance 15     2.3.4 List of Certain Documents 15   2.4 Order of Precedence 16   2.5 Survival 17         3.0 PERIOD OF PERFORMANCE AND PRICES 17   3.1 Performance 17     3.1.1 Period of Performance 17     3.1.2 Option to Extend 17   3.2 Pricing 18     3.2.1 Product Pricing 18     3.2.2 Manufacturing Configuration 18     3.2.3 Packaging 18     3.2.4 Local Transportation Devices 18   3.3 Subject Matter of Sale 18     3.3.1 Nonrecurring Work 19     3.3.1.1 Tooling - General 19     3.3.1.2 Static and Fatigue Test Articles 19     3.3.1.3 Contractor-Use Tooling (also known as Seller-Use Tooling 19     3.3.1.4 Common - Use Tooling 19     3.3.1.5 Use of Casting, Forging and Extrusion Tools 19     3.3.1.6 Initial Planning 19     3.3.1.7 Weight Status Reporting 20     3.3.1.8 Integrated Product Team 20     3.3.2 Recurring Work 20     3.3.2.1 Production Articles 20     3.3.2.2 Tool Maintenance 20     3.3.2.3 Disposable Shipping Fixtures 20     3.3.2.4 Maintenance of Production Planning 20     3.3.3 Spares and Miscellaneous Work 20     3.3.3.1 Spare Parts Ordering 20     3.3.3.2 Planning for Fabrication of Spare Parts 20     3.3.3.3 Sale of Boeing Proprietary Spare Parts 20     3.3.3.4 Miscellaneous Work 21 2 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- 4.0 GOVERNING QUALITY ASSURANCE REQUIREMENTS 21       5.0 APPLICABLE LAW 21       6.0 PRODUCT SUPPORT AND ASSURANCE 21   6.1 Warranty 21       6.2 Integrated Materials Management (IMM) Program 22       7.0 PAYMENT 22   7.1 Recurring Price 22   7.2 Nonrecurring Price/Special Charges 22   7.3 Payment Method 23   7.4 Payment Errors 24   7.5 Spare Parts 24   7.6 Invoicing 24     7.6.1 Invoicing Requirements 24     7.6.4 Mailing Instructions 24     7.6.5 Summary Invoices 25           8.0 SCHEDULE ACCELERATION/DECELERATION 25       9.0 NOTICES 25   9.1 Addresses 25         10.0 OBLIGATION TO PURCHASE AND SELL 26       11.0 COST AND PERFORMANCE VISIBILITY 27       12.0 CHANGE PROVISIONS 27   12.1 Reserved 27   12.2 Computation of Equitable Adjustment 27     12.2.1 Changes Not Subject to Price Adjustment 27     12.2.2 Changes Subject to Price Adjustment 28     12.2.3 Proposals for Price Adjustment 28     12.2.3.1 Timeframe 28     12.2.3.2 Content 29     12.2.3.3 Review of Price Adjustment Proposal 29     12.2.3.4 Future Derivative(s) and Follow-on Work 29     12.2.4 Change Pricing Criteria 29     12.2.4.1 Changes Prior to 100% Engineering Release 29     12.2.4.1.1 Nonrecurring Shipset Price Adjustment Prior to 100% Engineering Release 29     12.2.4.1.2 Recurring Shipset Price Adjustment Prior to 100% Engineering Release 30     12.2.4.2 Changes Subsequent to 100% Engineering Release 30     12.2.4.2.1 Nonrecurring Shipset Price Adjustment Subsequent to 100% Engineering Release 30     12.2.4.2.2 Recurring Price Adjustment Subsequent to 100% Engineering Release 30     12.2.4.3 Changes for Derivatives 30 3 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   --------------------------------------------------------------------------------     12.2.5 Apportionment and Payment of Price Adjustments 30     12.2.5.1 Nonrecurring Work 30     12.2.5.1.1 Price Adjustment 30     12.2.5.1.2 Apportionment and Payment 31     12.2.6.1 Recurring Work 31     12.2.6.1.1 Price Adjustment 31     12.2.6.1.2 Apportionment and Payment 31   12.3 Obsolescence 32   12.4 Change Absorption (Nonrecurring/Recurring) 32     12.4.1 Prior to 100% Engineering Release (Drawing Revision Level New) 32     12.4.2 Subsequent to 100% Engineering Release 32   12.5 Planning Schedule 33   12.6 Total Cost Management 33     12.6.1 Spirit Generated Technical and Cost Improvement 33   12.7 Reserved 33   12.9 Derivative Aircraft 34         13.0 SPARES AND OTHER PRICING 34   13.1 Spares 34     13.1.1 Spares Support 35     13.1.3 Spare Pricing 35     13.1.4 Spares Special Handling 36   13.2 Expedite of Production Requirements 36   13.3 Tooling 36     13.3.1 Responsible Party 36     13.3.2 Spirit Furnished Tooling 37     13.3.3.1 Title to Tooling 37     13.3.3.2 Use and Disposition of Tooling 37     13.3.3.3 Accountability for Tooling 39     13.3.3.4 Certified Tool Lists 39   13.4 Pricing of Spirit's Supporting Requirements 39   13.5 Pricing of Requirements for Modification or Retrofit 39     13.5.1 Spirit Responsibility or Regulatory Requirement 39     13.5.2 Contract Aftermarket Modification or Retrofit Work Performed by Spirit 39   13.6 Pricing of Similar Products 40         14.0 STATUS REPORTS/REVIEWS 41   14.1 General Reports / Reviews 41   14.2 Diversity Reporting 41   14.3 Program Manager 41   14.4 Certified Tool List 42   14.5 Problem Reports 42   14.6 Reserved 43       15.0 INTERNATIONAL COOPERATION 43   15.1 Market Access and Sales Support 43   15.2 Offset Assistance 43   15.3 Reserved 44 4 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- 16.0 Spirit FURNISHED MATERIAL/SUPPLIER BANKED MATERIAL 44         17.0 PARTICIPATION 44   17.1 Other Spirit Entities 44   17.2 Spirit Subcontractors/Suppliers 44   17.3 Notification of Contract 45   17.4 Notification of Price Reductions 45         18.0 INVENTORY AT CONTRACT COMPLETION 45         19.0 OWNERSHIP OF INTELLECTUAL PROPERTY 45   19.1 Technical Work Product 45   19.2 Inventions and Patents 46   19.4 Pre-Existing Inventions and Works of Authorship 46   19.5 Inapplicability 46         20.0 RESERVED 46         21.0 GUARANTEED WEIGHT REQUIREMENTS 46         22.0 SELLER DATA REQUIREMENTS 46         23.0 RESERVED 47         24.0 RESERVED 47         25.0 RESERVED 47         26.0 INFRINGEMENT 47         27.0 RAW MATERIAL PROGRAM 47   27.1 Boeing Raw Material Strategy 47   27.2 Reserved 48         28.0 DIGITIZATION OF PROPRIETARY INFORMATION AND MATERIALS 48         29.0 ON-SITE SUPPORT 48   29.1 Indemnification Negligence of Seller or subcontractor 48   29.2 Commercial General Liability 48   29.3 Automobile Liability 49   29.4 Workers' Compensation 49   29.5 Certificates of Insurance 49   29.6 Self-Assumption 49   29.7 Protection of Property 49   29.8 Compliance with Spirit Site Requirements 50 5 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- 30.0 Spirit TECHNICAL I MANUFACTURING ASSISTANCE REGARDING SELLER'S NONPERFORMANCE 50         31.0 U. S. CUSTOMS INVOICE REQUIREMENTS 50         32.0 STRATEGIC ALIGNMENT 51         33.0 CUSTOMS-TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT) 51         34.0 ENVIRONMENTAL MANAGEMENT SYSTEMS AND HEALTH AND SAFETY MANAGEMENT SYSTEMS 51         35.0 DELIVERY - TITLE AND RISK OF LOSS 52   35.1 Delivery Point and Schedule 52   35.2 Reserved 52   35.3 Reserved 52   35.4 Notification of Shipment 52   35.4.1 Title and Risk of Loss 52   35.5 Notice of Delay - Premium Effort 52         36.0 PACKAGING AND SHIPPING 53   36.1 Product Packaging 53   36.2 Consolidated Shipments and Markings 53   36.3 Freight Charges 54   36.4 Packing Sheet and Test Reports 54   36.5 Additional Copies 54   36.6 Price Inclusive 54         37.0 ADDITIONAL QUALITY ASSURANCE REQUIREMENTS 54   37.1 Federal Aviation Administration Inspection 54   37.2 Repair Authorization 54     37.2.1 Spirit-Performed Work 54     37.2.2 Reimbursement for Repairs 55         38.0 CHANGES 55         39.0 EXAMINATION OF RECORDS 56   39.1 Reports 56         40.0 EVENTS OF DEFAULT AND REMEDIES 56   40.1 Additional Event of Default 56   40.2 Interest on Overdue Amounts 56         41.0 CUSTOMER CONTACT 56         42.0 SUBCONTRACTING 56 6   Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- 43.0 SUPPLEMENTS AND MODIFICATIONS 57         44.0 INCREMENTAL RELEASE AND CYCLE TIME REQUIREMENTS 58   44.1 Incremental Release 58   44.2 Cycle Time Requirements 58         45.0 SURPLUS PRODUCTS 58   45.1 Return of Surplus Products 58   45.2 Use of Surplus Products 59         46.0 INTEGRATED / LIFE CYCLE PRODUCT TEAM 59   46.1 Purpose 59   46.2 Qualifications 59   46.3 Removal of Personnel 59   46.4 Work Schedule 59   46.5 Equipment and Supplies 60   46.6 Employment Status 60   46.7 Team Leader 60   46.8 Discipline 60   46.9 Insurance 60   46.10 Indemnification 60   46.11 Compensation 61         47.0 SELLER ASSISTANCE 61         48.0 DEFINE AND CONTROL AIRPLANE CONFIGURATION / MANUFACTURING RESOURCE MANAGEMENT (DCAC/MRM) 62       49.0 ELECTRONIC ACCESS AND EXCHANGE OF DIGITAL PRODUCT DEFINITION 62   49.1 Exchange of Digital Product Definition Between Spirit and Seller 62   49.2 System/Software Compatibility between Spirit and Seller 62   49.3 Electronic Access, Communications and Data Exchange via Telecommunications 62 Signature Page   Attachment 1 Work Statement and Pricing Attachment 1A Component Spares Requirements Attachment 2 Non-U.S. Procurement Report Attachment 3 Rates and Factors Attachment 4 Spirit AOG Coverage Attachment 5 Spirit AOG Shipping Notification Attachment 6 Seller Data Submittals Attachment 7 Supplier Data Requirements List Customers / Engineering Attachment 8 Commodity Listing and Terms of Sale 7 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- Attachment 9 Cost and Performance Reviews Attachment 10 Quality Assurance Requirements Attachment 11 Second Tier Support Report Attachment 12 Commercial Invoice Requirements (Customs Invoice) Attachment 13 On-Site Terms & Conditions Supplement Attachment 14 Reserved Attachment 15 Production Article Definition & Contract Change Notices Attachment 16 Non-Recurring and Recurring Price Status and Summary Tables Attachment 17 Value Engineering Methodology Attachment 18 Indentured Priced Parts List and Spares Pricing Attachment 19 Incremental Release Plan and Lead Times Attachment 20 Schedule Change Examples 8 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- AMENDMENTS Amend Number Description Date Approval                                                         9 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:   -------------------------------------------------------------------------------- SPECIAL BUSINESS PROVISIONS RELATING TO AEROSTRUCTURES and SYSTEMS BUSINESS UNIT PRODUCTS   THIS SPECIAL BUSINESS PROVISIONS (SBP) is entered into as of 10 March, 2006, by and between LMI Aerospace, Inc., a Missouri corporation, with its principal office in St. Charles, MO (“Seller”), and Spirit AeroSystems, Inc., a Delaware corporation ("Spirit"). Hereinafter, the Seller and Spirit may be referred to jointly as “Parties” hereto.   Now, therefore, in consideration of the mutual covenants set forth herein, the Parties agree as follows:   AGREEMENTS   1.0  DEFINITIONS     The definitions used herein are the same as those used in the GTA. In addition, the following terms are defined as follows:   A.   "Boeing Lifetime Serial Number" has the meaning set forth in Document D33200-1, "Boeing Suppliers' Tooling Document"   B.   "Boeing Proprietary Spare Parts" means all Spare Parts, which are manufactured (i) by Boeing, or (ii) to Boeing's detailed design with Boeing's authorization, or (iii) in whole or in part using Boeing Proprietary Information.   C.   "Boeing-Use Tooling" means certain gauge and interface Tooling (not including Boeing master gauges) manufactured by Seller in accordance with designs provided by Boeing, to be used exclusively by Boeing.   D.   "Common-Use Tooling" means all Tooling required for use by both Spirit and Seller.   E.   "Contract," "hereof," "hereto," "herein" and similar terms mean this Special Business Provisions, including all Exhibits and Documents, and all amendments, modifications and supplements hereto.   F.   "Contract Change Notice" or "CCN" means any written notice sent by Spirit to Seller (1) describing any change to the SBP statement of work pursuant to SBP Section 36.0 and authorizing Seller to proceed with the performance of work hereunder in accordance with such change description or (2) setting forth Spirit’s requirements for Production Articles and authorizing Seller’s performance in producing such Production Articles.     10 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   G.   "Contractor-Use Tooling" (also known as “Seller-Use Tooling”) means all Tooling needed to manufacture Products.   H.   "Cycle Time" means the period of time that elapses between the dates a Customer executes an implementation directive for a Program Airplane and delivery of such Program Airplane to such Customer.   I.   "Dataset" means any compilation of data or information (including, without limitation, numerical data, geometric definitions, program instructions or coded information) which may be used directly in, integrated with or applied to, a computer program for further processing. A Dataset may be a composite of two or more other Datasets or an extract of a larger Dataset.   J.   "Drawing" means an automated or manual depiction of graphics or technical information representing a Product or any part thereof and which includes the parts list and specifications relating thereto.   K.   "End Item Assembly" means any Product which is described by a single part number and which is comprised of more than one component part.   L.   "Engineering Release" means engineering Drawings, Datasets or other Documents, approved by Spirit and released through Spirit’s engineering Drawing release system, that define the design requirements of any Product.   M.   "Integrated Product Team" or "IPT" or “Design Build Team” "DBT" means a team composed of representatives from engineering, operations, procurement, design-to-cost and other disciplines as Spirit shall specify, whose objective is to optimize designs for cost, weight, performance and producibility.   N.   "Manufacturing Work Package" or "Work Package" means manufacturing effort that Seller will provide under this SBP.   O.   “Miscellaneous Work” is Seller performed work or services that includes, but is not limited to provision of additional test articles, Spirit-use tooling, test support, field support and Spirit-used supplier facilities.   P.   “Nonrecurring Shipset Price” or “Nonrecurring Price” shall have the meaning set forth in SBP Attachment 1.   Q.   “Nonrecurring Work” is Seller performed work, which may include, but is not limited to tooling, static and fatigue test articles, local transportation devices and planning.   R.   "Obsolescence" means the discontinuation of the requirement for any Product as a result of engineering or manufacturing change, which has rendered such Product no longer usable in the production of the Program Airplane or any Derivative.     11 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   S.   “Order” has the meaning set forth in GTA Section 1.0 E but shall also include any Contract Change Notice directing Seller to provide Production Articles.   T.   "Person" means any individual, partnership, corporation, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity.   U.   "Price" means the amount to be paid by Spirit to Seller for any Product in accordance with the terms of this SBP.   V.   "Production Articles" means those completed assemblies defined and configured, including SCD Products, as set forth in SBP Attachment 13 for the Program Airplane.   W.   "Program" means the design, development, marketing, manufacture, sales and customer support of Program Airplanes, Derivatives and other Products.   X.   "Program Airplane" means a commercial transport aircraft incorporating advanced technology and having a model designation for which Seller shall provide Production Articles pursuant to this SBP.   Y.   "Rate Tooling" for 737 means Tooling required to produce more than seven (7) Shipsets per month without regard to the production of Spare Parts or Products other than Production Articles and is comprised of Rate Tooling A, Rate Tooling B, and Rate Tooling C.   "Rate Tooling A" means 737 Product Tooling required to produce more than seven (7) up to fourteen (14) Shipsets per month and   "Rate Tooling B" means 737 Product Tooling required to produce more than fourteen (14) up to twenty-one (21) Shipsets per month.   "Rate Tooling C" means 737 Product Tooling required to produce more than twenty-one (21) up to twenty-eight (28) Shipsets per month.   "Rate Tooling" on all other Boeing Commercial Airplane programs means Tooling required to produce more than seven (7) Shipsets per month without regard to the production of Spare Parts or Products other than Production Articles.   Z.   “Recurring Shipset Price” means the Price for the Recurring Work (RW) associated with each Shipset.   AA.   “Recurring Work” means work Seller performs in producing Production Articles. The cost of Recurring Work can include, but is not limited to tool maintenance, replacement, and storage, packaging, disposable shipping fixtures and maintenance of production planning.     12 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   BB.   "SCD Products" means all goods, including components and parts thereof, designed to a Boeing Specification Control Drawing by Contractor or its Subcontractors, and provided or manufactured under this Contract.   CC.   "SCD Spare Parts" means Spare Parts that are also SCD Products.   DD.   "Shipset" means the total set of Production Articles provided by Seller hereunder necessary for production of one Program Airplane or Derivative.   EE.   "Spare Parts" or “Spares” means Production Articles or components thereof, and materials, assemblies and items of equipment relating thereto, which are intended for Spirit’s use or sale as spare parts or production replacements. The term "Spare Parts" includes, but is not limited to, Boeing Proprietary Spare Parts.   FF.   “Total Nonrecurring Work Package Price” shall have the meaning set forth in SBP Attachment 1.   GG.   “Value Engineering” is a single component of total cost management designed to leverage Spirit and Supplier Engineering resources to reduce costs (to Sellers) and prices (to Spirit) for Products through engineering changes in requirements, processes, or designs which in no way reduce airplane safety, performance, maintainability, reliability, producibility or capability. Value Engineering Methodology is provided in Attachment 17.   2.0   CONTRACT FORMATION     2.1  Order     2.1.1  Issuance of Orders for Production Articles     Spirit will notify Seller of its requirements for Production Articles by issuing individual Releasing Orders to authorize performance and establish a schedule for performance and delivery.   2.1.2 Issuance of Orders for Products and Services Other Than Production Articles     Spirit will notify Seller of its requirements for any Product other than Production Articles and for any Service under this SBP by issuing Orders. Such Orders will authorize performance, indicate Price, establish schedule for delivery or performance, provide identification of any such Product or Service and effect payment and accountability. Any such Order shall include a statement incorporating this SBP by reference and shall be governed by and be deemed to include the provisions of this SBP.     13 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------    2.2  Entire Agreement     The Order sets forth the entire agreement, and supersedes any and all other prior agreements understandings and communications between Spirit and Seller related to the subject matter of an Order. The rights and remedies afforded to Spirit or Customers pursuant to any provisions of an Order are in addition to any other rights and remedies afforded by any other provisions of the Order, the General Terms Agreement (GTA) or the SBP, by law or otherwise.   2.3  Incorporated by Reference     General Terms Agreement (“GTA”) Spirit AeroSystems GTA-T5P2-GB001851 dated 14 October 2005 is incorporated in and made a part of this SBP by this reference.   In addition to any other documents incorporated elsewhere in this SBP or GTA by reference, the following documents are incorporated in and made a part of this SBP by reference with full force and effect, as if set out in full text. It is the Seller’s responsibility to comply with the latest revision of these documents.   Boeing Document D33200-1 “Boeing Suppliers’ Tooling Document”   Boeing Document D953W001, “General Operations Requirements Document For Suppliers - External/internal Suppliers/Program Partners”   Boeing Document D37520-1, -1A, -1B, Supplier’s Part Protection Guides   Boeing Document D6-81628, “Shipping Label, Barcoded Preparation and Placement”   Form 49-5461, Furnished Material   Flysheet 856 -- INSTRUCTIONS FOR SHIPPING, PACKAGING, & MARKING.   Form 49-5868, Buyer Furnished Property   Form 49-5869, Certified Tool List   2.3.1  Supporting Documentation and Priority     All Documents (as hereinafter defined) are by this reference incorporated herein and made a part of this SBP. For purposes of this SBP, "Document" means all specifications, Drawings, Datasets, documents, publications and other similar materials, whether in a tangible or intangible form, as the same shall be amended from time to time, which relate to the manufacture and sale of Products or the provision of Services to Spirit pursuant to this SBP, including, but not limited to, the documents listed below, and any other documents specifically referred to in this SBP or in such other documents. Reference in any Document to "Contractor" or “Seller” or "Supplier" shall mean Seller for the purposes of this SBP. In the event of any inconsistency between the terms and conditions of this SBP and the terms and conditions of any Document, the terms and conditions of the SBP shall control. In the event any provisions of any Document or Documents conflict among themselves, Spirit will, on its own initiative or at the request of Seller, resolve such conflict, revise such Document or Documents accordingly, and so notify Seller. In resolving any such conflicts, this SBP shall be read as a whole and in a manner most likely to accomplish its purposes.     14   Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   2.3.2  Revision of Documents     Subject to the terms of SBP Section 2.3, Spirit may at any time revise any Document prepared by Spirit and Spirit shall provide Seller with revisions to Documents prepared by Spirit; except that stated addresses and designees for each Party contained therein may be modified unilaterally by such Party, and any modification of the Administrative Agreement shall be reflected promptly therein by amendment thereto.   2.3.3  Compliance     Seller shall, subject to the terms of this SBP Section 2.3, promptly comply with the provisions of all Documents, including any revisions thereto.   2.3.4  List of Certain Documents     Item   No.   Title A. D1-4426 Boeing Approved Process Sources B. D6-82479 Boeing Quality Management System Requirements for Suppliers C. D-13709 The Boeing Commercial Airplanes and Supplier Coordination of Engineering Data D. D6-4806 Skin Quality Acceptance Standards for Clad Aluminum Raw Material E. D6-9002 Appearance Control of Clad Aluminum Exterior Skins F. D953W001 General Operations Requirements Document For Suppliers - External/internal Suppliers/Program Partners       G. D33200-1 Boeing Suppliers' Tooling Document H. D6-17781 Material and Performance Evaluation of Designated Parts I. D6-1276 Control of Material and Machines J. D6T-10898-1 Weight Compliance Requirement/Contractor and Subcontractors K. D6-51991 Quality Assurance Standard Reflecting Digital Product Definition for Boeing Suppliers Using CAD/CAM L. D6T10731-1 Computer-Aided Manufacturing Guidelines and Interface for Program Contractors and Suppliers       M. ATA 300 Specification for Packaging of Airline Supplies     15 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   N. D37520-1, -1A, -1B Supplier’s Part Protection Guides O. D6-56199 Hardware and software compatibility requirements for suppliers use of BCAG CATIA native datasets as sole authority for design, manufacturing and inspection P. D6-81628 Shipping Label, Barcoded Preparation and Placement   2.4  Order of Precedence     In the event of a conflict or inconsistency between any of the terms of the following documents, the following order of precedence shall control:   A.   These Special Business Provisions (“SBP”) including attachments (excluding all documents listed below), then   B.   General Terms Agreement (“GTA”) (excluding all documents listed elsewhere on this listing), then   C.   Purchase Contract, if any, then   D.   Order (excluding all documents listed elsewhere on this listing), then   E.   Engineering Revision Document (ERD), if any, then   F.   The Subcontracted Parts - Revision, Authorization, and Transmittal (“SPRAT”), if any, then   G.   Engineering Drawing by Part Number and, if applicable, related Outside Production, Specification Plan (OPSP), Specification Plan Detail (SPCD) or Supplier Specification Plan (SSP) then   H.   All documents incorporated by reference in SBP Section 6.0, Product Support and Assurance, of this SBP, then   I.   Any other Spirit generated exhibits, attachments, forms, flysheets, codes or documents that the Parties agree shall be part of this SBP, then lastly   J.   Any Seller generated documents that the Parties agree shall be part of this SBP.   In resolving any such conflicts, these documents shall be read as a whole and in a manner most likely to accomplish their purposes.   Seller shall promptly report to Spirit in writing any inconsistencies in these documents, even if the inconsistency is resolvable using the above rules.     16 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     2.5  Survival     Without limiting any other survival provision contained herein and notwithstanding any other provision of this SBP or the GTA to the contrary, the representations, covenants, agreements and obligations of the Parties set forth in GTA Section 12.3 “Seller’s Claim”, GTA Section 16.0 “Termination or Wrongful Cancellation”, GTA Section 18.0 “Responsibility for Property”, GTA Section 20.0 ‘ Proprietary Information and Items”, GTA Section 24.0 “Spirit’s Rights in Seller’s Patents, Copyrights, Trade Secrets and Tooling”, GTA Section 27.0 “Property Insurance”, GTA Section 29.0 “Non-Waiver/Partial Invalidity”, this SBP Section 2.5 “Survival”, SBP Section 5.0 “Applicable Law”, SBP Section 29.0 “Insurance For On-Site Support”(if applicable), and SBP Section 41.0 “Supplements and Modifications”(if applicable), shall survive any cancellation, termination or expiration of this SBP, any assignment of this SBP or any payment and performance of any or all of the other obligations of the Parties hereunder. Termination or cancellation of any part of this SBP shall not alter or affect any part of this SBP, which has not been terminated or cancelled.   3.0  PERIOD OF PERFORMANCE AND PRICES     3.1  Performance     3.1.1  Period of Performance     The period of performance for this SBP shall include initial manufacturing activities required to support delivery of Products beginning on 01 January, 2007 and ending on 31 December, 2011.   Period of performance set out above shall be defined as order placement with potential delivery beyond 31 December, 2011.   3.1.2  Option to Extend     Seller grants to Spirit an option to extend the period of performance of this SBP as set forth below. Spirit may exercise the option by written notice to the Seller on or before 01 March, 2011. This option may be exercised by Spirit any number of times so long as each option increases the period of performance of this SBP by no less than one (1) year. However, in no event may Spirit unilaterally extend the SBP beyond 31 December, 2013, by exercise of this option.   Notwithstanding the option set forth herein, Spirit reserves the right to commence new negotiations with Seller concerning pricing and other terms for additional quantities of Products.     17 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   3.2  Pricing     3.2.1  Product Pricing     The prices of Products ordered under this SBP are set forth in SBP Attachment 1. Prices are in United States Dollars. *    *   3.2.2  Manufacturing Configuration     Unit pricing for each Product or part number shown in SBP Attachment 1 is based on the latest revisions of the engineering drawings or specifications at the time of the signing of this SBP and any amendments thereof (Ref. SBP Attachment 15).   3.2.3  Packaging     The prices shown in SBP Attachment 1 include all packaging costs. Seller shall package Product in accordance with the applicable requirements set forth in the documents referred to in SBP Section 2.3 for the location issuing the Order. In the case of Products to be shipped directly to Customers, A.T.A. Specification 300 "Specification for Packaging of Airline Supplies" shall apply unless otherwise directed by Spirit. Upon Spirit’s request, Seller will provide discreet packaging costs.   3.2.4  Local Transportation Devices     All shipping or handling fixtures necessary for the handling, transportation and loading of Products prior to delivery and which are additive to those shipping or handling fixtures specified by Spirit for transportation via air or surface carrier, off loading from the air or surface carrier or handling ("Local Transportation Devices") shall be provided by Seller at no cost or expense to Spirit. Seller shall plan, design, manufacture or procure, and test any Local Transportation Devices.   3.3  Subject Matter of Sale   Subject to the provisions of this SBP, Seller shall sell to Spirit and Spirit shall purchase from Seller certain nonrecurring Products as described in SBP Section 3.3.1, certain Production Articles and other recurring Products as described in SBP Section 3.3.2, and certain Spare Parts and other Miscellaneous Work as described in SBP Section 3.3.3.       ____________________________ *The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   18 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   3.3.1  Nonrecurring Work     3.3.1.1 Tooling - General   All Tooling produced in performance of this SBP must conform to the provisions of Boeing Document D953W001, "General Operations Requirements Document for Suppliers External/Internal Suppliers/Program Partners," and D33200-1, "Boeing Suppliers' Tooling Document”.   3.3.1.2 Static and Fatigue Test Articles   NOT APPLICABLE.   3.3.1.3 Contractor-Use Tooling (also known as Seller-Use Tooling)   Seller shall plan, design, manufacture or procure, and test all Contractor-Use Tooling. Contractor-Use Tooling shall be in the configuration, quantity and quality required to produce (i) Production Articles in accordance with SBP Attachment 1 and (ii) other Spirit requirements for Products (including, without limitation, Spare Parts and Rate Tooling). All lead, zinc and kirksite material used in the fabrication of Contractor-Use Tooling shall be furnished at no cost or expense to Spirit and no part of any Price hereunder shall be paid for Contractor-Use Tooling made of such material. If Spirit, or Spirit’s Customer, takes possession of any Contractor-Use Tooling made of such material, Spirit shall negotiate reimbursement with Seller for the cost of such material used in such Contractor-Use Tooling.   3.3.1.4 Common - Use Tooling   Seller shall design, manufacture or procure, and test all Common-Use Tooling including, without limitation, strongback handling fixtures, rotable shipping fixtures and handling fittings. The requirements for such items, if applicable, will be defined and identified by Spirit.   3.3.1.5 Use of Casting, Forging and Extrusion Tools   Spirit or its designees shall retain the primary right to use all applicable Tools for the production of castings, forgings and/or extrusions produced at Seller's direction for use under this SBP and such Tools shall be used only in the performance of this SBP or any other SBP that Spirit may designate in writing. Such Tools shall be retained for use in production of castings, forgings and/or extrusions for Spirit or as Spirit directs until Spirit gives written notice to Seller that a requirement for the use of such Tools no longer exists. Spirit agrees to grant to Seller the right to use any Tool for the production of castings, forgings or extrusions that will become part of any Product, in which Spirit has a right of use, ownership or other proprietary interest.   3.3.1.6 Initial Planning   NOT APPLICABLE     19 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   3.3.1.7 Weight Status Reporting   NOT APPLICABLE   3.3.1.8 Integrated Product Team   Seller shall, as required and in accordance with SBP Section 44.0, locate at Spirit facilities key personnel for Integrated Product Teams.   3.3.2  Recurring Work     3.3.2.1 Production Articles   Seller will provide the Production Articles specified in SBP Attachment 1 in accordance with the delivery schedules set forth in the applicable release orders. All Production Articles will be manufactured and delivered in accordance with the specifications and requirements set forth in this SBP.   3.3.2.2 Tool Maintenance   Seller shall provide control, accountability, care, storage, maintenance and replacements of all Contractor-Use Tooling and Common-Use Tooling, in accordance with Document D953W001, "General Operations Requirements Document for Suppliers," as required to support the manufacture and delivery of Products.   3.3.2.3 Disposable Shipping Fixtures   NOT APPLICABLE   3.3.2.4 Maintenance of Production Planning   Seller will revise and maintain the Tool and production planning as required to support the production of Production Articles and Spare Parts.   3.3.3  Spares and Miscellaneous Work     3.3.3.1 Spare Parts Ordering   In accordance with the requirements as identified in SBP Section 13.1, Seller will manufacture and sell such Spare Parts as Spirit may order from time to time. Seller shall accept any Order for Spare Parts during the term of the SBP.   3.3.3.2 Planning for Fabrication of Spare Parts   NOT APPLICABLE   3.3.3.3 Sale of Boeing Proprietary Spare Parts   Seller shall sell Boeing Proprietary Spare Parts to Spirit, or to third parties only with Spirit's prior written approval or at Spirit's direction. Seller shall respond to any inquiry from a third party concerning Boeing Proprietary Spare Parts in accordance with SBP Section 3.3.3.1.       20 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   3.3.3.4 Miscellaneous Work     Seller shall provide to Spirit Miscellaneous Work, including, without limitation, test articles, Spirit-Use Tooling, test support, field support or other related program support items, as may be ordered by Spirit from time to time.   4.0  GOVERNING QUALITY ASSURANCE REQUIREMENTS     In addition to those general quality assurance requirements set forth in the GTA, the work performed under this SBP shall be in accordance with the requirements set forth in SBP Attachment 10.   5.0  APPLICABLE LAW     This contract shall be governed by the laws of the State of Kansas. No consideration shall be given to Kansas’ conflict of law rules. This contract excludes the application of the 1980 United Nations Convention on Contracts for the International Sale of Goods. Seller hereby irrevocably consents to and submits itself exclusively to the jurisdiction of the applicable courts of Sedgwick County Kansas and the federal courts of Kansas State for the purpose of any suit, action or other judicial proceeding arising out of or connected with any Order or the performance or subject matter thereof. Seller hereby waives and agrees not to assert by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that (a) Seller is not personally subject to the jurisdiction of the above-named courts, (b) the suit, action or proceeding is brought in an inconvenient forum or (c) the venue of the suit, action or proceeding is improper.   6.0  PRODUCT SUPPORT AND ASSURANCE     6.1  Warranty     Seller acknowledges that Spirit and Customers must be able to rely on each Product performing as specified and that Seller will provide all required support. Accordingly, the following provisions, including documents, if any, set forth below are incorporated herein and made a part hereof:   "Boeing Designed, Sub-Contracted Products Manufacturers Warranty" Boeing Document M6-1124-3,   Spirit may choose initially not to extend the Seller's full warranty of Product to Customers. This action shall in no way relieve Seller of any obligation set forth in the warranty documents listed above. Spirit, at its sole discretion, may extend Seller's full warranty of Product to its Customers at any time. Furthermore, Seller agrees to support the Product as long as any aircraft using or supported by the Product remains in service.     21 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     6.2 Integrated Materials Management (IMM) Program     If requested by Spirit, Seller shall participate in and support Spirit's Integrated Materials Management (IMM) Program pursuant to terms and conditions mutually determined by the parties that will achieve an efficient and low cost supply chain infrastructure pursuant to the goals and strategies of the IMM Program as set forth below:   A.   Provide a Spirit integrated solution for customers’ material management operations;   B.   Provide guaranteed service levels to customers’ maintenance operations;   C.   Reduce inventory and process costs with better service levels to customers;   D.   Enable supply chain and customers to reduce costs and share benefits.   IMM on-site functions may be located at customers’ facilities and may include, demand planning, inventory management, repair and overhaul services and replenishment management. IMM global functions may include, planning and collaboration, global operations, systems integration, network supplier management, global logistics management, quality assurance, human resources, parts/services engineering, finance and accounting, communications, product development.   7.0  PAYMENT     7.1  Recurring Price     *    Except as otherwise provided on applicable Order identifying Pay-From Receipt, payment due dates, including discount periods, shall be computed from (a) the date of receipt of the Product, (b) the date of receipt of a correct (proper) invoice or (c) the scheduled delivery date of such Product, whichever is last. Unless freight and other charges are itemized, any discount shall be taken on the full amount of the invoice. All payments are subject to adjustment for shortages, credits and rejections.     7.2  Nonrecurring Price/Special Charges     *     ____________________________ *The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   22 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   7.3  Payment Method     All payments hereunder shall be made by check payable to the order of Seller deposited in the U.S. postal system via first-class mail to an address designated in writing by Seller.     23 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   7.4  Payment Errors     If an error in payment (over payment or under payment) is discovered by Spirit or Seller, a written notification will be submitted to the other Party and resolution of the error will occur in a timely manner after discovery of such error.   7.5  Spare Parts     The Price for any Spare Part shall be paid * .   7.6  Invoicing     7.6.1  Invoicing Requirements   Seller shall submit separate invoices for payment of Recurring and Nonrecurring Shipset Prices . Payment of any such invoice by Spirit shall be subject to the satisfaction of all of the following conditions:   A.   The Shipset of Production Articles for which payment is to be made shall have been delivered to Spirit. Any Shipset will be deemed to be delivered when all Production Articles constituting such Shipset shall have been delivered to Spirit.   B.   Spirit shall have received the Certified Tool List in form and substance satisfactory to Spirit, or otherwise in compliance with Documents D953W001 "General Operations Requirements Document for Suppliers," and D33200, "Boeing Suppliers' Tooling Manual," for the tools required to produce each Production Article in a Shipset, and, as changes to Production Articles shall occur, updated Certified Tool Lists listing additional Tools required to accomplish any such change, and   C.   The Spares Articles for which payment is to be made shall have been delivered to Spirit. Any Spare will be deemed to be delivered when all Articles constituting such Spare shall have been delivered to Spirit. The Miscellaneous Work (except for any Spare Part) for which payment is to be made shall be after delivery or provision, as the case may be, of the Product or Service constituting or containing such Miscellaneous Work to Spirit or Spirit’s designee   7.6.4  Mailing Instructions   All invoices shall be mailed to:   Spirit AeroSystems, Inc.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   24 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   P.O. Box 582808   Tulsa, OK 74158-2808   Attention: Accounts Payable, D/904   7.6.5  Summary Invoices     Seller shall supply a summary invoice for those shipments that contain multiple-invoiced items; each item in turn having its own invoice. The summary invoice shall be attached along with the paperwork for the shipment and provide total value for the invoices that accompany it as well as specify what invoices are covered.   An acceptable alternative is the use of a single invoice for multiple items, part numbers and purchase order numbers.   All specific questions and concerns on customs invoicing may be addressed to the Spirit Traffic Organization.   8.0  SCHEDULE ACCELERATION/DECELERATION     Notwithstanding GTA Section 10.0, Spirit may revise the delivery schedule and/or firing order without additional cost or change to the unit price stated in the applicable Order if (a) the delivery date of the Product under such Order is on or before the last date of contract, if applicable, and (b) Spirit provides Seller with written notice of such changes.   Upon receipt of written notice of the change, Seller shall make its best effort to implement the change as soon as possible, but in no event shall the change be implemented later than three (3) months after notification of a schedule acceleration or deceleration.   Seller shall be entitled to payment for schedule changes made with less than three (3) months’ notice noted above; provided, however, that such payment shall not be made with respect to any Shipset delivered three (3) months or more after such notice is given. Any such payment shall be an amount equal to four-tenths of one percent (.4%) of the Recurring Shipset Price multiplied by the number of Shipsets accelerated or decelerated during such three (3) month period. The resulting payment amount shall be made in full net sixty (60) days after receipt of a correct and valid invoice. See Attachment 20 for an example of the above.   9.0  NOTICES     9.1  Addresses     For all matters requiring the approval or consent of either party such approval or consent shall be requested in writing and is not effective until given in writing. Notices and other communications shall be given in writing by personal delivery, United States mail, express delivery, facsimile, or electronic transmission addressed to the respective party as follows:     25 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   To Spirit:   Attention: Randall P. Garrett: Dept. 953, Bldg. 057 Spirit AeroSystems, Inc.           P.O. Box 582808 Tulsa, Oklahoma 74158-2808       To Seller:   Attention: Rick Darrow Leonard’s Metal, Inc.           3600 Mueller Road St. Charles, MO 63301   10.0  OBLIGATION TO PURCHASE AND SELL     Spirit and Seller agree that in consideration of the prices set forth under SBP Attachment 1, Spirit shall issue Orders for Products from time to time to Seller for all of Spirit’s requirements. Such Products shall be shipped at any scheduled rate of delivery, as determined by Spirit, and Seller shall sell to Spirit Spirit’s requirements of such Products, provided that, without limitation on Spirit’s right to determine its requirements, Spirit shall not be obligated to issue any Orders for any given Product if:   A.   Any of Spirit’s customers specifies an alternate product;   B.   Such Product is, in Spirit’s reasonable judgment, not technologically competitive at any time, for reasons including but not limited to the availability of significant changes in technology, design, materials, specifications, or manufacturing processes which result in a reduced price or weight or improved appearance, functionality, maintainability or reliability;   C.   Spirit gives reasonable notice to Seller of a change in any of Boeing's aircraft which will result in Spirit no longer requiring such Product for such aircraft;   D.   Seller has materially defaulted in any of its obligations under any Order, whether or not Spirit has issued a notice of default to Seller pursuant to GTA Section 13.0;   E.   Spirit reasonably determines that Seller cannot support Spirit’s requirements for Products in the amounts and within the delivery schedules Spirit requires; or   F.   Spirit gives at least six (6) months notice to Seller that the Product is used in the manufacturing of an airplane component, assembly or other product previously manufactured in-house by Spirit and which component, assembly or other product Spirit has resourced to a third party supplier; or,     26 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   For purposes of this SBP Section 10.0, Spirit is defined as those organizations, divisions, groups or entities set forth specifically in SBP Attachment 1.   Seller represents and warrants to Spirit that discounts offered fairly reflect manufacturing, selling, or delivery cost savings resulting from this quantity sale and that such discounts are reasonably available to all other purchasers.     11.0  COST AND PERFORMANCE VISIBILITY     When requested by Spirit, Seller shall provide all necessary cost support data, source documents for direct and indirect costs, and assistance at the Seller's facility in support of cost and performance reviews performed by the Parties pursuant to cost reduction initiatives as set forth in SBP Section 12.6.   The Cost and Performance Review (CPR) process is the tool, which the Parties may use to measure Seller’s performance to the goals and objectives of Spirit as set forth in SBP Section 12.6. Spirit and Seller may implement a structured process called CPR to review and identify areas, processes and strategies to improve, reduce or eliminate which will result in the desired effect of reducing costs and/or improving cycle times for the Product(s) set forth in this SBP. The CPR process will address those activities, which are a direct result of both parties involvement. Seller will provide the resources and data sufficient to support the CPR process in accordance with the structure set forth in SBP Attachment 9.   12.0  CHANGE PROVISIONS     12.1  Reserved     12.2  Computation of Equitable Adjustment     The Rates and Factors set forth in SBP Attachment 3, which by this reference is incorporated herein, shall be used to determine the equitable adjustment, if any, (including equitable adjustments, if any, in the prices of Products to be incorporated in Derivative Aircraft), to be paid by Spirit pursuant to GTA Section 10.0 and SBP Section 38.0 for each individual change.   Adjustments to prices shall be established in accordance with SBP 12.2 and recorded in SBP Attachment 16.   12.2.1  Changes Not Subject to Price Adjustment     No adjustment to the Prices hereunder shall be made with respect to the following changes:   A.   All Production Article delivery schedule changes, including firing order and rate changes, except as provided in SBP Section 8.0, if applicable.     27 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   B.   Any other change that is not subject to Price adjustment in accordance with clause 12.2.2 below.   12.2.2  Changes Subject to Price Adjustment     An adjustment to the Prices hereunder shall be made with respect to the following changes:   A.   Committed Changes (70000 Series PRRs), Flight Changes (FCs), Master Changes (MCs), Rapid Revisions (RRs) and Modification Revisions (MRs), provided that such changes shall satisfy the criteria set forth in Paragraph 12.2.4 below.   B.   The transfer, pursuant to SBP Section 38.0, to or from Seller of responsibility for any part of the production of any Product or product or for the provision of any Service or service.   C.   Any change resulting in the production of Derivatives.   D.   Categorized changes (94000 and 95000 Series Production Revisions Records)(PRRs) as defined in Documents D6T11122-2, and D962W101, "Supplier Change Management".   E.   Change Incorporation Requests (CIRs) as defined in Document D953W001, "General Operations Requirements Document for Suppliers".   F.   Spirit generated SLCPN, “Supplier Generated Line Change Point Notice”.   12.2.3  Proposals for Price Adjustment     12.2.3.1 Timeframe     Changes Prior to 100% Engineering Release - No later than thirty (30) calendar days after 100% Engineering Release, Seller shall submit to Spirit a listing of all changes which were received by Seller prior to 100% Engineering Release together with Seller’s proposal for appropriate price adjustment.   Changes Subsequent to 100% Engineering Release - Seller must assert any claim to Spirit procurement Representative in writing within thirty (30) days and a fully supported proposal to Spirit procurement Representative within forty-five (45) calendar days after receipt of such direction.   If Spirit does not receive any proposal within the forty-five (45) day time period, no such adjustment shall be made to Nonrecurring and Recurring Shipset Prices.     28 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   12.2.3.2 Content     Seller shall provide a detailed description of each change, the technical impact on the Product’s form, fit, and/or function, and any significant impact on manufacturing processes. Seller shall include with each proposal a complete estimate of the Change’s impact on the Seller’s cost per Product, including, but not limited to, the impact on labor hours, labor rates, processing costs, sub-tier supplier costs and raw material costs. Spirit must be able to substantiate and verify Seller’s submittal.   12.2.3.3 Review of Price Adjustment Proposal     Spirit will review the Seller’s provided submittal and Spirit may request from Seller additional data to allow Spirit to thoroughly review each submittal. Seller will provide Spirit additional data within thirty (30) days of Spirit’s request for such additional data. Spirit will review any additional data submitted and inform Seller of any further requirements.   If Spirit and Seller mutually determine that a change meets the change pricing criteria set forth in SBP Section 12.2.4, Spirit and Seller will negotiate an equitable adjustment in the price to reflect the increase or decrease. Spirit shall adjust the then-current Nonrecurring and Recurring Shipset Prices in accordance with SBP Section 12.2.5.   12.2.3.4 Future Derivative(s) and Follow-on Work     For Derivative(s) and follow-on work outside the term of this SBP, Spirit reserves the right to contract with any supplier Spirit determines is appropriate for the supply of the Products addressed in this SBP. In determining the appropriate supplier for Derivative(s), market driven target prices, based on Spirit’s expected revenue generated from sales of Derivative(s), will be a key consideration in the selection process, and in the establishment of Nonrecurring and Recurring Shipset Prices for Derivative(s). If Spirit selects Seller as the supplier for these Products, change pricing will be subject to SBP Section 12.2.4.3.   12.2.4  Change Pricing Criteria     12.2.4.1 Changes Prior to 100% Engineering Release     For changes received by Seller prior to 100% Engineering Release, the then current Nonrecurring and/or Recurring Shipset Prices set forth in SBP Attachment 1 and/or 16 (whichever is applicable) shall be adjusted if:   12.2.4.1.1 Nonrecurring Shipset Price Adjustment Prior to 100% Engineering Release     For Nonrecurring Work, the price impact, up or down of each change on the Total Nonrecurring Work Package Price is *.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   29 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   12.2.4.1.2 Recurring Shipset Price Adjustment Prior to 100% Engineering Release     For Recurring Work, the price impact, up or down, of each change on the Recurring Shipset Price is *.   12.2.4.2 Changes Subsequent to 100% Engineering Release     For Changes received by Seller after 100% Engineering Release, the then current Nonrecurring and/or Recurring Shipset Prices set forth in SBP Attachments 1 and/or 16 (whichever is applicable) shall be adjusted if:   12.2.4.2.1 Nonrecurring Shipset Price Adjustment Subsequent to 100% Engineering Release     For Nonrecurring Work, the price impact, up or down, of change on the Total Nonrecurring Work Package Price is *.   12.2.4.2.2 Recurring Price Adjustment Subsequent to 100% Engineering Release     For Recurring Work, the price impact, up or down, of each change on the then-current Recurring Shipset Price is *.   12.2.4.3 Changes for Derivatives     Any changes associated with the production of Products for a Derivative shall be subject to the change pricing criteria set forth in SBP Section 12.2.3.1 and 12.2.3.2.   12.2.5  Apportionment and Payment of Price Adjustments     12.2.5.1 Nonrecurring Work     12.2.5.1.1 Price Adjustment     The amount of the Total Nonrecurring Work Package Price adjustment shall be equal to the value of the change subject to SBP Section 12.0 and shall be documented in SBP Attachment 16.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   30 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   12.2.5.1.2 Apportionment and Payment     Any adjustment to the Shipset Nonrecurring Price shall be paid * .   12.2.6.1 Recurring Work     12.2.6.1.1 Price Adjustment     The amount of the Recurring Shipset Price adjustment shall be equal to the value of the change subject to SBP Section 12.0 and shall be documented in SBP Attachment 16.   All changes to the Recurring Shipset Price shall be set forth in SBP Attachment 16.   12.2.6.1.2 Apportionment and Payment     The then-current Recurring Shipset Price shall be adjusted to reflect the change beginning with the first Shipset, which incorporates such change. See SBP Attachment 16 for an example.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   31 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   12.3  Obsolescence     No adjustment to Prices pursuant to SBP Section 12.2 shall include any of Seller's costs for obsolescence. Notwithstanding the foregoing, Seller shall be entitled to payment for any obsolescence estimated to exceed * and allowable in accordance with GTA Section 12.3. Each change shall, for purposes of determining obsolescence costs, be considered separately. Changes, for purposes of determining obsolescence costs, may not be combined for the purpose of exceeding the limit described in this SBP Section 12.3   12.4  Change Absorption (Nonrecurring/Recurring)     12.4.1  Prior to 100% Engineering Release (Drawing Revision Level New)     Notwithstanding the provisions of GTA Section 10.0, *.   *     12.4.2  Subsequent to 100% Engineering Release     Notwithstanding the provisions of GTA Section 10.0, *.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   32 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   *.   12.5  Planning Schedule      Any planning schedule, forecast, or any such quantity estimate provided by Spirit shall be used solely for production planning. Spirit may purchase Products in different quantities and specify different delivery dates as necessary to meet Spirit’s requirements. Any such estimate shall be subject to adjustment from time to time, and such adjustment shall not constitute a change under GTA Section 10.0 nor a termination under GTA Section 12.0.   12.6  Total Cost Management     Spirit and Seller shall engage in a process herein known as Total Cost Management (TCM). Spirit and Seller shall each identify cost reduction opportunities and work together for implementation. Spirit and Seller shall review TCM opportunities on a periodic basis, which shall include the establishment of targets and implementation plans. Where Spirit and Seller identify TCM cost improvements, beyond those previously anticipated, identified and documented in the price, the Parties will determine the amount of savings that will result from the improvements and share the savings. Notwithstanding any other provision(s) elsewhere in this SBP, where a savings is identified as part of TCM, the Parties agree to reduce the price accordingly including any related Spares work statement priced pursuant to this SBP. Seller suggestions disapproved by Spirit may be given consideration in achievement of TCM targets.   12.6.1    Spirit Generated Technical and Cost Improvement    At any time during the Seller's performance under this SBP, Spirit may offer specific recommendations to Seller for the incorporation of any new technologies and process improvements intended to reduce Seller's costs or improve Product performance. These recommendations may include, but are not limited to, Spirit proprietary information and Spirit owned patents. Notwithstanding any other provision(s) elsewhere in this SBP, where a savings is identified and documented, the Parties agree to reduce the price accordingly. Such recommendations by Spirit shall not relieve Seller of its obligation to perform under this SBP.   12.7  Reserved     12.8     Reserved     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   33 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   12.9  Derivative Aircraft     Spirit may, but is not obligated to direct Seller within the scope of the applicable Order and in accordance with the provisions of GTA Section 10.0 to supply Spirit’s requirements for Products for Derivative aircraft which correspond to those Products being produced under the applicable Order. For purposes of this SBP Section, Derivative Aircraft means any model airplane designated by Spirit as a derivative of an existing model airplane and which: (1) has the same number of engines as the existing model airplane; (2) utilizes essentially the same aerodynamic and propulsion design, major assembly components, and systems as the existing model airplane; (3) achieves other payload/range combinations by changes in body length, engine thrust, or variations in certified gross weight; (4) has the same body cross-section as the subject model aircraft; and (5) is designated as a Derivative to the FAA by Manufacturer. A Derivative does not include any subject model aircraft, which has been or was currently in production as of the date of execution of the applicable SBP. Furthermore, Spirit reserves the right to extend application of the above Products and prices to other aircraft models as required.   13.0  SPARES AND OTHER PRICING     13.1  Spares     For purposes of this SBP Section, the following requirements and definitions shall apply:   A.   AIRCRAFT ON GROUND (AOG) - means the highest Spares priority. Seller will expend best efforts to provide the earliest possible shipment of any Spare designated AOG by Spirit. Such effort includes but is not limited to working twenty-four (24) hours a day, seven days a week and use of premium transportation. Seller shall specify the delivery date of any such AOG Spare within two (2) hours of receipt of an AOG Spare request.   B.   DEMAND DATE - means a date provided to Seller by Spirit when Spirit wants the Product(s) on-dock. Seller will provide a commitment to Spirit no later than three (3) days from notification of demand date.   C.   SELLER’S FULL LEADTIME SPARE - means a Spare in which the Demand Date is equal to or greater than Seller’s normal lead-time or the Demand Date is less than Seller’s normal lead-time but Seller’s best effort commitment is Seller’s normal lead-time.   D.   SELLER’S LESS THAN FULL LEADTIME SPARE - means a Spare in which the Demand Date is less than Seller’s normal lead-time and Seller’s best effort commitment to meet the Demand Date is less than Seller’s normal lead-time   E.   PURCHASED ON ASSEMBLY REQUIREMENT (POA) - means any detail component needed to replace a component on an End Item Assembly currently in      34 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------      Spirit's assembly line process.  Seller shall expend best efforts to provide the earliest possible delivery of any Spare designated as POA by Spirit.  Such effort includes but is not limited to working twenty-four (24) hours a day, seven days a week and use of premium transportation.  Seller shall specify the delivery date of any such POA within two (2) hours of a POA request.   F.   IN-PRODUCTION SPARE - means any Spare which is in the current engineering configuration for the Product and is used on a model aircraft currently being manufactured by Spirit at the time of the Order.   G.   NON-PRODUCTION SPARE - means any Spare which is used on model aircraft no longer being manufactured by Aircraft Manufacturer (Post Production) or is in a non-current engineering configuration for the Product (Out of Production).   H.   BOEING PROPRIETARY SPARE - means any Spare, which is manufactured (i) by Boeing, or (ii) to Boeing's detailed designs with Boeing's authorization or (iii) in whole or in part using Boeing's Proprietary Materials.   13.1.1  Spares Support     The Demand Date initiative is Spirit’s means of providing Seller greater visibility of Customer requirements and expectations for Spares. Seller agrees to work with Spirit during the term of this SBP to identify and address those elements in the manufacturing or support processes which are critical to supporting the Demand Date initiative. Where possible, the parties will work to improve those critical elements.   Seller shall provide Spirit with a written Spares support plan describing Seller's process for supporting AOG commitments and manufacturing support. The plan must provide Spirit with the name and number of a twenty-four (24) hour contact for coordination of AOG requirements. Such contact shall be equivalent to the coverage provided by Spirit to its Customers as outlined in SBP Attachment 4 "Spirit AOG Coverage".   Seller shall notify Spirit as soon as possible via fax, telecon, or as otherwise agreed to by the Parties of each AOG requirement shipment using the form identified in SBP Attachment 5 "Spirit AOG Shipping Notification". Such notification shall include time and date shipped, quantity shipped, Order, pack slip, method of transportation and air bill if applicable. Seller shall also notify Boeing immediately upon the discovery of any delays in shipment of any requirement and identify the earliest revised shipment possible.   13.1.2 Reserved   13.1.3  Spare Pricing     *.     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   35 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   *.   During the term of this SBP, Spirit reserves the right to evaluate and determine if Seller's component part pricing (CPP) is market based. In the event Spirit, after consultation with Seller, determines Seller's CPP is not commensurate with market conditions, Spirit reserves the right to limit Spirit’s obligation to purchase the applicable part(s) from Seller under SBP Section 10.0. Spirit will, upon determination that Seller’s CPP is not market based, remove such Product from Attachment 1 and add it to Attachment 1A. For those items listed in Attachment 1A, Spirit reserves the right to purchase the items from Seller at the price set forth in Attachment 1A or from a third party as determined by Spirit.   13.1.4  Spares Special Handling     The price for all effort associated with the handling of Spare(s) is deemed to be included in the price for such Spare(s). If Spirit directs delivery of Spares to a place other than that designated in SBP Section 3.2.1, Spirit shall reimburse Seller for shipping charges, including insurance, paid by Seller to the designated place of delivery which exceed the original cost of shipping contemplated in this SBP. Such charges shall be shown separately on all invoices.   13.2  Expedite of Production Requirements      Any expedite charges to be paid for short flow production requirements shall be pre-approved by the Procurement Agent. Seller shall provide data to verify expedite charges. If Seller fails to meet their committed delivery, Spirit shall not be obligated to pay the agreed upon amount.   13.3  Tooling     13.3.1  Responsible Party     * . Seller shall not use tools, which contain, convey, embody, or were made in accordance with or by reference to any Proprietary Information and Materials of Spirit, to manufacture parts for anyone other than Spirit without the prior written authorization of Spirit.   *. In addition to the requirements set forth in SBP Section 7.2, the Seller shall comply with the applicable Terms and Conditions as set forth in SBP Section 2.3 for the Spirit location issuing the Order. *. Invoices shall be dated concurrent with, or subsequent to, shipment of the Products. No repair, replacement, maintenance or rework of such Tooling shall be     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   36 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   performed without Spirit’s prior written consent. Spirit shall notify Seller of any action required for discrepant Tooling.   13.3.2  Spirit Furnished Tooling     In the event Spirit furnishes Tooling to Seller, Seller shall comply with the applicable Terms and Conditions as set forth in SBP Section 2.3 for the Spirit location furnishing the Tooling. No repair, replacement, maintenance or rework of such Tooling shall be performed without Spirit’s prior written consent. Spirit shall notify Seller of any action required for discrepant Tooling.   13.3.3 Additional Tooling Requirement   Upon expiration, termination or cancellation of this SBP or any Product included herein and for up to one year thereafter, Seller shall at no cost to Spirit, prepare and package for shipment any and all Tooling in the possession or under the effective control of Seller or any of its Subcontractors or suppliers associated with this SBP or the applicable Product within 30 days of receipt of written notice from Spirit. Included as part of this preparation would be the transfer of title, where applicable, of such Tooling free and clear of all liens, claims or other rights of Seller or any third party.   Seller hereby authorizes Spirit or its representatives to enter upon its, or any of Seller's Subcontractors or suppliers, premises at any time during regular business hours upon one (1) day's advance written notice, for the limited purpose of taking physical possession of any or all of the aforesaid items. At the request of Spirit, Seller shall promptly provide to Spirit a detailed list of such items, including the location thereof, and shall catalog, crate, package, mark and ship such items expeditiously and in an orderly manner and otherwise in the manner requested by Spirit, which request may specify incremental or priority shipping of certain items. Seller shall, if instructed by Spirit, store or dispose of any or all of the aforesaid items in any reasonable manner requested by Spirit.   13.3.3.1 Title to Tooling     Except as provided in GTA Section 12.2, and GTA Section 13.0, Seller shall retain, and shall cause each of its subcontractors to retain, legal title to all Contractor-Use Tooling, Common-Use Tooling and Spirit-Use Tooling manufactured or procured by Seller or any of its subcontractors, as the case may be, until Seller shall have received full payment of the Nonrecurring Shipset Price therefore as provided in SBP Attachment 1 and SBP Section 7.0. Notwithstanding the foregoing, Seller shall retain, and shall cause each of its subcontractors to retain, title to such Tooling following receipt of such payment until such time as Spirit shall request the transfer of such title to Spirit.   13.3.3.2 Use and Disposition of Tooling     Seller shall use any and all Tooling only for the purpose of performing its obligations under this SBP, and shall not sell, lease or otherwise dispose of any Tooling. Seller shall obtain     37 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   and maintain in effect insurance in respect of all Contractor-Use Tooling and Common-Use Tooling (other than such Tooling, which is in the actual possession of Spirit,) in accordance with SBP Section 45.0. Seller shall not create or allow to exist in respect of any Tooling any lien, claim or right of any person or entity other than the rights of Spirit under this SBP.       38 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     13.3.3.3 Accountability for Tooling     Seller shall control and account for all Tooling. in accordance with the provisions of Boeing Document D33200, "Boeing Suppliers' Tooling Manual," and Boeing Document D953W001, “General Operations Requirements Document for Suppliers External/Internal Suppliers/Program Partners." This requirement shall apply to Spirit-Use Tooling until delivery thereof to Spirit, and to Contractor-Use Tooling and Common-Use Tooling at all times prior to the removal thereof by Spirit or delivery to Spirit or Spirit’s designee pursuant to GTA Section 12.2. Seller shall identify all new, reworked and re-identified Tooling with an identification tag containing the Boeing Lifetime Serial Number of each Tool. Boeing Lifetime Serial Numbers shall be provided to Seller by Spirit.   13.3.3.4 Certified Tool Lists     Seller shall prepare a list or lists ("Certified Tool List") containing the Tool number, the Boeing Lifetime Serial Number for each Tool and such other information as Spirit shall request. Seller shall prepare a separate Certified Tool List for (i) Contractor-Use Tools, (ii) Common-Use Tools, (iii) Spirit-Use Tools, and (iv) Casting/Extrusion Tools. Seller shall promptly submit each initial Certified Tool List to Spirit. Seller shall subsequently submit from time to time as specified by Spirit new Certified Tool Lists to supplement the information contained in the initial Certified Tool Lists.   13.4  Pricing of Spirit’s Supporting Requirements     Any Products required to assist Spirit’s supporting requirements, including but not limited to requirements test requirements, factory support, flight test spares will be provided for not more than the applicable price as set forth in SBP Attachment 1.   13.5  Pricing of Requirements for Modification or Retrofit     13.5.1  Spirit Responsibility or Regulatory Requirement     Any Products required by Spirit to support a modification or retrofit program which results from a regulatory requirement or which Spirit may be liable for the cost associated with such program shall be provided to Spirit at a price not more than the applicable price as set forth in SBP Attachment 1.   13.5.2 Contract Aftermarket Modification or Retrofit Work Performed by Spirit     Any Products required by Spirit to support modification or retrofit programs, which Spirit performs under contract, shall be provided for not more than the applicable price as set forth in SBP Attachment 1.     39 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   13.6  Pricing of Similar Products     New Products ordered by Spirit that are similar to or within Product families of Products currently being manufactured by Seller shall be priced using the same methodology or basis as that used to price the existing Product(s).     40 Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     14.0               STATUS REPORTS/REVIEWS   14.1  General Reports / Reviews   When requested by Spirit, Seller shall update and submit, as a minimum, monthly status reports or data requested by Spirit using a method mutually agreed upon by Spirit and Seller. Spirit has the right to impose more frequent reporting on Seller to achieve program objectives.   When requested by Spirit, Seller shall provide to Spirit a manufacturing milestone chart identifying the major purchasing, planning and manufacturing operations for the applicable Product(s).   Program reviews will be held at Seller’s facility or Spirit’s facilities as requested by Spirit. The topics of these reviews may include raw material and component part status, manufacturing status, production status, Seller’s current and future capacity assessments, Spirit supplied components, inventory, Spirit’s requirements, changes, forecasts and other issues pertinent to Seller’s performance under this SBP. Reviews will allow formal presentations and discussion of status reports as set forth above.   Formal management reviews shall be held periodically by Spirit and Seller to evaluate total cost performance (including overhead, man-hours (production and support)). During these reviews, Seller shall present and provide actual cost performance data with respect to this SBP.   14.2  Diversity Reporting   Seller shall report to Spirit on a quarterly basis, starting from the date of this SBP award, all payments to small businesses, small disadvantaged business/minority business enterprises, women-owned small business and historically black colleges and universities and minority institutions in dollars and as a percentage of the contract price paid to Seller to date, proving the information shown on the Second Tier Report located in SBP Attachment 11.   14.3                Program Manager   When requested by Spirit Seller will assign a full-time program manager whose exclusive responsibility will be to oversee and manage Seller's performance hereunder. The assignment of such program manager will be subject to Spirit’s prior approval of such Person's resume.     41  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   14.4  Certified Tool List     If applicable, Seller shall provide a Certified Tool List for all accountable tools thirty (30) days after delivery of the first production unit to Spirit, in accordance with SBP Section 2.3. Subsequent to submittal of the initial Certified Tool List, Seller shall provide Certified Tool Lists for any new, reworked or re-identified tools, thirty (30) days after completion of the first affected production part. All tooling manufactured and acquired by Seller for use in performance of the Program shall be in accordance with all tooling requirements specified in SBP Section 2.3.   14.5  Problem Reports     Seller shall provide a detailed report, notifying Spirit of program problems/issues that could impact Seller’s ability to deliver Products on time and otherwise in conformance with the terms of the GTA and SBP. The report shall contain a detailed description of the problem, impact on the program or affected tasks, and corrective/remedial action, with a recovery schedule. Submittal of a report in no way relieves Seller of any obligations under the GTA and SBP nor does it constitute a waiver of any rights and remedies Spirit may have with respect to any default.   Problem reports shall be submitted to the Spirit Procurement Representative within twenty-four (24) hours of known problem to Seller. Where problems arise prior to a normal status reporting date, Seller shall report said events immediately or within 24 hours. Status reports shall include, but are not limited to, the following topics:   A.   Delivery schedule updates, schedule impact issues and corrective action;   B.   Technical/manufacturing progress since the previous report period, including significant accomplishments, breakthroughs, problems and solutions;   C.   Identification of changes to key manpower or staffing levels;   D.   Identification of the critical events/activities expected within the next month and a discussion of potential risk factors;   E.   Progress on open Action Items, including closure dates;   F.   Purchased components and raw material status;   G.   Identification of Quality issues and resolutions;   H.   Manufacturing and Quality inspection progress of First Article products;   I.   Status on tool design and fabrication, as applicable, until completion;     42  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   J.   Inventory status of castings and forgings procured by Seller (if applicable).   14.6  Reserved     15.0 INTERNATIONAL COOPERATION      15.1  Market Access and Sales Support     Seller agrees to work with Spirit to develop a contracting strategy, which supports Spirit’s market access, and international business strategy. Spirit and Seller agree to work together to identify countries where Seller may subcontract in support of Spirit’s market access and international business strategy. With respect to work covered by this SBP, and if directed by Spirit, Seller agrees to procure from subcontractors or suppliers, in countries selected by Spirit, goods and services with a value to be determined by Spirit after coordination with Seller. Such direction may occur at any time during the performance of this SBP. Although not required to do so, Seller may satisfy such obligation through purchases not related to this SBP. If Seller is directed by Spirit to subcontract any part of its Product(s) and Seller anticipates an increase or decrease to the price for such Product(s) as a result of such direction, Seller shall immediately notify Spirit in writing. Spirit shall respond within thirty (30) days on whether Seller is to proceed.   15.2  Offset Assistance     Seller shall use its best reasonable efforts to cooperate with Spirit in the fulfillment of any non-United States offset program obligation that Spirit may have accepted as a condition of the sale of a Spirit product. In the event that Seller is either directed by Spirit, or on its own solicits bids and/or proposals for, or procures or offers to procure any goods or services relating to the work covered by this SBP from any source outside of the United States, Spirit shall be entitled, to the exclusion of all others, to all industrial benefits and other "offset" credits which may result from such solicitations, procurements or offers to procure. Seller shall take any actions that may be required on its part to assure that Spirit receives such credits. . Seller shall document on SBP Attachment 2 all offers to contract and executed contracts with such subcontractors or suppliers including the dollars contracted. Seller shall provide to Spirit an updated copy of SBP Attachment 2 for the six-month periods ending June 30 and December 31 of each year. The reports shall be submitted on the 1st of August and the 1st of February respectively. If Seller is directed by Spirit to subcontract any part of its Product(s) to a country in which Spirit has an offset obligation, an equitable price adjustment, increase or decrease, for Seller's costs and expenses will be considered by Spirit.     43  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   15.3  Reserved     16.0  Spirit FURNISHED MATERIAL/SUPPLIER BANKED MATERIAL     Material, including but not limited to raw material, standards, detail components and assemblies, furnished to Seller by Spirit shall be administered in accordance with a Bonded Stores Agreement between Spirit and Seller.   Seller shall provide Spirit with required on-dock dates for all material. Seller's notice shall provide Spirit with sufficient time to competitively acquire the material if, in its sole and absolute discretion, it desires to do so.   17.0  PARTICIPATION     17.1  Other Spirit Entities     Seller agrees that any Spirit division or Spirit subsidiary ("Spirit Entity") not specifically included in this SBP may, by issuing a purchase order, work order, or other release document, place orders under this SBP during the term hereof or any written extension thereof, under the terms, conditions and pricing specified by this SBP. Seller agrees that the prices set forth herein may be disclosed by Spirit on a confidential basis to Spirit entities wishing to invoke this SBP Section 17.1. Seller shall notify the Spirit Procurement Representative named in SBP Section 9.0 of Spirit Entities not specifically referenced herein who frequently use this SBP.   17.2  Spirit Subcontractors/Suppliers     Seller agrees that any subcontractor or supplier (hereinafter referred to as “Spirit Subcontractor”) performing work for a Spirit Entity, including but not limited to inventory management, may issue an order or contract with Seller independent of this SBP. Seller agrees to sell Products or support a schedule and or a quantity change to such Spirit Subcontractor for its use in its contracts with Spirit at the prices set forth herein or at a price that reflects the pricing methodology used under this SBP. Spirit assumes no obligation, including payment obligation, with respect to such independent contract. Seller agrees that the prices set forth herein may be disclosed by Spirit on a confidential basis to any Spirit Subcontractor wishing to invoke this SBP Section 17.2. Seller may request written verification from the Spirit Subcontractor that the Products ordered pursuant to the authority of this SBP support Spirit requirements. Seller shall periodically inform the Spirit Procurement Representative of each such request invoking this participation right.     44  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     17.3  Notification of Contract     In the event a purchaser known by Seller to be a Spirit Entity or Spirit Subcontractor places an order for supplies or services covered by this SBP but fails to reference this SBP or otherwise seek the prices established by this SBP, Seller shall notify such purchaser of the existence of this SBP and the prices established hereunder and shall offer such prices to such purchaser.   17.4  Notification of Price Reductions     If Seller is awarded an additional order or contract by another Spirit Entity that results in any price less than that established under this SBP, Seller agrees to notify the Spirit Procurement Representative immediately of said price reductions and shall extend all such price reductions to this SBP.   18.0  INVENTORY AT CONTRACT COMPLETION     Subsequent to Seller's last delivery of Product(s), Products which contain, convey, embody or were manufactured in accordance with or by reference to Spirit’s Proprietary Materials including but not limited to finished goods, work-in-process and detail components (hereafter "Inventory") which are in excess of Order quantity shall be made available to Spirit for purchase. In the event Spirit, in its sole discretion, elects not to purchase the Inventory, Seller may scrap the Inventory. Prior to scrapping the Inventory, Seller shall mutilate or render it unusable. Seller shall maintain, pursuant to their quality assurance system, records certifying destruction of the applicable Inventory. Said certification shall state the method and date of mutilation and destruction of the subject Inventory. Spirit or applicable regulatory agencies shall have the right to review and inspect these records at any time it deems necessary. In the event Seller elects to maintain the Inventory, Seller shall maintain accountability for the inventory and Seller shall not sell or provide the Inventory to any third party without prior specific written authorization from Spirit. Failure to comply with these requirements shall be a material breach and grounds for default pursuant to GTA Section 13.0. Nothing in this SBP Section 18.0 prohibits Seller from making legal sales directly to the United States of America Government.   19.0  OWNERSHIP OF INTELLECTUAL PROPERTY     19.1  Technical Work Product     All technical work product, including, but not limited to, ideas, information, data, documents, drawings, software, software documentation, software tools, designs, specifications, and processes produced by or for Seller, either alone or with others, in the course of or as a result of any work performed by or for Seller which is covered by this SBP will be the exclusive property of Spirit and be delivered to Spirit promptly upon request.     45   Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     19.2  Inventions and Patents     All inventions conceived, developed, or first reduced to practice by or for Seller, either alone or with others, in the course of or as a result of any work performed by or for Seller, which is covered by this SBP, and any patents based upon such inventions (both domestic and foreign), will be the exclusive property of Spirit. Seller will (i) promptly disclose all such inventions to Spirit in written detail and (ii) execute all papers, cooperate with Spirit, and perform all acts necessary or appropriate in connection with the filing, prosecution, maintenance, or assignment of related patents or patent applications on behalf of Spirit.     19.4  Pre-Existing Inventions and Works of Authorship     Seller grants to Spirit, and to Spirit’s subcontractors, suppliers, and customers in connection with Products or work being performed for Spirit, an irrevocably, nonexclusive, paid-up, worldwide license under any patents, copyrights, industrial designs and mask works (whether domestic or foreign) owned or controlled by Seller at any time and existing prior to or during the term of this SBP, but only to the extent that such patents or copyrights would otherwise interfere with Spirit or Spirit’s subcontractors', suppliers', or customers' use or enjoyment of Products or the work product, inventions, or works of authorship belonging to Spirit under this SBP.     19.5  Inapplicability     In the event of any inconsistency between this SBP Section 19.0 and any United States Government contract clause incorporated by reference into this SBP or any Order issued under this SBP, the incorporated clause shall govern to the extent that the end user of the Products is the United States Government.     20.0  RESERVED   21.0  GUARANTEED WEIGHT REQUIREMENTS   NOT APPLICABLE   22.0  SELLER DATA REQUIREMENTS   NOT APPLICABLE     46  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   23.0  RESERVED     24.0  RESERVED      25.0  RESERVED     26.0  INFRINGEMENT     Seller will indemnify, defend, and hold harmless Spirit and its Customers from all claims, suits, actions, awards (including, but not limited to, awards based on intentional infringement of patents known at the time of such infringement, exceeding actual damages, and/or including attorneys' fees and/or costs), liabilities, damages, costs and attorneys' fees related to the actual or alleged infringement of any United States or foreign intellectual property right (including, but not limited to, any right in a patent, copyright, industrial design or semiconductor mask work, or based on misappropriation or wrongful use of information or documents) and arising out of the manufacture, sale or use of Products by either Spirit or its Customers. Spirit and/or its Customers will duly notify Seller of any such claim, suit or action; and Seller will, at its own expense, fully defend such claim, suit or action on behalf of Spirit and/or its Customers. Seller shall have no obligation under this SBP Section 26.0 with regard to any infringement arising from: (i) Seller's compliance with formal specifications issued by Spirit where infringement could not be avoided in complying with such specifications or (ii) use or sale of Products for other than their intended application. For purposes of this SBP Section 26.0 only, the term Customer shall not include the United States Government; and the term Spirit shall include Spirit AeroSystems, Inc. and all Spirit entities and all officers, agents, and employees of Spirit or any Spirit entity.   27.0  RAW MATERIAL PROGRAM     27.1  Boeing Raw Material Strategy     During the term of this SBP, Seller shall procure from Boeing (or its designated service provider who will act on behalf of Boeing) all raw material of the commodity type specified on the SBP Attachment entitled "Commodity Listing and Terms of Sale" (SBP Attachment 8) necessary to support any Order issued pursuant to this SBP. From time to time, Spirit may amend the SBP Attachment entitled "Commodity Listing and Terms of Sale" by adding or deleting commodity types. Any such amendment, or revisions to the raw material pricing, shall be subject to adjustment under GTA Section 10.1 (Changes), provided that Seller shall take no action to terminate its existing supply agreements when such termination would result in an assertion for an adjustment until the Seller has received approval from Spirit. The provision of any raw material by Boeing to Seller shall be according to Boeing's standard terms of sale, the text of which is included in the SBP Attachment entitled "Commodity Listing and Terms of Sale". Spirit shall advise Seller of any designated service provider to be used at the time the Order is issued. Upon request by Spirit, Seller must provide to Spirit documentation (e.g., packing slips, invoices) showing Seller's full compliance with the obligations under this SBP Section. If requested by Spirit or its     47  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   designated service provider, Seller will provide an annual forecast of demand for the applicable commodity.   27.2  Reserved     28.0  DIGITIZATION OF PROPRIETARY INFORMATION AND MATERIALS     Seller grants, to Spirit a license under Seller’s copyrights for the purpose of converting Seller’s Proprietary Informations and Materials to a digital format (“Digital Materials”) and make such Digital Materials available to its employees for company internal use through a computer data base system. Except as otherwise specifically agreed to in writing by the parties, said license set forth hereunder shall survive termination or cancellation of this SBP relative to Digital Materials included in Spirit’s computer data base system prior to receipt of such notice of termination or cancellation.   29.0   ON-SITE SUPPORT     NOT APPLICABLE   29.1  Indemnification Negligence of Seller or subcontractor     Seller shall indemnify and hold harmless Spirit AeroSystems, Inc., its subsidiaries, and their directors, officers, employees, and agents from and against all actions, causes of action, liabilities, claims, suits, judgments, liens, awards, and damages, of any kind and nature whatsoever for property damage, personal injury, or death (including without limitation injury to or death of employees of Seller or any subcontractor thereof) and expenses, costs of litigation and counsel fees related thereto or incident to establishing the right to indemnification, arising out of or in any way related to the Contract, the performance thereof by Seller or any subcontractor thereof or other third parties, including without limitation the provision of services, personnel, facilities, equipment, support, supervision, or review. The foregoing indemnity shall apply only to the extent of the negligence of Seller, any subcontractor thereof, or their respective employees. In no event shall Seller’s obligations hereunder be limited to the extent of any insurance available to or provided by the Seller or any subcontractor thereof. Seller expressly waives any immunity under industrial insurance, whether arising out of statute or source, to the extent of the indemnity set forth in this paragraph.   29.2  Commercial General Liability     If Seller or any subcontractor thereof will be performing work on Spirit premises, Seller shall carry and maintain, and ensure that all subcontractors or suppliers thereof carry and maintain, throughout the period when work is performed and until final acceptance by Spirit, Commercial General Liability insurance with available limits of not less than One Million Dollars ($l,000,000) per occurrence for bodily injury and property damage combined.       48  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   29.3  Automobile Liability     If licensed vehicles will be used in connection with the performance of the work, Seller shall carry and maintain, and ensure that any subcontractor thereof who uses a licensed vehicle in connection with the performance of the work carries and maintains, throughout the period when work is performed and until final acceptance by Spirit, Business Automobile Liability insurance covering all vehicles, whether owned, hired, rented, borrowed, or otherwise, with available limits of not less than One Million Dollars ($1,000,000) per occurrence combined single limit for bodily injury and property damage.   29.4  Workers’ Compensation     Throughout the period when work is performed and until final acceptance by Spirit, Seller shall, and ensure that any subcontractor thereof shall, cover or maintain insurance in accordance with the applicable laws relating to Workers’ Compensation with respect to all of their respective employees working on or about Spirit premises. If Spirit is required by any applicable law to pay any Workers’ Compensation premiums with respect to an employee of Seller or any subcontractor, Seller shall reimburse Spirit for such payment.   29.5  Certificates of Insurance     Prior to commencement of the work Seller shall provide for Spirit review and approval Certificates of Insurance reflecting full compliance with the requirements set forth in SBP Section 29.2 “Commercial General Liability”, SBP Section 29.3 “Automobile Liability” and, SBP Section 29.3 “Workers’ Compensation”. Such certificates shall be kept current and in compliance throughout the period when work is being performed and until final acceptance by Spirit, and shall provide for thirty (30) days advance written notice to Spirit in the event of cancellation. Failure of Seller or any subcontractor thereof to furnish Certificates of Insurance, or to procure and maintain the insurance required herein or failure of Spirit to request such certificates, endorsements or other proof of coverage shall not constitute a waiver of the respective Seller’s or subcontractor’s obligations hereunder.   29.6  Self-Assumption     Any self-insured retention, deductibles, and exclusions in coverage in the policies required under this Section 29.0 shall be assumed by, for the account of, and at the sole risk of Seller or the subcontractor, which provides the insurance, and to the extent applicable shall be paid by such Seller or subcontractor. In no event shall the liability of Seller or any subcontractor thereof be limited to the extent of any of the minimum limits of insurance required herein.   29.7  Protection of Property     Seller assumes, and shall ensure that all subcontractors or suppliers thereof and their respective employees assume, the risk of loss or destruction of or damage to any property      49  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   of such parties whether owned, hired, rented, borrowed, or otherwise. Seller waives, and shall ensure that any subcontractor thereof and their respective employees waive, all rights of recovery against Spirit, its subsidiaries, and their respective directors, officers, employees, and agents for any such loss or destruction of or damage to any property of Seller, any subcontractor, or their respective employees.   At all times Seller shall, and ensure that any subcontractor thereof shall, use suitable precautions to prevent damage to Spirit property. If any such property is damaged by the fault or negligence of Seller or any subcontractor thereof, Seller shall, at no cost to Spirit, promptly and equitably reimburse Spirit for such damage, or repair or otherwise make good such property to Spirit’s satisfaction. If Seller fails to do so, Spirit may do so and recover from Seller the cost thereof.   29.8  Compliance with Spirit Site Requirements     In the event the Seller or Seller’s Subcontractor(s) performs any aspect of an applicable GTA, SBP or Order on property owned, operated, leased, or controlled by Spirit (hereinafter “On-Site Work”), Seller agrees to comply with the supplemental terms and conditions set forth in Attachment 13 “On-Site Terms and Conditions Supplement”.   30.0 Spirit TECHNICAL / MANUFACTURING ASSISTANCE REGARDING SELLER’S NONPERFORMANCE     Seller shall reimburse Spirit for all Spirit resources expended in providing Seller and/or Seller’s subcontractors or supplier’s technical or manufacturing assistance in resolving Seller nonperformance issues at the established Spirit internal wage rate, which shall include fringe benefits, multiplied by the estimated hours recorded by Spirit, plus the estimated Material costs associated with providing such assistance. In addition, Seller shall, at Spirit’s request, pay for normal and customary expenses relating to salaries, living expenses, travel and any other reasonable expenses related to the provision of technical services. Such reimbursement may be offset against any pending Seller invoice, regardless of Spirit model or program. Spirit’s rights under this clause are in addition to those available to Spirit for Seller’s nonperformance issues, including those where a demand for an Adequate Assurance of Performance may be made under GTA Section 17.0.   31.0  U. S. CUSTOMS INVOICE REQUIREMENTS      NOT APPLICABLE   50  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     32.0  STRATEGIC ALIGNMENT     Spirit may assign this SBP or any Order, in whole or in part, to a third party who is under an obligation to supply Spirit with components, kits, assemblies or systems that require the Seller's Product. At the time of such assignment, Seller releases Spirit from any and all claims, demands and rights, which Seller has or may thereafter have against Spirit in connection with such assigned SBP or Order. Spirit will require that its assignee expressly assume all obligations and perform all duties owed to Seller under the assigned SBP or Order. Promptly after the assignment, Spirit will notify Seller of the assignment and its effective date.   33.0  CUSTOMS-TRADE PARTNERSHIP AGAINST TERRORISM (C-TPAT)     C-TPAT is an initiative between business and government to protect global commerce from terrorism and increase the efficiencies of global transportation. The program calls for importers, carriers and brokers to establish policies to enhance their own security practices and those of their business partners involved in their supply chain. Such practices may include but are not limited to the following:   Procedural Security -Procedures in place to protect against unmanifested material being introduced into the supply chain- Physical Security -Buildings constructed to resist intrusion, perimeter fences, locking devices, and adequate lighting; Access Controls -Positive identification of all employees, visitors and suppliers; Personnel Security -Employment screening, background checks and application verifications Education and Training Awareness -Security awareness training, incentives for participation in security controls   Seller agrees to work with Spirit and appropriate industry and governmental agencies, as necessary, to develop and implement policies and procedures consistent with the C-TPAT initiative to ensure the safe and secure transport of Products under this SBP.   34.0  ENVIRONMENTAL MANAGEMENT SYSTEMS AND HEALTH AND SAFETY MANAGEMENT SYSTEMS     Seller shall implement an environmental management system (“EMS”) and health and safety management system (“HSMS”) with respect to its performance under this SBP; and insert, in any of its subcontractor and supplier contracts for performance of Seller’s     51  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   obligations under this SBP, provisions substantially similar to this SBP Section 34.0 and GTA Section 21.1 (Compliance with Laws).   35.0  DELIVERY - TITLE AND RISK OF LOSS     35.1  Delivery Point and Schedule     Notwithstanding the provisions of GTA Section 4.1, deliveries of Recurring Products shall be strictly in accordance with the quantities, the schedule and other requirements specified in SBP Attachment 1. All Products shall be delivered for United States domestic deliveries F.O.B. Buyer’s dock; for non-United States origin, DDU (as such term is defined by the International Chamber of Commerce in Incoterms 2000), or as otherwise specified by Spirit.   35.2  Reserved     35.3               Reserved     35.4  Notification of Shipment     Seller shall notify the Spirit personnel identified by the Procurement Agent, by telephone, facsimile or e-mail when any shipment is made. Such notification will include (i) a list of the items and quantities of items shipped, (ii) the Shipset number with respect to any item shipped, (iii) the number and weight of containers shipped, (iv) the shipper or packing sheet number with respect to such shipment, and (v) the date of such shipment. Seller shall e-mail, express or facsimile copies of shipping manifests for Common-Use Tools to Spirit. Such manifests shall identify Common-Use Tool codes and part numbers, unit numbers of Common-Use Tools and the airplane effectivity of the Production Article contained in such Common-Use Tools.   35.4.1  Title and Risk of Loss     Title to and risk of any loss of, or damage to, all Products (except for Common-Use Tooling) shall pass from Seller to Spirit upon delivery as set forth in this SBP Section 35.0 (delivery point), except for loss or damage resulting from Seller's fault or negligence or failure to comply with the terms of this SBP. Passing of title on delivery shall not constitute final acceptance of such Products by Spirit.     35.5  Notice of Delay - Premium Effort     Seller shall notify Spirit by e-mail, telephone or facsimile immediately of any circumstances, including, but not limited to, labor disputes, that may cause a delay in delivery by Seller or any of its subcontractors. Such notification shall state the estimated period of such delay and the actions being taken by Seller to prevent or recover from such delay. Seller also shall require each of its subcontractors under this Contract to provide such notification to     52  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   Seller concerning any such delay in the delivery of any subcontracted goods or services to Seller. At Spirit’s direction, Seller shall use additional effort, including premium effort, and shall ship via air or other expedited routing in order to avoid or minimize delay to the maximum extent possible. All additional costs resulting from such premium effort and/or premium transportation shall be paid by Seller. Additional costs include, but are not limited to all costs and expenses incurred by Spirit as a result of production line disruption attributable to Seller’s delayed delivery. Spirit’s rights under this SBP Section 33.5 are not exclusive, and any other rights provided in this Contract or by law are reserved. Disruption costs and expenses shall be an amount equal to the portion of resultant planned installation time allocated for out-of-sequence work multiplied by Spirit’s then-current rate for labor. These provisions shall also apply to incomplete work shipped to Spirit for completion (traveled work).   36.0  PACKAGING AND SHIPPING     Notwithstanding the provisions of GTA Section 7.0, the following SBP Sections shall address all packaging and shipping matters. see GTA 7.0 for all this §36.   36.1  Product Packaging     Except as expressly provided otherwise herein, all Products shall be prepared (cleaned, preserved, etc.) and packed for shipment in a manner acceptable to Spirit pursuant to Document D37520-1, -1A, & -1B, "Supplier’s Part Protection Guide," to (i) comply with carrier regulations and (ii) prevent damage or deterioration during handling, shipment and outdoor storage at destination for up to ninety (90) days. Packaging design shall be suitable for, and consistent with, the requirements and limitations of the transportation mode specified by Spirit. Spirit specifically reserves the right, at Spirit’s discretion; to direct air shipment from the delivery point specified in SBP Section 3.2.1 and Seller shall maintain a capability (where reasonably practicable) for meeting this requirement. Seller shall submit two (2) copies of its proposed preparation procedure and packaging design to Spirit for approval prior to the first Product delivery, and shall prepare and package each Product in accordance with the procedure and design approved by Spirit. Notwithstanding any Spirit approval of Seller's packaging design, Seller shall be solely liable for the manufacture of such packaging. Any package (or unitized group of packages) weighing in excess of forty-five (45) kilograms or otherwise not suited to manual handling shall be provided with skids to permit use of mechanical handling equipment.   36.2  Consolidated Shipments and Markings     All shipments of Products (excluding Purchase on Assembly ("POA"), Aircraft on Ground ("AOG") and Customer Spare Parts), which are forwarded on one day via one routing, shall be consolidated in accordance with Spirit’s instructions. POA, AOG and Customer Spare Parts shall be packaged separately. Each container shall be consecutively numbered and marked with the relevant Order number and the part number of each enclosed Product. Container and Order numbers shall be indicated on the appropriate bill of lading. Each unit       53  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   container (individual part box or other innermost package), each intermediate container and each shipping container (shipping box, crate or other outermost package) in each shipment shall be marked in English in accordance with Spirit’s written instructions.   36.3  Freight Charges     Seller shall deliver all Products F.O.B. Buyers dock or DDU Buyer’s dock. Any additional declared values required for freight shipments shall be as provided by Spirit.   36.4  Packing Sheet and Test Reports     The No. 1 shipping container in each shipment shall contain one (1) copy in English of (i) a packing sheet listing the contents of the entire shipment in accordance with Spirit’s written instructions and (ii) any test reports required by the specifications applicable to the Products being shipped.    36.5  Additional Copies     Additional copies of packing sheets, test reports and [customs invoices] shall be furnished to Spirit in accordance with Spirit’s written instructions.   36.6  Price Inclusive     Unless otherwise specified in this SBP, the Prices for Products stated in this SBP include the cost with respect to such Products of preparation, packaging, crating, shipping fixtures and containers, container marking, furnishing of packing sheets and test reports and loading on the carrier's equipment, in accordance with this SBP Section 36.0.   37.0  ADDITIONAL QUALITY ASSURANCE REQUIREMENTS      37.1  Federal Aviation Administration Inspection     Upon receipt of notice from the FAA or appropriate equivalent non-U.S. agency or Spirit that a conformity inspection shall be required with respect to any first Production Article or any other Production Article following a change in the configuration thereof, Seller shall coordinate with regional FAA or appropriate equivalent non-U.S. agency personnel to develop and implement a plan to bring such Production Article into compliance with FAA requirements prior to the delivery thereof in accordance with SBP Attachment 10.   37.2  Repair Authorization     37.2.1  Spirit-Performed Work     In the event that any Product is rejected by Spirit pursuant to GTA Section 8.3, Seller hereby grants to Spirit the right, without prior authorization from Seller, to repair or rework such Product, or to have such Product repaired or reworked by a third party. Such repair or     54  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   rework by Spirit or such third party shall be deemed not to be inconsistent with Seller's ownership of such Product. see §8.3   All costs and expenses of Spirit relating to such repair or rework shall be paid by Seller. Such costs and expenses shall be an amount equal to Spirit’s estimated rework hours multiplied by Spirit’s then-current rate for labor and materials or the amount charged Spirit by any third party for performing such repair or rework. Disruption costs and expenses shall be an amount equal to the portion of resultant planned installation time allocated for out-of-sequence work multiplied by Spirit’s then-current rate for labor. These provisions shall also apply to incomplete work shipped to Spirit for completion (traveled work).   37.2.2  Reimbursement for Repairs     Spirit will advise Seller quarterly, commencing no earlier than 90 days after first delivery, of costs and expenses incurred in the previous quarter for repair of Products pursuant to this SBP Section 37.0. Seller shall notify Spirit within thirty (30) days after receipt of such advice of any significant errors detected by Seller in Spirit’s estimate of costs and expenses. Spirit and Seller shall promptly resolve such errors. Seller’s failure to so notify Spirit shall be deemed to be an acceptance of Spirit’s estimate of costs and expenses. Spirit shall be entitled to either (a) set off the amount of such costs and expenses against any amounts payable to Seller hereunder or (b) invoice Seller for the amount of such costs and expenses, and Seller shall pay the invoiced amount promptly upon receipt of such invoice.   38.0  CHANGES     Notwithstanding the provisions of GTA Section 10.1, at any time, Spirit may, by written direction to Seller, make changes within the general scope of this SBP in: (i) Drawings, designs, specifications, Datasets or any other Document; (ii) Tooling (including, without limitation, the quantities thereof), Services or Spare Parts to be provided by Seller under this SBP; (iii) the method of shipping or packing; (iv) the place of delivery for all Products; (v) Program schedules, delivery rates and schedules for performance of Services; (vi) Program Airplane and Derivative models and Customer variables; (vii) Spirit-Furnished Property, and (viii) the allocation of responsibility as between Seller and Spirit for production of any component of any Product or the provision of any Service. Seller shall immediately comply with such written direction upon receipt, irrespective of any failure by the Parties to agree that such change shall be subject to Price adjustment in accordance with SBP Section 12.0 “Change Provisions” and SBP Section 13.0 “Spares and Other Pricing”.   If Seller reasonably expects that any Document or any revision to any Document shall significantly affect Seller's performance of any work hereunder, Seller shall, without affecting its obligation to comply in accordance with SBP Section 2.3 with any such Document as revised, so notify Spirit within ten (10) days of Seller's receipt of such Document or revision.     55  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     39.0  EXAMINATION OF RECORDS     39.1  Reports     Periodically, upon Spirit’s written request, and at no additional cost to Spirit, Seller shall prepare and submit to Spirit reports on the information contained in the records maintained by Seller and subject to Spirit audit pursuant to GTA Section 9.0. Such reports will set forth in detail costs and expenses by account category, month, work order and quantity. Seller will provide any explanations of any such report as reasonably requested by Spirit.   40.0  EVENTS OF DEFAULT AND REMEDIES     40.1  Additional Event of Default      In addition to those events of Default specified in GTA Section 13.1, the occurrence of the following event shall also constitute an Event of Default for purposes of GTA Section 13.1:   A.   Any Designated Event (as hereinafter defined) with respect to Seller. A Designated Event shall be deemed to have occurred at such time as a "person" or "group" (within the meaning of 14(d)(2) of the Securities Exchange Act of 1934) becomes the "Beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more than fifty percent (50%) of the then outstanding stock entitled to vote for the election of directors of Seller ("Voting Stock"). see GTA §28.3   40.2  Interest on Overdue Amounts      If Seller shall fail to pay when and as due any amount payable hereunder, such amount shall bear interest, payable on demand, at the per annum rate announced by Citibank, New York, New York, as its prime rate on the last working day of the month in which such amount becomes due.   41.0  CUSTOMER CONTACT     Spirit is responsible for all contact with Customers regarding the Program, Program Airplanes and Derivatives and any other Spirit programs. Seller shall not make any contact with actual or potential Customers on the subject of the Program, Program Airplanes or Derivatives without Spirit’s prior written consent; and Seller shall respond to any inquiry from actual or potential Customers regarding the Program, Program Airplanes or Derivatives by requesting that the inquiry be directed to Spirit. Seller shall, concurrently with such response, advise Spirit of such inquiry.   42.0  SUBCONTRACTING     Notwithstanding the provisions of GTA Section 28.1, Spirit may at any time during the performance of this SBP, review and approve Seller's make-or-buy plan and source     56  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   selection for Products, items and Tooling considered critical by Spirit because of process requirements or manufacturing complexity; provided that any subcontract by Seller for the procurement of goods or services in excess of $100,000 U.S. Dollars from any source outside of The United States shall be subject to Spirit’s prior written approval. Spirit’s approval shall not be unreasonably withheld. Seller shall in a timely manner submit to Spirit its proposed make-or-buy plan and proposed source selection before awarding any subcontract or purchase order with respect to any Products, items or Tooling. Spirit shall have the right to determine whether the proposed subcontractors are qualified to manufacture Products and Tooling in accordance with Spirit processes; provided, however, that Seller may accompany Spirit when Spirit is investigating the qualifications of proposed subcontractors. Approval or disapproval by Spirit of Seller's make-or-buy plan or source selection and any action taken by Spirit in connection with the qualification of subcontractors shall not be construed as relieving Seller of any of its obligations under this SBP.   43.0  SUPPLEMENTS AND MODIFICATIONS     Seller and Spirit acknowledge that this SBP does not, as of the date hereof, fully and finally determine all of the terms of the rights, obligations and liabilities of Seller and that, notwithstanding the absence of all of such terms, Seller and Spirit intend to make a contract hereby and intend to be bound by the terms hereof (including those yet to be determined). With respect to such terms which are not yet fully and finally determined, Spirit shall, from time to time from and after the execution and delivery of this SBP, specify such terms by notice given by Spirit to Seller pursuant to this SBP (including, without limitation, SBP Section 36.0), and all such terms shall be binding upon Seller. Such specification of terms shall be made by Spirit in its sole discretion, exercised in good faith and in a commercially reasonable manner. With respect to the commercial reasonableness of any such specific term, Seller acknowledges that the market for the sale of new commercial jet transport is extremely competitive and requires from manufacturers and suppliers the commitment of very substantial resources and may require the expenditure of substantial resources, and will likely require extraordinary effort. Accordingly, any specification of terms hereof by Spirit, as provided for above, shall not be deemed to be commercially unreasonable solely because such term requires Seller to expend substantial sums or to undertake extraordinary efforts to meet the Program requirements specified by Spirit. By way of example, and not as a limitation of the foregoing, Seller may be required in order to support Program requirements to increase its production rate to keep pace with Spirit’s development or production schedule for Program Airplanes and Derivatives as determined by Spirit from time to time with reference to actual and anticipated market demand for Program Airplanes and Derivatives. Without limiting the foregoing, nothing in this SBP Section 41.0 is intended by the Parties to affect the provisions of SBP Section 12.0 or SBP Section 36.0 of, or any other provisions contained in, this SBP Section 43.0, or the rights or obligations of either Party with respect to any adjustment or change to, or the payment of, Prices, whether or not arising from the further determination of the terms of this SBP or the expenditure of substantial sums or the undertaking of extraordinary efforts by Seller.     57  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     In the case of any subcontract for assigned Products that is identified in this SBP, Spirit shall be solely responsible for source selection placement of all follow-on requirements beyond the current contract. In addition, Seller shall not modify or extend any such subcontract without the prior written consent of Spirit.   44.0  INCREMENTAL RELEASE AND CYCLE TIME REQUIREMENTS     44.1  Incremental Release     Seller shall develop production plans and schedules for any new Production Articles based on SBP Attachment 19, as requested by Spirit. These production plans and schedules will include plans for the incremental purchase of material and the fabrication and assembly of specific numbers of Production Articles in accordance with pre-determined lead times ("Incremental Release Schedules"). Incremental Release Schedules for each Production Article shall be submitted to Spirit as part of Seller's proposal, and, after review and concurrence by Spirit, shall be incorporated into SBP Attachment 19. Any revision to any Incremental Release Schedule shall be reviewed by Spirit and, subject to Spirit’s concurrence with such revision; SBP Attachment 19 shall be revised accordingly. Seller shall purchase material, standards and purchased parts and authorize fabrication and assembly of Production Articles in accordance with Incremental Release Schedules.   44.2  Cycle Time Requirements     Spirit and Seller acknowledge that Spirit is committed to reduce Cycle Time. Seller agrees to support Spirit in its commitment and to take all necessary actions to support an initial Cycle Time for new Production Articles of not more than nine (9) months. If applicable, and within thirty (30) days after receipt of written request from Buyer, Seller shall submit to Spirit a written plan describing how Seller will comply with the Cycle Time schedules, as specified in SBP Attachment 19.   45.0  SURPLUS PRODUCTS     45.1  Return of Surplus Products     Spirit shall be entitled to return to Seller, at Spirit’s expense, any Product that has been delivered to Spirit in accordance with this SBP and that is surplus to Spirit’s then-current requirements (including, without limitation, any Products returned to Spirit by any Customer), provided that such Product is in a current production configuration or can be, in Spirit’s determination, economically changed to such a configuration. On receipt of any such Product, Seller shall credit Spirit’s account with eighty percent (80%) of the most recent catalog Price for such Product as set forth in SBP Attachment 16. If instructed by Spirit, Seller shall rework any returned Product to put such Product in a current configuration. Such rework shall be considered Miscellaneous Work and shall be priced in accordance with the provisions of SBP Attachment 16.     58  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   45.2  Use of Surplus Products     In its sole discretion, Spirit may, upon providing notice to Seller within 4 months to the scheduled delivery date for any Production Article, elect to use any Product in inventory or any Product returned to Spirit by any Customer in the place of such Production Article. Spirit’s notice shall include the cumulative line number of the Program Airplane or Derivative on which Spirit intends to incorporate such Product returned by such Customer. Seller shall not deliver such Production Article to Spirit and shall not invoice Spirit for the Price of such undelivered Production Article.   46.0  INTEGRATED / LIFE CYCLE PRODUCT TEAM     46.1  Purpose     As required, it is the objective of Spirit to utilize Integrated / Life Cycle Product Teams (IPT/LCPT). If applicable, Seller’s IPT/LCPT personnel located at Spirit’s facilities in accordance with this SBP will conduct their respective activities concurrently in a team environment to assist Spirit in improving producibility, reliability and maintainability of the Program Airplane. Notwithstanding Seller's participation in the IPT/LCPT, Spirit shall have the right to make any and all determinations with respect to the design of the Program Airplane and any Derivative.   46.2  Qualifications     Spirit shall have the right to review the qualifications of all personnel proposed by Seller for assignment to the IPT/LCPT. Seller shall forward professional resumes of such personnel to Spirit for review and approval by Spirit prior to assignment of such personnel.   46.3  Removal of Personnel     Upon receipt of a written request from Spirit for the replacement of any person assigned to the IPT/LCPT by Seller pursuant to this SBP Section 46.0, Seller shall remove such person from the IPT/LCPT. As soon thereafter as reasonably possible, Seller shall promptly furnish a satisfactory replacement.   46.4  Work Schedule     Except for sickness and other unavoidable absence, all personnel assigned to the IPT/LCPT by Seller pursuant to this SBP Section 46.0, shall be available during the customary work shift at the place designated by Spirit eight (8) working hours per day, Monday through Friday (except for identified Spirit holidays and such vacation periods as Spirit may reasonably permit) and shall work all overtime hours as Spirit may reasonably request.       59  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   46.5  Equipment and Supplies     All office equipment and office supplies necessary to accomplish assigned tasks will be provided to Contractor's IPT/LCPT personnel by Spirit. Spirit will not provide personal property (such as drafting equipment and calculators) necessary for the performance by Seller's IPT/LCPT personnel of their assigned tasks. Spirit shall not be responsible for loss or damage to such personal property.   46.6  Employment Status     Seller's IPT/LCPT personnel shall at all times remain employees of Seller and not employees of Spirit. Seller shall be responsible for all wages, salaries and other amounts due Seller's IPT/LCPT personnel and shall be responsible for all reports, requirements and obligations respecting them under local, state or federal laws of the United States, or the laws of any foreign country, including but not limited to social security, income tax, unemployment compensation, workers' compensation and any other local, state or federal taxes of the United States or the taxes of any foreign country.   46.7  Team Leader     Seller shall designate one of its IPT/LCPT personnel "Team Leader." Administrative matters between Spirit and Seller arising during the performance of this SBP shall be managed by the Team Leader. Timekeeping for Seller's IPT/LCPT personnel shall be the responsibility of the Team Leader and shall be approved by the appropriate Spirit engineering supervisor.   46.8  Discipline     Discipline of Seller's IPT/LCPT personnel shall be Seller's responsibility. While on Spirit premises, Seller's IPT/LCPT personnel shall obey all Spirit rules.   46.9  Insurance     Seller shall cover or insure all of Seller's IPT/LCPT personnel in compliance with the applicable laws relating to workers' compensation or employer's liability insurance, and shall comply with all other federal, state or local laws of the United States and the laws of any foreign country.   46.10  Indemnification     Seller shall indemnify and hold harmless Spirit, its officers, agents and employees, from and against any liability, obligation, claim, demand or cause of action for bodily injury, including death, or damage to property, resulting from the acts or omissions of Seller, its officers, agents or employees while on Spirit’s premises.     60  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   46.11  Compensation     Payment made to Seller for design engineering effort provided to Spirit pursuant to this SBP Section, shall be based on actual man months provided at the rate of $ (To Be Determined) per man month. (A man month consists of 163 man-hours.) The above rate includes any overtime requested by Spirit.   47.0  SELLER ASSISTANCE     In accordance with GTA 12.2 and GTA 13.2 Spirit may, by written notice to Seller, require Seller to transfer to Spirit or to Spirit’s designee title (to the extent not previously transferred) to any or all (i) Contractor-Use Tooling, Common-Use Tooling and other Tooling, (ii) Local Transportation Devices, (iii) Spirit-Furnished Property, (iv) raw materials, parts, work-in-process, incomplete or completed assemblies, and all other Products or parts thereof in the possession or under the effective control of Seller or any of its Subcontractors, and (v) Proprietary Information of Spirit, including, without limitation, planning data, Drawings and other Proprietary Information relating to the design, production, maintenance, repair and use of all Contractor-Use Tooling and Common-Use Tooling, in the possession or under the effective control of Seller or any of its Subcontractors, in each case free and clear of all liens, claims or other rights of any Person. Seller shall immediately transfer and deliver, and cause each of its Subcontractors to transfer and deliver, any or all of the aforesaid items in accordance with any written notice or notices given hereunder by Spirit to Seller, notwithstanding any event or circumstance whatsoever, including, without limitation, any claim or dispute Seller may assert in connection with a termination of this SBP or any payment for any such items. If Spirit shall require Seller to transfer and deliver to Spirit or Spirit’s designee any of the aforesaid items, Seller shall cooperate with and shall assist Spirit in developing and implementing plans to transfer the production of Products and provision of Services to Spirit, or to any other Person designated by Spirit, in an expeditious and orderly manner and will take such other steps to assist Spirit as Spirit may request in good faith, all for the purpose of maintaining, or attempting to maintain as nearly as may be possible, production of Program Airplanes and Derivatives in accordance with Spirit’s schedule of delivery of Program Airplanes and Derivatives to Customers.   Spirit and Seller acknowledge that the Program, and Spirit’s ability to sell and deliver Program Airplanes and Derivatives to Customers, will be substantially impaired if Seller delays, for any reason, its performance under this SBP Section 47.0. Spirit and Seller also acknowledge that Seller's assistance hereunder in the event of a cancellation, in whole or in part, of this SBP will be of fundamental significance to reduce incidental, consequential or other damages to Spirit. Consequently, Seller shall transfer and deliver to Spirit any or all of the aforesaid items notwithstanding any dispute or claim that Seller may have against Spirit. Seller shall not delay its performance under this SBP Section 47.0 by any action, including, without limitation, any judicial or other proceeding, or by any failure to act. Seller hereby authorizes Spirit or its representatives to enter upon its, or any of Seller's Subcontractors, premises at any time during regular business hours upon one (1) day's advance written       61  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   notice, for the limited purpose of taking physical possession of any or all of the aforesaid items. At the request of Spirit, Seller shall promptly provide to Spirit a detailed list of such items, including the location thereof, and shall catalog, crate, package, mark and ship such items expeditiously and in an orderly manner and otherwise in the manner requested by Spirit, which request may specify incremental or priority shipping of certain items. Seller shall, if instructed by Spirit, store or dispose of any or all of the aforesaid items in any reasonable manner requested by Spirit.   48.0 DEFINE AND CONTROL AIRPLANE CONFIGURATION / MANUFACTURING RESOURCE MANAGEMENT (DCAC/MRM)     Seller shall implement and maintain systems, as required, including, but not limited to, business, manufacturing and engineering systems that are compatible with Spirit’s DCAC/MRM systems.   49.0 ELECTRONIC ACCESS AND EXCHANGE OF DIGITAL PRODUCT DEFINITION     49.1 Exchange of Digital Product Definition Between Spirit and Seller     Seller's approval to receive and use computerized data shall be in accordance with documents D6-51991 "Quality Assurance Standards Reflecting Digital Product Definition for Boeing Suppliers using CAD/CAM", D6-56199 "Hardware and Software Compatibility Requirements for Suppliers Use of BCAG CATIA Native Datasets as Authority for Design, Manufacturing and Inspection", and D6-81491, “Authority and Usage of CATIA Native, CATIA IGES and PDM STEP Datasets.”   Seller will use a digital data request (DDR) form (as provided by Spirit) to request any Dataset to be provided by Spirit to Contractor for the performance of this SBP.   49.2  System/Software Compatibility between Spirit and Seller     After Seller is qualified to use the data exchange methods in accordance with Boeing Document D6-51991, "Quality Assurance Standards Reflecting Digital Product Definition for Boeing Suppliers Using CAD/CAM," Seller shall maintain compatibility with Boeing's systems in accordance with D6-56199 "Hardware and Software Compatibility Requirements for Suppliers Use of BCAG CATIA Native Datasets as authority for Design, Manufacturing and Inspection." Spirit shall provide timely notification to Contractor of revisions to Spirit's systems.   49.3 Electronic Access, Communications and Data Exchange via Telecommunications     Any electronic communications and data exchange via telecommunications between the parties shall be pursuant to a trading partner agreement executed concurrently with this SBP. Provided, that any amendments to the SBP, change authorizations and any other     62  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   matter requiring written authorization shall be communicated in writing and not solely by electronic communication.   Any electronic access to Spirit by Seller shall be pursuant to an electronic access or similar agreement.     63  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   EXECUTED in duplicate as of the date and year first set forth above by the duly authorized representatives of the Parties.       BUYER   SELLER Spirit AeroSystems, Inc.   LMI Aerospace, Inc.                 Signature on File .                 Signature on File . Name: Randall P. Garrett Name: Richard S. Darrow Title: Procurement Agent Title: Program Manager Date: 4/19/06 Date: 4/19/06   64  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 1 TO SPECIAL BUSINESS PROVISIONS WORK STATEMENT AND PRICING (Reference SBP Section 3.2, etc) FOR PURPOSES OF SBP Section 10.0, Spirit shall be defined as the following organizations, divisions, groups or entities:   Spirit AeroSystems, Inc., Tulsa, OK Spirit AeroSystems, Inc., McAlester, OK     65  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 1 TO SPECIAL BUSINESS PROVISIONS WORK STATEMENT AND PRICING   A1.1 Nonrecurring Prices Nonrecurring Item Planning and Design Fab. Total   NOT APPLICABLE:           Total Nonrecurring Work Package Price:     A1.2 Recurring Price   The price for Products to be delivered on or before 01 January 2007 through 31 December 2011, are firm fixed prices.         Part Number   Model   Nomenclature   Unit Price   ROLT * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * *         _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   66  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * *                                                                                 SBP ATTACHMENT 1 TO                                                                             SPECIAL BUSINESS PROVISIONS     Part Number   Model   Nomenclature   Unit Price   ROLT * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * * * 737NG SKIN * *        _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   67  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   * 737NG SKIN * * * 737NG SKIN  *  *  * 737NG SKIN  *  * * 737NG SKIN  *  *  *   737NG SKIN  *  * *  737NG SKIN  * * *  737NG SKIN  *  * *  737NG SKIN  *  * *  737NG SKIN  * *                                                                                   SBP ATTACHMENT 1 TO                                                                             SPECIAL BUSINESS PROVISIONS     Part Number   Model   Nomenclature   Unit Price   ROLT * 737NG SKIN *  * * 737NG SKIN * * * 737NG SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG NOSE SKIN * * * 737NG COVE SKIN * *       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   68  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * *   737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * *                   SBP ATTACHMENT 1 TO                                                             SPECIAL BUSINESS PROVISIONS     Part Number   Model   Nomenclature   Unit Price   ROLT * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * *       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   69  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   * 737NG COVE SKIN ASSY * * * 737NG COVE SKIN ASSY * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN ASSY * * * 737NG COVE SKIN ASSY * * * 737NG COVE SKIN * * * 737NG COVE SKIN * * * 737NG COVE SKIN * *                                                                               SBP ATTACHMENT 1 TO                                                                         SPECIAL BUSINESS PROVISIONS     Part Number   Model   Nomenclature   Unit Price   ROLT * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * *       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   70  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN ASSY * * * 737NGNG COVE SKIN ASSY * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 737NGNG COVE SKIN * * * 777 SKIN * * * 777 SKIN * * * 777 SKIN * * * 777 SKIN * *                                               _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   71  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------                                                                                   SBP ATTACHMENT 1A TO                                                 SPECIAL BUSINESS PROVISIONS Component Spares Requirements (See Section 13.1.3) The following Spare component parts may be purchased by Spirit at the corresponding price. Spirit is not obligated to purchase any of its requirements for the following spare component parts from Seller pursuant to SBP Section 13.1.3. PART NUMBER      UNIT PRICE     TBD 72  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------                                                                                         SBP ATTACHMENT 2 TO                                                                                     SPECIAL BUSINESS PROVISIONS NON-U.S. PROCUREMENT REPORT FORM (Seller to Submit as Required) (Reference SBP Section 15.0) Seller Name Country Commodity/ Nomenclature Bid Dollars Contracted Dollars                                                                                                                                                                                                                                                                                                                                                                                             73  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     74  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 3 TO SPECIAL BUSINESS PROVISIONS RATES AND FACTORS (Reference SBP Section 12.2)   The following Rates and Factors will be used on all price change negotiations during the period of performance of this SBP. Labor Classification Production Direct Labor Rate *  Manufacturing Burden * G&A (Gen. Admin. Expense) * Profit * Total Rate *     Labor Classification Tool Fab & Rework Direct Labor Rate * Manufacturing Burden * G&A (Gen. Admin. Expense) * Profit * Total Rate *       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   75  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------                                                                                             SBP ATTACHMENT 4 TO SPECIAL BUSINESS PROVISIONS Spirit AOG COVERAGE (Reference SBP Section 13.1.1) ¼   NORMAL HOURS Spirit’s PROCUREMENT REPRESENTATIVE Approximately 7:30 a.m. - 4:00 p.m. þ   Performs all functions of procurement process. þ   Manages formal communication with Seller. ¹   SECOND SHIFT - AOG PROCUREMENT SUPPORT 3:00 p.m. - 11:00 p.m. þ   May place order and assist with commitment and shipping information, working with several suppliers on a priority basis. þ   Provides a communication link between Seller and Boeing. )   24 HOUR AOG SERVICE - AOG CUSTOMER REPRESENTATIVE (CUSTOMER SERVICE DIVISION) (206) 662-7200 þ   Support commitment information particularly with urgent orders. þ   Customer Service Representative needs (if available): 1.   Part Number 2.   Spirit Purchase Order 3.   Airline Customer & customer purchase order number 4.   Boeing S.I.S. # If Seller is unable to contact any of the above, please provide AOG shipping information notification via FAX using Spirit AOG shipping notification form (SBP Attachment 5).     76  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: -------------------------------------------------------------------------------- SBP ATTACHMENT 5 TO SPECIAL BUSINESS PROVISIONS Spirit AOG SHIPPING NOTIFICATION (Reference SBP Section 13.1.1) To: FAX: (918) 832-3019 Phone: (918) 832-3414 Procurement Agent Name:   Phone:   From:   Today’s Date:           Part Number:   Customer P.O.:   Customer:   Ship Date:   Qty Shipped:   *SIS Number:   Spirit P.O.:   Pack Sheet:   *Airway Bill:   or Invoice:   Carrier:   *Flight #:   Freight Forwarder:       *If Applicable SHIPPED TO: þ   (check one) o   Spirit o   Direct Ship to Customer o   Direct Ship to Seller Remarks:                 77  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   If unable to contact Procurement Agent, Please use this form to fax shipping information.     78  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 6 TO SPECIAL BUSINESS PROVISIONS SELLER DATA SUBMITTALS EXAMPLES 1.   General Reports (as requested by Spirit) General reports may include, but not be limited to, Seller’s program progress reports, highlighting significant accomplishments and critical program issues, Seller’s manufacturing schedule depicting key milestone events to support program requirements. Refer to SBP Section 14.1 for details, etc.   2.   Diversity Reports A quarterly report verifying the information included on the Spirit Second Tier Report (SBP Attachment 11). Refer to SBP Section 14.2 for details. 3.   Certified Tool List (as requested by Spirit) Seller’s Certified Tool Lists for identifying all accountable tools, including any subsequent new, reworked or re-identified tools affecting the first production spares Product. Refer to SBP Section 14.4 for details. 4.   Problem Reports (as required) Seller’s written notification to Spirit of program problems, potential program impact and corrective action. Refer to SBP Section 14.5 for details. 5.   AOG Spares Support Plan Seller‘s written plan describing Seller’s procedure for supporting AOG spares delivery requirements. Refer to SBP Section 13.1.1 for details. 6.   Order Readiness Matrix (as required) Seller’s plan (matrix) identifying pre-manufacturing activities, such as, material procurement, tooling, planning and manufacturing readiness, that must be prioritized and completed prior to manufacture of a spares Product. Refer to SBP Section 14.6 for details.    7.  Non-U.S. Procurement Reporting (as required) A report, submitted in February and August annually, to document the Seller's contracts and solicitations with non-U.S. subcontractors or suppliers, relating to the work covered by this SBP. Refer to SBP Section 15.2 for details.   79  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 7 TO SPECIAL BUSINESS PROVISIONS SUPPLIER DATA REQUIREMENTS LIST (“SDRL”) CUSTOMER AND ENGINEERING (Reference SBP Section 22.0)   80  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 8 TO SPECIAL BUSINESS PROVISIONS COMMODITY LISTING AND TERMS OF SALE (Reference SBP Section 27.0) COMMODITY LISTING   *     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   81  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       SBP ATTACHMENT 8 TO SPECIAL BUSINESS PROVISIONS   TERMS OF SALE   Parties   The Seller is The Boeing Company, acting through its agent, TMX. The Customer is a Spirit subcontractor, at any tier, who is manufacturing a product in support of a Boeing requirement.   Sales   All materials to be furnished by Seller are to be within the limits and the sizes published by Seller and subject to Seller’s standard tolerances for variations. Seller will warrant that all materials to be supplied will conform to the descriptions contained herein and on the face of the purchase order and that Seller will convey good title to any such materials free from any security interest, or other lien or encumbrance held by any other party and unknown to the customer. THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS AND SELLER WILL MAKE NO OTHER EXPRESS OR IMPLIED WARRANTIES EXCEPT AS STATED HEREIN. Seller will not be liable for any incidental or consequential damages for any breach of warranty, express or implied. Seller’s liability and the Customer’s sole and exclusive remedy will be limited at Seller’s option either to (a) return of the materials and repayment of the purchase price, or (b) replacement of nonconforming materials upon return thereof to Seller. The Customer shall be required to notify Seller in writing of any claim of breach of warranty and no materials shall be returned to Seller by the Customer without Seller’s consent.   Payment Terms   The following payment processes will be followed for material sold to Customer by Seller. All payments shall be in United States Dollars.   DEBIT PROCESS   The debit process will be used in all circumstances where the Customer has an account with the Seller. The amount due is the quantity shipped multiplied by the unit price, plus the price for any value added services. * .     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   82  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 8 TO SPECIAL BUSINESS PROVISIONS   INVOICE PROCESS   The invoice process will be used for Customers not currently making direct sales to Boeing; foreign countries governed by MITI laws and regulations (currently Australia, Brazil, China, India, Japan, and Korea), and orders issued by Spirit. * .   LATE PAYMENT CHARGES   Payments due Seller representing undisputed charges for material and services that are not paid within *.   DEBIT/INVOICE DISPUTE PROCEDURE   Customer may dispute payment amounts due provided that (1) Customer contacts Seller within 25 days of the date of the debit/ invoice, (2) Customer provides a complete reason as to the dispute. If the action is Seller's to resolve, late payment charges will not be assessed on amounts that are under dispute. Once a dispute has been resolved, payment terms will be (net) thirty (30) days from the date of resolution.   FAILURE TO PAY   In the event Customer fails to make payments when due, Seller reserves the right to assert whatever remedies it may have u+nder law, including setoffs against amounts due from Seller to Customer on other contracts. In such an event, Seller may, with respect to future orders, require full payment in advance or otherwise alter the terms of payment specified earlier.       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   83  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 9 TO SPECIAL BUSINESS PROVISIONS COST AND PERFORMANCE REVIEWS (Reference SBP Section 11.0)   Cost Performance Reviews (CPR’s) will occur on as needed basis (alternating between Seller and Spirit locations unless otherwise agreed) at an agreeable time. The detail of the CPR’s will be defined at a later date between Spirit and Seller. When they are defined, this SBP Attachment 9 will be updated.   84  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 10 TO SPECIAL BUSINESS PROVISIONS   QUALITY ASSURANCE REQUIREMENTS     Attachment 10 to this SBP number T6B2-YB001940 hereby incorporates Tulsa Quality Flysheets TQPA 100, TQPA 101, TQPA 102, and TQPA 104 (revisions currently in effect as reflected and defined on releasing purchase orders). These Flysheets define the quality provisions that are applicable to this Statement of Work.         85  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: -------------------------------------------------------------------------------- 86  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: -------------------------------------------------------------------------------- SBP ATTACHMENT 11 TO SPECIAL BUSINESS PROVISIONS Spirit SECOND TIER SUPPORT REPORT (Reference SBP Section 14.2) Seller Name: Date: Seller Contact: Phone: Spirit Procurement Agent Contact: Phone: Spirit Purchase Contract #: Reporting Period * Jan - Mar Apr - Jun July - Sept Oct - Dec Year: Definitions ** Small Business (SB) The term "small business" shall mean a small business as defined pursuant to section 3 of the Small Business Act (15 U.S.C.A. 632) and relevant regulations issued pursuant thereto. Generally, this means a small business organized for profit, it is independently owned and operated, is not dominant in the field of operations in which it is bidding, and meets the size standards as prescribed in Government regulations. (Includes SDBs, SMBEs and WOSBs) Small Disadvantaged Business (SDB)   A small business certified by the U.S. Small Business Administration as a socially and economically small disadvantaged business for consideration of Government set-a-side contracting opportunities and business development. (Includes SDBs who are women-owned) Small Minority Business Enterprise (SMBE)   A small business that is at least 51 percent owned, operated and controlled by a minority group member (Asian, Black, Hispanic, and Native Americans); or, in the case of a publicly-owned business, at least 51% of the stock is owned by one or more minority group members and such individuals control the management and daily operations. (Includes SDBs) Women-Owned Small Business (WOSB)   A small business concern that is at least 51 percent owned by one or more women; or, in the case of any publicly owned business, at least 51 percent of the stock is owned by one or more women; and whose management and daily business operations are controlled by one or more women. (Includes WOSBs who are also SDBs) Contract Dollars Received by Seller A. Spirit contract dollars received by seller for the above reporting period* (report in whole numbers): $________________________________ Value of Subcontract 2nd Tier Dollars Awarded   Diversity Category Reporting Period (see above*) Dollars (report in whole numbers) Percent of Seller Dollars B. Small Business (SB)   (B ÷ A) C. Small Minority Business Enterprise (SMBE)   (C ÷ A)       87  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     D. Women-owned Small Business (WOSB)   (D ÷ A) Authorized Company Representative (Print): Authorized Company Representative (Signature): Date:       88  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 12 TO SPECIAL BUSINESS PROVISIONS   Commercial Invoice Requirements (Customs Invoice)   For Imports into the United States   1.   Commercial Invoice must be in English.   2.   Record the United States Port of Entry where merchandise is to be cleared by U.S. Customs.   3.   Date, Location, and Names of Seller and/or Shipper   A.   Date when the merchandise is sold, or agreed to be sold (Current Purchase Order date).   B.   Name and address of the Seller and/or Shipper if Seller is not the Shipper (Company name and address).   C.   Name and contact information for an employee, who is employed by the seller and/or shipper who has detailed knowledge of the sales transaction.   D.   Name and address of the Buyer (Spirit company name and site address)   E.   Name of Consignee if not the Buyer (Company receiving non-purchased transactions or drop ship destination).   4.   Purchase Order Number and Item Numbers   Provide the current purchase order and item numbers.   5.   Commercial Invoice Number (Seller’s option)   6.   Packing Sheet Number       If a separate packing sheet(s) is used to provide any of the required commercial invoice information, the packing sheet number(s) must be recorded on the commercial invoice.   7.   Merchandise Shipment Date (month, day, year)       Provide the date that the merchandise shipped from the Sellers factory or facility.         89  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: -------------------------------------------------------------------------------- SBP ATTACHMENT 12 TO SPECIAL BUSINESS PROVISIONS   Commercial Invoice Requirements (Customs Invoice)   For Imports into the United States…continued   8.   Related Party to Spirit       If the Seller is a Related Party to Spirit, or any of its subsidiaries, it must be stated on the invoice: “Related Party to Spirit”   9.   A detailed description of the merchandise being shipped must be provided to ensure proper product classification per the U.S. Customs Harmonized Tariff Schedule (HTS) and must include at a minimum:   A.   The full name by which each item is known. (i.e. Spirit drawing part name)   B.   The part number on the Spirit purchase order, or if the item is a raw material, provide the material grade, class, and dimensions.      Notes:   C.   Generic descriptions, abbreviations, acronyms, and Stock Keeping Unit (SKU) numbers are not acceptable.   D.   Spirit may request additional description information for items that do not have a Spirit part number and/or design.   10.   Quantities, Weights and Measures     Record the quantity of each part number in the shipment if not separately noted on packing sheet   A.   Record the total quantity of parts being shipped   B.   Provide the gross and net weight of the entire shipment   C.   Specify the unit of measure being used   D.   Specify the total number of boxes included on each packing sheet   E.   Textiles must specify the net and gross weights and the length, width, and total square meters of material.   90  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 12 TO SPECIAL BUSINESS PROVISIONS   Commercial Invoice Requirements (Customs Invoice)   For Imports into the United States…continued   11.   Specify the value of items being shipped     In addition to recording the Unit cost of each part on the commercial invoice, list separately, all Assists and Additional costs as directed by the Spirit Procurement representative:   A.   Assists   Assists are components, materials, dies, molds and tools, that are supplied by the Buyer, free of charge or at a reduced cost to the seller, and used in the production of imported goods. This also would include the Buyer paid transportation costs associated with the assist. These transportation costs will be provided by the procurement focal responsible for this merchandise.   B.   Additional Costs   i.   Engineering and Design work - Work that is performed outside the U.S, by non-U.S. employees, and is not included in the unit price of the merchandise being imported.   ii.   Packing Costs - Costs for packing that are incurred by the Buyer, and have not been included in the unit cost.   iii.   Non-recurring Charges - One time charges, incurred by the Buyer, for such items as, expedite fees and transportation costs, which have not been included in the unit cost.   iv.   Selling Commissions - Commissions incurred by Buyer that have not been included in the unit cost.   v.   Royalties - Fees the Buyer is required to pay as a condition of sale.   C.   If the item being shipped is a Repaired or Modified part:       91  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     i.   Include the value of the item being repaired or modified, and   ii.   The cost of the repair or modification   D.   Attach a copy of a “Shippers Declaration of Repair or Alteration” form.   i.   The Total Value of the entire shipment must be shown on the commercial invoice.       SBP ATTACHMENT 12 TO   SPECIAL BUSINESS PROVISIONS   Commercial Invoice Requirements (Customs Invoice)   For Imports into the United States…continued   12.   Type of Currency - Currency on all invoices must be in U.S. Dollars     Note: Where export license requirements mandate that the currency of the exporting country be stated on the invoice, include the following “for (export country) Customs purposes, value in (local currency).” This must be stated in addition to and not in lieu of the item value in U.S. Dollars.   13.   Country of Origin   Indicate the country of manufacture of each item being shipped.   14.   Discounts     List all discounts that have been agreed to between the buyer and seller, or may be allowed, that apply to the purchase price or value, but have not been included in the unit price.   15.   Rebates, Drawback and Bounties     If Seller receives any of these items, as a result of export, please itemize and provide description.   16.   Terms of Sale (Incoterms)     92  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       Specify the International Commercial Terms of Sale (Incoterms) on the commercial invoice as agreed to per the Spirit contract.     Note - Commercial invoices are required on all shipments whether or not a purchase order has been released or payment made. Non-Procurement examples include, free samples, returned tools and test parts.     93  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 13 TO SPECIAL BUSINESS PROVISIONS On Site Terms and Conditions Supplement (See Section 29.8)   A.   General:   1.   Seller’s Sole Responsibility for Safety & Environmental Protection. Seller shall at all times be solely responsible for all aspects of safety and environmental protection in connection with its On-Site Work, including initiating, maintaining, and supervising all safety and environmental precautions and programs. Such responsibility for safety includes, without limitation, the obligations set forth in Section 2 (Safety) of this Supplement. Such responsibility for environmental protection includes, without limitation, the obligations set forth in Section 3 (Environmental) of this Supplement. Seller shall at all times perform the On-Site Work, or ensure that it is performed by its Subcontractors, in a manner to avoid the risks of bodily injury to persons and damage to property or the environment. Seller shall promptly take all precautions that are necessary and adequate against any conditions that involve such risks. Seller shall continuously inspect all On-Site Work, materials, and equipment to discover the existence of any such conditions and shall be solely responsible for discovery and correction of any such conditions.   2.   No Spirit Responsibility for Seller’s Safety or Environmental Performance. Spirit shall have no responsibility for the safety or environmental performance of Seller or Seller’s Subcontractors, or any aspect of safety or environmental protection in connection with, their On-Site Work, including all safety and environmental precautions and programs of the Seller.   3.   Compliance with the Laws; Spirit Guidelines.   a)   Seller shall comply, and shall ensure that all Subcontractors comply, with all applicable legal requirements and the requirements of any applicable GTA, SBP and Order related to safety and environmental performance of their On-Site Work. Seller shall cooperate and coordinate with Spirit and other sellers and their subcontractors performing On-Site Work or otherwise present on site as necessary regarding safety and environmental protection matters.   b)   Seller shall adhere to, and ensure that all its Subcontractors performing On-Site Work adhere to reasonable work rules including without limitation safety, health and environmental guidelines provided by Spirit to Seller. By providing any such guidance, Spirit assumes no control or responsibility whatsoever for any aspect of the safety or environmental performance of the On-Site Work, which shall remain solely with Seller. Seller and its Subcontractors therefore shall supplement any such       94  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       guidelines in their safety and environmental plans as necessary and appropriate to assure safety and environmental protection and comply with their obligations under applicable law and any applicable GTA, SBP or Order. Where any applicable law is more protective than any such guidance or obligations of a GTA, SBP or Order, such law shall be followed. Seller shall provide a copy of the guidelines to all Seller employees assigned to perform On-Site Work and require that its Subcontractors provide copies to their employees assigned to perform On-Site Work.   4.   Indemnities. Environmental Indemnification. Seller shall indemnify, and hold harmless Spirit, its subsidiaries, and their directors, officers, employees, and agents (the “Spirit Indemnitees”) from and against: (a) all actions, causes of action, liabilities, claims, suits, judgments, liens, awards, fines, penalties, forfeitures and damages, of any kind and nature whatsoever (hereinafter "Claims"), (b) any expenses incurred in connection with the investigation or monitoring of conditions at any location used for or pertaining to Seller’s performance under an applicable GTA, SBP or any Order, (c) any clean up costs or other expenses incurred in connection with any cleanup, containment, remedial, removal, or restoration work, to the extent necessary under applicable law (and in the case of a release to Spirit property, to the extent necessary to return the property to its prior condition), and (d) expenses , costs of litigation and counsel fees related thereto or incident to establishing the right to indemnification, to the extent such Claims, costs, expenses, etc. arise out of an act or omission by Seller or any subcontractor thereof which (i) results directly or indirectly, in whole or in part, in the release, or threatened or suspected release, of any pollutants, hazardous substances, hazardous chemicals, toxic substances, hazardous wastes, dangerous wastes (as those terms are defined under any applicable law), or contaminants of any kind into the environment, or (ii) constitutes a violation of applicable law concerning environmental protection. In no event shall Seller’s obligations hereunder be limited to the extent of any insurance available to or provided by the Seller or any subcontractor thereof.   5.   Observations. Spirit personnel may, but are not required to, visit an On-Site Work area at any time to observe the Seller’s performance under this Supplement. Seller recognizes and agrees that any such visits or observations will neither relieve Seller of its sole responsibility for all aspects of safety and environmental protection in connection with the On-Site Work, nor create or constitute actual control or the right to control such safety or environmental performance by Spirit. Neither Spirit’s observations, or visits, nor any actions or inactions during or as a result of such visits or observations shall give rise to a duty, responsibility, or liability of Spirit to the Seller, any Subcontractor, their agents or employees.   B.   Safety   1.   Safety Programs and Plans. Although Seller has sole responsibility for safety in connection with the On-Site Work, Spirit has responsibility for the safety of its own       95  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       employees. Accordingly, before beginning the On-Site Work or any portion thereof, Seller shall develop and submit for Spirit’s review a written safety plan for Seller and any Subcontractor who will perform On-Site Work, in detail commensurate with the nature of that work. Such plan shall describe anticipated hazards and control methods the Seller will employ to provide adequate safeguards for all employees performing the On-Site Work, On-Site Work area invitees, Spirit agents and employees, and the public and shall describe housekeeping plans. An appropriate health or safety professional should prepare such a plan. Review of such plans by Spirit shall not:   a)   Relieve in any manner Seller of its sole responsibility for safety.   b)   Be construed as limiting in any manner Seller’s obligation to undertake any action that may be necessary or required to establish and maintain safe working conditions at the On-Site Work area.   c)   Indicate Spirit’s control over the manner in which Seller performs its work or supervises its employees.   d)   Create any liability for Spirit.   Seller’s safety plan shall be made readily available at the On-Site Work area. Seller shall follow its safety plan, and ensure that all its Subcontractors on site follow the plan.   2.   Safety Representative. Seller shall appoint a competent safety representative with full authority to coordinate, implement, and enforce Seller’s safety plan and shall authorize such representative to devote whatever time is necessary to properly perform such duties. The safety representative shall attend all safety meetings and participate fully in all activities outlined in Seller’s safety plan.   3.   Safety Meetings and Equipment. Seller shall hold initial and periodic meetings to instruct its personnel and all Subcontractors in safety practices for On Site Work. Minutes shall be recorded at all safety meetings and copies promptly submitted to Spirit upon request. Seller shall furnish appropriate safety equipment for the On-Site Work, train appropriate personnel in the use of the equipment, and enforce the use of such equipment by its employees. Seller shall ensure that each Subcontractor on site furnishes appropriate safety equipment for the On-Site Work, trains appropriate personnel in the use of the equipment, and enforces the use of such equipment by its employees.   4.   Accident Reports. Accidents and incidents that involve employee time away from Work or medical cases (not including first aid cases) or incidents that require an ambulance, security, or fire department response must be reported to the Spirit representative immediately. Such reports must be submitted in writing to the Spirit representative within one (1) hour of the accident or incident. Further, Seller shall maintain accurate     96  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------       accident and injury reports and shall furnish to Spirit a copy of any accident report prepared pursuant to any applicable law. Furthermore, Seller shall also furnish to Spirit, in a form acceptable to Spirit, a monthly summary of injuries and hours worked each month.   5.   Payment for Emergency Services. When any employee of Seller or any Subcontractor on site, who is engaged in any activity related to the On-Site Work, requires the services of an ambulance, physician, hospital, or other provider, Seller shall pay or arrange for such Subcontractor, or employee to pay all charges for any such services directly to the provider of such services.   6.   Emergency Notification. All emergency telephone numbers shall be provided to the Spirit representative and shall be readily accessible at the On-Site Work area.   C.   Environmental:   1.   Waste minimization. The Seller shall emphasize project planning to maximize the use, reuse and recycling of any solid waste, including but not limited to construction, demolition, and land clearing debris, and scrap materials, to the greatest extend feasible with consideration for cost.   2.   Solid Waste Handling. Covered Containers shall be used for collection of solid waste in locations approved by the Spirit representative. Segregation, recycling, disposal or other handling of solid waste shall be as approved by the Spirit representative.   3.   Hazardous Waste Handling.   If Seller or its Subcontractors expects to generate or handle hazardous waste or other waste materials in performance of the On-Site Work, Seller shall develop a written plan to be approved by the Spirit representative for the on-site management of such waste. The plan will identify the types and volumes of such waste/materials to be generated or handled in the course of the work and on-site management techniques for such waste/materials. Seller and its Subcontractors will manage such waste/materials on site as provided in the plan.   If additional or unanticipated amounts of waste/materials are generated or encountered on-site, the Seller shall advise the Spirit representative as soon as possible, and manage that waste/material on site as directed by the Spirit representative.   4.   Known Work Area Hazardous Materials. Before On-Site Work is commenced, Seller shall obtain from Spirit information regarding the existence of any known asbestos, petroleum, polychlorinated biphenyl (PCB), or other hazardous materials in a hazardous condition at the work area.     97  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     5.   Latent Work Area Hazardous Materials. If, in the course of the On-Site Work, Seller encounters materials reasonably believed to be asbestos, petroleum, PCBs, or other hazardous materials, which were not previously disclosed by Spirit and are in a hazardous condition at the work area, Seller shall immediately suspend the work in the area affected and immediately report, in writing, the condition to Spirit. The work in the affected area shall not thereafter be resumed except by written agreement of Spirit and Seller if, in fact, the materials are asbestos, petroleum, PCBs or other hazardous materials and are in a hazardous condition at the work area. The work in the affected area shall be resumed in the absence of the hazardous material or when the hazardous condition has been made safe through engineering or administrative controls.   6.   Asbestos Use Prohibited. No material containing asbestos may be used or installed without the written permission of the Spirit representative. When requested by the Spirit representative, Seller shall provide written verification that no materials containing asbestos have been installed as part of the work.   7.   Wastewater Handling and Stormwater Management. If Seller or its Subcontractors expect to produce wastewater in performance of the On-Site Work, including, but not limited to, water produced in subsurface dewatering, or expects to handle hazardous substances or other pollutants in an area that may be exposed to stormwater, Seller shall develop a written plan to be approved by the Spirit representative for handling such wastewater and/or hazardous substances or other pollutants. Both the control and discharge of stormwater shall be addressed in Seller’s plan. Such plan shall be drafted to adhere to applicable law and the Spirit site’s Storm Water Pollution Prevention Plan, National Pollution Discharge Elimination System Permit, and Sanitary Sewer System Discharge Permit, as applicable. The Spirit representative will inform the Seller of such permit requirements. The Seller and its Subcontractors shall adhere to the plan.   8.   Air Pollution Control. If Seller or its Subcontractors expect to produce emissions of any air pollutant or contaminant in the performance of the On-Site Work, Seller shall develop a written plan to be approved by the Spirit representative for minimizing such emissions. Such plan shall be drafted to assure compliance with all applicable law and any applicable provisions of any orders, permits or approvals issued to or in the name of Spirit, including but not limited to any applicable Air Operating Permit. The Spirit representative will inform the Seller of such provisions. The Seller and its Subcontractors shall adhere to the plan.     98  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     9.   Emergency Response and Reporting of Spills or Releases. If Seller or its Subcontractors expect to bring, use, produce, encounter or handle any hazardous chemicals, hazardous substances, or hazardous waste on site, Seller shall notify the Spirit representative and shall obtain from the Spirit representative information regarding the applicable plans and procedures for emergency response to spills or releases of hazardous chemicals, hazardous substances, and hazardous waste. Seller and its Subcontractors shall undertake immediate response to such spills or releases to contain the spill or release and prevent spreading, but only to the extent such response can be undertaken without posing a physical danger to the responding personnel or others nearby.   When the Seller or Subcontractor discovers a spill or release, whether or not Seller or a Subcontractor undertakes such response, the Seller or Subcontractor shall notify the Spirit representative and any other Spirit emergency response personnel identified in the Spirit emergency response plan and procedures provided. Unless the duty to report any such spills or releases to a governmental agency is imposed by law directly on the Seller or a Subcontractor, the Spirit representative shall perform such reporting. Seller and its Subcontractors shall cooperate fully with the Spirit representative in ensuring timely and complete reporting and response. If Seller or a Subcontractor is itself required by law to report a spill or release then the Seller or Subcontractor undertaking such reporting shall immediately inform the Spirit representative in detail regarding such reporting.   10.   Nuisance and Polluting Activity Prohibited. Polluting, dumping or discharging of any harmful, noxious, or regulated materials (such as concrete truck washout, vehicle maintenance fluids, residue from saw cutting operations, solid waste, and hazardous substances) into the building drains, streams, waterways, holding ponds or to the ground surface shall not be permitted. Further, Seller shall conduct its activities in such fashion to avoid creating any nuisance conditions, including but not limited to suppression of noise and dust, control of erosion, and implementation of other measures as necessary to minimize the off-site effects of work activities.     99  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     i.                SBP ATTACHMENT 14 TO                                                     SBP ATTACHMENT 14 TO SPECIAL BUSINESS PROVISIONS   Reserved   100  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 15 TO SPECIAL BUSINESS PROVISIONS     PRODUCTION ARTICLE DEFINITION AND CONTRACT CHANGE NOTICES (Reference SBP Section 3.2.2)   A. Configuration   The configuration of each Production Article shall be as described in the Engineering Requirements Document (ERD) and Subcontracted Parts, Revision, Authorization, and Transmittal (SPRAT) as identified on Releasing Purchase Orders.     101  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 16 TO SPECIAL BUSINESS PROVISIONS NON-RECURRING AND RECURRING PRICE STATUS AND SUMMARY TABLES (EXAMPLES - Reference SBP Section 12.2)   TOTAL   SUMMARY                   (Nonrecurring): (Example) Event Nonrecurring Price Impact Total Nonrecurring Amortize Over X Months - This Event Nonrecurring Payment per Quarter - This Event Nonrecurring Payment per Quarter - Cum Total Initial Contract *  * * * * Amendment 1 * * * * * Amendment 2 * * * * * This example reflects a ten-year contract.                   The initial Contract Non-Recurring Price was *                 Amendment 1 *                   Amendment 2 *                           years year months   quarters * 1 2002 120   40 * 2 2003 108 amendment 1 36 * 3 2004 96   32   4 2005 84   28 * 5 2006 72 amendment 2 24 * 6 2007 60   20 *     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   102  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     7 2008 48   16   8 2009 36   12 * 9 2010 24   8 * 10 2011 12   4 *   SBP ATTACHMENT 16 TO SPECIAL BUSINESS PROVISIONS   NON-RECURRING AND RECURRING PRICE STATUS AND SUMMARY TABLES (EXAMPLES - Reference SBP Section 12.2) continued… Recurring: (Example)                       Event Starting Recurring Shipset Price Recurring Impact per Shipset from Change Adjusted Recurring Shipset Price Starting Shipset Applicable Block Initial Shipset Price *  * * * * Amendment 1 * * * * * Amendment 2 * * * * * Amendment 3 * * * * *             This example reflects a ten-year contract.                     The initial Contract price was * per Shipset.                   Amendment 1 price change affected *. The increase was * per Shipset.               Amendment 2 price change affected *. The decrease was * per Shipset.               Amendment 3 price change affected *. The increase was * per Shipset.       _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   103  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 16 TO SPECIAL BUSINESS PROVISIONS     NON-RECURRING AND RECURRING PRICE STATUS AND SUMMARY TABLES   (DATA ENTRY - Reference SBP Section 12.2)   continued…   TOTAL   SUMMARY (Nonrecurring): Event Nonrecurring Price Impact Total Nonrecurring Amortize Over X Months - This Event Nonrecurring per Month - This Event Nonrecurring per Month Cum Total                                     Recurring: Event Starting Recurring Shipset Price Recurring Impact per Shipset from Change Adjusted Recurring Shipset Price Starting Shipset Applicable Block                                           104  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 17 TO SPECIAL BUSINESS PROVISIONS   VALUE ENGINEERING METHODOLOGY   (EXAMPLE - Reference SBP Section 1.0 GG)   In the following example, the baseline P.O. price for a certain end item is $500,000.00. The Seller has submitted a Value Engineering proposal, which has subsequently been accepted by Spirit for incorporation. The submittal contained a statement of work and the resultant savings if implemented. In addition, the first affected unit, Cum Line 101 was identified and the Seller and Spirit agreed upon a split of the savings with the result being * to Spirit and * to the supplier. Finally, the P.O. price was adjusted down to * starting at C/L 101 and carrying through the end of the contracted shipsets.   1.   Purchase Order Price:    $500,000   2.   First (1st) Affected Unit:    C/L 101   3.   Recurring Savings per Shipset:    $2,500   4.   Negotiated Savings Split ( * ):      *   5.   Price adjustment C/L101 and on:    $500,000 - * = *     _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   105  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     SBP ATTACHMENT 18 TO SPECIAL BUSINESS PROVISIONS     INDENTURED PRICED PARTS LIST AND SPARES PRICING     A.         INDENTURE PRICED PARTS LIST (Reference SBP 13.1.3)         B.         FOR AOG’S AND POA’s                                                                          (1) Shipset      Reorder       Unit Price    (1) x *  Part No.      Quantity       Lead Time      (per “A” above)                                 $      $       C.         FOR LESS THAN LEADTIME     Shipset      Reorder       Unit Price =     (1) x* Part No.      Quantity     Lead Time      (per “A” above)                              $      $                 _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   106  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 19 TO SPECIAL BUSINESS PROVISIONS   INCREMENTAL RELEASE PLAN AND LEAD TIMES (Reference SBP Section 44.0) A.   Lead Times   Lead times for material procurements, fabrication and assembly are as tabulated below in months prior to delivery of the first Shipset affected, and will be used to calculate incremental release schedules in Paragraph B.1 of this SBP Attachment 19. Material Months Metallic Raw Material (TBN) Nonmetallic Raw Material  Castings/Forgings/Extrusions  Purchased Parts  Fabrication Months Detail Parts (TBN) Assembly Rate Tooling A Months (Greater than [ ] to [ ] S/S per Month) (TBN)   Rate Tooling B  (Greater than [ ] to [ ] S/S per Month) (TBN) B.   Incremental Release Plan   1. In accordance with SBP Section 44.0, Seller will release Shipsets as scheduled herein on the dates indicated below. Qty     Support Point        Release Material                         S/S      Shipset No.           Date   Metallic Raw Material                 (TBN) Nonmetallic Raw Material  Castings/Forgings/Extrusions Purchased Parts Fabrication Lot 1 Lot 2 Lot 3 Lot 4     107  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------     Lot 5 SBP ATTACHMENT 19 TO SPECIAL BUSINESS PROVISIONS INCREMENTAL RELEASE PLAN AND LEAD TIMES (Reference SBP Section 44.0) continued… Assembly Lot 1 Lot 2 Lot 3 Lot 4 Lot 5   2. Release dates are based upon the following Master Schedule: Block                             MS No. C.    Cycle Time Plan In order to enable Seller to meet the nine (9) month Cycle Time requirement: 1) Spirit shall notify Seller not less than [_TBN__] months prior to the scheduled delivery date for any Product that will be incorporated into a Program Airplane which is (i) a Customer's first purchase of a particular, existing configuration of the Program Airplane or (ii) a Customer's second or greater purchase of a particular existing configuration of the Program Airplane, but which will have potential configuration changes (not including material changes or changes of a greater magnitude than any previous change already made). 2) Spirit shall notify Seller not less than [_TBN__] months prior to the scheduled delivery date for any Product that is impacted by a change in the assignment of a Customer or Program Airplane model to a specific line number.       108  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS: --------------------------------------------------------------------------------   SBP ATTACHMENT 20 TO SPECIAL BUSINESS PROVISIONS   SCHEDULE CHANGE EXAMPLES (Reference SBP Section 8.0) EXAMPLE Current Shipset Billing Price = *  Schedule No. 1 Month         1     2     3     4     5     6     7     8     9     10 S/S Per Month     *     *     *     *     *     *     *     *     *      * DECELERATION - Notice of deceleration of Schedule No. 1 is given at Month 3 resulting in the following schedule: Schedule No. 2 S/S Per Month     7     7     *10    10     7     7     7     7     7     7   Shipsets Decelerated          0      0    3 * ACCELERATION - Notice of acceleration of Schedule No. 2 is given at Month 7 resulting in the following schedule: Schedule No. 3 S/S Per Month     7     7     10     10     7     7     *7     10     10     10 Shipsets Accelerated             0     3     3 *   _________________________________ * The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2. A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.   109  Special Business Provisions Seller’s Name: LMI Aerospace, Inc.   T6B2-YB001940   INITIALS:    

  EXHIBIT 10.1 EXECUTION COPY ASSET PURCHASE AGREEMENT between SKYTEL CORP. and BELL INDUSTRIES, INC.   Dated as of November 10, 2006   --------------------------------------------------------------------------------   TABLE OF CONTENTS                 Page   ARTICLE I DEFINITIONS     1             1.1 Certain Definitions     1             1.2 Terms Defined Elsewhere in this Agreement     8             1.3 Other Definitional and Interpretive Matters     10             ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES     12             2.1 Purchase and Sale of Assets     12             2.2 Excluded Assets     14             2.3 Assumption of Liabilities     15             2.4 Excluded Liabilities     16             2.5 Further Conveyances and Assumptions; Consent of Third Parties     18             2.6 Bulk Sales Laws     19             2.7 Purchase Price Allocation     19             2.8 Allocation of Taxes and Expenses     20             2.9 Power of Attorney; Right of Endorsement     20             ARTICLE III CONSIDERATION     21             3.1 Consideration     21             3.2 Payment of Purchase Price     21             3.3 Purchase Price Adjustment     21             ARTICLE IV CLOSING AND TERMINATION     23             4.1 Closing Date     23             4.2 Termination of Agreement     23             4.3 Procedure Upon Termination     25             4.4 Effect of Termination     25             ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER     26             5.1 Organization and Good Standing     26             5.2 Authorization of Agreement     26             5.3 Conflicts; Consents of Third Parties; Subsidiaries     27             5.4 Financial Statements; Books of Account     27             5.5 Title to Purchased Assets; Sufficiency     28   i --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                 Page   5.6 Compliance with Laws; Permits     28             5.7 Material Contracts     29             5.8 Legal Proceedings     30             5.9 Intellectual Property     31             5.10 Insurance     32             5.11 Labor     32             5.12 Environmental Matters     33             5.13 Conduct of Business in Ordinary Course     34             5.14 Customers and Suppliers     35             5.15 PP&E     35             5.16 Foreign Corrupt Practices Act and Export Restrictions     35             5.17 Taxes     35             5.18 Real Property     36             5.19 Tangible Personal Property     36             5.20 Product Warranty; Product Liability     37             5.21 Certain Payments; Certain Interests     37             5.22 Employee Benefits     37             5.23 Financial Advisors     39             5.24 No Other Representations or Warranties     39             ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER     39             6.1 Organization and Good Standing     39             6.2 Authorization of Agreement     39             6.3 Conflicts; Consents of Third Parties     40             6.4 Litigation     40             6.5 Financial Advisors     40             6.6 Financing Commitment     40             6.7 No Other Representations or Warranties     41             ARTICLE VII COVENANTS     41             7.1 Access to Information     41   ii --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                 Page   7.2 Conduct of the Business Pending the Closing     41             7.3 Consents     42             7.4 Further Assurances     43             7.5 FCC Licenses     43             7.6 Confidentiality     43             7.7 Preservation of Records     44             7.8 Publicity     44             7.9 Non-Competition; Non-Solicitation     45             7.10 Use of MCI Trademarks     45             7.11 Tax Matters     45             7.12 Financing     46             7.13 Supplementation and Amendment of Schedules     46             ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFITS     47             8.1 Employment     47             8.2 Employee Benefits     47             8.3 Employee Rights     50             8.4 Successors and Assigns     50             8.5 Cooperation     50             8.6 Employee Obligations of Confidentiality     51             ARTICLE IX CONDITIONS TO CLOSING     51             9.1 Conditions Precedent to Obligations of Purchaser     51             9.2 Conditions Precedent to Obligations of Seller     53             ARTICLE X INDEMNIFICATION     54             10.1 Survival of Representations and Warranties     54             10.2 Indemnification by Seller     55             10.3 Indemnification by Purchaser     56             10.4 Indemnification Procedures     56             10.5 Certain Limitations on Indemnification     58             10.6 Calculation of Losses     59   iii --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                 Page   10.7 Tax Treatment of Indemnity Payments     59             10.8 Exclusive Remedy     59             ARTICLE XI MISCELLANEOUS     60             11.1 Expenses     60             11.2 Submission to Jurisdiction; Consent to Service of Process     60             11.3 Entire Agreement; Amendments and Waivers     61             11.4 Governing Law     61             11.5 Notices     62             11.6 Severability     63             11.7 Binding Effect; Assignment     63             11.8 Non-Recourse     63             11.9 Seller Parent Joinder     63             11.10 Counterparts     63             Exhibits       A   Form of Bill of Sale B   Form of Assignment and Assumption Agreement C   Form of Intellectual Property Agreement D   Form of Telecommunication Services Agreement E   Form of Reseller Agreement F   Form of CNAM Agreement G   Form of Colocation Agreement H   Form of Corporate Account Agreement iv --------------------------------------------------------------------------------   ASSET PURCHASE AGREEMENT           This ASSET PURCHASE AGREEMENT (the “Agreement”), dated as of November 10, 2006, is between SKYTEL CORP., a Delaware corporation (“Seller”), and BELL INDUSTRIES, INC., a California corporation (“Purchaser”).           W I T N E S S E T H:           WHEREAS, Seller presently conducts the Business (as hereinafter defined);           WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to acquire substantially all of Seller’s assets, properties, rights, and interests used in or relating to the Business for the Purchase Price (as hereinafter defined) and the assumption by Purchaser of certain specified liabilities relating to the Business, all as more specifically provided herein; and           WHEREAS, as a further condition and inducement to Purchaser to enter into this Agreement, Seller and Purchaser will enter into various transition services agreements, substantially in the forms attached hereto as Exhibits E, F and G pursuant to which Seller will provide to Purchaser certain transitional services, subject to the terms and conditions specified therein; and           WHEREAS, certain terms used in this Agreement are defined in Section 1.1;           NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows: ARTICLE I DEFINITIONS      1.1 Certain Definitions.           For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:           “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.           “Assigned Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.   --------------------------------------------------------------------------------             “Assigned Marks” shall have the meaning set forth in the Intellectual Property Agreement.           “Assigned Patents” shall have the meaning set forth in the Intellectual Property Agreement.           “Assigned Software” shall have the meaning set forth in the Intellectual Property Agreement.           “Business” means the business of Seller, consisting of the wireless data and messaging services provided by Seller within the United States.           “Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. § 101 et seq.           “Business Day” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.           “Business Non-Statutory Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “Business Statutory Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.           “Code” means the Internal Revenue Code of 1986, as amended.           “Contract” means any written contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, license, binding commitment, or other arrangement, whether written or oral, including but not limited to distribution and sales representative agreements, and other agreements (including any amendments and other modifications thereto).           “Deferred Compensation Plan” means the Mobile Telecommunication Technologies Corp. (Mtel) Deferred Compensation Plan.           “Documents” means all files, documents, instruments, papers, books, reports, records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer and supplier lists, regulatory filings, operating data and plans, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web pages, etc.), and other similar 2 --------------------------------------------------------------------------------   materials related primarily to the Business and the Purchased Assets in each case whether or not in electronic form; provided that “Documents” shall not include duplicate copies of such Documents retained by Seller or its Affiliates subject to the obligations relating to the use and disclosure thereof set forth in this Agreement.           “Employee” means, as of any applicable date, all individuals who are employed by Seller as common law employees in connection with the Business, including all active full-time and part-time employees, employees on vacation or approved personal leave, workers’ compensation, military leave with reemployment rights under federal Law, maternity leave, leave under the Family and Medical Leave Act of 1993, short-term disability, long-term disability, and employees on other approved leaves of absence with a legal or contractual right to reinstatement.           “Environmental Claim” means any allegation, notice of violation, action, suit, claim, Lien, demand, abatement or other Order or direction (conditional or otherwise) by reason of statute, common law, or contract, in law or equity, by any Governmental Body or by any other Person for personal injury (including sickness, disease or death), real, personal, tangible or intangible property damage, consequential damage, stigma, loss of value, damage to the environment (including but not limited to air, soil, water, or natural resources), nuisance, trespass, pollution, contamination or other adverse effects on the environment, or for fines, penalties, injunctions, or restrictions resulting from or based upon (a) the existence, or the continuation of the existence, of a Release or threatened Release (including, without limitation, sudden or non-sudden accidental or nonaccidental releases) of, or exposure or threatened exposure to, any Hazardous Material or other substance, chemical, material, pollutant, contaminant, odor, audible noise, or other Release in, into or onto the environment (including, without limitation, the air, soil, water or natural resources) at, in, by, from or related to any leased real estate or any activities conducted thereon or the Business; (b) the handling, use, transportation, storage, treatment or disposal of Hazardous Materials; (c) any disturbance or impact to the environment; or (d) the violation, or alleged violation, of any Environmental Law, Order or Permit of or from any Governmental Body.           “Environmental Law” means any Law relating to human health and safety or the protection of the environment or natural resources, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act of 1974 (42 U.S.C. § 300f et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. § 1101 et seq.); the Endangered Species Act of 1973 (7 U.S.C. § 136; 16 U.S.C. § 460 et seq.), and the Occupational Safety and Health Act of 1970 (29 U.S.C. §651 et seq.); as each has been amended and the regulations promulgated pursuant thereto. 3 --------------------------------------------------------------------------------             “ERISA Affiliate” means, with respect to any Person, all other Persons that are treated as a single employer with that Person pursuant to sections 414(b), 414(c), 414(m), and/or 414(o) of the Code.           “Excluded Marks” shall have the meaning set forth in the Intellectual Property Agreement.           “Excluded Pre-Petition Liabilities” means (i) any and all Claims (as such term is defined in the Bankruptcy Code) filed against the Debtors (as such term is defined in the Debtors’ Modified Second Amended Joint Plan of Reorganization under the Bankruptcy Code, dated October 21, 2003 (as thereafter modified, the “Plan”)), in the Debtors’ chapter 11 cases, and (ii) any other Claim that is subject to the discharge provisions contained in Section 10.02 of the Plan.           “GAAP” means generally accepted accounting principles in the United States as of the date hereof.           “Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, federal, state, or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).           “Hardware” means any and all computer and computer-related hardware, including, but not limited to, computers, file servers, facsimile servers, scanners, color printers, laser printers and networks.           “Hazardous Material” means any substance, chemical, material or waste, or any constituent thereof, that is defined by any Environmental Law as hazardous , corrosive, ignitable, explosive, infectious, radioactive, carcinogenic, petroleum-derived, or toxic, such that the use, storage, treatment, disposal, release, discharge of, or exposure to which is prohibited, limited or otherwise is regulated by any Governmental Body, or is regulated by or forms the basis of liability under any Environmental Law, including, without limitation, any material, waste or substance which is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “universal waste,” “commingled waste,” “a pollutant,” “pollution,” “subject waste,” a “contaminant,” “toxic waste” or “toxic substance” under any provision of Environmental Law, including but not limited to, petroleum or petroleum products, petroleum components, constituents, additives or derivatives thereof, radioactive materials, radionuclides, radon gas, mercury, asbestos and polychlorinated biphenyls.           “Indebtedness” of any Person means, without duplication, (i) the principal of and, accreted value and accrued and unpaid interest in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the 4 --------------------------------------------------------------------------------   deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities; (iii) all obligations of the type referred to in clauses (i) and (ii) of any Persons the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise; and (iv) all obligations of the type referred to in clauses (i) through (iii) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).           “Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “Intellectual Property Agreement” means the intellectual property agreement in the form attached hereto as Exhibit C between Seller and Purchaser, which apportions the rights in certain Intellectual Property between Seller and Purchaser and grants Purchaser certain rights and licenses thereunder.           “IRS” means the United States Internal Revenue Service and, to the extent relevant, the United States Department of Treasury.           “Knowledge of Seller” concerning a particular subject, area or aspect of the Business shall mean the knowledge of each of the Persons listed on Schedule 1.1(b) and all knowledge which was or should have been obtained upon reasonable inquiry by such Persons.           “Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule or regulation.           “Legal Proceeding” means any judicial, administrative or arbitral actions, suits or proceedings (public or private) by or before a Governmental Body.           “Liability” means any debt, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto.           “Licensed Excluded Marks” shall have the meaning set forth in the Intellectual Property Agreement.           “Licensed Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement or, except with respect to Real Property Leases and Tower Site Leases, other real estate declaration, covenant, condition, restriction or servitude. 5 --------------------------------------------------------------------------------             “Material Adverse Effect” means an effect, event, development, change, occurrence or state of facts which (i) is materially adverse to the Business, Assets, properties, financial condition, or results of operations of Seller, or (ii) prevents or materially impedes, impairs or hinders the consummation by Seller of the transactions contemplated by this Agreement, in each case, other than any effect, event, development, change, occurrence or state of facts arising out of or resulting from (A) general changes or conditions in the U.S. economy or securities or financial markets, (B) changes or conditions affecting the industries in which Seller operates (but only to the extent that the impact of such changes or conditions on Seller is not materially disproportionate to the impact on other Persons conducting business in such industries), (C) changes in Law or GAAP (but only to the extent that the impact of such changes on Seller is not materially disproportionate to the impact on other Persons conducting business in the industries in which Seller conducts business), (D) the occurrence of any war, sabotage, armed hostilities or acts of terrorism or any escalation or material worsening of any such war, sabotage, armed hostilities or acts of terrorism existing or underway as of the date hereof (but only to the extent that the impact of such changes on Seller is not materially disproportionate to the impact on other Persons conducting business in the industries in which Seller conducts business), (E) any action taken by Purchaser or any of its Affiliates in bad faith or in contravention of the terms of this Agreement, or (F) the announcement of this Agreement, compliance with the terms of this Agreement, or the consummation of the transactions contemplated by this Agreement (except with respect to the loss of employees or customers arising therefrom).           “Non-Statutory Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “Order” means any order, directive, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.           “Ordinary Course of Business” means the ordinary and usual course of normal day-to-day operations of the Business, as conducted by Seller.           “Owned Real Property” means all real property and interests in real property owned in fee by Seller.           “PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.           “Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.           “Permitted Exceptions” means (i) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings; (ii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business and not material in amount to the Business or the Purchased Assets; 6 --------------------------------------------------------------------------------   (iii) zoning, entitlement and other land use and environmental regulations by any Governmental Body; or (iv) valid title of a lessor under a capital or operating lease.           “Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.           “Products” means any and all products developed, manufactured, marketed or sold by Seller.           “Property” shall include all property and all other assets and interests of whatsoever nature including, without limitation, real and personal property, whether tangible or intangible, and claims, rights and choses in action, in each case, other than Intellectual Property.           “Proprietary Business Information” shall have the meaning set forth in the Intellectual Property Agreement.           “Purchased Contracts” means all Contracts of Seller related to the Business as of the Closing Date, other than Excluded Contracts.           “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any hazardous substance or pollutant or contaminant).           “Remedial Action” means any action, including, without limitation, any capital or operating expenditure, required or voluntarily undertaken to (a) clean up, remove, treat, or in any other way address any Hazardous Material or other substance in the indoor or outdoor environment, (b) prevent the Release or threatened Release, or minimize the further Release of any Hazardous Material or other substance so it does not migrate or endanger or threaten to endanger private or public health, welfare, or property or the environment, (c) investigate, monitor, study or assess, including without limitation, perform pre-remedial studies and investigations, operation and maintenance, or post-remedial monitoring and care, or (d) bring any Purchased Asset into compliance with all Environmental Laws, Orders and Permits.           “Seller Parent” means MCI, LLC, a Delaware limited liability company and sole stockholder of Seller.           “Seller Retained Intellectual Property” means the Subject Marks.           “Seller Proprietary Software” shall have the meaning set forth in the Intellectual Property Agreement.           “Statutory Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement. 7 --------------------------------------------------------------------------------             “Software” shall have the meaning set forth in the Intellectual Property Agreement.           “Subsidiary” means any Person of which a majority of the outstanding share capital, voting securities or other voting equity interests are owned, directly or indirectly, by Seller.           “Tax” or “Taxes” means (i) any and all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever; and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Taxing Authority in connection with any item described in clause (i).           “Taxing Authority” means the IRS and any other Governmental Body responsible for the administration of any Tax.           “Tax Return” means any return, report or statement required to be filed with respect to any Tax (including any attachments thereto, and any amendment thereof), including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where permitted or required, combined, consolidated or unitary returns for any group of entities that includes Seller, any of the Subsidiaries, or any of their Affiliates.           “Third Party Intellectual Property” shall have the meaning set forth in the Intellectual Property Agreement.           “Trademarks” shall have the meaning set forth in the Intellectual Property Agreement.           “Transfer Documents” means the Bill of Sale and the Assignment and Assumption Agreement.           “WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as amended, and the rules and regulations promulgated thereunder.      1.2 Terms Defined Elsewhere in this Agreement. For purposes of this Agreement, the following terms have meanings set forth in the sections indicated:       Term   Section Accounts Receivable   2.1(d) Agreement   Preamble Agreed Principles   3.3(a) Applications   7.5 8 --------------------------------------------------------------------------------         Term   Section Assumed Liabilities   2.3 Assignment and Assumption Agreement   9.1(k) Balance Sheet   5.4(a) Balance Sheet Date   5.4(a) Basket   10.5(a) Benefits Maintenance Period   8.2(a) Bill of Sale   9.1(j) Cap   10.5(a) Closing   4.1 Closing Date   4.1 Closing Statement   3.3(a) Closing Working Capital   3.3(a) CNAM Agreement   9.1(p) Colocation Agreement   9.1(q) Communications Act   5.3(b) Confidentiality Agreement   7.6 Corporate Account Agreement   9.1(r) Deposit   3.1(a) Dispute   11.2(a) Dispute Notice   11.2(a) Employee Benefit Plan   5.23(a) Environmental Permits   5.12(a) ERISA   5.23(a) Excluded Assets   2.2 Excluded Contracts   2.2(a) Excluded Liabilities   2.4 FCC   5.3(b) FCC Consent   7.5 FCC Licenses   5.6(c) Final Order   9.1(e) Final Working Capital   3.3(e) Financial Statements   5.4(a) Financing Commitment   4.2(f) FRP   8.2(e) Indemnification Claim   10.4(b) Independent Accountant   3.3(c) Inventory   2.1(c) Losses   10.2(a) Material Contract   5.7(a) Material Customers   5.14(a) Material Suppliers   5.14(b) Net Working Capital   3.3(a) 9 --------------------------------------------------------------------------------         Term   Section Nonassignable Assets   2.5(b) Non-Transferred Employees   8.1(a) Pension Plan   5.23(d) Personal Property Lease   5.19 Pre-Closing Covenants   10.1(b) Post-Closing Covenants   10.1(b) PP&E   2.1(g) Prepaids   2.1(e) Price Allocation   2.7(a) Property Taxes   2.8(a) Purchased Assets   2.1 Purchase Price   3.1 Purchaser   Preamble Purchaser Documents   6.2 Purchaser Indemnified Parties   10.2(a) Purchaser Plans   8.2(b) Purchaser Savings Plan   8.2(d) Purchaser’s FSA   8.2(f) Qualified Plan   5.23(c) Real Property Lease   5.18(a) Reseller Agreement   9.1(o) Seller   Preamble Seller Documents   5.2 Seller Indemnified Parties   10.3(a) Services   7.9 Standard Procedure   8.1(c) Survival Period   10.1(b) Telecommunication Services Agreement   9.1(m) Termination Date   4.2(a) Total Consideration   3.1 Tower Site Leases   5.18(a) Transferred Employees   8.1(a) Transfer Taxes   7.10      1.3 Other Definitional and Interpretive Matters                (a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:           Calculation of Time Period. When calculating the period of time before which, within which or following which, any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be 10 --------------------------------------------------------------------------------   excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.           Dollars. Any reference in this Agreement to $ shall mean U.S. dollars.           Exhibits/Schedules. The Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement. All matters disclosed in any Schedule shall be deemed to be disclosed in each other Schedule to the extent that the disclosure of such matters in such other Schedules, upon review of all schedules, is reasonably apparent. Disclosure of any item on any Schedule shall not constitute an admission or indication that such item or matter is material or would have a Material Adverse Effect. No disclosure on a Schedule relating to a possible breach or violation of any Contract, Law or Order shall be construed as an admission or indication that breach or violation exists or has actually occurred. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.           Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.           Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.           Herein. The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.           Including. The word “including” or any variation thereof means (unless the context of its usage otherwise requires) “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.           Reflected On or Set Forth In. An item arising with respect to a specific representation or warranty shall be deemed to be “reflected on” or “set forth in” a balance sheet or financial statements, to the extent any such phrase appears in such representation or warranty, if (a) there is a reserve, accrual or other similar item underlying a number on such balance sheet or financial statements that related to the subject matter of such representation, (b) such item is otherwise specifically set forth on the balance sheet or financial statements or (c) such item is reflected on the balance sheet or financial statements and is specifically set forth in the notes thereto. 11 --------------------------------------------------------------------------------             (b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES      2.1 Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement, at the Closing Purchaser shall purchase, acquire and accept from Seller, and Seller shall sell, transfer, assign, convey and deliver to Purchaser (or to a wholly owned subsidiary of Purchaser to be designated in writing by Purchaser at least five (5) Business Days prior to the Closing) all of the “Purchased Assets,” consisting of all of the assets, properties, rights, and interests wherever situated and of any kind or nature whatsoever owned by Seller as of the Closing Date and used directly or indirectly in the operation of the Business other than the Excluded Assets. The Purchased Assets shall be transferred to Purchaser by Seller free and clear of all Liens other than Permitted Exceptions. The “Purchased Assets” include, but are not limited to, each of the following assets:           (a) Balance Sheet. All Property, rights, and interests of the Business set forth or reflected on the Final Balance Sheet (except the Excluded Assets);           (b) Contracts. All rights of Seller under the Purchased Contracts including, but not limited to those set forth in Schedule 2.1(b), and all claims or causes of action with respect to the Purchased Contracts;           (c) Inventory. All inventory used or intended to be used primarily in connection with the Business, including, but not limited to all raw materials, work in process and finished goods (the “Inventory”);           (d) Accounts Receivable. All accounts receivable and any evidence thereof relating to or arising out of the Business and operation thereof, and any payments received with respect thereto after the Closing Date (including cash or check payments in transit on the Closing Date) (collectively, “Accounts Receivable”). Schedule 2.1(d) sets forth an itemized list of the Accounts Receivable as of the day immediately preceding the date hereof, and shall be updated as of the day immediately preceding the Closing Date, identifying such Accounts Receivable by obligor’s name, aging and amount;           (e) Prepaid Expenses and Deposits. All deposits (including customer deposits and security deposits for rent, electricity, telephone or otherwise) and prepaid charges and expenses, including any prepaid rent, of Seller related to any 12 --------------------------------------------------------------------------------   Purchased Assets other than prepaid charges, expenses and rent under the Real Property Leases and Personal Property Leases that is attributable to any period beginning prior to and ending on or before the Closing Date (“Prepaids”);           (f) Real Property Leases. All rights of Seller under each Real Property Lease to which Seller is a party, together with all improvements, fixtures and other appurtenances thereto and rights in respect thereof. An itemized list of such Real Property Leases as of the date hereof, identifying each such lease by reference to the property to which it relates and its commencement and expiration dates is set forth in Schedule 2.1(f), and shall be updated as of the Closing Date;           (g) Property, Plant, and Equipment. All equipment, assets in construction, office furniture and fixtures, computer equipment, office equipment, other furnishings, trucks, automobiles and other vehicles, supplies, and other tangible personal property of every kind and description, including tooling, wherever located (collectively, “PP&E”), other than such PP&E which is an Excluded Asset;           (h) Leased Tangible Property. All of the leased tangible personal property including, but not limited to the items set forth in Schedule 2.1(h), which includes all prepayments, security deposits and options to renew or purchase in connection therewith;           (i) Business Records. All Documents used in the Business, including Documents in Seller’s possession relating to Products, services, marketing, advertising, promotional materials, Assigned Intellectual Property, and all files, customer files and documents (including credit information), supplier lists, records, literature and correspondence, whether or not physically located on any of the premises referred to in Section 2.1(f) above, but excluding such files as may be required under applicable Law regarding privacy;           (j) FRP. FRP assets solely to the extent provided for in Section 8.2(f) hereof;           (k) Deferred Compensation Plan. Deferred Compensation Plan assets solely to the extent provided for in Section 8.2(h) hereof;           (l) Permits. All Permits used by Seller in the Business to the extent transferable to Purchaser, including, but not limited to, all FCC Licenses of Seller as listed on Schedule 2.1(l) attached hereto;           (m) Non-Disclosure, Confidentiality, Non-Compete, and Similar Agreements. All rights of Seller under non-disclosure or confidentiality, non-compete, or non-solicitation agreements with Employees of Seller or with third parties to the extent exclusively relating to the Business or the Purchased Assets, including, but not limited to, the standalone non-compete agreements set forth on Schedule 2.1(m) attached hereto; 13 --------------------------------------------------------------------------------             (n) Warranties and Guarantees. All of Seller’s interest in rights under or pursuant to all warranties, representations and guarantees, if any, made by vendors, suppliers, manufacturers and contractors relating to the Business or affecting the Purchased Assets;           (o) Intellectual Property. The Assigned Intellectual Property and Proprietary Business Information pursuant, in each case, pursuant to the terms of the Intellectual Property Agreement;           (p) Third Party Insurance Proceeds. All third-party property and casualty insurance proceeds, and all rights to third-party property and casualty insurance proceeds, in each case to the extent received or receivable in respect of the Business;           (q) Claims. All of Seller’s causes of action, claims, credits, demands or rights of set-off against third parties, to the extent related to the Business, except to the extent related to any Excluded Asset;           (r) Forms. All stationery, forms, labels, shipping material, art work, and photographs, in each case, except to the extent incorporating any Excluded Marks;           (s) Funded Compensation Rights. All rights (including experience ratings, to the extent transferable to Purchaser) with respect to unemployment and workers’ compensation, in each case, relating to Transferred Employees;           (t) Communications. All rights to the telephone and facsimile numbers used in the Business, as well as all rights to receive mail and other communications addressed to Seller and relating to the Business (including mail and communications from customers, suppliers, distributors, agents and others and payments with respect to the Purchased Assets); and           (u) Goodwill. All goodwill of the Business.      2.2 Excluded Assets. Nothing herein contained shall be deemed to sell, transfer, assign or convey the Excluded Assets to Purchaser, and Seller shall retain all right, title and interest to, in and under the Excluded Assets. “Excluded Assets” shall mean each of the following assets:           (a) The Excluded Contracts. All rights of Seller under the Contracts set forth on Schedule 2.2(a) and Schedule 5.9(f)(2), including all claims or causes of action with respect thereto (the “Excluded Contracts”).           (b) Cash and Cash Equivalents. All cash, cash equivalents, bank deposits or similar cash items of Seller; 14 --------------------------------------------------------------------------------             (c) Stock Certificates; Subsidiaries. All shares of capital stock of, or other ownership interests in the Subsidiaries, and all assets owned, leased or held by the Subsidiaries, whether or not used or useful in the Business;           (d) Real Property. All Owned Real Property;           (e) Corporate Books. All minute books, organizational documents, stock registers and such other books and records of Seller or any Subsidiary as pertain to ownership, organization or existence of Seller and each Subsidiary;           (f) Intellectual Property. All Intellectual Property (including Third Party Intellectual Property) other than the Assigned Intellectual Property and Proprietary Business Information, and the goodwill associated therewith.           (g) Additional Books and Records. Any (i) other books and records that Seller and the Subsidiaries are required by Law to retain or that Seller determines are necessary or advisable to retain; provided, however, that Purchaser shall have the right to make copies of any portions of such retained books and records that relate to the Business or any of the Purchased Assets; and (ii) documents relating to proposals to acquire the Business by Persons other than Purchaser, except for standalone confidentiality agreements;           (h) Tax Refunds. All interests in or rights to any refund of Taxes, Tax credits or Tax loss carryforwards relating to the operation of the Business, the Purchased Assets or the Assumed Liabilities, or applicable to, any period, or any portion of any period, ending on or before the Closing Date;           (i) Tax Records. All Tax returns and financial statements of Seller and the Subsidiaries and the Business and all records (including working papers) related thereto;           (j) Claims Related to Excluded Assets. All of Seller’s causes of action, claims, counterclaims, credits, demands or rights of set-off against third parties to the extent related to any Excluded Asset;           (k) Seller’s Rights Under This Agreement. All rights that accrue to Seller under this Agreement and the Seller Documents;           (l) Employee Benefit Plans. All Employee Benefit Plans and any assets relating to such plans, except to the extent specifically provided in Sections 8.2(f) and 8.2(h) hereof; and           (m) Other Assets. Such other assets as are set forth on Schedule 2.2(m).      2.3 Assumption of Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the Closing Purchaser shall assume, effective as of the 15 --------------------------------------------------------------------------------   Closing, and shall timely perform, pay and discharge in accordance with their respective terms, only the Liabilities of Seller set forth below in this Section 2.3, other than the Excluded Liabilities (collectively, the “Assumed Liabilities”), consisting of the following Liabilities:           (a) Liabilities of Seller under the Purchased Contracts;           (b) Liabilities arising out of, relating to or with respect to any Employee Benefit Plan solely to the extent provided for in Article VIII;           (c) all accounts payable existing on the Closing Date and incurred in the Ordinary Course of the Business (including, for the avoidance of doubt, (i) invoiced accounts payable and (ii) accrued but uninvoiced accounts payable), in each case, including those set forth on Schedule 2.3(c) to be delivered no less than five Business Days prior to the Closing Date;           (d) all Taxes to be paid by Purchaser pursuant to Section 7.11 hereof; and           (e) other Liabilities with respect to the Business, the Purchased Assets or the Transferred Employees arising after the Closing.      2.4 Excluded Liabilities. Purchaser will not assume, or be liable for, any liabilities which are not Assumed Liabilities. All such liabilities which are not Assumed Liabilities shall be referred to as “Excluded Liabilities,” all of which Seller shall retain and remain liable for (whether such Excluded Liabilities are known or unknown, absolute, contingent, liquidated or unliquidated, due or to become due, and whether claims with respect thereto are asserted before or after the Closing). Excluded Liabilities shall include, but not be limited to, each of the following Liabilities:           (a) any and all Liabilities of and/or on behalf of Seller for costs and expenses incurred in connection with this Agreement or the negotiation and consummation of the transactions contemplated by this Agreement;           (b) any and all employee-related Liabilities of Seller accrued or arising out of actions, omissions or events occurring prior to or on the Closing Date, including, without limitation: (i) accrued salaries and wages, (ii) accrued vacation and sick pay, (iii) accrued payroll Taxes, (iv) withholdings, (v) charges of unfair labor practices, or (vi) discrimination complaints;           (c) any and all Liabilities of Seller for the provision of health plan continuation coverage in accordance with the requirements of COBRA and Sections 601 through 608 of ERISA to employees of Seller, regardless of whether or not such employees accept employment with Purchaser pursuant to Section 8.1; 16 --------------------------------------------------------------------------------             (d) any and all Liabilities owed to, or claims of, Seller’s creditors, whether arising before or after the Closing Date, which may be asserted against Purchaser or any of the Purchased Assets pursuant to any applicable bulk sales, bulk transfer or similar laws and which do not otherwise constitute Assumed Liabilities;           (e) any and all Liabilities under any intercompany loans, accounts or Contracts between the Business, on the one hand, and Seller or any of its affiliates, on the other hand;           (f) any and all Liabilities relating to litigation (i) involving the Business, the Purchased Assets or Seller and existing as of the Closing Date, or (ii) to the extent arising out of or resulting from the Excluded Assets or Excluded Liabilities;           (g) any and all Liabilities of Seller arising by reason of any violation of any Law or any requirement of any Governmental Body, including all Liabilities arising from, related to or in connection with FCC enforcement actions, in each case, to the extent such Liability results from or arises out of events, facts or circumstances occurring or existing on or prior to the Closing Date;           (h) any and all Liabilities relating to or arising out of Excluded Assets, including Excluded Contracts;           (i) any and all Liabilities for the return by any customer of Seller of products sold or distributed by Seller on or prior to the Closing Date or for a warranty claim for any product or service sold, distributed or performed, as the case may be, by Seller on or prior to the Closing Date based on any express warranty or implied warranty arising due to the statements or conduct of Seller or Seller’s employees or agents prior to the Closing Date;           (j) any and all Taxes arising from or with respect to the Purchased Assets or the operation of the Business that are incurred in or attributable to any period, or any portion of any period, ending on or prior to the Closing Date, and income and similar Taxes, of a type not described in Section 7.11, that are imposed as a result of the sale of the Purchased Assets pursuant to this Agreement (except, in any case, as otherwise provided in this Agreement);           (k) any Liabilities of the Seller for Indebtedness;           (l) any and all Liabilities of Seller under any Contract, other than the Purchased Contracts, and any and all Liabilities of Seller under any Contract or Permit arising out of a breach or alleged breach thereof by Seller on or prior to the Closing Date;           (m) any and all Liabilities of Seller arising by reason of any violation or alleged violation of any Law or any requirement of any Governmental Body on or prior to the Closing Date; 17 --------------------------------------------------------------------------------             (n) any and any Liabilities for the return by any customer of Seller of products sold or distributed by Seller on or prior to the Closing or any Liabilities for a warranty claim for any product or service sold, distributed or performed, as the case may be, by the Seller on or prior to the Closing based on any express warranty, oral or written, or any implied warranty arising due to the statements or conduct of Seller or Seller’s employees or agents;           (o) any and all Liabilities of the Seller arising out of the injury to or death of any person or animal or damage to or destruction of any tangible property, whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from or related to products (or parts or components thereof) sold, distributed or otherwise disposed of or services performed by or on behalf of the Seller, in each case, on or prior to the Closing Date;           (p) any and all Liabilities of Seller for severance pay or the like with respect to any employee of the Seller that does not accept employment with the Purchaser upon completion of the transaction contemplated by this Agreement;           (q) any and all Liabilities of Seller for salaries, commissions, bonuses, deferred compensation or like payments to any director, officer or employee of the Seller for the period prior to the Closing, except as otherwise expressly provided herein; and           (r) all Excluded Pre-Petition Liabilities.           Notwithstanding any provisions in this Agreement to the contrary, Purchaser is assuming only the Assumed Liabilities and is not assuming any other Liability of Seller or its Subsidiaries (or any predecessor owner of all or part of the Business) of whatever nature. All such other Liabilities shall be retained by and remain Liabilities and obligations of Seller.      2.5 Further Conveyances and Assumptions; Consent of Third Parties.           (a) From time to time following the Closing, Seller and Purchaser shall execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases and acquittances and such other instruments, and shall take such further actions, as may be reasonably necessary or appropriate to assure fully to Purchaser and its successors or assigns, all of the rights, titles and interests intended to be conveyed to Purchaser under this Agreement and the Transfer Documents and to assure fully to Seller and its Affiliates and their successors and assigns, the assumption of the liabilities and obligations intended to be assumed by Purchaser under this Agreement and the Transfer Documents, and to otherwise make effective the transactions contemplated hereby and thereby.           (b) Nothing in this Agreement nor the consummation of the transactions contemplated hereby shall be construed as an attempt or agreement to 18 --------------------------------------------------------------------------------   assign any Purchased Asset, including any Contract, Permit, certificate, approval, authorization or other right, which by its terms or by Law is nonassignable without the consent of a third party or a Governmental Body or is cancelable by a third party in the event of an assignment (“Nonassignable Assets”) unless and until such consent shall have been obtained; provided, however, that Seller shall use its commercially reasonable efforts to cooperate with Purchaser at its request for up to 180 days following the Closing Date in endeavoring to obtain such consents promptly; and provided further, that such efforts shall not require Seller or any of its Affiliates to incur any Liabilities or provide any financial accommodation or to remain secondarily or contingently liable for any Assumed Liability to obtain any such consent. Purchaser and Seller shall use their respective commercially reasonable efforts to obtain, or cause to be obtained, any consent, substitution, approval or amendment required to novate all Liabilities under any and all Purchased Contracts or other Liabilities that constitute Assumed Liabilities or to obtain in writing the unconditional release of Seller and its Affiliates so that, in any such case, Purchaser shall be solely responsible for such Liabilities.      2.6 Bulk Sales Laws. Purchaser hereby waives compliance by Seller with the requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Purchaser; it being understood that any Liabilities arising out of the failure of Seller to comply with the requirements and provisions of any “bulk-transfer” Laws of any jurisdiction which would not otherwise constitute Assumed Liabilities shall be treated as Excluded Liabilities.      2.7 Purchase Price Allocation.           (a) For all Tax purposes, the Purchase Price (plus any Assumed Liabilities that are treated as consideration for the Purchased Assets) shall be allocated in the manner set forth in this Section 2.7 (the “Price Allocation”). Purchaser shall prepare a proposed allocation in a manner consistent with Section 1060 of the Code and the regulations promulgated thereunder and shall deliver such proposal to Seller for its review and approval not later than forty five (45) Business Days after the Closing Date. Seller shall notify Purchaser of its agreement to such proposal or of any modifications it wishes to make to such proposed allocation. If Seller proposes any modifications, then Seller and Purchaser will attempt to reach agreement on the Price Allocation prior to the due date for the filing of IRS Form 8594. In the event that Purchaser and Seller are unable to agree on the Price Allocation prior to such due date, then each party will separately file an IRS Form 8594. In the event that Purchaser and Seller agree on the Price Allocation (i) each party agrees to timely file an IRS Form 8594 reflecting the Price Allocation for the taxable year that includes the Closing Date and to make any timely filing required by applicable state or local Law, (ii) such Price Allocation shall be binding on Purchaser and Seller for all Tax reporting purposes, (iii) none of Purchaser or Seller or any of their respective Affiliates shall take any position inconsistent with such Price Allocation in connection with any Tax proceeding, except to the extent required by applicable Law, and (iv) if any Taxing Authority disputes 19 --------------------------------------------------------------------------------   such Price Allocation, the party receiving notice of the dispute shall promptly notify the other party hereto of such dispute, and the parties hereto shall cooperate in good faith in responding to such dispute in order to preserve the effectiveness of such Price Allocation.           (b) Any indemnification payment treated as an adjustment to the Total Consideration paid for the Purchased Assets under Article III hereof shall be reflected as an adjustment to the consideration allocated to a specific asset, if any, giving rise to the adjustment and if any such adjustment does not relate to a specific asset, such adjustment shall be allocated among the Purchased Assets in accordance with the Price Allocation method provided in this Section 2.7.      2.8 Allocation of Taxes and Expenses.           (a) All state, county and local ad valorem Taxes on Purchased Assets (“Property Taxes”) shall be prorated between Purchaser and Seller as of the Closing Date, computed by multiplying the amount of Property Taxes for the fiscal year for which the same are levied by a fraction, the numerator of which is the number of days in such fiscal year up to and including the Closing Date and the denominator of which is the number of days in such fiscal year. In connection with such proration of Property Taxes, in the event that actual Property Tax figures are not available at the Closing Date, proration of Property Taxes shall be based upon the actual Property Taxes for the preceding fiscal year for which actual Property Tax figures are available, and re-prorated when actual Property Tax figures become available. All utility charges, gas charges, electric charges, water charges, water rents and sewer rents, if any, relating to the Purchased Assets shall be apportioned between Purchaser and Seller as of the Closing Date, computed on the basis of the most recent meter charges or, in the case of annual charges, on the basis of the established fiscal year.           (b) All prorations and applicable payments to either party in connection with this Section 2.8 shall be made, insofar as feasible, on the Closing Date, and the Purchase Price shall be adjusted accordingly. During the three-month period subsequent to the Closing Date, Seller shall advise Purchaser, and Purchaser shall advise Seller, of any actual changes to such prorations, and the Purchase Price shall be increased or decreased, as applicable, at the end of such three-month period. In the event Purchaser or Seller shall receive bills after the Closing Date for expenses incurred before the Closing Date that were not prorated in accordance with this Section 2.8 or that were re-prorated in accordance with this Section 2.8, then Purchaser or Seller, as the case may be, shall promptly notify the other party as to the amount of the expense subject to proration and the responsible party shall pay its portion of such expense (or, in the event such expense has been paid on behalf of the responsible party, reimburse the other party for its portion of such expenses).      2.9 Power of Attorney; Right of Endorsement. Effective as of the Closing, Seller hereby constitutes and appoints Purchaser the true and lawful attorney of Seller with full power of substitution, in the name and on behalf of Seller, but for the benefit of 20 --------------------------------------------------------------------------------   and at the sole cost and expense of Purchaser, (a) to collect all Purchased Assets, (b) to endorse, without recourse, checks, notes and other instruments in connection with the Business and constituting Purchased Assets, (c) to institute and prosecute all proceedings which Purchaser may deem proper in order to collect, assert or enforce any claim, right or title in or to the Purchased Assets, (d) to defend and compromise all actions, suits or proceedings with respect to any of the Purchased Assets and (e) to do all such reasonable acts and things with respect to the Purchased Assets as Purchaser may deem advisable, subject to the consent of the Seller, which consent shall not be unreasonably withheld; provided that the foregoing shall not apply with respect to any Excluded Assets or Excluded Liabilities or to any Legal Proceedings in respect thereof. Seller agrees that the foregoing powers are coupled with an interest and shall not be revocable by Seller directly or indirectly in any manner. Purchaser shall retain for its own account any amounts collected pursuant to the foregoing powers. ARTICLE III CONSIDERATION      3.1 Consideration.           (a) The aggregate consideration for the Purchased Assets shall be (i) an amount in cash equal to $23,000,000 (the “Purchase Price”), subject to adjustment as provided in Section 3.3, of which $3,450,000 (the “Deposit”) shall be paid by Purchaser to Seller pursuant to Section 3.1(b) and (ii) the assumption of the Assumed Liabilities (together with the Purchase Price, the “Total Consideration”).           (b) Prior to, or immediately upon, the execution of this Agreement, Purchaser shall pay to Seller the Deposit in immediately available United States funds to an account designated by Seller.      3.2 Payment of Purchase Price. On the Closing Date, (a) Purchaser shall pay the Purchase Price (less the Deposit) to Seller by wire transfer of immediately available United States funds into an account or accounts designated by Seller.      3.3 Purchase Price Adjustment.           (a) As promptly as practicable, but no later than 45 days after the Closing Date, Seller shall cause to be prepared and delivered to Purchaser the Closing Statement (as defined below) and a certificate based on such Closing Statement setting forth Seller’s calculation of Closing Working Capital. The closing statement (the “Closing Statement”) shall present the Net Working Capital as of the end of business on the Closing Date (“Closing Working Capital”). “Net Working Capital” means the consolidated current assets of the Business, reduced by the consolidated current liabilities of the Business, in each case as determined in accordance with the accounting principles set forth on Schedule 3.3(a) (the “Agreed Principles”). 21 --------------------------------------------------------------------------------             (b) If Purchaser disagrees with Seller’s calculation of Closing Working Capital delivered pursuant to Section 3.3(a), Purchaser may, within 30 days after delivery of the Closing Statement, deliver a notice to Seller stating that Purchaser disagrees with such calculation and specifying in reasonable detail those items or amounts as to which Purchaser disagrees and the basis therefor (provided that Purchaser’s disagreement may not be based upon adjustments sought to be made at times other than when such adjustments are customarily made). Purchaser shall be deemed to have agreed with all other items and amounts contained in the Closing Statement and the calculation of Closing Working Capital delivered pursuant to Section 3.3(a).           (c) If a notice of disagreement shall be duly delivered pursuant to Section 3.3(b), Purchaser and Seller shall, during the 30 days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, the amount of Closing Working Capital. If during such period, Purchaser and Seller are unable to reach such agreement, they shall promptly thereafter cause an independent accounting firm as they shall mutually select (the “Independent Accountant”) to review this Agreement and the disputed items or amounts for the purpose of calculating Closing Working Capital (it being understood that in making such calculation, the Independent Accountant shall be functioning as an expert and not as an arbitrator). Each party agrees to execute, if requested by the Independent Accountant, an engagement letter containing terms that are reasonably requested by the Independent Accountant. Purchaser and Seller shall cooperate with the Independent Accountant and promptly provide all documents and information requested by the Independent Accountant. In making such calculation, the Independent Accountant shall consider only those items or amounts in the Closing Statement and Seller’s calculation of Closing Working Capital as to which Purchaser has disagreed in its notice of disagreement duly delivered pursuant to Section 3.3(b). The Independent Accountant shall deliver to Purchaser and Seller, as promptly as practicable (but in any case no later than 45 days from the date of engagement of the Independent Accountant), a report setting forth such calculation. Such report shall be final and binding upon Purchaser and Seller, shall be deemed a final arbitration award that is binding on Purchaser and Seller, and neither Purchaser nor Seller shall seek further recourse to courts or other tribunals, other than to enforce such report. Judgment may be entered to enforce such report in any court of competent jurisdiction. The Independent Accountant will determine the allocation of the cost of its review and report based on the inverse of the percentage its determination (before such allocation) bears to the total amount of the total items in dispute as originally submitted to the Independent Accountant. For example, should the items in dispute total in amount to $1,000 and the Independent Accountant awards $600 in favor of Seller’s position, 60% of the costs of its review and report would be borne by Purchaser and 40% of the costs would be borne by Seller.           (d) Purchaser and Seller shall, and shall cause their respective representatives to, cooperate and assist in the preparation of the Closing Statement and the calculation of Closing Working Capital and in the conduct of the review referred to in 22 --------------------------------------------------------------------------------   this Section 3.3, including the making available to the extent necessary of books, records, work papers and personnel.           (e) If Final Working Capital exceeds $4,000,000, Purchaser shall pay to Seller, in the manner and with interest as provided in Section 3.3(f), the amount of such excess, and if Final Working Capital is less than $4,000,000, Seller shall pay to Purchaser, as an adjustment to the Purchase Price, in the manner and with interest as provided in Section 3.3(f), the amount of such difference. “Final Working Capital” means Closing Working Capital (i) as shown in Seller’s calculation delivered pursuant to Section 3.3(a) if no notice of disagreement with respect thereto is duly delivered pursuant to Section 3.3(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by Purchaser and Seller pursuant to Section 3.3(c) or (B) in the absence of such agreement, as shown in the Independent Accountant’s calculation delivered pursuant to Section 3.3(c); provided, however, that in no event shall Final Working Capital be more than Seller’s calculation of Closing Working Capital delivered pursuant to Section 3.3(a) or less than Purchaser’s calculation of Closing Working Capital delivered pursuant to Section 3.3(b).           (f) Any payment pursuant to Section 3.3(e) shall be made at a mutually convenient time and place within five (5) Business Days after Final Working Capital has been determined by wire transfer by Purchaser or Seller, as the case may be, of immediately available funds to the account of such other party as may be designated in writing by such other party. The amount of any payment to be made pursuant to this Section 3.3 shall bear interest from and including the Closing Date to but excluding the date of payment at a rate per annum equal to the “prime rate” as published in the “money rates” (or similar) section of The Wall Street Journal on the date of payment calculated on the basis of the number of days elapsed from the Closing Date to the date of payment. ARTICLE IV CLOSING AND TERMINATION      4.1 Closing Date. The consummation of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities provided for in Article II hereof (the “Closing”) shall take place at the offices of Manatt, Phelps & Phillips, LLP, located at 7 Times Square, New York, NY 10036 (or at such other place as the parties may designate in writing) at 10:00 a.m. (New York City time) on the last Business Day (the “Closing Date”) of the month in which all of the conditions set forth in Article IX have been satisfied or waived (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), unless another time, date or place is agreed to in writing by the parties hereto.      4.2 Termination of Agreement. This Agreement may be terminated prior to the Closing as follows: 23 --------------------------------------------------------------------------------             (a) At the election of Seller or Purchaser on or after the date that is 120 days following the date hereof (such date, the “Termination Date”), if the Closing shall not have occurred by the close of business on such date; provided that, if the condition set forth in Section 9.1(e) is the only condition remaining to be satisfied on such date (other than those conditions that are only capable of being satisfied on the Closing), then Seller or Purchaser may extend the Termination Date by seventy five (75) additional days; and provided further that the right to terminate this Agreement under this Section 4.2(a) shall not be available to any party whose failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date;           (b) by mutual written consent of Seller and Purchaser;           (c) by Purchaser, provided that it is not then in material breach of any of its obligations under this Agreement, if Seller (i) fails in any material respect to perform any of its covenants in this Agreement when performance thereof is due or (ii) has breached in any material respect any of the representations or warranties contained in Article V of this Agreement, and does not cure such failure or breach within fifteen (15) Business Days after Purchaser delivers written notice thereof; provided, however, that Purchaser shall not be entitled to terminate this Agreement pursuant to this Section 4.2(c) if, prior to the expiration of such fifteen (15) Business Day period, Seller delivers a certificate signed by an officer of Seller certifying that (A) Seller reasonably believes that such breach or failure is capable of being cured prior to the Termination Date and (B) Seller shall use its reasonable best efforts to cause such breach or failure to be cured prior to the Termination Date;           (d) by Seller, provided that it is not then in material breach of any of its obligations under this Agreement, if Purchaser (i) fails in any material respect to perform any of its covenants in this Agreement when performance thereof is due or (ii) has breached in any material respect any of the representations or warranties contained in Article VI of this Agreement, and does not cure such failure or breach within fifteen (15) Business Days after Seller delivers written notice thereof; provided, however, that Seller shall not be entitled to terminate this Agreement pursuant to this Section 4.2(d) if, prior to the expiration of such fifteen (15) Business Day period, Purchaser delivers a certificate signed by an officer of Seller certifying that (A) Purchaser reasonably believes that such breach or failure is capable of being cured prior to the Termination Date and (B) Purchaser shall use its reasonable best efforts to cause such breach or failure to be cured prior to the Termination Date;           (e) by Seller or Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the parties hereto shall promptly appeal any adverse determination which is appealable (and pursue such appeal with reasonable diligence); or 24 --------------------------------------------------------------------------------             (f) by Seller if Purchaser has not, within eight (8) Business Days following the date hereof, (i) obtained a signed commitment (in a form that is reasonably satisfactory to Seller) from a banking or other financial institution reasonably satisfactory to Seller to provide debt financing to Purchaser in an aggregate amount of not less than $40,000,000 in connection with the transactions contemplated hereby (the “Financing Commitment”) and (ii) delivered to Seller a copy of the Financing Commitment which is certified by Purchaser’s Chief Executive Officer or Chief Financial Officer to be true, correct and complete.      4.3 Procedure Upon Termination. In the event of termination and abandonment by Purchaser or Seller, or both, pursuant to Section 4.2 hereof, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the purchase of the Assets hereunder shall be abandoned, without further action by Purchaser or Seller.      4.4 Effect of Termination.           (a) In the event that this Agreement is validly terminated in accordance with Sections 4.2 and 4.3, then each of the parties shall be relieved of its respective duties and obligations arising under this Agreement from and after the date of such termination and such termination shall be without liability to Purchaser or Seller; provided, that no such termination shall relieve any party hereto from liability for any breach of this Agreement or other Liability arising prior to termination hereof and; provided, further, that the obligations of the parties set forth in this Section 4.4 and Article XI hereof shall survive any such termination and shall be enforceable hereunder.           (b) If this Agreement is validly terminated:           (i) by Purchaser pursuant to Section 4.2(a) (prior to Seller validly extending the Termination Date as set forth in Section 4.2(a)) if the condition set forth in Section 9.1(e) shall not have been satisfied by the date that is 120 days following the date hereof and immediately prior to such termination the conditions set forth in Sections 9.1(a) and (b) shall have been satisfied; or           (ii) by Purchaser pursuant to Section 4.2(a) prior to the date that is 195 days following the date hereof (assuming that Seller validly extended the Termination Date by seventy-five (75) days as set forth in Section 4.2(a)) and the conditions set forth in each of Sections 9.1(a) and (b) and Section 9.1(e) shall not have been satisfied by the Termination Date, as so extended),           (iii) by Seller pursuant to Section 4.2(d) or Section 4.2(f), then the Deposit (together with any interest or other income that may have been earned thereon) shall be forfeited to Seller, and Purchaser shall have no claim whatsoever thereto. If this Agreement is validly terminated for any other reason, then Seller shall refund the Deposit (excluding any interest or other income that may have been earned 25 --------------------------------------------------------------------------------   thereon) to Purchaser, to be paid by wire transfer of immediately available United States funds into an account designated by Purchaser.           (c) The Confidentiality Agreement shall survive any termination of this Agreement and nothing in this Section 4.4 shall relieve Purchaser or Seller of its respective obligations under the Confidentiality Agreement. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser that:           5.1 Organization and Good Standing. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted. Seller is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a Material Adverse Effect. Schedule 5.1 sets forth a list of the states in which Seller is qualified to do business as of the date hereof.           5.2 Authorization of Agreement. Seller has all requisite corporate power and authority to execute and deliver this Agreement and Seller has all requisite power, authority and legal capacity to execute and deliver each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by Seller in connection with the consummation of the transactions contemplated by this Agreement (the “Seller Documents”), to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and each of the Seller Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by all requisite corporate action on the part of Seller and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement and such other agreements and documents or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Seller Documents will be at or prior to the Closing, duly and validly executed and delivered by Seller and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each of the Seller Documents when so executed and delivered will constitute, legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 26 --------------------------------------------------------------------------------        5.3 Conflicts; Consents of Third Parties; Subsidiaries.           (a) Except as set forth on Schedule 5.3(a), none of the execution and delivery by Seller of this Agreement, the consummation of the transactions contemplated hereby, or compliance by Seller with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation or by-laws of Seller; (ii) any Contract (other than Tower Site Leases) or Permit to which Seller is a party or by which any of the properties or assets of Seller are bound; (iii) any Order of any Governmental Body applicable to Seller or by which any of the properties or assets of Seller are bound; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations that would not (A) materially impair the ability of Seller to enter into this Agreement and to consummate the transactions contemplated hereby, (B) materially adversely affect the business, operations, or condition (financial or otherwise) of the Business, or (C) subject any material portion of the Purchased Assets to any Lien.           (b) Except as set forth on Schedule 5.3(b), no material consent, waiver, approval, Order, Permit or authorization of, or filing with, or notification to, any Person or Governmental Body is required on the part of Seller in connection with the execution and delivery of this Agreement, the compliance by Seller with any of the provisions hereof, or the consummation of the transactions contemplated hereby, except for filings with and approvals of the Federal Communications Commission (the “FCC”) as required under the Communications Act of 1934 (the “Communications Act”) and the rules and regulations promulgated thereunder.           (c) All of Seller’s Subsidiaries are listed on Schedule 5.3(c). No such Subsidiary owns, uses, has a right to use, leases, licenses, or otherwise has any interest of any type whatsoever in any of the Property used in the Business.      5.4 Financial Statements; Books of Account.           (a) Seller has made available to Purchaser copies of (i) the unaudited balance sheets of Seller as at December 31, 2005 and 2004 and the related unaudited statements of income of Seller for the years then ended, in each case, used in the preparation of the audited financial statements of MCI, Inc. for such periods, and (ii) the unaudited balance sheet of Seller as at September 30, 2006 and the related statement of income of Seller for the three-month period then ended (such unaudited statements, including the related notes and schedules thereto, are referred to herein as the “Financial Statements”). Except as set forth in the notes thereto and as disclosed in Schedule 5.4(a), each of the Financial Statements has been prepared in accordance with GAAP consistently applied and presents fairly in all material respects the consolidated financial position, results of operations and cash flows of Seller and its Subsidiaries as at the dates and for the periods indicated therein. For the purposes hereof, the unaudited 27 --------------------------------------------------------------------------------   balance sheet of Seller as at September 30, 2006 is referred to as the “Balance Sheet” and September 30, 2006 is referred to as the “Balance Sheet Date.”           (b) Except as set forth on Schedule 5.4(b), the books, records and accounts of Seller accurately and fairly reflect, in all material aspects, the transactions and the assets and liabilities of Seller relating to the Business. Seller maintains a system of internal accounting control sufficient all material aspects to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (iii) access to assets, properties, books, records and accounts is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accounting for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.           (c) Except as set forth in Schedule 5.5(a), Seller does not have any material Liabilities of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except liabilities that (i) are reflected or disclosed in Balance Sheet (whether or not required under GAAP to be disclosed in the Balance Sheet or the notes thereof), (ii) were incurred after the Balance Sheet Date in the Ordinary Course of Business or (iii) are set forth in Schedule 5.4(c) hereto.      5.5 Title to Purchased Assets; Sufficiency.           (a) Except as set forth in Schedule 5.5(a), Seller owns and has good title to each of the Purchased Assets, free and clear of all Liens other than Permitted Exceptions.           (b) The Purchased Assets and Licensed Intellectual Property constitute all of the assets necessary together with Seller’s agreements hereunder and under the Seller Documents for Purchaser to conduct the Business as of the Closing Date without interruption and in the Ordinary Course of Business, except the Excluded Assets and those services set forth on Schedule 5.5(b).           (c) Except as set forth in Schedule 5.5(a), and except for the effects of this Agreement, the consummation of the transactions contemplated hereby, or of any actions of Purchaser or any Affiliate of Purchaser, upon the consummation of the transactions contemplated hereby, Purchaser will have acquired, on and as of the Closing Date, good and valid title in and to the Purchased Assets, free and clear of all Liens other than Permitted Exceptions.      5.6 Compliance with Laws; Permits.           (a) Except for minor discrepancies in the latitude and/or longitude of certain sites, Seller is in compliance in all material respects with all Laws applicable to its operations and assets and to the Business. Seller has not received any written notice 28 --------------------------------------------------------------------------------   of or been charged with the violation of any Laws, which violation would adversely affect the Business in any material respect. Schedule 5.6(a) contains a description of any such written notices which have been received by Seller as of the date hereof.           (b) Except for the matters addressed in Section 5.6(c), Seller currently has all material Permits which are required for the operation of the Business as presently conducted. Seller is not in material default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a material default or violation) of any term, condition or provision of any material Permit to which it is a party.           (c) Schedule 5.6(c) sets forth a true and complete list as of the date of this Agreement of all Permits issued or granted to Seller by the FCC that are required for the operation of the Business as presently conducted (the “FCC Licenses”). Except as set forth on Schedule 5.6(c) and for minor discrepancies with respect to the latitude and/or longitude of certain sites, (i) each of the FCC Licenses is in full force and effect; (ii) Seller has complied in all material respects with the terms of each of the FCC Licenses; (iii) to the Knowledge of Seller, no condition exists or event has occurred which, with or without the lapse of time or the giving of notice, or both, would reasonably be expected to result in the revocation, cancellation, adverse modification or non-renewal of any of the FCC Licenses; (iv) without limiting the generality of clause (ii) above, as of the date hereof, all license fees and expenses due and payable by Seller in relation to the FCC Licenses have been paid by Seller; and (v) since January 1, 2004, all material reports and other documents required to be filed by Seller with the FCC or any other Governmental Body with respect to the FCC Licenses have been timely filed.      5.7 Material Contracts.      (a) Schedule 5.7(a) sets forth all of the following Contracts currently in effect, whether written or oral, other than Real Property Leases and Tower Site Leases, to which Seller is a party or by which it is bound and that are primarily related to the Business or by which the Purchased Assets may be bound or affected and that are Purchased Contracts (collectively, the “Material Contracts”):           (i) Contracts with any Affiliate or current officer or director of Seller;           (ii) Contracts containing a covenant or agreement not to compete in any geographical area or in any line of business that materially limits the operation of the Business as presently conducted;           (iii) Contracts for the sale of any of the Purchased Assets, other than in the Ordinary Course of Business;           (iv) Contracts relating to any acquisition made (and for which there are continuing contractual obligations of Seller thereunder as of the date 29 --------------------------------------------------------------------------------   hereof) or to be made by Seller of any operating business or the capital stock of any other Person;           (v) any union contract, collective bargaining agreement or other similar agreement;           (vi) Contracts for joint ventures, strategic alliances, partnerships, licensing arrangements, or sharing of profits;           (vii) Contracts relating to incurrence of Indebtedness, or the making of any loans, in each case, other than in the Ordinary Course of Business;           (viii) Contracts not terminable without penalty upon 90 days (or less) notice;           (ix) Contracts providing for an extension of credit other than consistent with normal customer credit terms;           (x) Contracts that provide for a guaranty by Seller relating to the borrowing of money or extension of credit (other than accounts receivable and accounts payable in the Ordinary Course of Business);           (xi) any standalone non-compete agreements; and           (xii) Contracts which involve the expenditure of more than $200,000 in the aggregate.           True and complete copies of all Material Contracts have been made available to Purchaser.           (b) Except as set forth on Schedule 5.7(b), (i) all Material Contracts are valid, binding and in full force and effect and are enforceable by Seller in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (ii) neither Seller nor, to the Knowledge of Seller, any other party to any of the Material Contracts is in breach or default thereunder in any material respect; and (iii) to the Knowledge of Seller, no condition exists or event has occurred which, with or without the lapse of time or the giving of notice, or both, would constitute a default by Seller in any material respect under any Material Contract.      5.8 Legal Proceedings. As of the date of this Agreement, except as set forth on Schedule 5.8, there are no material Legal Proceedings pending, nor, to Seller’s Knowledge, threatened against Seller, or to which Seller is otherwise a party, before any Governmental Body and (i) relating to the Business, or (ii) which questions or challenges 30 --------------------------------------------------------------------------------   the validity of this Agreement or any action taken or to be taken by Seller pursuant to this Agreement. As of the date of this Agreement, Seller is not subject to any Order relating to the Business.      5.9 Intellectual Property.           (a) Schedule 5.9(a) sets forth a complete list of all applications and registrations in and to the Assigned Patents and the Assigned Marks, and a complete list of the Software which constitutes Assigned Software. Seller (i) owns all right, title and interest in and to the Assigned Intellectual Property free and clear of all encumbrances and licenses, and (ii) has the legal and valid right to grant the joint ownership interest to Purchaser in the Proprietary Business Information and grant the licenses granted to Purchaser in and to the Licensed Intellectual Property . Except for actions relating to the prosecution of patent and trademark applications pending before the respective patent and trademark offices, Seller has not received written notice of any pending or threatened action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand that challenges the legality, validity, enforceability, registrations, use, or ownership of each item of Assigned Intellectual Property in the applicable country or jurisdiction.           (b) To Seller’s Knowledge, the use, development, manufacture, marketing, license, sale, or furnishing of any product or service currently licensed, utilized, sold, provided or furnished by Seller in the conduct of the Business does not violate any license or contract, agreement, arrangement, commitment or undertaking between Seller and any third party. To Seller’s Knowledge, Seller has received no written notice of any claim of infringement or misappropriation of any Intellectual Property right of any third party due to Seller’s conduct of the Business.           (c) To Seller’s Knowledge, no current or former employee, consultant or independent contractor of Seller: (i) is in material violation of any term or covenant of any employment contract, patent disclosure agreement, invention assignment agreement, nondisclosure agreement or noncompetition agreement with Seller; (ii) is in material violation of any term or covenant of any contract, agreement, arrangement, commitment or undertaking with any other party by virtue of such employee’s, consultant’s or independent contractor’s being employed by, or performing services for, Seller or using trade secrets or proprietary information of others in the performance of such services for Seller without permission; or (iii) has developed any copyrightable, patentable or otherwise proprietary work for Seller that is subject to any agreement under which such employee, consultant or independent contractor has assigned or otherwise granted to any third party any Intellectual Property rights in or to such work. To Seller’s Knowledge, the employment of any employee of Seller or the use by Seller of the services of any consultant or independent contractor does not subject Seller to any Liability to any third party for improperly soliciting such employee, consultant or independent contractor to work for Seller, whether such Liability is based on contractual or other legal obligations to such third party. 31 --------------------------------------------------------------------------------             (d) To Seller’s Knowledge, all current officers, employees and consultants of Seller having access to confidential information of Seller, its customers or business partners have executed and delivered to Seller an agreement regarding the protection of such confidential information to Seller, or are under a statutory, regulatory, fiduciary or other legal duty to preserve the confidentiality of such confidential information (in the case of confidential information of Seller’s customers and business partners, to the extent required by such customers and business partners), and copies of all such agreements have been delivered to Purchaser’s legal counsel.           (e) Schedule 5.9(e) set forth a true and complete list of all Third Party Software included in or required for the use of the Assigned Software, other than third party Software licensed to Seller pursuant to a standard “click wrap,” “shrink wrap,” or “open source” license agreement.           (f) Schedule 5.9(f)(1) sets forth a true and complete list of agreements under which Seller has obtained the right to use the Software listed on Schedule 5.9(e). Schedule 5.9(f)(2) sets forth a true and complete list of those agreements listed on Schedule 5.9(f)(1) which constitute Excluded Contracts. Schedule 5.9(f)(3) sets forth a true and complete list of those agreements listed on Schedule 5.9(f)(1) which constitute Purchased Contracts. To Seller’s Knowledge, Seller may assign its rights and obligations under the contracts listed on Schedule 5.9(f)(3) to Purchaser without the consent of any third party.      5.10 Insurance. Except to the extent that Seller self insures, Seller has policies of insurance of the type and in amounts customarily carried by Persons conducting businesses or owning assets similar to those of the Business. All such policies are in full force and effect, all premiums due thereon have been paid and Seller is otherwise in compliance in all material respects with the terms and provisions of such policies. Seller has not received any notice of cancellation or non-renewal of any such policy or arrangement nor, to the Knowledge of Seller, is the termination of any such policies or arrangements threatened.      5.11 Labor.           (a) Seller is not a party to any labor or collective bargaining agreement.           (b) Seller is not a party to any Contract for the employment of any individual on a full-time, part-time or other basis.           (c) As of the date hereof, there are no (i) strikes, work stoppages, work slowdowns or lockouts pending or, to the Knowledge of Seller, threatened against or involving Seller, or (ii) unfair labor practice charges, grievances or complaints pending or, to the Knowledge of Seller, threatened by or on behalf of any employee or group of employees of Seller. 32 --------------------------------------------------------------------------------             (d) Seller has not received notice of the intent of any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to the Business, and no such investigation is in progress.           (e) There are no complaints, lawsuits or other proceedings pending or, to the Knowledge of Seller, threatened in any forum by or on behalf of any present or former employee of Seller, any applicant for employment or classes of the foregoing alleging breach of any express or implied contract of employment, any Laws governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship.           (f) Since the enactment of the WARN Act, Seller has complied in all respects with the WARN Act with respect to (i) any “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Business, (ii) any “mass layoff’ (as defined in the WARN Act) affecting any site of employment or facility used in the Business, (iii) any transaction or layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign Law or regulation or (iv) any “employment loss” suffered by any of Seller’s employees (as defined in the WARN Act). Seller assumes responsibility for any claims arising under the WARN Act with regard to the termination of employees by Seller pursuant to the transaction contemplated by this Agreement.           (g) Schedule 5.11(g) sets forth (i) with respect to all present employees of the Business, their dates of hire, positions and total annual compensation (split between base and incentive compensation), (ii) the wage rates for non-salaried and non-executive salaried employees of the Business by classification, and (iii) all group insurance programs in effect for employees of the Business.      5.12 Environmental Matters.           (a) Seller is not subject to any Order or plan of correction relating to a violation of any Environmental Law;           (b) Seller has not received notice, and otherwise has no Knowledge of, noncompliance with any Environmental Law or Permit or Order, or pending, threatened or ongoing Environmental Claims, or investigations under Environmental Laws, concerning the Business, or any currently or previously owned or leased Property of Seller;           (c) Seller is not in material violation of any Environmental Law and has complied with all applicable Environmental Laws in all material respects;           (d) No Hazardous Material has been Released, or threatens to be Released from the operations of the Business in violation of any applicable 33 --------------------------------------------------------------------------------   Environmental Law, requiring action under any Environmental Law, or has resulted in any Environmental Claim, including without limitation, personal injury or property or other damage; and           (e) Seller has not handled, used, discharged, released, disposed of, transported or arranged for the transportation or disposal of, any Hazardous Materials, (i) in a manner that may reasonably form the basis of an Environmental Claim, or (ii) to a facility, site or location that is listed on any federal or state investigation or cleanup list pursuant to any Environmental Law or that Seller otherwise has Knowledge that such facility, site or location is subject to investigation or cleanup required pursuant to any Environmental Law.      5.13 Conduct of Business in Ordinary Course. Except for the transactions contemplated hereby or as set forth on Schedule 5.13, since December 31, 2005, (i) Seller has conducted the Business in the Ordinary Course of Business, (ii) there has not been any event, change, occurrence or circumstance that has had a Material Adverse Effect, and (iii) Seller has not taken any action that if taken after the date hereof would cause a breach of its representations and warranties set forth in this Article V. Except as set forth on Schedule 5.13, since December 31, 2005, there has not been, in each case as it relates to the Business:           (a) any damage, destruction or loss (whether or not covered by insurance) with respect to any Purchased Asset that is material to the Business;           (b) except for changes arising from the acquisition by Verizon Communications Inc. of MCI, Inc., any change by Seller in its accounting methods, principles or practices, or any changes in depreciation or amortization policies or rates adopted by it;           (c) any termination or failure to renew, or any threat made in writing (that was not subsequently withdrawn in writing) to terminate or fail to renew, any Material Contract, or any amendments or modifications thereto;           (d) except as may have occurred in the Ordinary Course of Business, any sale, abandonment, transfer, lease, license or any other disposition of any material properties or assets of Seller;           (e) except with respect to equity securities of any Person received by Seller following the reorganization or restructuring of such person, any acquisition of any capital stock or business of any other person (or any reaching of an agreement, arrangement or understanding to do the same);           (f) any bonuses awarded or paid to employees of the Company, except to the extent accrued on the Balance Sheet, or any increase in the compensation payable or to become payable by it to any of the Company’s directors, officers or employees; or 34 --------------------------------------------------------------------------------             (g) except in the Ordinary Course of Business, (i) any incurrence of indebtedness or assumption, guarantee or other responsibility for the debts of any other Person (other than check-clearing endorsements made in the Ordinary Course of Business), (ii) any loans, advances or capital contributions to or investments in any other Person (other than advances against commissions and advances of expenses to sales personnel in the normal course of business), or (iii) any grant of any security interest or creation or modification of any Liens on any of the Purchased Assets.      5.14 Customers and Suppliers. In each case with respect to the Business:           (a) Schedule 5.14(a) sets forth each of Seller’s fifteen (15) largest customers as a percentage of Seller’s revenue along with actual revenue generated by each such customer for the year ended December 31, 2005 and for the nine-month period ended September 30, 2006 (“Material Customers”). None of the Material Customers have informed Seller in writing that such Material Customer intends to reduce its purchases from Seller over the next 24 months period; and           (b) Schedule 5.14(b) sets forth each of Seller’s fifteen (15) largest suppliers (excluding lessors under Tower Site Leases) as a percentage of Seller’s purchases along with the actual amount of purchases from each such supplier for the year ended December 31, 2005 and for the nine-month period ended September 30, 2006 (“Material Suppliers”). None of the Material Suppliers have informed Seller in writing that such Material Supplier intends to no longer supply the Business after the Closing Date.      5.15 PP&E. The PP&E in the aggregate is in good operating condition and repair, and generally is adequate and suitable in all material respects for the present and continued use, operation and maintenance thereof as now used, operated or maintained.      5.16 Foreign Corrupt Practices Act and Export Restrictions. Seller is in compliance with the Foreign Corrupt Practices Act of 1977, as amended, in respect of its operation of the Business. Seller does not provide any of its services in Cuba, Syria, Myanmar (Burma), Iran, North Korea, Libya or Sudan or any other country subject to U.S. trade restrictions, embargo or executive order.      5.17 Taxes.           (a) Except as set forth on Schedule 5.17(a), and except for matters that would not have a Material Adverse Effect, Seller or the affiliated, combined or unitary tax group of which Seller is or was a member, as the case may be, has filed, or there have been timely filed on Seller’s behalf, all Tax Returns in respect of the Purchased Assets and/or the Business that are required to be filed by it and has paid all Taxes shown thereon. 35 --------------------------------------------------------------------------------             (b) As of the date of this Agreement, there are no Legal Proceedings pending or, to Seller’s Knowledge, threatened with respect to the Business in respect of any Tax.           (c) The Purchased Assets are not subject to any joint venture, partnership or other arrangement or contract that is treated as a partnership for Tax purposes.      This Section 5.18 represents the sole and exclusive representation and warranty of Seller regarding Tax matters      5.18 Real Property.           (a) Schedule 5.18(a) sets forth a complete list of (i) all leases of real property by Seller (individually, a “Real Property Lease” and collectively, the “Real Property Leases”), as lessee or lessor, and (ii) all agreements relating to the use of transmission towers not owned by Seller but used by Seller in the operation of the Business (the “Tower Site Leases”). Seller has provided Purchaser with true and correct copies of all Real Property Leases.           (b) Except as set forth on Schedule 5.18(b), (i) Seller has a valid, binding and enforceable leasehold interest under each of the Real Property Leases and material Tower Site Leases under which it is a lessee, free and clear of all Liens other than Permitted Exceptions; (ii) each of the Real Property Leases and material Tower Site Leases is in full force and effect; (iii) Seller has not assigned its rights under any of the Real Property Leases or Tower Site Leases to any other person; (iv) neither Seller nor, to the Knowledge of Seller, any other party to any of the Real Property Leases is in noncompliance, breach or default thereunder, except in each case for such noncompliance, breaches and defaults that, individually or in the aggregate, would not adversely affect the ability of Purchaser to enjoy the use of the property subject to the Real Property Leases in the manner for which they were intended, or that would otherwise have a Material Adverse Effect; (v) since June 30, 2006, no Real Property Lease has been modified or amended in writing in any material manner and no party to any Real Property Lease has given Seller written notice of or, to the Knowledge of Seller, made a claim with respect to any breach or default; and (vi) other than the consummation of the transactions contemplated by this Agreement, to the Knowledge of Seller, no condition exists or event has occurred which, with or without the lapse of time or the giving of notice, or both, would constitute a default by any party under any Real Property Lease or Tower Site Lease that is material to the operation of the Business as currently conducted, or to the use of the property subject to the Real Property Leases in the manner for which they were intended.      5.19 Tangible Personal Property. Schedule 5.19 sets forth all leases of personal property by Seller (“Personal Property Leases”) involving annual payments in excess of $10,000, or terms in excess of one year. Seller has not received any written notice of any default or event that with notice or lapse of time or both would constitute a default by 36 --------------------------------------------------------------------------------   Seller under any of the Personal Property Leases. Neither Seller nor, to the Knowledge of Seller, any other party to any of the Personal Property Leases is in noncompliance, breach or default thereunder in any material respect. Since June 30, 2006, no Personal Property Lease has been modified or amended in writing in any material manner and no party to any Personal Property Lease has given Seller written notice of or, to the Knowledge of Seller, made a claim with respect to any breach or default. To the Knowledge of Seller, no condition exists or event has occurred which, with or without the lapse of time or the giving of notice, or both, would constitute a default by any party under any Personal Property Lease.      5.20 Product Warranty; Product Liability.           (a) Except as set forth on Schedule 5.20, (i) each Product manufactured, sold or delivered by Seller in conducting the Business has been in conformity with all product specifications and all express and implied warranties, (ii) Seller has no liability for replacement or repair of any such Products or other damages in connection therewith or any other product obligations not reserved against on the Balance Sheet, and (iii) Seller has not sold any Products or delivered any services that included a warranty for a period of longer than one (1) year.           (b) To Seller’s Knowledge, (i) Seller has no material liability arising out of any injury to individuals or property as a result of the ownership, possession, or use of any Product designed, manufactured, assembled, repaired, sold or installed by or on behalf of Seller and (ii) Seller has not committed any act or failed to commit any act which would result in, and there has been no occurrence which would give rise to or form the basis of, any product liability or liability for breach of warranty (whether covered by insurance or not) on the part of Seller with respect to Products designed, manufactured, assembled, repaired, sold or installed by or on behalf of Seller.      5.21 Certain Payments; Certain Interests. Neither Seller nor, to the Knowledge of Seller, any director, officer, employee, or other Person associated with or acting on behalf of any of Seller, has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person, private or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business for Seller, (ii) to pay for favorable treatment for business secured by Seller, (iii) to obtain special concessions or for special concessions already obtained, for or in respect of Seller, (iv) that might subject Seller to any material damage or penalty in any Legal Proceeding, (v) in violation of any Law, or (vi) if not continued in the future, might have a Material Adverse Effect on the Seller, or (b) established or maintained any fund or asset with respect to Seller that has not been recorded in the books and records of Seller.      5.22 Employee Benefits.           (a) Schedule 5.22(a) lists each “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended 37 --------------------------------------------------------------------------------   (“ERISA”)) and any other material stock award, stock option, stock purchase, bonus or other incentive compensation, vacation, change of control, educational assistance, deferred compensation, salary continuation, disability, retirement, welfare benefit, severance, or life insurance plan or agreement in which current or former Employees participate (each, an “Employee Benefit Plan”). Seller has made available to Purchaser correct and complete copies of (i) each Employee Benefit Plan, (ii) the most recent annual reports on Form 5500 required to be filed with respect to each Employee Benefit Plan (if any such report was required), (iii) the most recent summary plan description for each Employee Benefit Plan for which such summary plan description is required and (iv) each trust agreement and insurance or group annuity contract relating to any Employee Benefit Plan.           (b) Each Employee Benefit Plan with respect to which Purchaser will assume assets and/or liabilities pursuant to Article VIII hereof has been administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and all other applicable Laws, except for any noncompliance that would not have a Material Adverse Effect.           (c) To the Knowledge of Seller, each Employee Benefit Plan that is intended to be tax qualified under Section 401(a) of the Code (a “Qualified Plan”) is so qualified except for any noncompliance that would not result in a Material Adverse Effect. Seller has made available to Purchaser a correct and complete copy of the most recent determination letter received with respect to each Qualified Plan.           (d) Except as set forth on Schedule 5.22(d):           (i) since the effective date of ERISA, no material liability under Title IV of ERISA has been incurred or is reasonably expected to be incurred by Seller (other than liability for premiums due to the PBGC), unless such liability has been, or prior to the Closing Date will be, satisfied in full;           (ii) no Employee Benefit Plan subject to Title IV of ERISA or Section 412 of the Code (each, a “Pension Plan”) has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived;           (iii) the PBGC has not instituted proceedings and no filing has been made by Seller or any of its ERISA Affiliates to terminate any Pension Plan; and           (iv) none of the Pension Plans is a “multiemployer plan,” as that term is defined in Section 3(37) of ERISA, and neither Seller nor any of its ERISA Affiliates has made or incurred a “complete withdrawal” or a “partial withdrawal,” as such terms are respectively defined in Sections 4203 and 4205 of ERISA that would result in the incurrence of a material liability by Seller or any of its ERISA Affiliates. 38 --------------------------------------------------------------------------------             (e) Except as set forth on Schedule 5.22(e), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any current or former Employee under the Deferred Compensation Plan, (ii) increase any benefits under the Deferred Compensation Plan or any other Employee Benefit Plan with respect to which Purchaser will assume assets and/or liabilities pursuant to Article VIII or (iii) result in the acceleration of the time of payment of, vesting of or other rights with respect to any such benefits.      This Section 5.22 represents the sole and exclusive representation and warranty of Seller regarding employee benefit matters.      5.23 Financial Advisors. Except for Daniels & Associates, L.P., no Person has acted, directly or indirectly, as a broker, finder or financial advisor for Seller in connection with the transactions contemplated by this Agreement and no such Person is entitled to any fee or commission or like payment in respect thereof.      5.24 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V (as modified by the Schedules hereto), neither Seller nor any other Person makes any other express or implied representation or warranty on behalf of Seller with respect to Seller, the Business, the Purchased Assets, the Assumed Liabilities or the transactions contemplated by this Agreement and Seller makes no representations or warranties to Purchaser regarding the probable success or profitability of the Business. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER           Purchaser hereby represents and warrants to Seller that:      6.1 Organization and Good Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business.      6.2 Authorization of Agreement. Purchaser has full corporate power and authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement or to be executed by Purchaser in connection with the consummation of the transactions contemplated hereby and thereby (the “Purchaser Documents”), and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this Agreement and each Purchaser Document have been duly authorized by all necessary corporate action on behalf of Purchaser. This Agreement has been, and each Purchaser Document will be at or prior to the Closing, duly executed and delivered by Purchaser and (assuming the due authorization, execution and delivery by the other 39 --------------------------------------------------------------------------------   parties hereto and thereto) this Agreement constitutes, and each Purchaser Document when so executed and delivered will constitute, the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).      6.3 Conflicts; Consents of Third Parties.           (a) Except as set forth on Schedule 6.3(a), none of the execution and delivery by Purchaser of this Agreement, the consummation of the transactions contemplated hereby, or the compliance by Purchaser with any of the provisions hereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under, any provision of (i) the certificate of incorporation and by-laws of Purchaser, (ii) any Contract or Permit to which Purchaser is a party or by which Purchaser or its properties or assets are bound, (iii) any Order of any Governmental Body applicable to Purchaser or by which any of the properties or assets of Purchaser are bound or (iv) any applicable Law.           (b) Except as set forth on Schedule 6.3(b), no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Purchaser in connection with the execution and delivery of this Agreement, the compliance by Purchaser with any of the provisions hereof, the consummation of the transactions contemplated hereby, or for Purchaser to conduct the Business, other than (i) filings with and approvals of the FCC as required under the Communications Act and (ii) such other consents, waivers, approvals, Orders, Permits or authorizations the failure of which to obtain would not have materially adversely affect Purchaser’s ability to consummate the transactions contemplated by this Agreement.      6.4 Litigation. There are no Legal Proceedings pending or, to the actual knowledge of Purchaser, threatened that are reasonably likely to prohibit or restrain the ability of Purchaser to enter into this Agreement or consummate the transactions contemplated hereby.      6.5 Financial Advisors. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof.      6.6 Financing Commitment. As of the Closing Date, the Financing Commitment shall be in full force and effect, and shall not have been amended or terminated. 40 --------------------------------------------------------------------------------        6.7 No Other Representations or Warranties. Except for the representations and warranties contained in this Article VI (as modified by the Schedules hereto), neither Purchaser nor any other Person makes any other express or implied representation or warranty on behalf of Purchaser. ARTICLE VII COVENANTS      7.1 Access to Information. Seller agrees that, prior to the Closing, subject to its obligations set forth in Section 7.6 hereof, Purchaser shall be entitled, through its officers, employees and representatives (including its legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Business and such examination of the books and records of the Business, the Purchased Assets and the Assumed Liabilities as it reasonably requests and to make extracts and copies of such books and records. Any such investigation and examination shall be conducted upon reasonable advance notice in a reasonable manner. Notwithstanding anything to the contrary contained herein, prior to the Closing, without the prior written consent of Seller, which may be withheld for any reason, Purchaser shall not contact any suppliers to, or customers of, Seller. Seller shall cause the officers, directors, employees, consultants, agents, accountants, attorneys and other representatives of Seller to cooperate with Purchaser and Purchaser’s representatives in connection with such investigation and examination, and Purchaser and its representatives shall cooperate with Seller and its representatives and shall use their reasonable efforts to minimize any disruption to the Business. Notwithstanding anything herein to the contrary, no such investigation or examination shall be permitted to the extent that it would require Seller to disclose information subject to attorney-client privilege. No investigation pursuant to this Section shall affect any representation or warranty given by the Seller in this Agreement.      7.2 Conduct of the Business Pending the Closing.           (a) Prior to the Closing, except (I) as set forth on Schedule 7.2, (II) as reasonably determined by Seller and Purchaser to be required by applicable Law, (III) as otherwise contemplated by this Agreement or (IV) with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed), Seller shall:           (i) conduct the Business only in the Ordinary Course of Business; and           (ii) use its commercially reasonable efforts to (A) preserve the present business operations, organization and goodwill of the Business, and (B) preserve the present relationships with customers and suppliers of Seller. 41 --------------------------------------------------------------------------------             (b) Except (I) as set forth on Schedule 7.2, (II) as reasonably determined by Seller and Purchaser to be required by applicable Law, (III) as otherwise contemplated by this Agreement or (IV) with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed), Seller shall not, solely as it relates to the Business:           (i) other than in the Ordinary Course of Business or as required by Law, Contract or the terms of any Employee Benefit Plan, or in connection with the transition to the Verizon Communications Inc. compensation and benefits structure, (A) increase the annual level of compensation of any director or executive officer of Seller, (B) grant any bonus, benefit or other direct or indirect compensation, (C) adopt, or increase the coverage or benefits available under, any Employee Benefit Plan or (E) enter into any employment, deferred compensation, severance, consulting, non-competition or similar agreement (or amend any such agreement) with any director or executive officer of Seller;           (ii) subject any of the Purchased Assets to any Lien, except for Permitted Exceptions;           (iii) acquire any material properties or assets that would be Purchased Assets or sell, assign, license, transfer, convey, lease or otherwise dispose of a material portion of the Purchased Assets (except pursuant to an existing Contract or inventory in the Ordinary Course of Business or for the purpose of disposing of obsolete or worthless assets);           (iv) cancel or compromise any material debt or claim or waive or release any right of Seller that constitutes a Purchased Asset with a value in excess of $50,000 individually or $100,000 in the aggregate;           (v) enter into any commitment for capital expenditures in excess of $125,000 for any individual commitment and $250,000 for all commitments in the aggregate;           (vi) enter into, modify or terminate any labor or collective bargaining agreement;           (vii) enter into or agree to enter into any merger or consolidation with any Person;           (viii) except as required by applicable Law or GAAP, make any material change to any of its methods of accounting or accounting practice; or           (ix) agree to do anything prohibited by this Section 7.2(b).      7.3 Consents. Seller shall (and shall cause its Affiliates to) use their commercially reasonable efforts to obtain at the earliest practicable date all consents and 42 --------------------------------------------------------------------------------   approvals required to consummate the transactions contemplated by this Agreement, including the consents and approvals referred to in Sections 5.3(b) and 6.3(b) hereof, and Purchaser shall (and shall cause its Affiliates to) cooperate with Seller in connection with obtaining all such consents and approvals; provided however, that Seller shall not be obligated to pay any consideration therefor to any third party from whom consent or approval is requested unless expressly required by the terms of any Contract (excluding any Tower Site Lease).      7.4 Further Assurances. Subject to, and not in limitation of, Section 7.3 hereof, each of Seller and Purchaser shall use its commercially reasonable efforts to (i) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement and (ii) cause the fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement.      7.5 FCC Licenses. Within five (5) business days after Purchaser delivers to Seller a certified copy of the Financing Commitment as contemplated by Section 4.2(f), Purchaser and Seller shall jointly file with the FCC substantially complete applications (the “Applications”) to request the FCC’s consent to the voluntary assignment of the Permits from Seller to Purchaser (the “FCC Consent”). Purchaser and Seller shall each pay its own expenses in connection with the preparation and prosecution of the Applications and shall share any filing fee associated with the Applications equally. Seller and Purchaser shall prosecute the Applications before the FCC, including replying to or opposing any petitions to deny filed in any form whatsoever against the Applications, with all reasonable diligence, in order to obtain the FCC Consent promptly and in order to carry out the provisions of this Agreement. If FCC reconsideration or review, or if judicial review shall be sought with respect to the FCC Consent by a third party or upon the FCC’s own motion, Purchaser and Seller shall cooperate in opposing such requests for FCC reconsideration or review or for judicial review.      7.6 Confidentiality.           (a) Purchaser acknowledges that the information provided to it in connection with this Agreement and the transactions contemplated hereby is subject to the terms of the confidentiality agreement between Purchaser and Seller, dated January 11, 2006 (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only upon, the Closing Date, the Confidentiality Agreement shall terminate with respect to information relating solely to the Business or otherwise included in the Purchased Assets; provided, however, that Purchaser acknowledges that any and all other Confidential Information provided to it by Seller or its representatives concerning Seller and the Subsidiaries and not related exclusively to the Business or the Purchased Assets shall remain subject to the terms and conditions of the Confidentiality Agreement after the Closing Date           (b) From and after the Closing Date, Seller shall not and shall cause its officers and directors not to, directly or indirectly, disclose, reveal, divulge or 43 --------------------------------------------------------------------------------   communicate to any Person other than authorized officers, directors and employees of Purchaser or use or otherwise exploit for its own benefit or for the benefit of anyone other than Purchaser, any Confidential Information (as defined below). Seller and its officers and directors shall not have any obligation to keep confidential any Confidential Information if and to the extent disclosure thereof is required by Law or other regulatory process, including preparation of financial statements, tax audits and Legal Proceedings by or against Seller or its Affiliates. For purposes of this Section 7.6(b), “Confidential Information” shall mean any confidential information with respect to the Business, including methods of operation, customers, customer lists, Products, prices, fees, costs, inventions, know-how, marketing methods, plans, suppliers, competitors, markets or other specialized information or proprietary matters. “Confidential Information” does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement or (ii) becomes generally available to the public other than as a result of a disclosure not otherwise permissible hereunder.      7.7 Preservation of Records. Seller and Purchaser agree that each of them shall preserve and keep the records held by it or their Affiliates relating to the Business in respect of periods ending on or prior to Closing for a period of seven years from the Closing Date and shall make such records and personnel available to the other as may be reasonably required by such party, including by providing reasonable access during regular business hours upon reasonable advance notice and under reasonable circumstances and subject to restrictions under applicable Law, in connection with, among other things, preparation of financial statements, regulatory filings, any insurance claims by, Legal Proceedings or tax audits against or governmental investigations of Seller or Purchaser or any of their Affiliates (other than in connection with Legal Proceedings between the parties hereto) or in order to enable Seller or Purchaser to comply with their respective obligations under this Agreement and each other agreement, document or instrument contemplated hereby or thereby. Each of Seller and Purchaser shall be entitled, at its sole cost and expense, to make copies of the books and records to which they are entitled to access pursuant to this Section 7.7. In the event Seller or Purchaser wishes to destroy such records after that time, such party shall first give 90 days prior written notice to the other and such other party shall have the right at its option and expense, upon prior written notice given to such party within such 90 day period, to take possession of the records within 180 days after the date of such notice.      7.8 Publicity. Neither Seller nor Purchaser shall issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld or delayed, unless, in the sole judgment of Purchaser or Seller, as applicable, disclosure is otherwise required by applicable Law or by the applicable rules of any stock exchange on which Purchaser or Seller or any of their respective Affiliates lists securities, provided that, to the extent required by applicable Law, the party intending to make such release shall use its reasonable efforts consistent 44 --------------------------------------------------------------------------------   with such applicable Law to consult with the other party with respect to the timing and content thereof.      7.9 Non-Competition; Non-Solicitation.           (a) Seller agrees that for a period of twenty-four months following the Closing, it shall not utilize for itself or disseminate to any of its Affiliates, and shall cause its Affiliates not to utilize, any customer lists of Seller or the Business or any other proprietary information of Seller or the Business concerning the identity of customers of Seller, in each case, as of the Closing Date, for the purpose of providing such customers with any products or services or interfering with or damaging any relationship and/or agreement between Purchaser or any of Purchaser’s Affiliates and any such customer.           (b) Seller agrees that for a period of twelve months following the Closing, Seller shall not and shall cause its Affiliates not to cause, solicit, induce or encourage any Transferred Employee if such Transferred Employee is then employed by Purchaser or its Affiliates, or has been employed by Purchaser or its Affiliates during the preceding three (3) month period, to leave such employment or hire, employ or otherwise engage any such individual; provided that neither generalized searches through media advertisement, employment firms or otherwise that are not directed to such personnel nor any employment or hiring pursuant to or as a result thereof shall constitute a violation of the foregoing.           (c) Neither Seller not its Affiliates shall employ any Transferred Employee for a period of one year after the date that such Transferred Employee ceases to be an employee of Purchaser or its Affiliates.           (d) Seller hereby agrees that a violation or attempted or threatened violation of this Section 7.9 will cause irreparable injury to Purchaser for which money damages would be inadequate, and that Purchaser shall be entitled, in addition to any other rights or remedies it may have, whether in law or in equity, to obtain an injunction enjoining and restraining Seller from a violation of the covenant contained herein. If, at the time of enforcement of this Section 7.9 a court shall hold that the duration, scope, geographic area or other restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope, geographic area or other restrictions deemed reasonable under such circumstances by such court shall be substituted for the stated duration, scope, geographic area or other restrictions.      7.10 Use of MCI Trademarks. Purchaser agrees that it shall have no right to use of the names “WorldCom”, “MCI”, “Verizon” or any other Excluded Marks, and will not at any time hold itself out as having any affiliation with Seller Parent or any of its Affiliates. Seller shall grant to Purchaser a limited license under certain Licensed Excluded Marks, pursuant to the terms of the Intellectual Property Agreement.      7.11 Tax Matters. Purchaser and Seller shall cooperate in preparing, executing and filing use, sales, real estate, transfer and similar Tax Returns relating to the purchase 45 --------------------------------------------------------------------------------   and sale of the Purchased Assets. Such Tax Returns shall be prepared in a manner that is consistent with the determination of the fair market values allocated to the Purchased Assets as contemplated by Section 2.7(a) hereof. All sales, transfer, documentary, stamp, recording and similar Taxes incurred in connection with the purchase and sale of the Purchased Assets (“Transfer Taxes”) shall be borne equally Purchaser and Seller.      7.12 Financing.           (a) Purchaser agrees to notify Seller promptly (but in any event within two (2) Business Days) if, at any time prior to the Closing Date, (i) the Financing Commitment shall expire or be terminated for any reason, (ii) any financing source that is a party to the Financing Commitment notifies Purchaser that such source no longer intends to provide financing to Purchaser on the terms set forth therein, or (iii) for any reason Purchaser no longer believes in good faith that it will be able to obtain any of the financing substantially on the terms described in the Financing Commitment. Purchaser shall not, and shall not permit any of its Subsidiaries or Affiliates to, without the prior written consent of Seller, which consent shall not be unreasonably withheld, take any action or enter into any transaction, including, without limitation, any merger, acquisition, joint venture, disposition, lease, contract or debt or equity financing that would impair, materially delay or prevent Purchaser’s obtaining of the financing contemplated by the Financing Commitment. Purchaser shall not amend or alter, or agree to amend or alter, the Financing Commitment in any manner that would impair, materially delay or prevent the consummation of the transactions contemplated hereby without the prior written consent of Seller, which consent shall not be unreasonably withheld.           (b) If the Financing Commitment shall be terminated or modified in a manner adverse to Purchaser for any reason (excluding immaterial modifications affecting pricing (but not amount)), Purchaser shall use its commercially reasonable efforts to obtain, and will provide Seller with a copy of, a new financing commitment from a financial institution reasonably acceptable to Seller that provides for at least the same amount of financing as the Financing Commitment as originally issued, funding conditions no less favorable than those included in the Financing Commitment as originally issued, and other terms and conditions the aggregate effect of which is not materially adverse to the ability of Purchaser to consummate the transactions contemplated hereby in comparison with those terms and conditions contained in the Financing Commitment as originally issued, which extension or new commitment shall include a termination date not earlier than the Termination Date. Purchaser shall accept any such new commitment letter if the funding conditions and other terms and conditions contained therein, in the aggregate, are not materially adverse to Purchaser in comparison with those contained in the Financing Commitment as originally issued.      7.13 Supplementation and Amendment of Schedules. From time to time prior to the Closing, Seller shall have the right to supplement or amend the Schedules with respect to any matter hereafter arising or discovered after the delivery of the Schedules 46 --------------------------------------------------------------------------------   pursuant to this Agreement; provided that no such supplement or amendment shall have any effect on the satisfaction of the condition to Closing set forth in Section 9.1(a). ARTICLE VIII EMPLOYEES AND EMPLOYEE BENEFITS      8.1 Employment.           (a) Transferred Employees. Prior to the Closing, Purchaser shall deliver, in writing, an offer of employment to each of the Employees who remain employed immediately prior to the Closing (including Employees on leave) to commence immediately following the Closing. Each such offer of employment shall be for at least the same total compensation (including salary and bonus) and position in effect immediately prior to the Closing. Such individuals who accept such offers are hereinafter referred to as the “Transferred Employees.” Such individuals who do not accept such offers are hereinafter referred to as the “Non-Transferred Employees.”           (b) Purchaser shall provide each Transferred Employee whose employment is involuntarily terminated (other than for cause) by Purchaser or its Affiliates prior to the one-year anniversary of the Closing Date with severance payments and severance benefits that are no less favorable than the severance payments and severance benefits to which such employee would have been entitled on account of an eligible termination under the MCI Severance Plan as in effect as of the Closing Date. Such severance payments and benefits may be provided in the manner and under the plan or policy designated by Purchaser in its discretion.           (c) For a period of six (6) months, Seller and its Affiliates shall not hire as an employee, consultant or otherwise any Non-Transferred Employee.           (d) Standard Procedure. Pursuant to the “Standard Procedure” provided in section 5 of Revenue Procedure 96-60, 1996-2 C.B. 399, (i) Purchaser and Seller shall report on a predecessor/successor basis as set forth therein, (ii) Seller will not be relieved from filing a Form W-2 with respect to any Transferred Employees, and (iii) Purchaser will undertake to file (or cause to be filed) a Form W-2 for each such Transferred Employee with respect to the portion of the year during which such Employees are employed by Purchaser that includes the Closing Date, excluding the portion of such year that such Employee was employed by Seller.      8.2 Employee Benefits.           (a) Purchaser shall provide, or cause to be provided, for a period of one year following the Closing or such longer period of time required by applicable Law (the “Benefit Maintenance Period”), to each of the Transferred Employees, compensation (including salary, wages and opportunities for commissions, bonuses, incentive pay, overtime and premium pay), employee benefits, location of employment 47 --------------------------------------------------------------------------------   and a position of employment that are, in each case, substantially equivalent to those provided to such Transferred Employee immediately prior to the Closing. Consistent with the foregoing, Purchaser shall provide a dollar-for-dollar matching contribution under the Purchaser Savings Plan (as defined below) with respect to 401(k) deferrals up to 6% of eligible pay under such plan for Transferred Employees. Furthermore, Seller shall furnish Purchaser with a schedule setting forth certain other items of compensation to which each Transferred Employee is entitled as of the Closing. Purchaser shall be entitled to audit Seller’s books and records in order to verify the accuracy of the information set forth in this schedule. For purposes of this section, Purchaser shall be deemed to have provided “substantially equivalent” compensation to such Transferred Employees if it provides them with the items of compensation specified in the schedule, or, if any inaccurate information is contained in the schedule, if it provides them with the items of compensation to which they were entitled as of the Closing as is determined through an audit of Seller’s books and records. After the Closing, Purchaser shall not discriminate against Transferred Employees in relation to similarly situated employees of Purchaser by reason of their status as Transferred Employees.           (b) For purposes of eligibility and vesting (but not benefit accrual) under the employee benefit plans of Purchaser and its Affiliates providing benefits to Transferred Employees (the “Purchaser Plans”), Purchaser shall credit each Transferred Employee with his or her years of service with Seller and any predecessor entities, to the same extent as such Transferred Employee was entitled immediately prior to the Closing to credit for such service under any similar Employee Benefit Plan. The Purchaser Plans shall not deny Transferred Employees coverage on the basis of pre-existing conditions or evidence of insurability and shall credit such Transferred Employees for any deductibles and out-of-pocket expenses paid under the comparable Employee Benefit Plans in the year of initial participation in the Purchaser Plans.           (c) Transferred Employees shall not accrue benefits under any employee benefit policies, plans, arrangements, programs, practices or agreements of Seller or any of its Affiliates after the Closing Date. Nothing in this Agreement shall cause duplicate benefits to be paid or provided to or with respect to any Transferred Employee under any employee benefit policies, plans, arrangements, programs, practices or agreements. References herein to a benefit with respect to a Transferred Employee shall include, where applicable, benefits with respect to any eligible dependents and beneficiaries of such Transferred Employee under the same employee benefit policy, plan, arrangement, program, practice or agreement.           (d) Purchaser shall take all action necessary and appropriate to ensure that, as of the Closing Date, Purchaser or its Affiliate maintains a qualified retirement plan under Code section 401(k) (hereinafter referred to as the “Purchaser Savings Plan”). The Purchaser Savings Plan shall not accept rollover contributions from any Transferred Employees.           (e) Except for the MCI Health Care and Dependent Care Reimbursement Plans (the “FRP”) account balances described in Section 8.2(f) hereof 48 --------------------------------------------------------------------------------   and except for any assets relating to the Deferred Compensation Plan as described in Section 8.2(h), nothing in this Agreement shall require Seller or its Affiliates to transfer assets or reserves with respect to any Employee Benefit Plan to Purchaser or its Affiliates or the Purchaser Plans.           (f) Seller will make available to Purchaser, not less than five (5) calendar days prior to the Closing Date, a list of Transferred Employees who are participating in or have participated in the FRP, together with the elections made prior to the Closing Date with respect to such accounts through the Closing Date. Purchaser shall take all actions necessary and legally permissible to ensure that as of the Closing Date, it includes the Transferred Employees who are participating in the FRP as of the Closing Date, in a Purchaser Plan that constitutes a Code section 125 plan and any flexible spending arrangements thereunder (“Purchaser’s FSA”). Purchaser shall further take all actions necessary and legally permissible to amend Purchaser’s FSA to provide that as of the Closing Date and for the plan year in which the Closing Date occurs, but not for any specific time thereafter, (A) the Transferred Employees who elected to participate in the FRP shall become participants in Purchaser’s FSA as of the beginning of the FRP’s plan year and at the level of coverage provided under the FRP, except that any Transferred Employees who continue participation in the FRP after the Closing Date as provided below shall not be covered by Purchaser’s FSA for that year; (B) the Transferred Employees’ salary reduction elections shall be taken into account for the remainder of Purchaser’s FSA plan year as if made under Purchaser’s FSA; and (C) Purchaser’s FSA shall reimburse medical expenses incurred by the Transferred Employees at any time during the FRP’s plan year (including claims incurred prior to the Closing Date but unpaid prior to the Closing Date), up to the amount of the Transferred Employee’s election and reduced by amounts previously reimbursed by the FRP. The Transferred Employees shall cease to be eligible for reimbursements from the FRP as of the Closing Date, except to the extent that any Transferred Employee elects continuation of coverage under the FRP as permitted by section 4980B of the Code and section 601 et seq. of ERISA. As soon as practicable following the Closing Date, Seller shall transfer to Purchaser or its Affiliate and Purchaser (or its Affiliate) agrees to accept, those amounts which represent the debit and credit balances under the FRP of the Transferred Employees who are to become covered by Purchaser’s FSA and the transfer of such amounts shall take into account on a net basis employees’ payroll deductions and claims paid through the Closing Date. Seller represents that as of the Closing Date it has properly withheld from the pay of applicable Transferred Employees all amounts in accordance with the FRP elections of such employees.           (g) Except as required by applicable Law, Purchaser shall be responsible for all Liabilities with respect to Transferred Employees attributable to their accrued and unused vacation, sick days and personal days through the Closing Date.           (h) Effective as of the Closing Date, Seller shall transfer sponsorship of the Deferred Compensation Plan and any related grantor trust (if any) to Purchaser, and Purchaser shall assume sponsorship of the Deferred Compensation Plan and any related grantor trust (if any) from Seller. 49 --------------------------------------------------------------------------------        8.3 Employee Rights. Nothing herein express or implied shall confer upon any employee of Seller or its Affiliates, or Purchaser or its Affiliates, or upon any legal representative of such employee, or upon any collective bargaining agent, any rights or remedies, including any right to employment or continued employment for any specified period, of any nature or kind whatsoever under or by reason of this Agreement. Nothing in this Agreement shall be deemed to confer upon any person (nor any beneficiary thereof) any rights under or with respect to any plan, program or arrangement described in or contemplated by this Agreement, and each person (and any beneficiary thereof) shall be entitled to look only to the express terms of any such plan, program or arrangement for his or her rights thereunder. Nothing in this Agreement shall cause Purchaser or its Affiliates, or Seller or its Affiliates to have any obligation to provide employment or any employee benefits to any individual who is not a Transferred Employee or to continue to employ any Transferred Employee for any period of time following the Closing subject to limitations contained in any union contract or collective bargaining agreement. This Agreement does not create any right of an employee or union to object or to refuse to assent to Seller’s assignment of or Purchaser’s assumption of or succession to any employment agreement, union contract, collective bargaining agreement, or other agreement relating to conditions of employment, employment separation, severance or employee benefits, nor shall this Agreement be construed as recognizing that any such rights exist.      8.4 Successors and Assigns. In the event Purchaser or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each case, proper provision shall be made so that such successors and assigns of Purchaser honor the obligations of Purchaser and its Affiliates set forth in this Article VIII. In the event Purchaser or any of its Affiliates outsources any of the Transferred Employees during the Benefit Maintenance Period and such employees are not paid a severance benefit in accordance with Section 8.2(a), then, and in each case, proper provision shall be made so that the outsourcing vendor maintains a severance pay plan or policy that provides a severance benefit for each Transferred Employee who is involuntarily terminated by the outsourcing vendor during such period, which benefit is the same as the severance benefits that would otherwise have been provided to such employees in accordance with Section 8.2(a). For purposes of this Section 8.4, a Transferred Employee shall be considered to have been outsourced if the employee is hired by the outsourcing vendor pursuant to or in connection with an agreement entered into between Purchaser or any of its Affiliates and the outsourcing vendor whereby the outsourcing vendor will provide services to or for Purchaser or any of its Affiliates.      8.5 Cooperation. Seller and Purchaser agree to cooperate fully with respect to the actions necessary to effect the transactions contemplated in this Article VIII, including the provision of records (including payroll records) and information as each may reasonably request from the other. 50 --------------------------------------------------------------------------------        8.6 Employee Obligations of Confidentiality. Notwithstanding anything to the contrary contained in this Agreement, Seller shall retain the right, after the Closing Date, to enforce agreements with its current or former Employees, consultants, and contractors related to Intellectual Property owned by Seller or any of its Affiliates. ARTICLE IX CONDITIONS TO CLOSING      9.1 Conditions Precedent to Obligations of Purchaser. The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser in whole or in part to the extent permitted by applicable Law):           (a) the representations and warranties of Seller set forth in this Agreement qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, at and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date);           (b) Seller shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied with by it prior to the Closing Date, and Purchaser shall have received a certificate signed by an authorized officer of Seller, dated the Closing Date, to the foregoing effect;           (c) During the period from the date hereof to the Closing Date, there shall not have been any Material Adverse Effect, and Purchaser shall have received a certificate signed by an authorized officer of Seller, dated the Closing Date, to the foregoing effect;           (d) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;           (e) all consents and approvals of the FCC shall have been obtained and become a Final Order (for the purposes of this Section 9.1(e), an action or order of the FCC granting the FCC’s consent shall be deemed to have become a “Final Order” when such action or order shall have been issued by the FCC in writing, setting forth the FCC Consent, and (i) such action or order shall not have been reversed, stayed, enjoined, set aside, annulled or suspended, and (ii) no protest, request for stay, reconsideration or review by the FCC on its own motion or by any third party, petition for FCC reconsideration or for rehearing, application for FCC review, or judicial appeal of such 51 --------------------------------------------------------------------------------   action or order shall be pending, when the period provided by law for initiating such protest, request for stay, reconsideration or review by the FCC on its own motion, petition for FCC reconsideration or for rehearing, application for FCC review, or judicial appeal of such action or order shall have expired);           (f) all consents of third parties set forth on Schedule 9.1(f) shall have been obtained;           (g) Seller shall have obtained consents of third parties to the assignment by Seller of a number of Tower Site Leases such that, together with those Tower Site Leases not requiring consent to the assignment thereof, Purchaser shall obtain at Closing valid leasehold rights to use a minimum of sixty five percent (65%) of the transmission towers not owned by Seller but used by Seller in the operation of the Business as of the Closing Date;           (h) there shall not have occurred and be continuing on the Closing Date (i) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory) or (ii) any limitation (whether or not mandatory) by any United States Governmental Body on the extension of credit by banks or other financial institutions;           (i) Seller shall have caused to be removed those Liens identified on Schedule 9.1(i), and evidence of such removal reasonably satisfactory to Purchaser shall have been delivered to Purchaser;           (j) Seller shall have delivered a certificate, dated the Closing Date, executed by any vice president or the secretary or any assistant secretary of Seller, including (i) a copy of the resolutions of the Board of Directors of Seller authorizing the execution, delivery and performance of this Agreement and the other Seller Documents to which it is a party, certified by the secretary or an assistant secretary of Seller as of the Closing Date, and which shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded and (ii) an incumbency certificate from Seller, dated the Closing Date, as to the incumbency and signature of the officers of Seller executing this Agreement or any Seller Document;           (k) Seller shall have delivered, or caused to be delivered, to Purchaser a duly executed bill of sale in the form of Exhibit A hereto (the “Bill of Sale”);           (l) Seller shall have delivered, or caused to be delivered, to Purchaser a duly executed assignment and assumption agreement in the form of Exhibit B hereto (the “Assignment and Assumption Agreement”);           (m) Seller shall have delivered, or caused to be delivered, to Purchaser the Intellectual Property Agreement, duly executed by Seller; 52 --------------------------------------------------------------------------------             (n) Seller shall have delivered to Purchaser a telecommunication services agreement in the form of Exhibit D hereto (the “Telecommunication Services Agreement”), duly executed by Seller;           (o) Seller shall have delivered to Purchaser a reseller agreement in the form of Exhibit E hereto (the “Reseller Agreement”), duly executed by Seller;           (p) Seller shall have delivered to Purchaser a CNAM agreement in the form of Exhibit F hereto (the “CNAM Agreement”), duly executed by Seller;           (q) Seller shall have delivered, or caused to be delivered, to Purchaser a real estate colocation agreement in the form of Exhibit G hereto (the “Colocation Agreement”), duly executed by Seller; and           (r) Seller shall have delivered, or caused to be delivered, to Purchaser a corporate account agreement in the form of Exhibit H hereto (the “Corporate Account Agreement”), duly executed by Seller.      9.2 Conditions Precedent to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by Seller in whole or in part to the extent permitted by applicable Law):           (a) the representations and warranties of Purchaser set forth in this Agreement qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, at and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date), and Seller shall have received a certificate signed by an authorized officer of Purchaser, dated the Closing Date, to the foregoing effect;           (b) Purchaser shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Purchaser on or prior to the Closing Date, and Seller shall have received a certificate signed by an authorized officer of Purchaser, dated the Closing Date, to the foregoing effect;           (c) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;           (d) all consents and approvals of the FCC shall have been obtained; 53 --------------------------------------------------------------------------------             (e) Purchaser shall have delivered, or caused to be delivered, to Seller evidence of the wire transfer referred to in Section 3.2;           (f) Purchaser shall have delivered to Seller the Assignment and Assumption Agreement, duly executed by Purchaser;           (g) Purchaser shall have delivered to Seller the Intellectual Property Agreement, duly executed by Purchaser;           (h) Purchaser shall have delivered to Seller the Telecommunication Services Agreement, duly executed by Purchaser;           (i) Purchaser shall have delivered to Seller the Reseller Agreement, duly executed by Purchaser;           (j) Purchaser shall have delivered to Seller the CNAM Agreement, duly executed by Purchaser;           (k) Purchaser shall have delivered to Seller the Colocation Agreement, duly executed by Purchaser; and           (l) Purchaser shall have delivered to Seller the Corporate Account Agreement, duly executed by Purchaser.      9.3. Frustration of Closing Conditions. Neither Seller nor Purchaser may rely on the failure of any condition set forth in Section 9.1 or 9.2, as the case may be, if such failure was caused by such party’s failure to comply with any provision of this Agreement. ARTICLE X INDEMNIFICATION      10.1 Survival of Representations and Warranties. (a) The representations and warranties of Purchaser and Seller contained in this Agreement shall survive the Closing solely for purposes of this Article X and such representations and warranties shall terminate at the close of business on the date that is fifteen (15) months after the Closing Date; provided, however, that (i) the representations and warranties contained in Sections 5.1, 5.2, 5.5(a), 5.23, 6.1, 6.2 and 6.5 shall survive the Closing and remain in effect indefinitely and (ii) the representations and warranties contained in Sections 5.12 and 5.17 shall survive the Closing until 60 days following the expiration of the applicable statute of limitations with respect to the particular matter that is the subject matter thereof. Any claim for indemnification with respect to any of such matters which is not asserted by notice containing sufficient detail as to allow the claim to be evaluated (and including the amount of such claim) given as herein provided relating thereto within such 54 --------------------------------------------------------------------------------   specified period of survival may not be pursued and is hereby irrevocably waived after such time.           (b) All of the covenants or other agreements of the parties contained in this Agreement shall survive until fully performed or fulfilled, unless and to the extent only that non-compliance with such covenants or agreements is waived in writing by the party entitled to such performance. No claim for a breach of a covenant or other agreement set forth in this Agreement that (i) by its nature is required to be performed by or prior to Closing (the “Pre-Closing Covenants”) may be made or brought by any party hereto more than six (6) months after the Closing Date and (ii) by their nature are required to be performed after Closing (the “Post-Closing Covenants”) may be made or brought by any party hereto after the one year anniversary of the last date on which each such Post-Closing Covenant was required to be performed (in each case, a “Survival Period”); provided, however, that any obligation to indemnify and hold harmless shall not terminate with respect to any Losses to which the Person to be indemnified shall have given notice in writing setting forth the specific claim and the basis therefor in reasonable detail to the indemnifying party in accordance with Section 10.4(a) before the termination of the applicable Survival Period.      10.2 Indemnification by Seller.           (a) Subject to Sections 7.11 and 10.5 hereof, Seller hereby agrees to indemnify and hold Purchaser and its directors, officers, employees, Affiliates, stockholders, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all losses, liabilities, claims, demands, judgments, damages (excluding incidental and consequential damages), fines, suits, actions, costs and expenses (individually, a “Loss” and, collectively, “Losses”) arising out of, based upon, attributable to or resulting from:           (i) any misrepresentation in, or any failure of, any of the representations or warranties made by Seller in this Agreement to be true and correct in all respects at and as of the Closing Date;           (ii) the breach of or non-compliance with any Pre-Closing Covenant or any Post-Closing Covenant on the part of Seller;           (iii) any and all Excluded Assets or any Excluded Liability; and           (iv) all actions, suits, proceedings, demands, assessments, judgments, costs, penalties and expenses, including reasonable attorneys’ fees, incident to the foregoing.           (b) Purchaser acknowledges and agrees that Seller shall not have any liability under any provision of this Agreement for any Loss to the extent that such 55 --------------------------------------------------------------------------------   Loss relates to action taken by Purchaser or any other Person (other than Seller in breach of this Agreement) after the Closing Date. Purchaser shall take and shall cause its Affiliates to take all reasonable steps to mitigate any Loss upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto.      10.3 Indemnification by Purchaser.           (a) Subject to Section 10.5, Purchaser hereby agrees to indemnify and hold Seller and its directors, officers, employees, Affiliates, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Seller Indemnified Parties”) harmless from and against any and all Losses arising out of, based upon, attributable to or resulting from:           (i) any misrepresentation in, or any failure of, any of the representations or warranties made by Purchaser in this Agreement to be true and correct in all respects at and as of the Closing Date;           (ii) the breach of or non-compliance with any Pre-Closing Covenant or any Post-Closing Covenant on the part of Purchaser;           (iii) any Assumed Liability;           (iv) any Purchased Assets or Purchaser’s operation of the Business after the Closing Date; and           (v) all actions, suits, proceedings, demands, assessments, judgments, costs, penalties and expenses, including reasonable attorneys’ fees, incident to the foregoing.      10.4 Indemnification Procedures.           (a) A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought.           (b) In the event that any Legal Proceedings shall be instituted or that any claim or demand shall be asserted by any third party in respect of which payment may be sought under Sections 10.2 and 10.3 hereof (regardless of the limitations set forth in Section 10.5) (an “Indemnification Claim”), the indemnified party shall promptly cause written notice of the assertion of any Indemnification Claim of which it has knowledge which is covered by this indemnity to be forwarded to the indemnifying party. The failure of the indemnified party to give reasonably prompt notice of any Indemnification Claim shall not release, waive or otherwise affect the indemnifying party’s obligations with respect thereto except to the extent that the indemnifying party is prejudiced as a result of such failure and then only to the extent of such prejudice. The indemnifying party shall have the right, at its sole option and expense, to be 56 --------------------------------------------------------------------------------   represented by counsel of its choice, which must be reasonably satisfactory to the indemnified party, and to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against by it hereunder. If the indemnifying party elects to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against by it hereunder, it shall within 30 days (or sooner, if the nature of the Indemnification Claim so requires) notify the indemnified party of its intent to do so; provided that if Seller is the indemnifying party that defends against, negotiates, settles or otherwise deals with such Indemnification Claim, the attorneys’ fees and other Losses incurred by Seller in connection with such defense, negotiation, settlement or other dealings shall reduce (by the amount thereof) the amount recoverable under the Cap by Purchaser Indemnified Parties from Seller. If the indemnifying party elects not to defend against, negotiate, settle or otherwise deal with any Indemnification Claim which relates to any Losses indemnified against hereunder, the indemnified party may defend against, negotiate, settle or otherwise deal with such Indemnification Claim. If the indemnifying party shall assume the defense of any Indemnification Claim, the indemnified party may participate, at his or its own expense, in the defense of such Indemnification Claim; provided, however, that such indemnified party shall be entitled to participate in any such defense with separate counsel at the expense of the indemnifying party if (i) so requested by the indemnifying party to participate or (ii) in the reasonable opinion of counsel to the indemnified party a conflict or potential conflict exists between the indemnified party and the indemnifying party that would make such separate representation advisable; and provided, further, that the indemnifying party shall not be required to pay for more than one such counsel (plus any appropriate local counsel) for all indemnified parties in connection with any Indemnification Claim. The parties hereto agree to cooperate fully with each other in connection with the defense, negotiation or settlement of any such Indemnification Claim. Notwithstanding anything in this Section 10.4 to the contrary, neither the indemnifying party nor the indemnified party shall, without the written consent of the other party (which consent shall not be unreasonably withheld), settle or compromise any Indemnification Claim or permit a default or consent to entry of any judgment unless the claimant and such party provide to such other party an unqualified release from all liability in respect of the Indemnification Claim. Notwithstanding the foregoing, if a settlement offer solely for money damages is made by the applicable third party claimant, and the indemnifying party notifies the indemnified party in writing of the indemnifying party’s willingness to accept the settlement offer and, subject to the applicable limitations of Sections 10.5 and 10.6, pay the amount called for by such offer, and the indemnified party declines to accept such offer, the indemnified party may continue to contest such Indemnification Claim, free of any participation by the indemnifying party, and the amount of any ultimate liability with respect to such Indemnification Claim that the indemnifying party has an obligation to pay hereunder shall be limited to the lesser of (A) the amount of the settlement offer that the indemnified party declined to accept plus the Losses of the indemnified party relating to such Indemnification Claim through the date of its rejection of the settlement offer or (B) the aggregate Losses of the indemnified party 57 --------------------------------------------------------------------------------   with respect to such Indemnification Claim. If the indemnifying party makes any payment on any Indemnification Claim, the indemnifying party shall be subrogated, to the extent of such payment, to all rights and remedies of the indemnified party to any insurance benefits or other claims of the indemnified party with respect to such Indemnification Claim.           (c) After any final decision, judgment or award shall have been rendered by a Governmental Body of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the indemnified party and the indemnifying party shall have arrived at a mutually binding agreement with respect to an Indemnification Claim hereunder, the indemnified party shall forward to the indemnifying party notice of any sums due and owing by the indemnifying party pursuant to this Agreement with respect to such matter.      10.5 Certain Limitations on Indemnification.           (a) Except as set forth in Section 10.5(b), notwithstanding the provisions of this Article X, neither Seller nor Purchaser shall have any indemnification obligations for Losses under Section 10.2(a)(i) or Section 10.3(a)(i) unless the aggregate amount of all such Losses exceeds $230,000 (the “Basket”), and then only to the extent of such excess. Subject to Section 10.5(b), in no event shall the aggregate indemnification to be paid by (i) Seller or Purchaser under this Article X for Losses under Section 10.2(a)(i) or Section 10.3(a)(i) (other than with respect to Losses arising out of a breach by Seller of the representations and warranties set forth in Sections 5.5(a) (Title), 5.11 (Labor), 5.12 (Environmental), 5.17 (Taxes), and 5.22 (Benefits), exceed $5,750,000 (the “Cap”), (ii) Seller under this Article X for Losses arising out of a breach by Seller of the representations and warranties set forth in Sections 5.11 (Labor) and 5.22 (Benefits) (together with all other claims made by Purchaser under Section 10.2(a)(i)) exceed $11,500,000, or (iii) Seller under this Article X for Losses arising out of a breach by Seller of the representations and warranties set forth in Sections 5.12 (Environmental) and 5.17 (Taxes) (together with all other claims made by Purchaser under Section 10.2(a)(i)) exceed the Purchase Price.           (b) Notwithstanding anything in this Article X, the limitation requiring notice of any indemnification claim within a specific time period set forth in Sections 10.1(a) and 10.1(b), and the Cap, Basket and other limitations set forth in Section 10.5(a), shall not apply to claims for indemnification in respect of Losses arising under the representations and warranties set forth in Sections 5.1, 5.2, 5.5(a), 5.23, 6.1, 6.2 and 6.5 or related to or arising out of the matters set forth in Sections 10.2(a)(iii)-(iv), 10.3(a)(iii)-(v), or to claims alleging fraud or willful misconduct.           (c) Seller shall not be required to indemnify any Purchaser Indemnified Party and Purchaser shall not be required to indemnify any Seller Indemnified Party to the extent of any Losses that a court of competent jurisdiction 58 --------------------------------------------------------------------------------   shall have determined by final judgment to have resulted from the bad faith, gross negligence or willful misconduct of the party seeking indemnification.           (d) Purchaser shall not make any claim for indemnification under this Agreement in respect of any matter that is taken into account in the calculation of any adjustment to the Purchase Price pursuant to Section 3.3.      10.6 Calculation of Losses.           (a) The amount of any Losses for which indemnification is provided under this Article X shall be net of any amounts actually recovered or recoverable by the indemnified party under insurance policies with respect to such Losses (net of any Taxes or expenses incurred in connection with such recovery). Purchaser shall use its commercially reasonable efforts to recover under insurance policies for any Losses prior to seeking indemnification under this Agreement; provided, that Purchaser shall have no obligation whatsoever to maintain insurance.           (b) Notwithstanding anything to the contrary elsewhere in this Agreement, no party shall, in any event, be liable to any other Person for any consequential, incidental, indirect, special or punitive damages of such other Person, including loss of revenue, income or profits, diminution of value or loss of business reputation or opportunity relating to the breach or alleged breach hereof (provided that such limitation with respect to lost profits shall not limit Seller’s right to recover contract damages in connection with Purchaser’s failure to close in violation of this Agreement).      10.7 Tax Treatment of Indemnity Payments. Seller and Purchaser agree to treat any indemnity payment made pursuant to this Article X as an adjustment to the Purchase Price on their Tax Returns to the extent permitted by applicable Law.      10.8 Exclusive Remedy. From and after the Closing, the sole and exclusive remedy for any breach or failure to be true and correct, or alleged breach or failure to be true and correct, of any representation or warranty or any covenant or agreement in this Agreement, shall be indemnification in accordance with this Article X. In furtherance of the foregoing, each of the parties hereby waive, to the fullest extent permitted by applicable Law, any and all other rights, claims and causes of action (including rights of contributions, if any) known or unknown, foreseen or unforeseen, which exist or may arise in the future, that it may have against Seller or Purchaser, as the case may be, arising under or based upon any federal, state or local Law (including any such Law relating to environmental matters or arising under or based upon any securities Law, common Law or otherwise). Notwithstanding the foregoing, this Section 10.8 shall not operate to (i) interfere with or impede the operation of the provisions of Article III providing for the resolution of certain disputes relating to the Purchase Price between the parties and/or by an Independent Accountant or (ii) limit the rights of the parties to seek equitable remedies (including specific performance or injunctive relief). 59 --------------------------------------------------------------------------------   ARTICLE XI MISCELLANEOUS      11.1 Expenses. Except as otherwise provided in this Agreement, each of Seller and Purchaser shall bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby.      11.2 Submission to Jurisdiction; Consent to Service of Process.           (a) The parties agree that any controversy, claim or dispute arising out of or relating to or in connection with this Agreement, including, without limitation, any dispute regarding the breach, termination, enforceability or validity hereof (each, a “Dispute”) should be regarded as a business problem to be resolved promptly through business-oriented negotiations before resorting to legal action in accordance with the provisions of Section 11.2(b) hereof. The parties therefore agree to attempt in good faith to resolve any Dispute promptly by negotiation between the executives of the parties who have authority to settle the Dispute. Such negotiations shall commence upon the mailing of a notice (the “Dispute Notice”) from the appropriate executive of the requesting party to an appropriate executive of the responding party. If the Dispute has not been resolved by these Persons within thirty (30) days of the date of the Dispute Notice, unless the parties mutually agree in writing to a longer period, the Dispute shall be referred to the chief executive officer of each of Seller and Purchaser, for discussion and negotiation among them. In the event the Dispute has still not been resolved by negotiation within forty-five (45) days of the date of the Dispute Notice, then either party thereto may commence legal action in accordance with Section 11.2(b) hereof. All negotiations pursuant to this Section 11.2(a) shall be confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence and shall not be used for, or admitted in, any arbitration or court proceedings under this Agreement. Nothing contained in this Section 11.2(a) shall preclude a party from seeking injunctive relief if the prerequisites to obtaining injunctive relief, including irreparable harm, are otherwise satisfied.           (b) (i) With respect to any Dispute that has not been resolved pursuant to Section 11.2(a) hereof, the parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within Wilmington, Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties 60 --------------------------------------------------------------------------------   hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.           (ii) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by the delivery of a copy thereof in accordance with the provisions of Section 11.5.           (iii) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.      11.3 Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and exhibits hereto) and the Confidentiality Agreement represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and thereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.      11.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such State without giving effect to the choice of law principles of such State that would require or permit the application of the laws of another jurisdiction. 61 --------------------------------------------------------------------------------        11.5 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand (with written confirmation of receipt), (ii) when sent by facsimile (with written confirmation of transmission) or (iii) one Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by notice given to the other party pursuant to this provision): If to Seller, to: MCI, LLC 22001 Loudoun County Parkway Ashburn, Virginia 20147 Facsimile: (703) 886-0895 Attention: Stephen R. Mooney with copies (which shall not constitute notice) to: Verizon Communications Inc. 140 West Street, 29th Floor New York, New York 10007 Facsimile: (908) 766-3813 Attention: Marianne Drost, Esq. and Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Facsimile: (212) 310-8007 Attention: Frederick S. Green If to Purchaser, to: Bell Industries, Inc. 8888 Keystone Crossing, Suite 1700 Indianapolis, Indiana 46240 Facsimile: (317) 715-6790 Attention: Chief Executive Officer 62 --------------------------------------------------------------------------------   with a copy (which shall not constitute notice) to: Manatt, Phelps & Phillips, LLP 11355 W. Olympic Boulevard Los Angeles, California 90064 Facsimile: (310) 914-5712 Attention: Mark J. Kelson      11.6 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.      11.7 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Seller or Purchaser, directly or indirectly (by operation of law or otherwise), without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void. No assignment of any obligations hereunder shall relieve the parties hereto of any such obligations.      11.8 Non-Recourse. Except as set forth in Section 11.9 hereof, no past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney or representative of Seller or its Affiliates shall have any liability for any obligations or liabilities of Seller under this Agreement or the Seller Documents of or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby and thereby.      11.9 Seller Parent Joinder. For purposes of all obligations of Seller under this Agreement, including any indemnity or other payment obligations of Seller hereunder, Seller Parent hereby agrees to be bound by such obligations jointly and severally with Seller and agrees that all such obligations may be enforced against Seller Parent by Purchaser in accordance with the provisions of this Agreement to the same extent as if Seller Parent were a party to this Agreement and bound hereby.      11.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and 63 --------------------------------------------------------------------------------   all of which, when taken together, will be deemed to constitute one and the same agreement. [Remainder of page intentionally left blank] 64 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective authorized officers as of the date first written above.               SKYTEL CORP.               By:   /s/ Francis Shammo                   Name: Francis Shammo         Title: SVP and Chief Financial Officer               BELL INDUSTRIES, INC.               By:   /s/ John A. Fellows                   Name: John A. Fellows Title: Chief Executive Officer               The undersigned hereby joins as a party to this Agreement for the limited purposes provided in Section 11.9 of this Agreement:               MCI, LLC               By:   /s/ Francis Shammo                   Name: Francis Shammo Title: SVP and Chief Financial Officer  

-------------------------------------------------------------------------------- Exhibit 10-jj Summary of Terms and Conditions of Accelerated Stock Options Effective December 30, 2005 All of the Company’s outstanding unvested stock options granted to directors, officers and employees of the Company, except the unvested options of Jeffrey P. Baker, the Company’s President and CEO became fully vested effective December 30, 2005. The acceleration of vesting of these stock options does not alter the vesting of restricted stock held by directors and officers of the Company. The stock option awards subject to this acceleration of vesting generally provide that 25% of the number of shares underlying an option award vest on each of the first four anniversaries from the grant date. The acceleration of the vesting of all outstanding, unvested stock options granted under the Plans only affects stock option awards granted from December 30, 2001 through 2005. The acceleration does not affect stock option awards granted prior to December 30, 2001 and prior years as those options have already vested. The following table summarizes the outstanding options subject to accelerated vesting:     Aggregate Number of Shares Issuable Under Accelerated Stock Options (#)   Weighted Average Exercise Price Per Share ($) Total Non-Employee Directors 97,500 3.46 Total Named Executive Officers1  72,500 3.59 Total All Other Employees 731,750 3.32 Total2  901,750 3.36 -------------------------------------------------------------------------------- 1 Includes named executive officers (except Mr. Baker) named in the Summary Compensation Table in the Company’s 2005 Proxy Statement filed with the Securities and Exchange Commission on April 22, 2005. 2 The accelerated options represent approximately 37.95% of the Company’s total outstanding options.     --------------------------------------------------------------------------------

AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT This Amendment No. 1 (this “Amendment”) is made and entered into as of the ____ day of May, 2006 by and among Edgewater Foods International, Inc., a Nevada corporation (the “Company”), and the undersigned purchasers (the “Purchasers”) of shares of Series A Convertible Preferred Stock of the Company.  Capitalized terms used but not defined herein have the meanings assigned to them in the Registration Rights Agreement (as defined below). WHEREAS, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) dated as of April 12, 2006. WHEREAS, the Company and the Purchasers desire to amend the Registration Rights Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties agree as follows: 1. The definition of “Filing Date“ contained in Section 1 of the Registration Rights Agreement is hereby deleted in its entirety and the following language shall replace such definition in Section 1 of the Registration Rights Agreement: "Filing Date" means the fifth (5th) Business Day following the closing of the Additional Preferred Stock and Warrant Financing, but in no event later than June 30, 2006; provided that, if the Filing Date falls on a Saturday, Sunday or any other day which shall be a legal holiday or a day on which the Commission is authorized or required by law or other government actions to close, the Filing Date shall be the following Business Day.     2. Except as expressly amended by this Amendment, the parties agree that all other provisions of the Registration Rights Agreement remain unchanged and that the Registration Rights Agreement remains in full force and effect. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [Signature page follows] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly executed as of the date first written above.    EDGEWATER FOODS INTERNATIONAL, INC.        By:  ______________________________________    Name:  Michael Boswell Title:  Acting Chief Financial Officer            PURCHASER:        By: _______________________________________ Name: Title:

  MTN GLOBAL FUNDING AGREEMENT Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 (515) 247-5111 In consideration of the payment made by, or at the direction of, Principal Life Income Fundings Trust 2006-55 (the “Agreement Holder”) of the Net Deposit, as described below, Principal Life Insurance Company (“Principal Life”) agrees to make payments to the person or persons entitled to them, subject to the provisions of this funding agreement (this “Agreement”). This Agreement is delivered in and subject to the laws of the State of Iowa. This Agreement is issued and accepted subject to all the terms set out in it. This Agreement is executed by Principal Life at its Corporate Center to take effect as of the 30th day of August, 2006, which is referred to as the Effective Date, subject to the receipt by Principal Life or its designee of the Net Deposit (as set forth in Section 1).       /s/ Joyce N. Hoffman   /s/ Larry Zimpleman Senior Vice President and   President and Corporate Secretary   Chief Operating Officer       /s/ Jim Madden   Registrar   August 30, 2006   Date GLOBAL FUNDING AGREEMENT NO. 7-07919 RESTRICTIONS REGARDING THE TRANSFER OR SALE OF THIS FUNDING AGREEMENT OR ANY INTEREST HEREIN ARE SET FORTH HEREIN   --------------------------------------------------------------------------------         FUNDING AGREEMENT   No. 7-07919      This Agreement is issued in connection with the issuance by the Trust (specified in the Annex) of Secured Notes (the “Notes”) which are identified in the annex hereto (the “Annex”) and which are being issued by the Trust pursuant to the Prospectus dated February 16, 2006, the Prospectus Supplement dated February 16, 2006, as from time to time amended or supplemented, and the Pricing Supplement applicable to the Notes (the “Pricing Supplement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Notes. Where used in this Agreement, the term “Notes” shall mean the Notes secured by this Agreement as the same exist on the Effective Date, without giving effect to any amendments or modifications to said Notes effected or made after any such Effective Date unless such amendments or modifications to said Notes have been consented to in writing by Principal Life. 1.   Deposit       Principal Life agrees to accept, and the Agreement Holder agrees to pay or cause to be paid to Principal Life, for value on the Effective Date, the Net Deposit (as specified in the Annex). All funds received by Principal Life under this Agreement shall become the exclusive property of Principal Life and remain a part of Principal Life’s general account without any duty or requirement of segregation or separate investment.       This Agreement shall become effective only upon the receipt by Principal Life or its designee of the Net Deposit.   2.   Fund       Upon receipt of the Net Deposit, Principal Life will establish, under this Agreement, a bookkeeping account in the name of the Agreement Holder, which will evidence Principal Life’s obligations under this Agreement.       The Deposit deemed received (as specified in the Annex), (i) less any withdrawals to make payments hereunder and (ii) plus any interest accrued and premium, if any, pursuant to Section 7, will be referred to as the “Fund”.       Principal Life is neither a trustee nor a fiduciary with respect to the Fund.   3.   Purchase of Notes By Principal Life       Principal Life may purchase some or all of the Notes in the open market or otherwise at any time, and from time to time. Simultaneously, upon such purchase, (1) the purchased Notes shall, by their terms become mandatorily redeemable by the Trust as specified in the related Pricing Supplement, Prospectus Supplement and/or Prospectus and (2) the Fund under this Agreement shall be permanently reduced by the same percentage as the principal amount of the Notes so redeemed bears to the sum of (i) the aggregate principal amount of all Notes issued and outstanding immediately prior to such redemption and (ii) the principal amount of the Trust Beneficial Interest related to such Notes. If Principal Life, in its sole discretion, engages in such open market or other purchases, then the Trust, the Indenture Trustee in respect of such Notes, and Principal Life shall take 2 --------------------------------------------------------------------------------       actions (including, in the case of Principal Life, making the payment(s) necessary to effect the Trust’s redemption of such Notes) as may be necessary or desirable to effect the cancellation of such Notes by the Trust.   4.   Entire Agreement       This Agreement and the Annex attached hereto constitute the entire Agreement.   5.   Representations   (a)   Each party hereto represents and warrants to the other that as of the date hereof:   (i)   it has the power to enter into this Agreement and to consummate the transactions contemplated hereby;     (ii)   this Agreement has been duly authorized, executed and delivered, this Agreement constitutes a legal, valid and binding obligation of each party hereto, and this Agreement is enforceable in accordance with the terms hereof, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights, and subject as to enforceability to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law; and     (iii)   the execution and delivery of this Agreement and the performance of obligations hereunder do not and will not constitute or result in a default, breach or violation of the terms or provisions of its certificate, articles or charter of incorporation, declaration of trust, by-laws or any agreement, instrument, mortgage, judgment, injunction or order applicable to it or any of its property.   (b)   The Trust further represents and warrants to Principal Life that:   (i)   it is a person other than a natural person and is purchasing this Agreement for the purpose of providing collateral security for securities registered with the United States Securities and Exchange Commission;     (ii)   it has been informed and understands that transfer is restricted by the terms of this Agreement; and     (iii)   it (a) is solely responsible for determining whether this Agreement is suitable for the purpose intended; (b) has carefully read this Agreement (including the Annex) before signing this Agreement; (c) has had a reasonable opportunity to make such inquiries as it deemed necessary prior to signing this Agreement; and (d) has received or had access to such additional information as it deemed necessary in connection with its decision to sign this Agreement. 3 --------------------------------------------------------------------------------       In performing its obligations hereunder Principal Life is not acting as a fiduciary, agent or other representative for the Agreement Holder or anyone else. All representations and warranties made by the Agreement Holder and Principal Life in this Agreement shall be considered to have been relied upon by the other in connection with the execution hereof.   6.   Assignment of Agreement       The following conditions must be satisfied in order to effectuate any assignment of this Agreement:   (i)   This Agreement may only be transferred through a book entry system maintained by Principal Life, or an agent designated by it, within the meaning of Temporary Treasury Regulations Section 5f.103-1(c) and Treasury Regulations Section 1.871-14(c)(1)(i).     (ii)   The Agreement Holder, and any assignee, must comply with applicable securities laws.     (iii)   Principal Life has consented in writing to the proposed assignment, such consent not to be unreasonably withheld.     (iv)   Principal Life shall have received from the proposed assignee a duly executed certificate containing, in substance, the information, representations, warranties, acknowledgments and agreements set forth in this Agreement.     Any attempted sale, transfer, anticipation, assignment, hypothecation, or alienation not in accordance with this Section 6 shall be void and of no effect. Until such time, if any, as Principal Life has consented in writing to a proposed assignment, Principal Life shall not be obligated to make any payments to or at the direction of anyone other than the person shown on Principal Life’s books and records as the Agreement Holder. Once the foregoing conditions have been satisfied with respect to an assignment, the assignee or its successor shall be deemed to be the sole Agreement Holder for all purposes of this Agreement and Principal Life shall promptly amend its records to reflect the assignee’s status as Agreement Holder.   7.   Payments to the Agreement Holder       Principal Life shall pay to, or at the direction of, the Agreement Holder by the date (the “Due Date”) on which any payment becomes due in respect of the Notes secured by this Agreement (and in any event such period of time prior to the Due Date as shall be necessary to ensure that the Trust can fulfill its obligation to make payment in full of all amounts due and payable under the Notes on the Due Date), an amount in the currency or currencies in which the Notes are denominated as specified in the Notes equal to the sum of (i) the amount of principal and/or (as the case may be) interest and/or (as the case may be) premium falling due in respect of the Notes on such Due Date (the “Notes Component”) and (ii) the amount of any payments owed by the Trust in respect of the Trust Beneficial Interest falling due on such date (the “Beneficial Interest Component”). In the event that Principal Life fails to make payment of any such amount on or prior to 4 --------------------------------------------------------------------------------       the Due Date, Principal Life shall pay to or at the direction of the Agreement Holder, on demand by the Agreement Holder, (i) if the failure relates to the Notes Component, an amount in the currency specified in the Notes equal to the amount of default interest (or other amount) which becomes due and payable by the Trust in accordance with the Notes as a consequence of any delay in the Trust making the relevant payment of principal, interest or premium (as the case may be) to the holders of the of Notes and (ii) if the failure relates to the Beneficial Interest Component, such amount or default interest, if any, determined in the same manner as default interest on the Notes Component.       Interest shall accrue on the Fund in the same amount and pursuant to the same terms as interest accrues on the Notes secured by this Agreement and on the Trust Beneficial Interest related to the Notes.       If any amount is withdrawn from the Fund in order to make a payment under this Section 7, interest will cease to be credited with regard to such amount as of the end of the day immediately preceding the date on which such withdrawal is made.       All payments made by Principal Life to the Agreement Holder hereunder shall be paid in same-day, freely transferable funds to such account as has been specified for such purpose by the Agreement Holder.       Notwithstanding anything to the contrary in this Section 7, if Principal Life shall, with respect to any scheduled amount due and payable under any of the Notes, comply in all respects with the requirements of this Section 7, but an event of default has occurred with respect to the Notes and as a result payments with respect to the Notes have been accelerated, otherwise than by reason of any default under this Agreement by Principal Life, no Event of Default (as defined below) under this Funding Agreement shall be deemed to have occurred, no payments with respect to this Agreement shall be accelerated and Principal Life will remain obligated to make payments under this Agreement as if no event of default had occurred with respect to the Notes.   8.   Termination of Agreement       Subject to the provisions of the following paragraph and the Annex, this Agreement shall terminate and cease to be of any further force or effect on the day and at the time upon which all amounts have been withdrawn from the Fund pursuant to this Agreement.       Upon the occurrence of any of the following events (each, an “Event of Default”) and following a written demand by the Agreement Holder, Principal Life shall pay to, or at the direction of, the Agreement Holder all amounts that the Trust is required to pay in such event under the Notes and the Trust Beneficial Interest:   (i)   Principal Life’s failure to make any payment of interest, premium (if applicable) or installment payments (if applicable) in accordance with this Agreement, if such failure to pay is not corrected within seven (7) Business Days after such payment becomes due and payable; or 5 --------------------------------------------------------------------------------     (ii)   Principal Life’s failure to make any payment of principal (other than any installment payment) in accordance with this Agreement, if such failure to pay is not corrected within one (1) Business Day after such payment becomes due and payable; or     (iii)   if Principal Life (a) is dissolved (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes its obligations); (b) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (c) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (d) institutes or has instituted against it an administrative or legal proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any supervision, rehabilitation, liquidation, bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (1) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its rehabilitation, winding-up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within 60 days of the institution or presentation thereof; (e) has a resolution passed for its rehabilitation, winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes the obligations of Principal Life); (f) seeks or becomes subject to the appointment of an administrator, supervisor, rehabilitator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (g) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 60 days thereafter; (h) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (a) to (g) (inclusive); or (i) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.     Notwithstanding anything to the contrary in this Section 8, if an event described in clause (iii) above occurs, this Agreement will automatically terminate and the amount of the Fund will be immediately due and payable by Principal Life to the Agreement Holder, or the account specified by the Agreement Holder.       Principal Life will promptly notify the Agreement Holder and the Rating Agencies in writing of the occurrence of any of (i) through (iii) above.   9.   Withholding; Additional Amounts       All amounts due in respect of this Agreement will be made without withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or 6 --------------------------------------------------------------------------------       other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority in the United States unless the withholding or deduction is required by law, regulation or official interpretation thereof. Unless otherwise specified in the Annex, Principal Life will not pay any additional amounts to the Agreement Holder in the event that any withholding or deduction is so required by law, regulation or official interpretation thereof, and the imposition of a requirement to make any such withholding or deduction will not give rise to an Event of Default or any independent right or obligation to redeem this Agreement.   10.   Currency       Except as may be specifically noted in the Annex, the Net Deposit and all payments under Section 7 of this Agreement shall be made using the currency or currencies as specified in the Notes.   11.   Tax Treatment       Principal Life and the Agreement Holder agree that this Agreement shall be disregarded for U.S. Federal income tax purposes. Principal Life and the Agreement Holder further agree that if this Agreement is not so disregarded, it will and is intended to be treated as a debt obligation of Principal Life issued in registered form within the meaning of Treasury Regulations Section 1.871-14(c)(1)(i), except to the extent provided in Treasury Regulations Section 1.163-5T (or any subsequent similar regulation).   12.   Amendment and Modification       This Agreement may be amended or modified in whole or in part, at any time and from time to time, for any period or periods (a) by mutual written agreement by such officers of Principal Life, the Agreement Holder and, where such Agreement Holder is the Indenture Trustee upon an assignment by way of security of this Agreement by the Trust, the Trust and (b) without the consent of any other person affected thereby.   13.   Notice       Except as otherwise provided herein, all notices given pursuant to this Agreement shall be in writing, and shall either be delivered, mailed or telecopied to the locations listed below or at such other address or to the attention of such other persons as such party shall have designated for such purpose in a written notice complying as to delivery with the terms of this Section 13. Each such notice shall be effective (i) if given by telecopy, when transmitted to the applicable number so specified in this Section 13 (if required herein, such notice shall also be sent by mail, with first class postage prepaid), (ii) if given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if given by any other means, when actually delivered at such address. 7 --------------------------------------------------------------------------------   If to Principal Life:       Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 Attention:   General Counsel Telephone:   (515) 247-5111 Telecopy:   (515) 248-3011       Principal Life Insurance Company 711 High Street Des Moines, Iowa 50392-0001 Attention:   Jim Fifield, Counsel Telephone:   (515) 248-9196 Telecopy:   (515) 235-9353 If to the Agreement Holder:       Principal Life Income Fundings Trust 2006-55 c/o U.S. Bank Trust National Association 100 Wall Street, 16th Floor New York, NY 10005 Attention:   Thomas E. Tabor Telephone:   (212) 361-6184 Facsimile:   (212) 809-5459 with a copy to:       Citibank, N.A. Citibank Agency and Trust 388 Greenwich Street, 14th Floor New York, NY 10013 Attention:   Nancy Forte Telephone:   (212) 816-5685 Telecopy:   (212) 816-5527 14.   Business Day       For purposes of this Agreement, “Business Day” means any day that is a Business Day as specified in the Notes or the Indenture.   15.   Business Day Convention       If the date on which any payment is due to be made under this Agreement shall occur on a day on which is not a Business Day, such payment shall be made in accordance with the Business Day Convention as specified in the Notes or the Indenture. 8 --------------------------------------------------------------------------------   16.   Jurisdiction       The parties to this Agreement hereby consent to the non-exclusive jurisdiction of any State or Federal Court of competent jurisdiction located within the State of New York, in the Borough of Manhattan, in connection with any actions or proceedings arising directly or indirectly from this Agreement.   17.   Waiver       The obligations of Principal Life or the Agreement Holder under this Agreement may be waived only in writing by the party to this Agreement whose interests are adversely affected by such waiver. No failure or delay, on the part of the party adversely affected, in exercising any right or remedy hereunder shall operate as a waiver thereof.   18.   Tax Redemption.       If a Tax Event (defined below) occurs, Principal Life will have the right to redeem this Agreement by giving not less than 30 and no more than 60 days prior written notice to the Agreement Holder and by paying to the Agreement Holder an amount equal to the Fund. The term “Tax Event” means that Principal Life shall have received an opinion of independent legal counsel stating in effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the Effective Date of this Agreement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to U.S. federal income tax with respect to interest accrued or received on this Agreement or (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges. 9 --------------------------------------------------------------------------------   ANNEX This Annex will become effective as of the Effective Date, subject to the requirements of Section 1.           Trust:   Principal Life Income Fundings Trust 2006-55           Net Deposit:   The Net Deposit is $2,931,360.00.           Deposit:   Regardless of the amount of the Net Deposit, the Deposit is deemed to be $2,976,015.00.           Bank and Account:   Wells Fargo Bank Iowa, N.A. ABA No.: XXXXXXXX For credit to Principal Life Insurance Company Account #XXXXXXXX           Title of Notes:   Principal Life Income Fundings Trust 2006-55 5.85% Principal® Life CoreNotes® Due 2016           Survivor’s Option:   Unless this Agreement has been declared due and payable prior to the Maturity Date of the related Notes by reason of any Event of Default, or has been previously redeemed or otherwise repaid, the Agreement Holder may request repayment of this Agreement upon the valid exercise of the Survivor’s Option in the Notes by the Representative of the deceased Beneficial Owner of such Notes (a “Survivor’s Option”).               Except as provided below, upon the tender to and acceptance by Principal Life of this Agreement (or portion thereof) securing the Notes as to which the Survivor’s Option has been exercised, Principal Life shall repay to the Agreement Holder the amount of the Fund equal to (i) 100% of the principal amount of the Notes as to which the Survivor’s Option has been validly exercised and accepted, plus accrued and unpaid interest on such amount to the date of repayment, or (ii) in the case of Discount Notes, the Issue Price of the Notes as to which the Survivor’s Option has been validly exercised and accepted, plus accrued discount and any accrued and unpaid interest on such amount to the date of repayment. However, Principal Life shall not be obligated to repay:               •   more than the greater of $2,000,000 or 2% of the aggregate deposit for all funding agreement contracts securing all outstanding notes issued under the Principal® Life CoreNotesSM program as of the end of the most recent calendar year; A-1 --------------------------------------------------------------------------------     •   more than $250,000 in aggregate deposit of funding agreement contracts securing outstanding notes issued under the Principal® Life CoreNotesSM program as to which the Survivor’s Option has been exercised on behalf of any single beneficial owner in any calendar year; or     •   more than 2% of the Deposit under this Agreement which secures the related Notes, as of the end of the most recent calendar year.           Principal Life shall not make repayments pursuant to the Agreement Holder’s request for repayment upon exercise of the Survivor’s Option in amounts that are less than $1,000, and, in the event that the limitations described in the preceding sentence would result in the partial repayment of this Agreement, the principal amount of this Agreement remaining outstanding after repayment must be at least $1,000 (the minimum authorized denomination of this Agreement). A request for repayment by the Agreement Holder upon an otherwise valid election to exercise the Survivor’s Option may not be withdrawn.           This Agreement (or portion thereof) accepted for repayment shall be repaid on the first Interest Payment Date for the related Notes that occurs 20 or more calendar days after the date of such acceptance.           In order to obtain repayment of this Agreement (or portion thereof) upon exercise of the Survivor’s Option, the Agreement Holder must provide to Principal Life (i) a written request for repayment signed by the Agreement Holder, and (ii) any additional information Principal Life requires to evidence satisfaction of any conditions to the repayment of this Agreement (or portion thereof). A-2 --------------------------------------------------------------------------------         PRINCIPAL LIFE INSURANCE COMPANY       By:   /s/ Christopher P. Freese             Name:   Christopher P. Freese             Title:   Officer                         PRINCIPAL LIFE INCOME FUNDINGS TRUST 2006-55       By:   U.S. Bank Trust National Association, not in its individual capacity, but solely in its capacity as trustee       By:   Bankers Trust Company, N.A., under Limited Power of Attorney, dated February 16, 2006.       By:   /s/ Diana L. Cook             Name:   Diana L. Cook             Title:   Vice President       A-3

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  Exhibit 10.12 Loan No.:  502856397                                                                                               5 Becker Farm Road, Roseland, New Jersey PROMISSORY NOTE $15,500,000.00                                                                                                                                                                  May 9, 2006 FOR VALUE RECEIVED, the undersigned, 5 BECKER SPE LLC, a Delaware limited liability company (“Borrower”), having an address c/o Mack-Cali Realty, L.P. at 11 Commerce Drive, Cranford, New Jersey 07016, promises to pay to the order of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”), at the office of Lender at Commercial Real Estate Services, 8739 Research Drive URP — 4, NC 1075, Charlotte, North Carolina 28262, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of FIFTEEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($15,500,000.00), together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the rate of six and twenty-seven hundredths percent (6.27%) (the “Note Rate”), together with all other amounts due hereunder or under the other Loan Documents (as defined herein), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. ARTICLE I TERMS AND CONDITIONS SECTION 1.1             COMPUTATION OF INTEREST. INTEREST SHALL BE COMPUTED HEREUNDER BASED ON A 360-DAY YEAR AND BASED ON THE ACTUAL NUMBER OF DAYS ELAPSED FOR ANY PERIOD IN WHICH INTEREST IS BEING CALCULATED INCLUDING, WITHOUT LIMITATION, THE INTEREST ONLY PERIOD (HEREINAFTER DEFINED), AS MORE PARTICULARLY SET FORTH ON ANNEX 1 ATTACHED HERETO AND INCORPORATED BY THIS REFERENCE. INTEREST SHALL ACCRUE FROM THE DATE ON WHICH FUNDS ARE ADVANCED HEREUNDER (REGARDLESS OF THE TIME OF DAY) THROUGH AND INCLUDING THE DAY ON WHICH FUNDS ARE CREDITED PURSUANT TO SECTION 1.2 HEREOF. SECTION 1.2             PAYMENT OF PRINCIPAL AND INTEREST. PAYMENTS IN FEDERAL FUNDS IMMEDIATELY AVAILABLE AT THE PLACE DESIGNATED FOR PAYMENT RECEIVED BY LENDER PRIOR TO 2:00 P.M. LOCAL TIME ON A DAY ON WHICH LENDER IS OPEN FOR BUSINESS AT SAID PLACE OF PAYMENT SHALL BE CREDITED PRIOR TO CLOSE OF BUSINESS, WHILE OTHER PAYMENTS, AT THE OPTION OF LENDER, MAY NOT BE CREDITED UNTIL IMMEDIATELY AVAILABLE TO LENDER IN FEDERAL FUNDS AT THE PLACE DESIGNATED FOR PAYMENT PRIOR TO 2:00 P.M. LOCAL TIME ON THE NEXT DAY ON WHICH LENDER IS OPEN FOR BUSINESS. INTEREST ONLY SHALL BE PAYABLE IN SIXTY (60) EQUAL CONSECUTIVE MONTHLY INSTALLMENTS IN THE AMOUNT SET FORTH ON ANNEX 1 (THE “INTEREST ONLY MONTHLY PAYMENT AMOUNT”), BEGINNING ON JUNE 11, 2006 (THE “FIRST PAYMENT DATE”), AND CONTINUING ON THE ELEVENTH (11TH) DAY OF EACH AND EVERY CALENDAR MONTH THEREAFTER THROUGH AND INCLUDING MAY 11, 2011 (THE “INTEREST ONLY PERIOD”) AND, THEREAFTER, PRINCIPAL AND INTEREST SHALL BE PAYABLE IN EQUAL CONSECUTIVE MONTHLY INSTALLMENTS OF --------------------------------------------------------------------------------   $95,637.88 EACH (THE “PRINCIPAL AND INTEREST MONTHLY PAYMENT AMOUNT” AND, TOGETHER, WITH THE INTEREST ONLY MONTHLY PAYMENT AMOUNT, THE “MONTHLY PAYMENT AMOUNT”), BEGINNING ON JUNE 11, 2011 AND CONTINUING ON THE ELEVENTH (11TH) DAY OF EACH AND EVERY CALENDAR MONTH THEREAFTER THROUGH AND INCLUDING APRIL 11, 2016 (EACH, A “PAYMENT DATE”). ON MAY 11, 2016 (THE “MATURITY DATE”) (PROVIDED THAT IN THE EVENT THAT THERE IS A DEFEASANCE OF THE LOAN PURSUANT TO SECTION 1.5(D) HEREOF, THE MATURITY DATE SHALL AUTOMATICALLY BE THE LOCKOUT EXPIRATION DATE), THE ENTIRE OUTSTANDING PRINCIPAL BALANCE HEREOF, TOGETHER WITH ALL ACCRUED BUT UNPAID INTEREST THEREON, SHALL BE DUE AND PAYABLE IN FULL. SECTION 1.3             APPLICATION OF PAYMENTS. SO LONG AS NO EVENT OF DEFAULT (AS HEREINAFTER DEFINED) EXISTS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, EACH SUCH MONTHLY INSTALLMENT SHALL BE APPLIED, FIRST, TO ANY AMOUNTS HEREAFTER ADVANCED BY LENDER HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, SECOND, TO ANY LATE FEES AND OTHER AMOUNTS PAYABLE TO LENDER, THIRD, TO THE PAYMENT OF ACCRUED INTEREST AND LAST TO REDUCTION OF PRINCIPAL. SECTION 1.4             PAYMENT OF “SHORT INTEREST”. IF THE ADVANCE OF THE PRINCIPAL AMOUNT EVIDENCED BY THIS NOTE IS MADE ON A DATE OTHER THAN A PAYMENT DATE, BORROWER SHALL PAY TO LENDER CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF INTEREST AT THE NOTE RATE FOR A PERIOD FROM THE DATE HEREOF THROUGH AND INCLUDING THE TENTH (10TH) DAY OF EITHER (X) THIS MONTH, IN THE EVENT THAT THE DATE HEREOF IS ON OR PRIOR TO THE 11TH OF THE MONTH, AND (Y) THE IMMEDIATELY SUCCEEDING MONTH, IN THE EVENT THAT THE DATE HEREOF IS AFTER THE 11TH OF THE MONTH. SECTION 1.5             PREPAYMENT; DEFEASANCE. (A)           THIS NOTE MAY NOT BE PREPAID, IN WHOLE OR IN PART (EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN), AT ANY TIME PRIOR TO THE PAYMENT DATE OCCURRING THREE (3) PAYMENT DATES IMMEDIATELY PRIOR TO THE MATURITY DATE (THE “LOCKOUT EXPIRATION DATE”). IN THE EVENT THAT BORROWER WISHES TO HAVE THE PROPERTY (AS HEREINAFTER DEFINED) RELEASED FROM THE LIEN OF THE SECURITY INSTRUMENT PRIOR TO THE LOCKOUT EXPIRATION DATE, BORROWER’S SOLE OPTION SHALL BE A DEFEASANCE (AS HEREINAFTER DEFINED) UPON SATISFACTION OF THE TERMS AND CONDITIONS SET FORTH IN SECTION 1.5(D) HEREOF. THIS NOTE MAY BE PREPAID IN WHOLE BUT NOT IN PART WITHOUT PREMIUM OR PENALTY ON ANY PAYMENT DATE OCCURRING ON OR AFTER THE LOCKOUT EXPIRATION DATE PROVIDED (I) WRITTEN NOTICE OF SUCH PREPAYMENT IS RECEIVED BY LENDER NOT MORE THAN NINETY (90) DAYS AND NOT LESS THAN THIRTY (30) DAYS PRIOR TO THE DATE OF SUCH PREPAYMENT, AND (II) SUCH PREPAYMENT IS ACCOMPANIED BY ALL INTEREST ACCRUED HEREUNDER THROUGH AND INCLUDING THE DATE OF SUCH PREPAYMENT AND ALL OTHER SUMS DUE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS. IF, UPON ANY SUCH PERMITTED PREPAYMENT ON ANY PAYMENT DATE OCCURRING ON OR AFTER THE LOCKOUT EXPIRATION DATE, THE AFORESAID PRIOR WRITTEN NOTICE HAS NOT BEEN TIMELY RECEIVED BY LENDER, THERE SHALL BE DUE A PREPAYMENT FEE EQUAL TO THE LESSER OF (I) THIRTY (30) DAYS’ INTEREST COMPUTED AT THE NOTE RATE ON THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE SO PREPAID AND (II) INTEREST COMPUTED AT THE NOTE RATE ON THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE SO PREPAID THAT WOULD HAVE BEEN PAYABLE FOR THE PERIOD FROM, AND INCLUDING, THE DATE OF PREPAYMENT THROUGH THE MATURITY DATE, AS THOUGH SUCH PREPAYMENT HAD NOT OCCURRED. (B)           IF, PRIOR TO THE LOCKOUT EXPIRATION DATE, THE INDEBTEDNESS EVIDENCED BY THIS NOTE SHALL HAVE BEEN DECLARED DUE AND PAYABLE BY LENDER PURSUANT TO ARTICLE II HEREOF OR THE PROVISIONS OF ANY OTHER LOAN DOCUMENT DUE TO A DEFAULT BY BORROWER, THEN, IN ADDITION TO THE 2 --------------------------------------------------------------------------------   INDEBTEDNESS EVIDENCED BY THIS NOTE BEING IMMEDIATELY DUE AND PAYABLE, THERE SHALL ALSO THEN BE IMMEDIATELY DUE AND PAYABLE A PREPAYMENT FEE IN AN AMOUNT EQUAL TO THE YIELD MAINTENANCE PREMIUM (AS HEREINAFTER DEFINED) BASED ON THE ENTIRE INDEBTEDNESS ON THE DATE OF SUCH ACCELERATION. IN ADDITION TO THE AMOUNTS DESCRIBED IN THE PRECEDING SENTENCE, IN THE EVENT OF ANY SUCH ACCELERATION OR TENDER OF PAYMENT OF SUCH INDEBTEDNESS OCCURS OR IS MADE ON OR PRIOR TO THE FIRST (1ST) ANNIVERSARY OF THE DATE OF THIS NOTE, THERE SHALL ALSO THEN BE IMMEDIATELY DUE AND PAYABLE AN ADDITIONAL PREPAYMENT FEE OF THREE PERCENT (3%) OF THE PRINCIPAL BALANCE OF THIS NOTE. THE TERM “YIELD MAINTENANCE PREMIUM” SHALL MEAN AN AMOUNT EQUAL TO THE GREATER OF (A) ONE PERCENT (1%) OF THE PRINCIPAL AMOUNT BEING PREPAID, AND (B) THE PRESENT VALUE OF A SERIES OF PAYMENTS EACH EQUAL TO THE PAYMENT DIFFERENTIAL (AS HEREINAFTER DEFINED) AND PAYABLE ON EACH PAYMENT DATE OVER THE REMAINING ORIGINAL TERM OF THIS NOTE AND ON THE MATURITY DATE, DISCOUNTED AT THE REINVESTMENT YIELD (AS HEREINAFTER DEFINED) FOR THE NUMBER OF MONTHS REMAINING AS OF THE DATE OF SUCH PREPAYMENT TO EACH SUCH PAYMENT DATE AND THE MATURITY DATE. THE TERM “PAYMENT DIFFERENTIAL” SHALL MEAN AN AMOUNT EQUAL TO (I) THE NOTE RATE LESS THE REINVESTMENT YIELD, DIVIDED BY (II) TWELVE (12) AND MULTIPLIED BY (III) THE PRINCIPAL SUM OUTSTANDING UNDER THIS NOTE AFTER APPLICATION OF THE CONSTANT MONTHLY PAYMENT DUE UNDER THIS NOTE ON THE DATE OF SUCH PREPAYMENT, PROVIDED THAT THE PAYMENT DIFFERENTIAL SHALL IN NO EVENT BE LESS THAN ZERO. THE TERM “REINVESTMENT YIELD” SHALL MEAN AN AMOUNT EQUAL TO THE LESSER OF (I) THE YIELD ON THE U.S. TREASURY ISSUE (PRIMARY ISSUE) WITH A MATURITY DATE CLOSEST TO THE MATURITY DATE, OR (II) THE YIELD ON THE U.S. TREASURY ISSUE (PRIMARY ISSUE) WITH A TERM EQUAL TO THE REMAINING AVERAGE LIFE OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, WITH EACH SUCH YIELD BEING BASED ON THE BID PRICE FOR SUCH ISSUE AS PUBLISHED IN THE WALL STREET JOURNAL ON THE DATE THAT IS FOURTEEN (14) DAYS PRIOR TO THE DATE OF SUCH PREPAYMENT (OR, IF SUCH BID PRICE IS NOT PUBLISHED ON THAT DATE, THE NEXT PRECEDING DATE ON WHICH SUCH BID PRICE IS SO PUBLISHED) AND CONVERTED TO A MONTHLY COMPOUNDED NOMINAL YIELD. IN THE EVENT THAT ANY PREPAYMENT FEE IS DUE HEREUNDER, LENDER SHALL DELIVER TO BORROWER A STATEMENT SETTING FORTH THE AMOUNT AND DETERMINATION OF THE PREPAYMENT FEE, AND, PROVIDED THAT LENDER SHALL HAVE IN GOOD FAITH APPLIED THE FORMULA DESCRIBED ABOVE, BORROWER SHALL NOT HAVE THE RIGHT TO CHALLENGE THE CALCULATION OR THE METHOD OF CALCULATION SET FORTH IN ANY SUCH STATEMENT IN THE ABSENCE OF MANIFEST ERROR, WHICH CALCULATION MAY BE MADE BY LENDER ON ANY DAY DURING THE FIFTEEN (15) DAY PERIOD PRECEDING THE DATE OF SUCH PREPAYMENT. LENDER SHALL NOT BE OBLIGATED OR REQUIRED TO HAVE ACTUALLY REINVESTED THE PREPAID PRINCIPAL BALANCE AT THE REINVESTMENT YIELD OR OTHERWISE AS A CONDITION TO RECEIVING THE PREPAYMENT FEE. (C)           PARTIAL PREPAYMENTS OF THIS NOTE SHALL NOT BE PERMITTED, EXCEPT FOR PARTIAL PREPAYMENTS RESULTING FROM LENDER’S ELECTION TO APPLY INSURANCE OR CONDEMNATION PROCEEDS TO REDUCE THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE AS PROVIDED IN THE SECURITY INSTRUMENT, IN WHICH EVENT NO PREPAYMENT FEE OR PREMIUM SHALL BE DUE UNLESS, AT THE TIME OF EITHER LENDER’S RECEIPT OF SUCH PROCEEDS OR THE APPLICATION OF SUCH PROCEEDS TO THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, AN EVENT OF DEFAULT, OR AN EVENT WHICH, WITH NOTICE OR THE PASSAGE OF TIME, OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT, SHALL HAVE OCCURRED, WHICH DEFAULT OR EVENT OF DEFAULT IS UNRELATED TO THE APPLICABLE CASUALTY OR CONDEMNATION, IN WHICH EVENT THE APPLICABLE PREPAYMENT FEE OR PREMIUM SHALL BE DUE AND PAYABLE BASED UPON THE AMOUNT OF THE PREPAYMENT. NO NOTICE OF PREPAYMENT SHALL BE REQUIRED UNDER THE CIRCUMSTANCES SPECIFIED IN THE PRECEDING SENTENCE. NO PRINCIPAL AMOUNT REPAID MAY BE REBORROWED. ANY SUCH PARTIAL PREPAYMENTS OF PRINCIPAL SHALL BE APPLIED TO THE UNPAID PRINCIPAL BALANCE EVIDENCED HEREBY BUT SUCH APPLICATION SHALL NOT REDUCE THE AMOUNT OF THE FIXED MONTHLY INSTALLMENTS REQUIRED TO BE PAID PURSUANT TO SECTION 1.2 ABOVE. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS SECTION, THE PREPAYMENT FEES PROVIDED ABOVE SHALL 3 --------------------------------------------------------------------------------   BE DUE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, UNDER ANY AND ALL CIRCUMSTANCES WHERE ALL OR ANY PORTION OF THIS NOTE IS PAID PRIOR TO THE MATURITY DATE, WHETHER SUCH PREPAYMENT IS VOLUNTARY OR INVOLUNTARY, INCLUDING, WITHOUT LIMITATION, IF SUCH PREPAYMENT RESULTS FROM LENDER’S EXERCISE OF ITS RIGHTS UPON BORROWER’S DEFAULT AND ACCELERATION OF THE MATURITY DATE OF THIS NOTE (IRRESPECTIVE OF WHETHER FORECLOSURE PROCEEDINGS HAVE BEEN COMMENCED), AND SHALL BE IN ADDITION TO ANY OTHER SUMS DUE HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS. NO TENDER OF A PREPAYMENT OF THIS NOTE WITH RESPECT TO WHICH A PREPAYMENT FEE IS DUE SHALL BE EFFECTIVE UNLESS SUCH PREPAYMENT IS ACCOMPANIED BY THE APPLICABLE PREPAYMENT FEE. (D)           (I)  ON ANY PAYMENT DATE ON OR AFTER THE EARLIER TO OCCUR OF (X) THREE (3) YEARS FOLLOWING THE FIRST PAYMENT DATE HEREUNDER, AND (Y) THE DAY IMMEDIATELY FOLLOWING THE DATE WHICH IS TWO (2) YEARS AFTER THE “STARTUP DAY,” WITHIN THE MEANING OF SECTION 860G(A) (9) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM TIME TO TIME OR ANY SUCCESSOR STATUTE (THE “CODE”), OF A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT,” WITHIN THE MEANING OF SECTION 860D OF THE CODE (A “REMIC TRUST”), THAT HOLDS THIS NOTE, AND PROVIDED NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, AT BORROWER’S OPTION, LENDER SHALL CAUSE THE RELEASE OF THE PROPERTY FROM THE LIEN OF THE SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS (A “DEFEASANCE”) UPON THE SATISFACTION OF THE FOLLOWING CONDITIONS: (A)          BORROWER SHALL GIVE NOT MORE THAN NINETY (90) DAYS’ OR LESS THAN SIXTY (60) DAYS’ PRIOR WRITTEN NOTICE TO LENDER SPECIFYING THE DATE BORROWER INTENDS FOR THE DEFEASANCE TO BE CONSUMMATED (THE “RELEASE DATE”), WHICH DATE SHALL BE A PAYMENT DATE. (B)           ALL ACCRUED AND UNPAID INTEREST AND ALL OTHER SUMS DUE UNDER THIS NOTE AND UNDER THE OTHER LOAN DOCUMENTS UP TO AND INCLUDING THE RELEASE DATE SHALL BE PAID IN FULL ON OR PRIOR TO THE RELEASE DATE. (C)           BORROWER SHALL DELIVER TO LENDER ON OR PRIOR TO THE RELEASE DATE: (1)           A SUM OF MONEY IN IMMEDIATELY AVAILABLE FUNDS (THE “DEFEASANCE DEPOSIT”) EQUAL TO THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE PLUS AN AMOUNT, IF ANY, WHICH TOGETHER WITH THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, SHALL BE SUFFICIENT TO ENABLE LENDER TO PURCHASE, THROUGH MEANS AND SOURCES CUSTOMARILY EMPLOYED AND AVAILABLE TO LENDER, FOR THE ACCOUNT OF BORROWER, (X) DIRECT, NON-CALLABLE, FIXED RATE OBLIGATIONS OF THE UNITED STATES OF AMERICA OR (Y) NON-CALLABLE, FIXED RATE OBLIGATIONS, OTHER THAN U.S. TREASURY OBLIGATIONS, THAT ARE “GOVERNMENT SECURITIES” WITHIN THE MEANING OF SECTION 2(A)(16) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, THAT PROVIDE FOR PAYMENTS PRIOR, BUT AS CLOSE AS POSSIBLE, TO ALL SUCCESSIVE MONTHLY PAYMENT DATES OCCURRING AFTER THE RELEASE DATE AND TO THE LOCKOUT EXPIRATION DATE, WITH EACH SUCH PAYMENT BEING EQUAL TO OR GREATER THAN THE AMOUNT OF THE CORRESPONDING INSTALLMENT OF PRINCIPAL AND/OR INTEREST REQUIRED TO BE PAID UNDER THIS NOTE (INCLUDING, BUT NOT LIMITED TO, THE SCHEDULED OUTSTANDING PRINCIPAL BALANCE OF THE LOAN DUE ON THE MATURITY DATE BASED UPON PAYMENTS OF PRINCIPAL AND INTEREST 4 --------------------------------------------------------------------------------   THROUGH THE LOCKOUT EXPIRATION DATE) FOR THE BALANCE OF THE TERM HEREOF (THE “DEFEASANCE COLLATERAL”), EACH OF WHICH SHALL BE DULY ENDORSED BY THE HOLDER THEREOF AS DIRECTED BY LENDER OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER IN FORM AND SUBSTANCE SATISFACTORY TO LENDER IN ITS SOLE DISCRETION (INCLUDING, WITHOUT LIMITATION, SUCH INSTRUMENTS AS MAY BE REQUIRED BY THE DEPOSITORY INSTITUTION HOLDING SUCH SECURITIES OR THE ISSUER THEREOF, AS THE CASE MAY BE, TO EFFECTUATE BOOK-ENTRY TRANSFERS AND PLEDGES THROUGH THE BOOK-ENTRY FACILITIES OF SUCH INSTITUTION) IN ORDER TO PERFECT UPON THE DELIVERY OF THE DEFEASANCE SECURITY AGREEMENT (AS HEREINAFTER DEFINED) THE FIRST PRIORITY SECURITY INTEREST IN THE DEFEASANCE COLLATERAL IN FAVOR OF LENDER IN CONFORMITY WITH ALL APPLICABLE STATE AND FEDERAL LAWS GOVERNING GRANTING OF SUCH SECURITY INTERESTS. (2)           A PLEDGE AND SECURITY AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO LENDER, CREATING A FIRST PRIORITY SECURITY INTEREST IN FAVOR OF LENDER IN THE DEFEASANCE COLLATERAL (THE “DEFEASANCE SECURITY AGREEMENT”); (3)           A CERTIFICATE OF BORROWER CERTIFYING THAT ALL OF THE REQUIREMENTS SET FORTH IN THIS SUBSECTION 1.5(D)(I) HAVE BEEN SATISFIED; (4)           ONE OR MORE OPINIONS OF COUNSEL FOR BORROWER IN FORM AND SUBSTANCE AND DELIVERED BY COUNSEL WHICH WOULD BE SATISFACTORY TO LENDER STATING, AMONG OTHER THINGS, THAT (I) LENDER HAS A PERFECTED FIRST PRIORITY SECURITY INTEREST IN THE DEFEASANCE COLLATERAL AND THAT THE DEFEASANCE SECURITY AGREEMENT IS ENFORCEABLE AGAINST BORROWER IN ACCORDANCE WITH ITS TERMS, (II) IN THE EVENT OF A BANKRUPTCY PROCEEDING OR SIMILAR OCCURRENCE WITH RESPECT TO BORROWER, NONE OF THE DEFEASANCE COLLATERAL NOR ANY PROCEEDS THEREOF WILL BE PROPERTY OF BORROWER’S ESTATE UNDER SECTION 541 OF THE U.S. BANKRUPTCY CODE, AS AMENDED, OR ANY SIMILAR STATUTE AND THE GRANT OF SECURITY INTEREST THEREIN TO LENDER SHALL NOT CONSTITUTE AN AVOIDABLE PREFERENCE UNDER SECTION 547 OF THE U.S. BANKRUPTCY CODE, AS AMENDED, OR APPLICABLE STATE LAW, (III) THE RELEASE OF THE LIEN OF THE SECURITY INSTRUMENT AND THE PLEDGE OF DEFEASANCE COLLATERAL WILL NOT DIRECTLY OR INDIRECTLY RESULT IN OR CAUSE ANY REMIC TRUST THAT THEN HOLDS THIS NOTE TO FAIL TO MAINTAIN ITS STATUS AS A REMIC TRUST AND (IV) THE DEFEASANCE WILL NOT CAUSE ANY REMIC TRUST TO BE AN “INVESTMENT COMPANY” UNDER THE INVESTMENT COMPANY ACT OF 1940; (5)           EVIDENCE IN WRITING FROM ANY APPLICABLE RATING AGENCY (AS DEFINED IN THE SECURITY INSTRUMENT) TO THE EFFECT THAT THE DEFEASANCE WILL NOT RESULT IN A DOWNGRADING, WITHDRAWAL OR QUALIFICATION OF THE RESPECTIVE RATINGS IN EFFECT IMMEDIATELY PRIOR TO SUCH DEFEASANCE FOR ANY SECURITIES (AS HEREINAFTER DEFINED) ISSUED IN CONNECTION WITH THE SECURITIZATION WHICH ARE THEN OUTSTANDING; PROVIDED, HOWEVER, NO EVIDENCE FROM A RATING AGENCY SHALL BE REQUIRED IF THIS NOTE DOES NOT MEET THE THEN-CURRENT REVIEW REQUIREMENTS OF SUCH RATING AGENCY. 5 --------------------------------------------------------------------------------   (6)           A CERTIFICATE IN FORM AND SCOPE ACCEPTABLE TO LENDER IN ITS SOLE DISCRETION FROM AN ACCEPTABLE INDEPENDENT ACCOUNTANT CERTIFYING THAT THE DEFEASANCE COLLATERAL WILL GENERATE AMOUNTS SUFFICIENT TO MAKE ALL PAYMENTS OF PRINCIPAL AND INTEREST DUE UNDER THIS NOTE THROUGH THE LOCKOUT EXPIRATION DATE AND THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN DUE ON THE MATURITY DATE BASED UPON PAYMENTS OF PRINCIPAL AND INTEREST THROUGH THE LOCKOUT EXPIRATION DATE; (7)           BORROWER AND ANY GUARANTOR OR INDEMNITOR OF BORROWER’S OBLIGATIONS UNDER THE LOAN DOCUMENTS FOR WHICH BORROWER HAS PERSONAL LIABILITY EXECUTES AND DELIVERS TO LENDER SUCH DOCUMENTS AND AGREEMENTS AS LENDER SHALL REASONABLY REQUIRE TO EVIDENCE AND EFFECTUATE THE RATIFICATION OF SUCH PERSONAL LIABILITY AND GUARANTY OR INDEMNITY, RESPECTIVELY; (8)           SUCH OTHER CERTIFICATES, DOCUMENTS OR INSTRUMENTS AS LENDER MAY REASONABLY REQUIRE; AND (9)           PAYMENT OF ALL FEES, COSTS, EXPENSES AND CHARGES INCURRED BY LENDER IN CONNECTION WITH THE DEFEASANCE OF THE PROPERTY AND THE PURCHASE OF THE DEFEASANCE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ALL LEGAL FEES AND COSTS AND EXPENSES INCURRED BY LENDER OR ITS AGENTS IN CONNECTION WITH RELEASE OF THE PROPERTY, REVIEW OF THE PROPOSED DEFEASANCE COLLATERAL AND PREPARATION OF THE DEFEASANCE SECURITY AGREEMENT AND RELATED DOCUMENTATION, ANY REVENUE, DOCUMENTARY, STAMP, INTANGIBLE OR OTHER TAXES, CHARGES OR FEES DUE IN CONNECTION WITH TRANSFER OF THE NOTE, ASSUMPTION OF THE NOTE, OR SUBSTITUTION OF COLLATERAL FOR THE PROPERTY SHALL BE PAID ON OR BEFORE THE RELEASE DATE. WITHOUT LIMITING BORROWER’S OBLIGATIONS WITH RESPECT THERETO, LENDER SHALL BE ENTITLED TO DEDUCT ALL SUCH FEES, COSTS, EXPENSES AND CHARGES FROM THE DEFEASANCE DEPOSIT TO THE EXTENT OF ANY PORTION OF THE DEFEASANCE DEPOSIT WHICH EXCEEDS THE AMOUNT NECESSARY TO PURCHASE THE DEFEASANCE COLLATERAL. (D)          IN CONNECTION WITH THE DEFEASANCE DEPOSIT, BORROWER HEREBY AUTHORIZES AND DIRECTS LENDER USING THE MEANS AND SOURCES CUSTOMARILY EMPLOYED AND AVAILABLE TO LENDER TO USE THE DEFEASANCE DEPOSIT TO PURCHASE FOR THE ACCOUNT OF BORROWER THE DEFEASANCE COLLATERAL. FURTHERMORE, THE DEFEASANCE COLLATERAL SHALL BE ARRANGED SUCH THAT PAYMENTS RECEIVED FROM SUCH DEFEASANCE COLLATERAL SHALL BE PAID DIRECTLY TO LENDER TO BE APPLIED ON ACCOUNT OF THE INDEBTEDNESS OF THIS NOTE. ANY PART OF THE DEFEASANCE DEPOSIT IN EXCESS OF THE AMOUNT NECESSARY TO PURCHASE THE DEFEASANCE COLLATERAL AND TO PAY THE OTHER AND RELATED COSTS BORROWER IS OBLIGATED TO PAY UNDER THIS SECTION 1.5 SHALL BE REFUNDED TO BORROWER. (II)      UPON COMPLIANCE WITH THE REQUIREMENTS OF SUBSECTION 1.5(D)(I), THE PROPERTY SHALL BE RELEASED FROM THE LIEN OF THE SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS, AND THE DEFEASANCE COLLATERAL SHALL CONSTITUTE COLLATERAL WHICH SHALL SECURE THIS NOTE AND ALL OTHER OBLIGATIONS UNDER THE LOAN DOCUMENTS. LENDER WILL, AT 6 --------------------------------------------------------------------------------   BORROWER’S EXPENSE, EXECUTE AND DELIVER ANY AGREEMENTS REASONABLY REQUESTED BY BORROWER TO RELEASE THE LIEN OF THE SECURITY INSTRUMENT FROM THE PROPERTY. (III)     UPON THE RELEASE OF THE PROPERTY IN ACCORDANCE WITH THIS SECTION 1.5(D), BORROWER SHALL ASSIGN ALL ITS OBLIGATIONS AND RIGHTS UNDER THIS NOTE, TOGETHER WITH THE PLEDGED DEFEASANCE COLLATERAL, TO A NEWLY CREATED SUCCESSOR ENTITY WHICH COMPLIES WITH THE TERMS OF SECTION 2.29 OF THE SECURITY INSTRUMENT DESIGNATED BY LENDER IN ITS SOLE DISCRETION. SUCH SUCCESSOR ENTITY SHALL EXECUTE AN ASSUMPTION AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO LENDER IN ITS SOLE DISCRETION PURSUANT TO WHICH IT SHALL ASSUME BORROWER’S OBLIGATIONS UNDER THIS NOTE AND THE DEFEASANCE SECURITY AGREEMENT. AS CONDITIONS TO SUCH ASSIGNMENT AND ASSUMPTION, BORROWER SHALL (X) DELIVER TO LENDER AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO A PRUDENT LENDER AND DELIVERED BY COUNSEL SATISFACTORY TO A PRUDENT LENDER STATING, AMONG OTHER THINGS, THAT SUCH ASSUMPTION AGREEMENT IS ENFORCEABLE AGAINST BORROWER AND SUCH SUCCESSOR ENTITY IN ACCORDANCE WITH ITS TERMS AND THAT THIS NOTE AND THE DEFEASANCE SECURITY AGREEMENT AS SO ASSUMED, ARE ENFORCEABLE AGAINST SUCH SUCCESSOR ENTITY IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, AND (Y) PAY ALL COSTS AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, LEGAL FEES) INCURRED BY LENDER OR ITS AGENTS IN CONNECTION WITH SUCH ASSIGNMENT AND ASSUMPTION (INCLUDING, WITHOUT LIMITATION, THE REVIEW OF THE PROPOSED TRANSFEREE AND THE PREPARATION OF THE ASSUMPTION AGREEMENT AND RELATED DOCUMENTATION). UPON SUCH ASSUMPTION, BORROWER SHALL BE RELIEVED OF ITS OBLIGATIONS HEREUNDER, UNDER THE OTHER LOAN DOCUMENTS OTHER THAN AS SPECIFIED IN SECTION 1.5(D)(I)(C)(7) ABOVE AND UNDER THE DEFEASANCE SECURITY AGREEMENT (OR OTHER DEFEASANCE DOCUMENT). SECTION 1.6             SECURITY. THE INDEBTEDNESS EVIDENCED BY THIS NOTE AND THE OBLIGATIONS CREATED HEREBY ARE SECURED BY, AMONG OTHER THINGS, THAT CERTAIN MORTGAGE, DEED OF TRUST OR DEED TO SECURE DEBT, SECURITY AGREEMENT AND FIXTURE FILING (THE “SECURITY INSTRUMENT”) FROM BORROWER FOR THE BENEFIT OF LENDER, DATED OF EVEN DATE HEREWITH, COVERING THE PROPERTY. THE SECURITY INSTRUMENT, TOGETHER WITH THIS NOTE AND ALL OTHER DOCUMENTS TO OR OF WHICH LENDER IS A PARTY OR BENEFICIARY NOW OR HEREAFTER EVIDENCING, SECURING, GUARANTYING, MODIFYING OR OTHERWISE RELATING TO THE INDEBTEDNESS EVIDENCED HEREBY, ARE HEREIN REFERRED TO COLLECTIVELY AS THE “LOAN DOCUMENTS”. ALL OF THE TERMS AND PROVISIONS OF THE LOAN DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE. SOME OF THE LOAN DOCUMENTS ARE TO BE FILED FOR RECORD ON OR ABOUT THE DATE HEREOF IN THE APPROPRIATE PUBLIC RECORDS. ARTICLE II DEFAULT SECTION 2.1             EVENTS OF DEFAULT. IT IS HEREBY EXPRESSLY AGREED THAT SHOULD ANY DEFAULT OCCUR IN THE PAYMENT OF PRINCIPAL OR INTEREST AS STIPULATED ABOVE AND SUCH PAYMENT IS NOT MADE ON THE DATE SUCH PAYMENT IS DUE, OR SHOULD ANY OTHER DEFAULT OCCUR UNDER ANY OTHER LOAN DOCUMENT AND NOT BE CURED WITHIN ANY APPLICABLE GRACE OR NOTICE PERIOD (IF ANY), THEN AN EVENT OF DEFAULT (AN “EVENT OF DEFAULT”) SHALL EXIST HEREUNDER, AND IN SUCH EVENT THE INDEBTEDNESS EVIDENCED HEREBY, INCLUDING ALL SUMS ADVANCED OR ACCRUED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, AND ALL UNPAID INTEREST ACCRUED THEREON, SHALL, AT THE OPTION OF LENDER AND WITHOUT 7 --------------------------------------------------------------------------------   NOTICE TO BORROWER, AT ONCE BECOME DUE AND PAYABLE AND MAY BE COLLECTED FORTHWITH, WHETHER OR NOT THERE HAS BEEN A PRIOR DEMAND FOR PAYMENT AND REGARDLESS OF THE STIPULATED DATE OF MATURITY. SECTION 2.2             LATE CHARGES. IN THE EVENT THAT ANY PAYMENT IS NOT RECEIVED BY LENDER ON THE DATE WHEN DUE (SUBJECT TO ANY APPLICABLE GRACE PERIOD), THEN, IN ADDITION TO ANY DEFAULT INTEREST PAYMENTS DUE HEREUNDER, BORROWER SHALL ALSO PAY TO LENDER A LATE CHARGE IN AN AMOUNT EQUAL TO FIVE PERCENT (5%) OF THE AMOUNT OF SUCH OVERDUE PAYMENT. SECTION 2.3             DEFAULT INTEREST RATE. SO LONG AS ANY EVENT OF DEFAULT EXISTS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, REGARDLESS OF WHETHER OR NOT THERE HAS BEEN AN ACCELERATION OF THE INDEBTEDNESS EVIDENCED HEREBY, AND AT ALL TIMES AFTER MATURITY OF THE INDEBTEDNESS EVIDENCED HEREBY (WHETHER BY ACCELERATION OR OTHERWISE), INTEREST SHALL ACCRUE ON THE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, FROM THE DATE DUE UNTIL THE DATE CREDITED, AT A RATE PER ANNUM EQUAL TO FIVE PERCENT (5%) IN EXCESS OF THE NOTE RATE, OR, IF SUCH INCREASED RATE OF INTEREST MAY NOT BE COLLECTED UNDER APPLICABLE LAW, THEN AT THE MAXIMUM RATE OF INTEREST, IF ANY, WHICH MAY BE COLLECTED FROM BORROWER UNDER APPLICABLE LAW (AS APPLICABLE, THE “DEFAULT INTEREST RATE”), AND SUCH DEFAULT INTEREST SHALL BE IMMEDIATELY DUE AND PAYABLE. SECTION 2.4             BORROWER’S AGREEMENTS. BORROWER ACKNOWLEDGES THAT IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE LENDER’S ACTUAL DAMAGES RESULTING FROM ANY LATE PAYMENT OR DEFAULT, AND SUCH LATE CHARGES AND DEFAULT INTEREST ARE REASONABLE ESTIMATES OF THOSE DAMAGES AND DO NOT CONSTITUTE A PENALTY. THE REMEDIES OF LENDER IN THIS NOTE OR IN THE LOAN DOCUMENTS, OR AT LAW OR IN EQUITY, SHALL BE CUMULATIVE AND CONCURRENT, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR TOGETHER, IN LENDER’S DISCRETION. SECTION 2.5             BORROWER TO PAY COSTS. IN THE EVENT THAT THIS NOTE, OR ANY PART HEREOF, IS COLLECTED BY OR THROUGH AN ATTORNEY-AT-LAW, BORROWER AGREES TO PAY ALL COSTS OF COLLECTION, INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS’ FEES. SECTION 2.6             EXCULPATION. NOTWITHSTANDING ANYTHING IN THIS NOTE OR THE LOAN DOCUMENTS TO THE CONTRARY, BUT SUBJECT TO THE QUALIFICATIONS HEREINBELOW SET FORTH, LENDER AGREES THAT: (A)           BORROWER SHALL BE LIABLE UPON THE INDEBTEDNESS EVIDENCED HEREBY AND FOR THE OTHER OBLIGATIONS ARISING UNDER THE LOAN DOCUMENTS TO THE FULL EXTENT (BUT ONLY TO THE EXTENT) OF THE SECURITY THEREFOR, THE SAME BEING ALL PROPERTIES (WHETHER REAL OR PERSONAL), RIGHTS, ESTATES AND INTERESTS NOW OR AT ANY TIME HEREAFTER SECURING THE PAYMENT OF THIS NOTE AND/OR THE OTHER OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS (COLLECTIVELY, THE “PROPERTY”); (B)           IF A DEFAULT OCCURS IN THE TIMELY AND PROPER PAYMENT OF ALL OR ANY PART OF SUCH INDEBTEDNESS EVIDENCED HEREBY OR IN THE TIMELY AND PROPER PERFORMANCE OF THE OTHER OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS, ANY JUDICIAL PROCEEDINGS BROUGHT BY LENDER AGAINST BORROWER SHALL BE LIMITED TO THE PRESERVATION, ENFORCEMENT AND FORECLOSURE, OR ANY THEREOF, OF THE LIENS, SECURITY TITLES, ESTATES, ASSIGNMENTS, RIGHTS AND SECURITY INTERESTS NOW OR AT ANY TIME HEREAFTER SECURING THE PAYMENT OF THIS NOTE AND/OR THE OTHER OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS, AND NO ATTACHMENT, EXECUTION OR OTHER WRIT OF PROCESS SHALL BE 8 --------------------------------------------------------------------------------   SOUGHT, ISSUED OR LEVIED UPON ANY ASSETS, PROPERTIES OR FUNDS OF BORROWER OTHER THAN THE PROPERTY, EXCEPT WITH RESPECT TO THE LIABILITY DESCRIBED BELOW IN THIS SECTION; AND (C)           IN THE EVENT OF A FORECLOSURE OF SUCH LIENS, SECURITY TITLES, ESTATES, ASSIGNMENTS, RIGHTS OR SECURITY INTERESTS SECURING THE PAYMENT OF THIS NOTE AND/OR THE OTHER OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS, NO JUDGMENT FOR ANY DEFICIENCY UPON THE INDEBTEDNESS EVIDENCED HEREBY SHALL BE SOUGHT OR OBTAINED BY LENDER AGAINST BORROWER, EXCEPT WITH RESPECT TO THE LIABILITY DESCRIBED BELOW IN THIS SECTION; PROVIDED, HOWEVER, THAT, NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION, BORROWER SHALL BE FULLY AND PERSONALLY LIABLE AND SUBJECT TO LEGAL ACTION (I) FOR PROCEEDS PAID UNDER ANY INSURANCE POLICIES (OR PAID AS A RESULT OF ANY OTHER CLAIM OR CAUSE OF ACTION AGAINST ANY PERSON OR ENTITY) BY REASON OF DAMAGE, LOSS OR DESTRUCTION TO ALL OR ANY PORTION OF THE PROPERTY, TO THE FULL EXTENT OF SUCH PROCEEDS NOT PREVIOUSLY DELIVERED TO LENDER, BUT WHICH, UNDER THE TERMS OF THE LOAN DOCUMENTS, SHOULD HAVE BEEN DELIVERED TO LENDER, (II) FOR PROCEEDS OR AWARDS RESULTING FROM THE CONDEMNATION OR OTHER TAKING IN LIEU OF CONDEMNATION OF ALL OR ANY PORTION OF THE PROPERTY, TO THE FULL EXTENT OF SUCH PROCEEDS OR AWARDS NOT PREVIOUSLY DELIVERED TO LENDER, BUT WHICH, UNDER THE TERMS OF THE LOAN DOCUMENTS, SHOULD HAVE BEEN DELIVERED TO LENDER, (III) FOR ALL TENANT SECURITY DEPOSITS OR OTHER REFUNDABLE DEPOSITS PAID TO OR HELD BY BORROWER OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH LEASES OF ALL OR ANY PORTION OF THE PROPERTY WHICH ARE NOT APPLIED IN ACCORDANCE WITH THE TERMS OF THE APPLICABLE LEASE OR OTHER AGREEMENT, EXCEPT IF LENDER RECEIVES SUCH TENANT SECURITY DEPOSITS OR OTHER REFUNDABLE DEPOSITS AND FAILS TO REFUND SAME TO THE APPLICABLE TENANT(S) IN ACCORDANCE WITH SUCH TENANT’S LEASE, (IV) FOR RENT AND OTHER PAYMENTS RECEIVED FROM TENANTS UNDER LEASES OF ALL OR ANY PORTION OF THE PROPERTY PAID MORE THAN ONE (1) MONTH IN ADVANCE, PROVIDED THAT WITH RESPECT TO ANY TAXES AND/OR OPERATING EXPENSES PAID BY ANY TENANTS IN OTHER THAN MONTHLY INSTALLMENTS UNDER THE APPLICABLE LEASE, SUCH PAYMENTS SHALL NOT BE PAID MORE THAN ONE INSTALLMENT IN ADVANCE, (V) FOR RENTS, ISSUES, PROFITS AND REVENUES OF ALL OR ANY PORTION OF THE PROPERTY RECEIVED OR APPLICABLE TO A PERIOD AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT HEREUNDER OR UNDER THE LOAN DOCUMENTS WHICH ARE NOT EITHER APPLIED TO THE ORDINARY AND NECESSARY EXPENSES OF OWNING AND OPERATING THE PROPERTY OR PAID TO LENDER, (VI) FOR WASTE COMMITTED ON THE PROPERTY, DAMAGE TO THE PROPERTY AS A RESULT OF THE INTENTIONAL MISCONDUCT OR GROSS NEGLIGENCE OF BORROWER OR ANY OF ITS PRINCIPALS, OFFICERS, GENERAL PARTNERS OR MEMBERS, ANY GUARANTOR, ANY INDEMNITOR, OR ANY AGENT OR EMPLOYEE OF ANY SUCH PERSON, OR ANY REMOVAL OF  ALL OR ANY PORTION OF THE PROPERTY IN VIOLATION OF THE TERMS OF THE LOAN DOCUMENTS, TO THE FULL EXTENT OF THE LOSSES OR DAMAGES INCURRED BY LENDER ON ACCOUNT OF SUCH OCCURRENCE, (VII) FOR FAILURE TO PAY ANY VALID TAXES, ASSESSMENTS, MECHANIC’S LIENS, MATERIALMEN’S LIENS OR OTHER LIENS WHICH COULD CREATE LIENS ON ANY PORTION OF THE PROPERTY WHICH WOULD BE SUPERIOR TO THE LIEN OR SECURITY TITLE OF THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS, TO THE FULL EXTENT OF THE AMOUNT CLAIMED BY ANY SUCH LIEN CLAIMANT EXCEPT, WITH RESPECT TO ANY SUCH TAXES OR ASSESSMENTS, TO THE EXTENT THAT FUNDS HAVE BEEN DEPOSITED WITH LENDER PURSUANT TO THE TERMS OF THE SECURITY INSTRUMENT SPECIFICALLY FOR THE APPLICABLE TAXES OR ASSESSMENTS AND NOT APPLIED BY LENDER TO PAY SUCH TAXES AND ASSESSMENTS, (VIII) FOR ALL OBLIGATIONS AND INDEMNITIES OF BORROWER UNDER THE LOAN DOCUMENTS RELATING TO HAZARDOUS SUBSTANCES (AS DEFINED IN THE SECURITY INSTRUMENT) OR RADON OR COMPLIANCE WITH ENVIRONMENTAL LAWS (AS DEFINED IN THE SECURITY INSTRUMENT) AND REGULATIONS TO THE FULL EXTENT OF ANY LOSSES OR DAMAGES (INCLUDING THOSE RESULTING FROM DIMINUTION IN VALUE OF ANY PROPERTY) INCURRED BY LENDER AND/OR ANY OF ITS AFFILIATES AS A RESULT OF THE EXISTENCE OF SUCH HAZARDOUS SUBSTANCES OR RADON OR FAILURE TO COMPLY WITH SUCH ENVIRONMENTAL LAWS OR REGULATIONS, AND (IX) FOR FRAUD, MATERIAL MISREPRESENTATION OR FAILURE TO DISCLOSE A MATERIAL FACT, 9 --------------------------------------------------------------------------------   ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMISSION TO STATE A MATERIAL FACT IN THE WRITTEN MATERIALS AND/OR INFORMATION PROVIDED TO LENDER OR ANY OF ITS AFFILIATES BY OR ON BEHALF OF BORROWER OR ANY OF ITS AFFILIATES, PRINCIPALS, OFFICERS, GENERAL PARTNERS OR MEMBERS, ANY GUARANTOR, ANY INDEMNITOR OR ANY AGENT, EMPLOYEE OR OTHER PERSON AUTHORIZED OR APPARENTLY AUTHORIZED TO MAKE STATEMENTS, REPRESENTATIONS OR DISCLOSURES ON BEHALF OF BORROWER, ANY AFFILIATE, PRINCIPAL, OFFICER, GENERAL PARTNER OR MEMBER OF BORROWER, ANY GUARANTOR OR ANY INDEMNITOR, TO THE FULL EXTENT OF ANY LOSSES, DAMAGES AND EXPENSES OF LENDER AND/OR ANY OF ITS AFFILIATES ON ACCOUNT THEREOF. REFERENCES HEREIN TO PARTICULAR SECTIONS OF THE LOAN DOCUMENTS SHALL BE DEEMED REFERENCES TO SUCH SECTIONS AS AFFECTED BY OTHER PROVISIONS OF THE LOAN DOCUMENTS RELATING THERETO. NOTHING CONTAINED IN THIS SECTION SHALL (1) BE DEEMED TO BE A RELEASE OR IMPAIRMENT OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE OR THE OTHER OBLIGATIONS OF BORROWER UNDER THE LOAN DOCUMENTS OR THE LIEN OF THE LOAN DOCUMENTS UPON THE PROPERTY, OR (2) PRECLUDE LENDER FROM FORECLOSING THE LOAN DOCUMENTS IN CASE OF ANY DEFAULT OR FROM ENFORCING ANY OF THE OTHER RIGHTS OF LENDER EXCEPT AS STATED IN THIS SECTION, OR (3) LIMIT OR IMPAIR IN ANY WAY WHATSOEVER (A) THE INDEMNITY AND GUARANTY AGREEMENT (THE “INDEMNITY AGREEMENT”) OR (B) THE ENVIRONMENTAL INDEMNITY AGREEMENT (THE “ENVIRONMENTAL INDEMNITY AGREEMENT”), EACH OF EVEN DATE HEREWITH EXECUTED AND DELIVERED IN CONNECTION WITH THE INDEBTEDNESS EVIDENCED BY THIS NOTE OR RELEASE, RELIEVE, REDUCE, WAIVE OR IMPAIR IN ANY WAY WHATSOEVER, ANY OBLIGATION OF ANY PARTY TO THE INDEMNITY AGREEMENT OR THE ENVIRONMENTAL INDEMNITY AGREEMENT. Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in this Section 2.6 SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event of (i) a default by Borrower, Indemnitor (as defined in the Security Instrument) or any general partner, manager or managing member of Borrower of any of the covenants set forth in Section 2.9 of the Security Instrument or a default by Borrower, Indemnitor or any general partner, manager or managing member of Borrower which is a Single-Purpose Entity (as defined in the Security Instrument) (if any) of the covenants set forth in Section 2.29 of the Security Instrument, or (ii) if the Property or any part thereof shall become an asset in (A) a voluntary bankruptcy or insolvency proceeding of Borrower or Indemnitor, or (B) an involuntary bankruptcy or insolvency proceeding of Borrower or Indemnitor in which the Borrower or the Indemnitor colludes or any of their affiliates with creditors in such bankruptcy or insolvency proceeding and which is not dismissed within sixty (60) days of filing or (C) Borrower or Indemnitor or any of their affiliates intentionally interferes in any material respect, directly or indirectly, with Lender’s exercise and/or realization of Lender’s remedies under and as set forth in the Loan Documents other than by the assertion of a good faith defense based upon a failure by Lender to observe the provisions of this Section 2.6 of this Note. Notwithstanding anything to the contrary in this Note, the Security Instrument or any of the other Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness evidenced hereby or secured by the Security Instrument or any of the other Loan Documents or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Note, the Security Instrument and the other Loan Documents. 10 --------------------------------------------------------------------------------   ARTICLE III GENERAL CONDITIONS SECTION 3.1             NO WAIVER; AMENDMENT. NO FAILURE TO ACCELERATE THE INDEBTEDNESS EVIDENCED HEREBY BY REASON OF DEFAULT HEREUNDER, ACCEPTANCE OF A PARTIAL OR PAST DUE PAYMENT, OR INDULGENCES GRANTED FROM TIME TO TIME SHALL BE CONSTRUED (I) AS A NOVATION OF THIS NOTE OR AS A REINSTATEMENT OF THE INDEBTEDNESS EVIDENCED HEREBY OR AS A WAIVER OF SUCH RIGHT OF ACCELERATION OR OF THE RIGHT OF LENDER THEREAFTER TO INSIST UPON STRICT COMPLIANCE WITH THE TERMS OF THIS NOTE, OR (II) TO PREVENT THE EXERCISE OF SUCH RIGHT OF ACCELERATION OR ANY OTHER RIGHT GRANTED HEREUNDER OR BY ANY APPLICABLE LAWS; AND BORROWER HEREBY EXPRESSLY WAIVES THE BENEFIT OF ANY STATUTE OR RULE OF LAW OR EQUITY NOW PROVIDED, OR WHICH MAY HEREAFTER BE PROVIDED, WHICH WOULD PRODUCE A RESULT CONTRARY TO OR IN CONFLICT WITH THE FOREGOING. NO EXTENSION OF THE TIME FOR THE PAYMENT OF THIS NOTE OR ANY INSTALLMENT DUE HEREUNDER MADE BY AGREEMENT WITH ANY PERSON NOW OR HEREAFTER LIABLE FOR THE PAYMENT OF THIS NOTE SHALL OPERATE TO RELEASE, DISCHARGE, MODIFY, CHANGE OR AFFECT THE ORIGINAL LIABILITY OF BORROWER UNDER THIS NOTE, EITHER IN WHOLE OR IN PART, UNLESS LENDER AGREES OTHERWISE IN WRITING. THIS NOTE MAY NOT BE CHANGED ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT OF ANY WAIVER, CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT. SECTION 3.2             WAIVERS. PRESENTMENT FOR PAYMENT, DEMAND, PROTEST AND NOTICE OF DEMAND, PROTEST AND NONPAYMENT AND ALL OTHER NOTICES ARE HEREBY WAIVED BY BORROWER. BORROWER HEREBY FURTHER WAIVES AND RENOUNCES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO THE BENEFITS OF ANY MORATORIUM, REINSTATEMENT, MARSHALING, FORBEARANCE, VALUATION, STAY, EXTENSION, REDEMPTION, APPRAISEMENT, EXEMPTION AND HOMESTEAD NOW OR HEREAFTER PROVIDED BY THE CONSTITUTION AND LAWS OF THE UNITED STATES OF AMERICA AND OF EACH STATE THEREOF, BOTH AS TO ITSELF AND IN AND TO ALL OF ITS PROPERTY, REAL AND PERSONAL, AGAINST THE ENFORCEMENT AND COLLECTION OF THE OBLIGATIONS EVIDENCED BY THIS NOTE OR THE OTHER LOAN DOCUMENTS. SECTION 3.3             LIMIT OF VALIDITY. THE PROVISIONS OF THIS NOTE AND OF ALL AGREEMENTS BETWEEN BORROWER AND LENDER, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL, INCLUDING, BUT NOT LIMITED TO, THE LOAN DOCUMENTS, ARE HEREBY EXPRESSLY LIMITED SO THAT IN NO CONTINGENCY OR EVENT WHATSOEVER, WHETHER BY REASON OF DEMAND OR ACCELERATION OF THE MATURITY OF THIS NOTE OR OTHERWISE, SHALL THE AMOUNT CONTRACTED FOR, CHARGED, TAKEN, RESERVED, PAID OR AGREED TO BE PAID (“INTEREST”) TO LENDER FOR THE USE, FORBEARANCE OR DETENTION OF THE MONEY LOANED UNDER THIS NOTE EXCEED THE MAXIMUM AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY CIRCUMSTANCE WHATSOEVER, PERFORMANCE OR FULFILLMENT OF ANY PROVISION HEREOF OR OF ANY AGREEMENT BETWEEN BORROWER AND LENDER SHALL, AT THE TIME PERFORMANCE OR FULFILLMENT OF SUCH PROVISION SHALL BE DUE, EXCEED THE LIMIT FOR INTEREST PRESCRIBED BY LAW OR OTHERWISE TRANSCEND THE LIMIT OF VALIDITY PRESCRIBED BY APPLICABLE LAW, THEN, IPSO FACTO, THE OBLIGATION TO BE PERFORMED OR FULFILLED SHALL BE REDUCED TO SUCH LIMIT, AND IF, FROM ANY CIRCUMSTANCE WHATSOEVER, LENDER SHALL EVER RECEIVE ANYTHING OF VALUE DEEMED INTEREST BY APPLICABLE LAW IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO ANY EXCESSIVE INTEREST SHALL BE APPLIED TO THE REDUCTION OF THE PRINCIPAL BALANCE OWING UNDER THIS NOTE IN THE INVERSE ORDER OF ITS MATURITY (WHETHER OR NOT THEN DUE) OR, AT THE OPTION OF LENDER, BE PAID OVER TO BORROWER, AND NOT TO THE PAYMENT OF INTEREST. ALL INTEREST (INCLUDING ANY AMOUNTS OR PAYMENTS JUDICIALLY OR OTHERWISE UNDER THE LAW DEEMED TO BE INTEREST) CONTRACTED FOR, CHARGED, TAKEN, 11 --------------------------------------------------------------------------------   RESERVED, PAID OR AGREED TO BE PAID TO LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED AND SPREAD THROUGHOUT THE FULL TERM OF THIS NOTE, INCLUDING ANY EXTENSIONS AND RENEWALS HEREOF UNTIL PAYMENT IN FULL OF THE PRINCIPAL BALANCE OF THIS NOTE SO THAT THE INTEREST THEREON FOR SUCH FULL TERM WILL NOT EXCEED AT ANY TIME THE MAXIMUM AMOUNT PERMITTED BY APPLICABLE LAW. TO THE EXTENT UNITED STATES FEDERAL LAW PERMITS A GREATER AMOUNT OF INTEREST THAN IS PERMITTED UNDER THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, LENDER WILL RELY ON UNITED STATES FEDERAL LAW FOR THE PURPOSE OF DETERMINING THE MAXIMUM AMOUNT PERMITTED BY APPLICABLE LAW. ADDITIONALLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, LENDER MAY, AT ITS OPTION AND FROM TIME TO TIME, IMPLEMENT ANY OTHER METHOD OF COMPUTING THE MAXIMUM LAWFUL RATE UNDER THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED OR UNDER OTHER APPLICABLE LAW BY GIVING NOTICE, IF REQUIRED, TO BORROWER AS PROVIDED BY APPLICABLE LAW NOW OR HEREAFTER IN EFFECT. THIS SECTION 3.3 WILL CONTROL ALL AGREEMENTS BETWEEN BORROWER AND LENDER. SECTION 3.4             USE OF FUNDS. BORROWER HEREBY WARRANTS, REPRESENTS AND COVENANTS THAT NO FUNDS DISBURSED HEREUNDER SHALL BE USED FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. SECTION 3.5             UNCONDITIONAL PAYMENT. BORROWER IS AND SHALL BE OBLIGATED TO PAY PRINCIPAL, INTEREST AND ANY AND ALL OTHER AMOUNTS WHICH BECOME PAYABLE HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS ABSOLUTELY AND UNCONDITIONALLY AND WITHOUT ANY ABATEMENT, POSTPONEMENT, DIMINUTION OR DEDUCTION AND WITHOUT ANY REDUCTION FOR COUNTERCLAIM OR SETOFF. IN THE EVENT THAT AT ANY TIME ANY PAYMENT RECEIVED BY LENDER HEREUNDER SHALL BE DEEMED BY A COURT OF COMPETENT JURISDICTION TO HAVE BEEN A VOIDABLE PREFERENCE OR FRAUDULENT CONVEYANCE UNDER ANY BANKRUPTCY, INSOLVENCY OR OTHER DEBTOR RELIEF LAW, THEN THE OBLIGATION TO MAKE SUCH PAYMENT SHALL SURVIVE ANY CANCELLATION OR SATISFACTION OF THIS NOTE OR RETURN THEREOF TO BORROWER AND SHALL NOT BE DISCHARGED OR SATISFIED WITH ANY PRIOR PAYMENT THEREOF OR CANCELLATION OF THIS NOTE, BUT SHALL REMAIN A VALID AND BINDING OBLIGATION ENFORCEABLE IN ACCORDANCE WITH THE TERMS AND PROVISIONS HEREOF, AND SUCH PAYMENT SHALL BE IMMEDIATELY DUE AND PAYABLE UPON DEMAND. SECTION 3.6             GOVERNING LAW. THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND ENFORCED ACCORDING TO THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED. SECTION 3.7             WAIVER OF JURY TRIAL. BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE DEBT EVIDENCED BY THIS NOTE OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR BORROWER, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. 12 --------------------------------------------------------------------------------   ARTICLE IV MISCELLANEOUS PROVISIONS SECTION 4.1             SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL; INTERPRETATION. THE TERMS AND PROVISIONS HEREOF SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF BORROWER AND LENDER AND THEIR RESPECTIVE HEIRS, EXECUTORS, LEGAL REPRESENTATIVES, SUCCESSORS, SUCCESSORS IN TITLE AND ASSIGNS, WHETHER BY VOLUNTARY ACTION OF THE PARTIES OR BY OPERATION OF LAW. AS USED HEREIN, THE TERMS “BORROWER” AND “LENDER” SHALL BE DEEMED TO INCLUDE THEIR RESPECTIVE HEIRS, EXECUTORS, LEGAL REPRESENTATIVES, SUCCESSORS, SUCCESSORS IN TITLE AND ASSIGNS, WHETHER BY VOLUNTARY ACTION OF THE PARTIES OR BY OPERATION OF LAW. IF BORROWER CONSISTS OF MORE THAN ONE PERSON OR ENTITY, EACH SHALL BE JOINTLY AND SEVERALLY LIABLE TO PERFORM THE OBLIGATIONS OF BORROWER UNDER THIS NOTE. ALL PERSONAL PRONOUNS USED HEREIN, WHETHER USED IN THE MASCULINE, FEMININE OR NEUTER GENDER, SHALL INCLUDE ALL OTHER GENDERS; THE SINGULAR SHALL INCLUDE THE PLURAL AND VICE VERSA. TITLES OF ARTICLES AND SECTIONS ARE FOR CONVENIENCE ONLY AND IN NO WAY DEFINE, LIMIT, AMPLIFY OR DESCRIBE THE SCOPE OR INTENT OF ANY PROVISIONS HEREOF. TIME IS OF THE ESSENCE WITH RESPECT TO ALL PROVISIONS OF THIS NOTE. THIS NOTE AND THE OTHER LOAN DOCUMENTS CONTAIN THE ENTIRE AGREEMENTS BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND ALL PRIOR AGREEMENTS RELATIVE HERETO AND THERETO WHICH ARE NOT CONTAINED HEREIN OR THEREIN ARE TERMINATED. SECTION 4.2             TAXPAYER IDENTIFICATION. BORROWER’S TAX IDENTIFICATION NUMBER IS 34-2004597.     [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 13 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Borrower has executed this Note as of the date first written above. BORROWER: 5 BECKER SPE LLC,   a Delaware limited liability company         By: /s/ Mitchell E. Hersh \   Name: Mitchell E. Hersh     Title: President and Chief Executive Officer STATE OF New Jersey SS: COUNTY OF Union BE IT REMEMBERED that on the 8th day of May, 2006, Mitchell E. Hersh personally came before me, and this person acknowledged under oath, to my satisfaction, that he is the President and Chief Executive Officer of 5 Becker SPE LLC, a Delaware limited liability company, the entity named in this document, and this document was signed and delivered by the entity as its voluntary act duly authorized by a proper resolution of the limited liability company.   /s/ Beverly E. Sturr     Beverly E. Sturr Notary Public of New Jersey My Commission expires on March 30, 2010   --------------------------------------------------------------------------------   INTEREST ONLY ANNEX 1 TO $15,500,000 PROMISSORY NOTE BY 5 BECKER SPE LLC TO WACHOVIA BANK, NATIONAL ASSOCIATION [SEE ATTACHED]     I-1 --------------------------------------------------------------------------------   LOAN TERMS   Original Principal Amount   $ 15,500,000.00   Note Rate % (Per Annum)   6.270 % Original Amortization Term (Months)   360   Monthly Payment Amount (Excluding IO Period)   $ 95,637.88   Note Date   5/9/2006   First Pay Date   6/11/2006   Original Loan Term (Months)   120   Scheduled Maturity Date   5/11/2016   Interest Accrual Basis During Amortization Periods   ACTUAL/360   Interest Only (IO) Periods (Months)   60   Interest Accrual Basis During IO Period   ACTUAL/360     5 BECKER FARM ROAD   502856397   Pay Period   Pay Date   Accrual Days in Period   Scheduled Payment   Interest Component of Scheduled Payment   Principal Component of Scheduled Payment   Ending Unpaid Principal Balance   0   5/11/2006   2   $ 0.00   $ 5,399.16   $ 0.00   $ 15,500,000.00   1   6/11/2006   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   2   7/11/2006   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   3   8/11/2006   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   4   9/11/2006   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   5   10/11/2006   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   6   11/11/2006   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   7   12/11/2006   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   8   1/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0,00   $ 15,500,000.00   9   2/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   10   3/11/2007   28   $ 75,588.33   $ 75,588.33   $ 0.00   $ 15,500,000.00   11   4/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   12   5/11/2007   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   13   6/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00     I-2 --------------------------------------------------------------------------------   14   7/11/2007   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   15   8/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   16   9/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   17   10/11/2007   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   18   11/11/2007   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   19   12/11/2007   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   20   1/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   21   2/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   22   3/11/2008   29   $ 78,287.92   $ 78,287.92   $ 0.00   $ 15,500,000.00   23   4/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   24   5/11/2008   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   25   6/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   26   7/11/2008   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   27   8/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   28   9/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   29   10/11/2008   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   30   11/11/2008   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   31   12/11/2008   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   32   1/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   33   2/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   34   3/11/2009   28   $ 75,588.33   $ 75,588.33   $ 0.00   $ 15,500,000.00   35   4/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   36   5/11/2009   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   37   6/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   38   7/11/2009   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   39   8/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   40   9/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   41   10/11/2009   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   42   11/11/2009   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   43   12/11/2009   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   44   1/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   45   2/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   46   3/11/2010   28   $ 75,588.33   $ 75,588.33   $ 0.00   $ 15,500,000.00   47   4/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   48   5/11/2010   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   49   6/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00     I-3 --------------------------------------------------------------------------------   50   7/11/2010   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   51   8/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   52   9/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   53   10/11/2010   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   54   11/11/2010   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   55   12/11/2010   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   56   1/11/2011   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   57   2/11/2011   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   58   3/11/2011   28   $ 75,588.33   $ 75,588.33   $ 0.00   $ 15,500,000.00   59   4/11/2011   31   $ 83,687.08   $ 83,687.08   $ 0.00   $ 15,500,000.00   60   5/11/2011   30   $ 80,987.50   $ 80,987.50   $ 0.00   $ 15,500,000.00   61   6/11/2011   31   $ 95,637.88   $ 83,687.08   $ 11,950.80   $ 15,488,049.20   62   7/11/2011   30   $ 95,637.88   $ 80,925.06   $ 14,712.82   $ 15,473,336.38   63   8/11/2011   31   $ 95,637.88   $ 83,543.12   $ 12,094.76   $ 15,461,241.62   64   9/11/2011   31   $ 95,637.88   $ 83,477.82   $ 12,160.06   $ 15,449,081.56   65   10/11/2011   30   $ 95,637.88   $ 80,721.45   $ 14,916.43   $ 15,434,165.13   66   11/11/2011   31   $ 95,637.88   $ 83,331.63   $ 12,306.25   $ 15,421,858.88   67   12/11/2011   30   $ 95,637.88   $ 80,579.21   $ 15,058.67   $ 15,406,800.21   68   1/11/2012   31   $ 95,637.88   $ 83,183.88   $ 12,454.00   $ 15,394,346.21   69   2/11/2012   31   $ 95,637.88   $ 83,116.64   $ 12,521.24   $ 15,381,824.97   70   3/11/2012   29   $ 95,637.88   $ 77,691.03   $ 17,946.85   $ 15,363,878.12   71   4/11/2012   31   $ 95,637.88   $ 82,952.14   $ 12,685.74   $ 15,351,192.38   72   5/11/2012   30   $ 95,637.88   $ 80,209.98   $ 15,427.90   $ 15,335,764.48   73   6/11/2012   31   $ 95,637.88   $ 82,800.35   $ 12,837.53   $ 15,322,926.95   74   7/11/2012   30   $ 95,637.88   $ 80,062.29   $ 15,575.59   $ 15,307,351.36   75   8/11/2012   31   $ 95,637.88   $ 82,646.94   $ 12,990.94   $ 15,294,360.42   76   9/11/2012   31   $ 95,637.88   $ 82,576.80   $ 13,061.08   $ 15,281,299.34   77   10/11/2012   30   $ 95,637.88   $ 79,844.79   $ 15,793.09   $ 15,265,506.25   78   11/11/2012   31   $ 95,637.88   $ 82,421.01   $ 13,216.87   $ 15,252,289.38   79   12/11/2012   30   $ 95,637.88   $ 79,693.21   $ 15,944.67   $ 15,236,344.71   80   1/11/2013   31   $ 95,637.88   $ 82,263.56   $ 13,374.32   $ 15,222,970.39   81   2/11/2013   31   $ 95,637.88   $ 82,191.35   $ 13,446.53   $ 15,209,523.86   82   3/11/2013   28   $ 95,637.88   $ 74,171.78   $ 21,466.10   $ 15,188,057.76   83   4/11/2013   31   $ 95,637.88   $ 82,002.86   $ 13,635.02   $ 15,174,422.74   84   5/11/2013   30   $ 95,637.88   $ 79,286.36   $ 16,351.52   $ 15,158,071.22   85   6/11/2013   31   $ 95,637.88   $ 81,840.95   $ 13,796.93   $ 15,144,274.29     I-4 --------------------------------------------------------------------------------   86   7/11/2013   30   $ 95,637.88   $ 79,128.83   $ 16,509.05   $ 15,127,765.24   87   8/11/2013   31   $ 95,637.88   $ 81,677.33   $ 13,960.55   $ 15,113,804.69   88   9/11/2013   31   $ 95,637.88   $ 81,601.95   $ 14,035.93   $ 15,099,768.76   89   10/11/2013   30   $ 95,637.88   $ 78,896.29   $ 16,741.59   $ 15,083,027.17   90   11/11/2013   31   $ 95,637.88   $ 81,435.78   $ 14,202.10   $ 15,068,825.07   91   12/11/2013   30   $ 95,637.88   $ 78,734.61   $ 16,903.27   $ 15,051,921.80   92   1/11/2014   31   $ 95,637.88   $ 81,267.83   $ 14,370.05   $ 15,037,551.75   93   2/11/2014   31   $ 95,637.88   $ 81,190.25   $ 14,447.63   $ 15,023,104.12   94   3/11/2014   28   $ 95,637.88   $ 73,262.67   $ 22,375.21   $ 15,000,728.91   95   4/11/2014   31   $ 95,637.88   $ 80,991.44   $ 14,646.44   $ 14,986,082.47   96   5/11/2014   30   $ 95,637.88   $ 78,302.28   $ 17,335.60   $ 14,968,746.87   97   6/11/2014   31   $ 95,637.88   $ 80,818.76   $ 14,819.12   $ 14,953,927.75   98   7/11/2014   30   $ 95,637.88   $ 78,134.27   $ 17,503.61   $ 14,936,424.14   99   8/11/2014   31   $ 95,637.88   $ 80,644.24   $ 14,993.64   $ 14,921,430.50   100   9/11/2014   31   $ 95,637.88   $ 80,563.29   $ 15,074.59   $ 14,906,355.91   101   10/11/2014   30   $ 95,637.88   $ 77,885.71   $ 17,752.17   $ 14,888,603.74   102   11/11/2014   31   $ 95,637.88   $ 80,386.05   $ 15,251.83   $ 14,873,351.91   103   12/11/2014   30   $ 95,637.88   $ 77,713.26   $ 17,924.62   $ 14,855,427.29   104   1/11/2015   31   $ 95,637.88   $ 80,206.93   $ 15,430.95   $ 14,839,996.34   105   2/11/2015   31   $ 95,637.88   $ 80,123.61   $ 15,514.27   $ 14,824,482.07   106   3/11/2015   28   $ 95,637.88   $ 72,294.06   $ 23,343.82   $ 14,801,138.25   107   4/11/2015   31   $ 95,637.88   $ 79,913.81   $ 15,724.07   $ 14,785,414.18   108   5/11/2015   30   $ 95,637.88   $ 77,253.79   $ 18,384.09   $ 14,767,030.09   109   6/11/2015   31   $ 95,637.88   $ 79,729.66   $ 15,908.22   $ 14,751,121.87   110   7/11/2015   30   $ 95,637.88   $ 77,074.61   $ 18,563.27   $ 14,732,558.60   111   8/11/2015   31   $ 95,637.88   $ 79,543.54   $ 16,094.34   $ 14,716,464.26   112   9/11/2015   31   $ 95,637.88   $ 79,456.64   $ 16,181.24   $ 14,700,283.02   113   10/11/2015   30   $ 95,637.88   $ 76,808.98   $ 18,828.90   $ 14,681,454.12   114   11/11/2015   31   $ 95,637.88   $ 79,267.62   $ 16,370.26   $ 14,665,083.86   115   12/11/2015   30   $ 95,637.88   $ 76,625.06   $ 19,012.82   $ 14,646,071.04   116   1/11/2016   31   $ 95,637.88   $ 79,076.58   $ 16,561.30   $ 14,629,509.74   117   2/11/2016   31   $ 95,637.88   $ 78,987.16   $ 16,650.72   $ 14,612,859.02   118   3/11/2016   29   $ 95,637.88   $ 73,807.12   $ 21,830.76   $ 14,591,028.26   119   4/11/2016   31   $ 95,637.88   $ 78,779.39   $ 16,858.49   $ 14,574,169.77   120   5/11/2016   30   $ 14,650,319.81   $ 76,150.04   $ 14,574,169.77   $ 0.00     I-5 --------------------------------------------------------------------------------   120       3,653   $ 25,222,393.77   $ 9,722,393.77   $ 15,500,000.00         I-6 --------------------------------------------------------------------------------

SECURITY AGREEMENT As of December 15, 2006, for value received, the undersigned ("Debtor") pledges, assigns and grants to Comerica Bank ("Bank"), whose address is 333 West Santa Clara Street, San Jose, CA, 95113, Attention: Commercial Loan Documentation, Mail Code 4770, a continuing security interest and lien (any pledge, assignment, security interest or other lien arising hereunder is sometimes referred to herein as a "security interest") in the collateral (as defined below) to secure payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future indebtedness ("Indebtedness") to the Bank of Akeena Solar, Inc. ("Borrower) and/or Debtor. Indebtedness includes without limit any and all obligations or liabilities of the Borrower and/or Debtor to the Bank, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, known or unknown; any and all obligations or liabilities for which the Borrower and/or Debtor would otherwise be liable to the Bank were it not for the invalidity or unenforceability of them by reason of any bankruptcy, insolvency or other law, or for any other reason; any and all amendments, modifications, renewals and/or extensions of any of the above; all costs incurred by Bank in establishing, determining continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Agreement or under any other agreement between Bank and Borrower and/or Debtor or in connection with any proceeding involving Bank as a result of any financial accommodation to Borrower and/or Debtor; and all other costs of collecting Indebtedness, including without limit attorneys fees, Debtor agrees to pay Bank all such costs incurred by the Bank, immediately upon demand, and until paid all costs shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law. Any reference in this Agreement to attorneys fees shall be deemed a reference to reasonable fees, costs, and expenses of both in-house and outside counsel and paralegals, whether inside or outside counsel is used, whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorneys fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise. Debtor further covenants, agrees, represents and warrants as follows: 1. Collateral shall mean all personal property of Debtor including, without limitation, all of the following property Debtor now or later owns or has an interest in, wherever located: o all Accounts Receivable (for purposes of this Agreement, "Accounts Receivable" consists of all accounts, general intangibles, chattel paper (including without limit electronic chattel paper and tangible chattel paper), contract rights, deposit accounts, documents, instruments and rights to payment evidenced by chattel paper, documents or instruments, health care insurance receivables, commercial tort claims, letters of credit, letter of credit rights, supporting obligations, and rights to payment for money or funds advanced or sold), o all Inventory, o all Equipment and Fixtures, o all software (for purposes of this Agreement "Software" consists of all (i) computer programs and supporting information provided in connection with a transaction relating to the program, and (ii) computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program whether or not the program is associated with the goods in such a manner that it customarily is considered part of the goods, and whether or not, by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods, and whether or not the program is embedded in goods that consist solely of the medium in which the program is embedded), o all investment property (including, without limit, securities, securities entitlements, and financial assets), o specific items listed below and/or on attached Schedule A, if any, is/are also included in Collateral; o all goods, instruments, (including, without limit, promissory notes), documents (including, without limit, negotiable documents), policies and certificates of insurance, deposit accounts, and money or other property (except real property which is not a fixture) which are now or later in possession of Bank, or as to which Bank now or later controls possession by documents or otherwise, and o all additions, attachments, accessions, parts, replacements substitutions, renewals, interest, dividends, distributions, rights of any kind (including but not limited to stock splits, stock rights, voting and preferential rights), products, and proceeds of or pertaining to the above including, without limit, cash or other property which were proceeds and are recovered by a bankruptcy trustee or otherwise as a preferential transfer by Debtor. In the definition of Collateral, a reference to a type of collateral shall not be limited by a separate reference to a more specific or narrower type of that collateral. 2. Warranties, Covenants and Agreements. Debtor warrants, covenants and agrees as follows: 2.1 Debtor shall furnish to Bank, in form and at intervals as Bank may request, any information Bank may reasonably request and allow Bank to examine, inspect, and copy any of Debtor's books and records. Debtor shall, at the request of Bank, mark its records and the Collateral to clearly indicate the security interest of Bank under this Agreement. 2.2 At the time any Collateral becomes, or is represented to be, subject to a security interest in favor of Bank, Debtor shall be deemed to have warranted that: (a) Debtor is the lawful owner of the Collateral and has the right and authority to subject it to a security interest granted to Bank; (b) name of the Collateral is subject to any security interest other than that in favor of Bank; (c) there are no financing statements on file, other than in favor of Bank; (d) no person, other than Bank, has possession or control (as defined in the Uniform Commercial Code) of any Collateral of such nature that perfection of a security interest may be accomplished by control; and (e) Debtor acquired its rights in the Collateral in the ordinary course of its business. 2.3 Debtor will keep the Collateral free at all times from all claims, liens, security interest and encumbrances other than those in favor of Bank. Debtor will not, without the prior written consent of Bank, sell, transfer or lease, or permit to be sold, transferred or leased, any or all of the Collateral, except (where Inventory is pledged as Collateral) for inventory in the ordinary course of its business and will not return any Inventory to its supplier. Bank or its representatives may at all reasonable times inspect the Collateral and may enter upon all premises where the Collateral is kept or might be located. 2.4 Debtor will do all acts and will execute or cause to be executed all writings requested by Bank to establish, maintain and continue an exclusive, perfected and first security interest of Bank in the Collateral. Debtor agrees that Bank has no obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personality, to secure payment of the Indebtedness, and Debtor is not relying upon assets in which the Bank may have a lien or security interest for payment of the Indebtedness. 2.5 Debtor will pay within the time that they can be paid without interest or penalty all taxes, assessments and similar charges which at any time are or may become a lien, charge, or encumbrance upon any Collateral, except to the extent contested in good faith and bonded in a manner satisfactory to Bank. If Debtor fails to pay any of these taxes, assessments, or other charges in the time provided above, Bank has the option (but not the obligation) to do so and Debtor agrees to repay all amounts so expanded by Bank Immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness. 2.6 Debtor will keep the Collateral in good condition and will protect it from loss, damage, or deterioration from any cause. Debtor has and will maintain at all times (a) with respect to the Collateral, insurance under an "all risk" policy against fire and other risks customarily insured against, and (b) pubic liability insurance and other insurance as may be required by law or reasonably required by Bank, all of which insurance shall be in amount, form and content, and written by companies as may be satisfactory to Bank, containing a lender's loss payable endorsement acceptable to Bank. Debtor will deliver to Bank immediately upon demand evidence satisfactory to Bank that the required insurance has been procured. If Debtor fails to maintain satisfactory insurance, Bank has the option (but not the obligation) to do so and Debtor agrees to repay all amounts so expended by Bank immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness. 2.7 On each occasion on which Debtor evidences to Bank the account balances on and the nature and extent of the Accounts Receivable, Debtor shall be deemed to have warranted that except as otherwise indicated: (a) each of those Accounts Receivable is valid and enforceable without performance by Debtor of any act; (b) each of those account balances are in fact owing; (c) there are no setoffs, recoupments, credits, contra accounts, counterclaims or defenses against any of those Accounts Receivable; (d) as to any Accounts Receivable represented by a note, trade acceptance, draft or other instrument or by any chattel paper or document, the same have been endorsed and/or delivered by Debtor to Bank; (e) Debtor has not received with respect to any Account Receivable, any notice of the death of the related account debtor, nor of the dissolution, liquidation, termination of existence, insolvency, business failure, appointment of a receiver for, assignment for the benefit of creditors by, or filing of a petition in bankruptcy by or against, the account debtor; and (f) as to each Account Receivable, except as may be expressly permitted by Bank to the contrary in another document, the account debtor is not an affiliate of Debtor, the United States of America or any department, agency or instrumentality of it, or a citizen or resident of any jurisdiction outside of the United States. Debtor will do all acts and will execute all writings requested by Bank to perform, enforce performance of, and collect all Accounts Receivable. Debtor shall neither make nor permit any modification, compromise or substitution for any Account Receivable without the prior written consent of Bank. Bank may at any time and from time to time verify Accounts Receivable directly with account debtors or by other methods acceptable to Bank without notifying Debtor. Debtor agrees, at Bank's request, to arrange or cooperate with Bank in arranging for verification of Accounts Receivable. 2.8 Debtor at all times shall be in strict compliance with all applicable laws, including without limit any laws, ordinances, directives, orders, statutes, or regulations an object of which is to regulate or improve health, safety, or the environment ("Environmental Laws"). 2.9 If Bank, acting in its sole discretion, redelivers Collateral to Debtor or Debtor's designee for the purpose of (a) the ultimate sale or exchange thereof; or (b) presentation, collection, renewal, or registration of transfer thereof; or (c) loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with it preliminary to sale or exchange; such redelivery shall be in trust for the benefit of Bank and shall not constitute a release of Bank's security interest in it or in the proceeds or products of it unless Bank specifically so agrees in writing. If Debtor requests any such redelivery, Debtor will deliver with such request a duly executed financing statement in form and substance satisfactory to Bank. Any proceeds of Collateral coming into Debtor's possession as a result of any such redelivery shall be held in trust for Bank and immediately delivered to Bank for application on the Indebtedness. Bank may (in its sole discretion) deliver any or all of such collateral. Bank, at its option, may require delivery of any Collateral to Bank at any time with such endorsements or assignments of the Collateral as Bank may request. 2.10 At any time and without notice, Bank may, as to Collateral other than Equipment, Fixtures or Inventory: (a) cause any or all of such Collateral to be transferred to its name or to the name of its nominees; (b) receive or collect by legal proceedings or otherwise all dividends, interest, principal payments and other sums and all other distributions at any time payable or receivable on account of such Collateral, and hold the same as Collateral, or apply the same to the indebtedness, the manner and distribution of the application to be in the sole discretion of Bank; (c) enter into any extension, subordination, reorganization, deposit, merger or consolidation agreement or any other agreement relating to or effecting such Collateral, and deposit or surrender control of such Collateral, and accept other property in exchange for such Collateral and hold or apply the property or money so received pursuant to this Agreement; and (d) take such actions in its own name or in Debtor's name as Bank, in its sole discretion, deems necessary or appropriate to establish exclusive control (as defined in the Uniform Commercial Code) over any Collateral of such nature that perfection of the Bank's security interest may be accomplished by control. 2.11 Bank may assign any of the Indebtedness and deliver any or all of the Collateral to its assignee, who then shall have with respect to Collateral so delivered all the rights and powers of Bank under this Agreement, and after that bank shall be fully discharged from all liability and responsibility with respect to Collateral so delivered. 2.12 Debtor delivers this Agreement based solely on Debtor's independent investigation of (or decision not to investigate) the financial condition of Borrower and is not relying on any information furnished by Bank. Debtor assumes full responsibility for obtaining any further information concerning the Borrower's financial condition, the status of the Indebtedness or any other matter which the undersigned may deem necessary or appropriate now or later. Debtor waives any duty on the part of Bank, and agrees that Debtor is not relying upon nor expecting Bank to disclose to Debtor any fact now or later known by Bank, whether relating to the operations or condition of Borrower, the existence, liabilities or financial condition of any guarantor of the Indebtedness, the occurrence of any default with respect to the Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Debtor's risk or Debtor's rights against Borrower. Debtor knowingly accepts the full range of risk encompassed in this Agreement, which risk includes without limit the possibility that Borrower may incur Indebtedness to Bank after the financial condition of Borrower, or Borrower's ability to pay debts as they mature, has deteriorated. 2.13 Debtor shall defend, indemnify and hold harmless Bank, its employees, agents, shareholders, affiliates, officers, and directors from and against any and all claims, damages, fines, expenses, liabilities or causes of action of whatever kind, including without limit consultant fees, legal expenses, and attorneys fees, suffered by any of them as a direct or indirect result of any actual or asserted violation of any law, including, without limit, Environmental Laws, or of any remediation relating to any property required by any law, including without limit Environmental Laws, INCLUDING ANY CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK'S OWN NEGLIGENCE, except and to the extent (but only to the extent) caused by Bank's gross negligence or wilful misconduct. 3. Collection of Proceeds. 3.1 Debtor agrees to collect and enforce payment of all Collateral until Bank shall direct Debtor to the contrary. Immediately upon notice to Debtor by Bank and at all times after that, Debtor agrees to fully and promptly cooperate and assist Bank in the collection and enforcement of all Collateral and to hold in trust for Bank all payments received in connection with Collateral and from the sale, lease or other disposition of any Collateral, all rights by way of suretyship or guaranty and all rights in the nature of a lien or security interest which Debtor now or later has regarding Collateral. Immediately upon and after such notice, Debtor agrees to (a) endorse to Bank and immediately deliver to Bank all payments received on Collateral or from the sale, lease or other disposition of any Collateral or arising from any other rights or interests of Debtor in the Collateral, in the form received by Debtor without commingling with any other funds, and (b) immediately deliver to Bank all property in Debtor's possession or later coming into Debtor's possession through enforcement of Debtor's rights or interests in the Collateral. Debtor irrevocably authorizes Bank or any Bank employee or agent to endorse the name of Debtor upon any checks or other items which are received in payment for any Collateral, and to do any and all things necessary in order to reduce these items to money. Bank shall have no duty as to the collection or protection of Collateral or the proceeds of it, nor as to the preservation of any related rights, beyond the use of reasonable care in the custody and preservation of Collateral in the possession of Bank. Debtor agrees to take all steps necessary to preserve rights against prior parties with respect to the Collateral. Nothing in this Section 3.1 shall be deemed a consent by Bank to any sale, lease or other disposition of any Collateral. 3.2 Debtor agrees that immediately upon Bank's request (whether or not any Event of Default exists) the indebtedness shall be on a "remittance basis" in accordance with the following. In connection therewith, Debtor shall at its sole expense establish and maintain (and Bank, at Bank's option, may establish and maintain at Debtor's expense): (a) A United States Post Office lock box (the "Lock Box"), to which Bank shall have exclusive access and control. Debtor expressly authorizes Bank, from time to time, to remove contents from the Lock Box, for disposition in accordance with this Agreement. Debtor agrees to notify all account debtors and other parties obligated to Debtor that all payments made to Debtor (other than payments by electronic funds transfer) shall be remitted, for the credit of Debtor, to the Lock Box, and Debtor shall include a like statement on all invoices; and (b) A non-interest bearing deposit account with Bank which shall be titled as designated by Bank (the "Cash Collateral Account") to which Bank shall have exclusive access and control. Debtor agrees to notify all account debtors and other parties obligated to Debtor that all payments made to Debtor by electronic funds transfer shall be remitted to the Cash Collateral Account, and Debtor, at Bank's request, shall include a like statement on all invoices. Debtor shall executive all documents and authorizations as required by Bank to establish and maintain the Lock Box and the Cash Collateral Account. 3.3 All items or amounts which are remitted to the Lock Box, to the Cash Collateral Account, or otherwise delivered by or for the benefit of Debtor to Bank on account of partial or full payment of, or with respect to, any Collateral shall, at Bank's option, (a) be applied to the payment of the Indebtedness, whether then due or not, in such order or at such time of application as Bank may determine in its sole discretion, or, (b) be deposited to the Cash Collateral Account. Debtor agrees that Bank shall not be liable for any loss or damage which Debtor may suffer as a result of Bank's processing of items or its exercise of any other rights or remedies under this Agreement, including without limitation indirect, special or consequential damages, loss of revenues or profits, or any claim, demand or action by any third party arising out of or in connection with the processing of items or the exercise of any other rights or remedies under this Agreement. Debtor agrees to indemnify and hold Bank harmless from and against all such third party claims, demands or actions, and all related expenses or liabilities, including, without limitation, attorney's fees and INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK'S OWN NEGLIGENCE except to the extent (but only to the extent) caused by Bank's gross negligence or willful misconduct. 4. Defaults, Enforcement and Application of Proceeds. 4.1 Upon the occurrence of any of the following events (each an "Event of Default"), Debtor shall be in default under this Agreement: (a) Any failure to pay the Indebtedness or any other indebtedness when due, or such portion of it as may be due, by acceleration or otherwise; or (b) Any failure or neglect to comply with, or breach of or default under, any term of this Agreement, or any other agreement or commitment between Borrower, Debtor, or any guarantor of any of the Indebtedness ("Guarantor") and Bank; or (c) Any warranty, representation, financial statement, or other information made, given or furnished to Bank by or on behalf of Borrower, Debtor, or any Guarantor shall be, or shall prove to have been, false or materially misleading when made, given, or furnished; or (d) Any loss, theft, substantial damage or destruction to or of any Collateral, or the issuance of filing of any attachment, levy, garnishment or the commencement of any proceeding in connection with any Collateral or of any other judicial process of, upon or in respect of Borrower, Debtor, any Guarantor, or any Collateral; or (e) Sale or other disposition by Borrower, Debtor, or any Guarantor of any substantial portion of its assets or property or voluntary suspension of the transaction of business by Borrower, Debtor, or any Guarantor, or death, dissolution, termination or existence, merger, consolidation, insolvency, business failure, or assignment for the benefit of creditors of or by Borrower, Debtor, or any Guarantor; or commencement of any proceedings under any state or federal bankruptcy or insolvency laws or laws for the relief of debtors by or against Borrower, Debtor, or any Guarantor; or the appointment of a receiver, trustee, court appointee, sequestrator or otherwise, for all or any part of the property of Borrower, Debtor, or any Guarantor; or (f) Bank deems the margin of Collateral insufficient or itself insecure, in good faith believing that the prospect of payment of the Indebtedness or performance of this Agreement is impaired or shall fear deterioration, removal, or waste of Collateral; or (g) An event of default shall occur under any instrument, agreement or other document evidencing, securing or otherwise relating to any of the Indebtedness. 4.2 Upon the occurrence of any Event of Default, Bank may at its discretion and without prior notice to Debtor declare any or all of the Indebtedness to be immediately due and payable, and shall have and may exercise any right or remedy available to it including, without limitation, any one or more of the following rights and remedies: (a) Exercise all the rights and remedies upon default, in foreclosure and otherwise, available to secured parties under the provisions of the Uniform Commercial Code and other applicable law; (b) Institute legal proceedings to foreclose upon the lien and security interest granted by this Agreement, to recover judgment for all amounts then due and owing as Indebtedness, and to collect the same out of any Collateral or the proceeds of any sale of it; (c) Institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all Collateral; and/or (d) Personally or by agents, attorneys, or appointment of a receiver, enter upon any premises where collateral may then be located, and take possession of all or any of it and/or render it unusable; and without being responsible for loss or damage to such Collateral, hold, operate, sell, lease, or dispose of all or any Collateral at one or more public or private sales, leasings or other dispositions, at places and times and on terms and conditions as Bank may deem fit, without any previous demand or advertisement; and except as provided in this Agreement, all notice of sale, lease or other disposition, and advertisement, and other notice or demand, any right or equity of redemption, and any obligation of a prospective purchaser or lessee to inquire as to the power and authority of Bank to sell, lease, or otherwise dispose of the Collateral or as to the application by Bank of the proceeds of sale or otherwise, which would otherwise be required by, or available to Debtor under, applicable law are expressly waived by Debtor to the fullest extent permitted. At any sale pursuant to this Section 4.2, whether under the power of sale, by virtue of judicial proceedings or otherwise, it shall not be necessary for Bank or a public officer under order of a court to have present physical or constructive possession of Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Bank or the public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable law, conclusively establish the truth and accuracy of the matters stated (including, without limit, as to the amounts of the principal of and interest on the indebtedness, the accrual and nonpayment of it and advertisement and conduct of the sale); and all prerequisites to the sale shall be presumed to have been satisfied and performed. Upon any sale of any Collateral, the receipt of the officer making the sale under judicial proceedings or of Bank shall be sufficient discharge to the purchase for the purchase money, and the purchaser shall not be obligated to see to the application of the money. Any sale of any Collateral under this Agreement shall be a perpetual bar against Debtor with respect to that Collateral. At any sale or other disposition of the Collateral pursuant to this Section 4.2, Bank disclaims all warranties which would otherwise be given under the Uniform Commercial Code, including without limit a disclaimer of any warranty relating to title, possesion, quiet enjoyment or the like, and Bank may communicate these disclaimers to a purchaser at such disposition. This disclaimer of warranties will not render the sale commercially unreasonable. 4.3 Debtor shall at the request of Bank, notify the account debtors or obligors of Bank's security interest in the Collateral and direct payment of it to Bank. Bank may, itself, upon the occurrence of any Event of Default so notify and direct any account debtor or obligor. At the request of Bank, whether or not an Event of Default shall have occurred, Debtor shall immediately take such actions as the Bank shall request to establish exclusive control (as defined in the Uniform Commercial Code) by Bank over any Collateral which is of such a nature that perfection of a security interest may be accomplished by control. 4.4 The proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by Bank first upon all expenses authorized by the Uniform Commercial Code and all reasonable attorney fees and legal expenses incurred by Bank; the balance of the proceeds of the sale or other disposition shall be applied in the payment of the Indebtedness, first to interest, then to principal, then to remaining Indebtness and the surplus, if any shall be paid over to Debtor or to such other person(s) as may be entitled to it under applicable law. Debtor shall remain liable for any deficiency, which it shall pay to Bank immediately upon demand. Debtor agrees that Bank shall be under no obligation to accept any noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unresonable. If Bank agrees in its sole discreation to accept noncash proceeds (unless the failure to do so would be commercially unreasonable), Bank may ascribe any commercially reasonable value to such proceeds. without limiting the foregoing, Bank may apply any discount factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in cash by Bank. 4.5 Nothing in this Agreement is intended, nor shall it be construed, to preclude Bank from pursuing any other remedy provided by law or in equity for the collection of the indebtedness or for the recovery of any other sum to which Bank may be entitled for the breach of this Agreement by Debtor. Nothing in this Agreement shall reduce or release in any way any rights or security interests of Bank contained in any existing agreement between Borrower, Debtor, or any Guarantor and Bank. 4.6 No waiver of default or consent to any act by Debtor shall be effective unless in writing and signed by an authorized officer of Bank. No waiver of any default or forbearance on the part of Bank in enforcing any of its rights under this Agreement shall operate as a waiver of any other default or of the same default on a future occasion or of any rights. 4.7 Debtor (a) irrevocably appoints Bank or any agent of Bank (which appointment is coupled with an interest) the true and lawful attorney of Debtor (with full power of substitution) in the name, place and stead of, and at the expense of, Debtor and (b) authorizes Bank or any agent of Bank, in its own name, at Debtor's expense, to do any of the following, as Bank, in its sole discretion, deems appropriate: (i) to demand, receive, sue for, and give receipts or acquittances for any moneys due or to become due on any Collateral and to endorse any item representing any payment on or proceeds of the Collateral; (ii) to execute and file in the name of and on behalf of Debtor all financing statements or other filings deemed necessary or desirable by Bank to evidence, perfect, or continue the security interests granted in this Agreement; and (iii) to do and perform any act on behalf of Debtor permitted or required under this Agreement. 4.8 Upon the occurrence of an Event of Default, Debtor also agrees, upon request of Bank, to assemble the Collateral and make it available to Bank at any place designated by Bank which is reasonably convenient to Bank and Debtor. 4.9 The following shall be the basis for any finder of fact's determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any surplus or deficiency under Section 9.615(f) of the Uniform Commercial Code (as in effect on or after July 1, 2001): (a) The Collateral which is the subject matter of the disposition shall be valued in an "as is" condition as of the date of the disposition, without any assumption or expectation that such Collateral will be repaired or improved in any manner; (b) the valuation shall be based upon an assumption that the transferee of such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (c) all reasonable closing costs customarily borne by the seller in commercial sales transactions relating to property similar to such Collateral shall be deducted including, without limitation, brokerage commissions, tax prorations, attorney's fees, whether inside or outside counsel is used, and marketing costs; (d) the value of the Collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated with maintaining such Collateral pending sale (to the extent not accounted for in (c) above), and other maintenance, operational and ownership expenses; and (e) any expert opinion testimony given or considered in connection with a determination of the value of such Collateral must be given by persons having at least 5 years experience in appraising property similar to the Collateral and who have conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above. The "value" of any such Collateral shall be a factor in determining the amount of proceeds which would have been realized in a disposition to a transferee other than a secured party, a person related to a secured party or a secondary obligor under Section 9.615(f) of the Uniform Commercial Code. 5. Miscellaneous. 5.1 Until Bank is advised in writing by Debtor to the contrary, all notices, requests and demands required under this Agreement or by law shall be given to, or made upon, Debtor at the following address: 605 University Avenue STREET ADDRESS Los Gatos CA 95032 SANTA CLARA CITY STATE ZIP CODE COUNTY 5.2 Debtor will give Bank not less than 90 days prior written notice of all contemplated changes in Debtor's name, location, chief executive office, principal place of business, and/or location of any Collateral, but the giving of this notice shall not cure any Event of Default caused by this change. 5.3 Bank assumes no duty of performance or other responsibility under any contracts contained within the Collateral. 5.4 Bank has the right to sell, assign, transfer, negotiate or grant participations or any interest in, any or all of the Indebtedness and any related obligations, including without limit this Agreements. In connection with the above, but without limiting its ability to make other disclosures to the full extent allowable, Bank may disclose all documents and information which Bank now or later has relating to Debtor, the Indebtedness or this Agreement, however obtained. Debtor further agrees that Bank may provide information relating to this Agreement or relating to Debtor or the Indebtedness to the Bank's parent, affiliates, subsidiaries, and service providers. 5.5 In addition to Bank's other rights, any indebtedness owing from Bank to Debtor can be set off and applied by Bank on any Indebtedness at any time(s) either before or after maturity or demand without notice to anyone. Any such action shall not constitute acceptance of collateral in discharge of any portion of the Indebtedness. 5.6 Debtor, to the extent not expressly prohibited by applicable law, waives any right to require the Bank to: (a) proceed against any person or property; (b) give notice of the terms, time and place or any public or private sale of personal property security held from Borrower or any other person, or otherwise comply with the provisions of Section 9.504 of the Uniform Commercial Code in effect prior to July 1, 2001 or its successor provisions thereafter; or (c) pursue any other remedy in the Bank's power. Debtor waives notice of acceptance of this Agreement and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any indebtedness, and agree(s) that the Bank may, once or any number of times, modify the terms of any Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Indebtedness, or permit Borrower to incur additional Indebtedness, all without notice to Debtor and without affecting in any manner the unconditional obligation of Debtor under this Agreement. Debtor unconditionally and irrevocably waives each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of Debtor under this Agreement, and acknowledges that such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from Debtor now or later securing the Indebtedness, and acknowledges that as of the date of this Agreement no such defense or setoff exists. 5.7 Debtor waives any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from Borrower any amounts paid or the value of any Collateral given by Debtor pursuant to this Agreement until such time as all of the Indebtedness has been fully paid. 5.8 In the event that applicable law shall obligate Bank to give prior notice to Debtor of any action to be taken under this Agreement, Debtor agrees that a written notice given to Debtor at least ten days before the date of the act shall be reasonably notice of the act and, specifically, reasonable notification of the time and place of any public sale or of the time after which any private sale, lease, or other disposition is to be made, unless a shorter notice period is reasonable under the circumstances. A notice shall be deemed to be given under this Agreement when delivered to Debtor or when placed in an envelope addressed to Debtor and deposited, with postage prepaid, in a post office or official depository under the exclusive care and custody of the United States Postal Service or delivered to an overnight courier. The mailing shall be by overnight courier, certified, or first class mail. 5.9 Notwithstanding any prior revocation, termination, surrender, or discharge of this Agreement in whole or in part, the effectiveness of this Agreement shall automatically continue or be reinstated in the event that any payment received or credit given by Bank in respect of the Indebtedness is returned, disgorged, or rescinded under any applicable law, including, without limitation, bankruptcy or insolvency laws, in which case this Agreement, shall be enforceable against Debtor as if the returned, disgorged, or rescinded payment or credit had not been received or given by Bank, and whether or not Bank relied upon this payment or credit or changed its position as a consequence of it. In the event of continuation or reinstatement of this Agreement, Debtor agrees upon demand by Bank to execute and deliver to Bank those documents which Bank determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of Debtor to do so shall not affect in any way the reinstatement or continuation. 5.10 This Agreement and all the rights and remedies of Bank under this Agreement shall inure to the benefit of Bank's successors and assigns and to any other holder who derives from Bank title to or an interest in the Indebtedness or any portion of it, and shall bind Debtor and the heirs, legal representatives, successors, and assigns of Debtor. Nothing in this Section 5.10 is deemed a consent by Bank to any assignment by Debtor. 5.11 If there is more than one Debtor, all undertakings, warranties and covenants made by Debtor and all rights, powers and authorities given to or conferred upon Bank are made or given jointly and severally. 5.12 Except as otherwise provided in this Agreement, all terms in this Agreement have the meanings assigned to them in Division 9 (or, absent definition in Division 9, in any other Division) of the Uniform Commercial Code, as those meanings may be amended, supplemented, revised or replaced from time to time. "Uniform Commercial Code" means the California Uniform Commercial Code, as amended, supplemented, revised or replaced from time to time. Notwithstanding the forgoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning. If the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, then the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall be disregarded in defining terms used in this Agreement. 5.13 No single or partial exercise, or delay in the exercise, of any right or power under this Agreement, shall preclude other or further exercise of the rights and powers under this Agreement. The unenforceability of any provision of this Agreement shall not affect the enforceability of the remainder of this Agreement. This Agreement constitutes the entire agreement of Debtor and Bank with respect to the subject matter of this Agreement. No amendment or modification of this Agreement shall be effective unless the same shall be in writing and signed by Debtor and an authorized officer of Bank. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPALS. 5.14 To the extend that any of the Indebtedness is payable upon demand, nothing contained in this Agreement shall modify the terms and conditions of that Indebtedness nor shall anything contained in this Agreement prevent Bank from making demand, without notice and with or without reason, for immediate payment of any or all of that indebtedness at any time(s), whether or not an Event of Default has occurred. 5.15 Debtor represents and warrants that Debtor's exact name is the name set forth in this Agreement. Debtor further represents and warrants the following and agrees that Debtor is, and at all times shall be, located in the following place: Debtor is an individual, and Debtor is located (as determined pursuant to the Uniform Commercial Code) at Debtor's principal residence which is (street address, state and county or parish): N/A. Debtor is a registered organisation which is organized under the laws of one of the states comprising the United States (e.g. corporation, limited partnership, registered limited liability partnership or limited liability company), and Debtor is located (as determined pursuant to the Uniform Commercial Code) in the state under the laws of which it was organized, which is (state): DE. Debtor is a domestic organization which is not a registered organization under the laws of the United States or any state thereof (e.g. general partnership, joint venture, trust, estate or association), and Debtor is located (as determined pursuant to the Uniform Commercial Code) at its sole place of business or, if it has more than one place of business, at its chief executive office, which is (street address, state and county or parish): N/A. Debtor is a registered organization organized under the laws of the United States, and Debtor is located in the state that United States law designates as its location or, if United States law authorizes the Debtor redesignate the state for its location, the state designated by Debtor, or if neither of the foregoing are applicable, at the District of Columbia. Based on the foregoing, Debtor is located (as determined pursuant to the Uniform Commercial Code) at (state): N/A. Debtor is a foreign individual or foreign organization or a branch or agency of a bank that is not organized under the laws of the United States or a state thereof, Debtor is located (as determined pursuant to the Uniform Commercial Code) at (street address, state and county or parish): N/A. The Collateral is located at and shall be maintained at the following location(s): 605 UNIVERSITY AVE. STREET ADDRESS LOS GATOS CA 95032 SANTA CLARA CITY STATE ZIP CODE COUNTY Collateral shall be maintained only at the locations identified in this Section 5.15. 5.16 A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement under the Uniform Commerical Code and may be filed by Bank in any filing office. 5.17 This Agreement shall be terminated only by the filing of a termination statement in accordance with the applicable provisions of the Uniform Commerical Code, but the obligations contained in Section 2.13 of this Agreement shall survive termination. 5.18 Debtor agrees to reimburse the Bank upon demand for any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys' fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in enforcing or attempting to enforce this Agreement or in exercising or attempting to exercise any right or remedy under this Agreement or incurred in any other matter or proceeding relating to this Security Agreement. 6. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRAIL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CETAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS. 7. Special Provisions Applicable to this Agreement. (*None, if left blank) DEBTOR: Akeena Solar, Inc. -------------------------------- DEBTOR NAME TYPED/PRINTED By: /s/ Barry Cinnamon ------------------------------------ SIGNATURE OF Its: President ------------------------------------ TITLE (If applicable) By: ------------------------------------ SIGNATURE OF Its: ----------------------------------- TITLE (If applicable) By: ------------------------------------ SIGNATURE OF Its: ----------------------------------- TITLE (If applicable) By: ------------------------------------ SIGNATURE OF Its: ----------------------------------- TITLE (If applicable) Borrower(s): Akeena Solar, Inc. PEDESTAL - Dynamic Security Agreement Revision Date (12/03) KMA

Exhibit 10.2 WARNER MUSIC GROUP CORP. DIRECTOR RESTRICTED STOCK AWARD AGREEMENT THIS DIRECTOR RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”), is made, effective as of the 2nd day of March, 2006 (hereinafter the “Date of Grant”), between Warner Music Group Corp., a Delaware corporation, (the “Company”), and Shelby W. Bonnie (the “Director”). R E C I T A L S: WHEREAS, the Company has adopted the Warner Music Group Corp. 2005 Omnibus Award Plan (the “Plan”), pursuant to which awards of restricted shares of the Company’s Common Stock may be granted to persons including members of the Board of Directors of the Company (the “Board”); and WHEREAS, the Board has determined that it is in the best interests of the Company and its stockholders to grant the restricted stock award provided for herein (the “Restricted Stock Award”) to the Director in connection with the Director’s services to the Company, such grant to be subject to the terms set forth herein. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Incorporation by Reference, Etc. The provisions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan. The Board shall have final authority to interpret and construe the Plan and this Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive upon the Director and his legal representative in respect of any questions arising under the Plan or this Agreement. 2. Grant of Restricted Stock Award. The Company hereby grants on the Date of Grant to the Director a Restricted Stock Award consisting of 3,842 shares of Common Stock (hereinafter called the “Restricted Shares”), on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. The Restricted Shares shall vest in accordance with Section 3(a) hereof. 3. Terms and Conditions. (a) Vesting. Except as otherwise provided in the Plan and this Agreement, and contingent upon the Director’s continued membership on the Board, one hundred percent (100%) of the Restricted Shares shall vest and become non-forfeitable on the first anniversary of the Award Date (such anniversary, the “Vesting Date”). The “Award Date” shall be February 23, 2006. -------------------------------------------------------------------------------- (b) Taxes. The Director shall pay to the Company promptly upon request, and in any event at the time the Director recognizes taxable income in respect of the Restricted Stock Award, an amount equal to the taxes, if any, the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Shares. Such payment shall be made in the form of cash. (c) Certificates. Certificates evidencing the Restricted Shares shall be issued by the Company and shall be registered in the Director’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to, in the case of any particular Restricted Shares, the applicable Vesting Date. As a condition to the receipt of this Restricted Stock Award, the Director shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares. (d) Effect of Termination of Services. (i) Except as provided in subsection (ii) of this Section 3(d), unvested Restricted Shares shall be forfeited without consideration by the Director at any time prior to the Vesting Date upon the Director’s cessation of Board membership. (ii) Upon the Director’s cessation of Board membership due to death or Disability, any remaining unvested Restricted Shares shall vest on the date of such termination. (e) Rights as a Stockholder; Dividends. The Director shall be the record owner of the Restricted Shares unless and until such shares are forfeited pursuant to Section 3(d) hereof or sold or otherwise disposed of, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights, if any, with respect to the Restricted Shares; provided that any cash or in-kind dividends paid with respect to unvested Restricted Shares shall be withheld by the Company and shall be paid to the Director, without interest, only when, and if, such Restricted Shares shall become vested. As soon as practicable following the vesting of any Restricted Shares, certificates for such vested Restricted Shares and any cash dividends or in-kind dividends credited to the Director’s account with respect to such Restricted Shares shall be delivered to the Director or the Director’s beneficiary along with the stock power relating thereto. -------------------------------------------------------------------------------- (f) Restrictive Legend. All certificates representing Restricted Shares shall have affixed thereto a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws: TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE WARNER MUSIC GROUP CORP. 2005 OMNIBUS AWARD PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF MARCH 2, 2006, BETWEEN WARNER MUSIC GROUP CORP. AND SHELBY W. BONNIE. A COPY OF SUCH PLAN AND AGREEMENT IS ON FILE AT THE OFFICES OF WARNER MUSIC GROUP CORP. (g) Transferability. The Restricted Shares may not at any time prior to the Vesting Date (as to any particular Restricted Share) be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Director and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. 4. Miscellaneous. (a) Notices. Any notice, consent, request or other communication made or given in accordance with this Agreement shall be in writing and shall be deemed to have been duly given when actually received or, if mailed, three days after mailing by registered or certified mail, return receipt requested, or one business day after mailing by a nationally recognized express mail delivery service with instructions for next-day delivery, to those persons listed below at their following respective addresses or at such other address or person’s attention as each may specify by notice to the others: To the Company: Warner Music Group Corp. 75 Rockefeller Plaza New York, New York 10019 Attention: General Counsel To the Director: The most recent address for the Director in the records of the Company. The Director hereby agrees to promptly provide the Company with written notice of any change in the Director’s address for so long as this Agreement remains in effect. -------------------------------------------------------------------------------- (b) Bound by Plan. By signing this Agreement, the Director acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan. (c) Beneficiary. The Director may file with the Board a written designation of a beneficiary on such form as may be prescribed by the Board and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Director, the executor or administrator of the Director’s estate shall be deemed to be the Director’s beneficiary. (d) Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and of the Director and the beneficiaries, executors, administrators, heirs and successors of the Director. (e) Entire Agreement. This Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersedes all prior communications, representations and negotiations in respect thereto. No change, modification or waiver of any provision of this Agreement shall be valid unless the same be in writing and signed by the parties hereto. (f) GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE. ANY ACTION TO ENFORCE THIS AGREEMENT MUST BE BROUGHT IN A COURT SITUATED IN, AND THE PARTIES HEREBY CONSENT TO THE JURISDICTION OF, COURTS SITUATED IN NEW YORK COUNTY, NEW YORK. EACH PARTY HEREBY WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH ACTION. (g) JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT IS LITIGATED OR HEARD IN ANY COURT. (h) Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement. -------------------------------------------------------------------------------- (i) Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. The parties hereto confirm that any facsimile copy of another party’s executed counterpart of this Agreement (or its signature page thereof) will be deemed to be an executed original thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement.   Warner Music Group Corp.   /s/ David H. Johnson By:   David H. Johnson Title:   EVP & General Counsel   /s/ Shelby Bonnie   Shelby W. Bonnie

Exhibit 10.1 BUCA, INC. EMPLOYEE STOCK PURCHASE PLAN 1. Purpose and Scope of Plan. The purpose of this BUCA, Inc. Employee Stock Purchase Plan (the “Plan”) is to provide the employees of BUCA, Inc. (the “Company”) and its subsidiaries with an opportunity to acquire a proprietary interest in the Company through the purchase of its common stock and, thus, to develop a stronger incentive to work for the continued success of the Company. The Plan is intended to be an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended, and shall be interpreted and administered in a manner consistent with such intent. 2. Definitions. 2.1. The terms defined in this section are used (and capitalized) elsewhere in this Plan: (a) “Affiliate” means each domestic or foreign corporation that is a “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code or any successor provision, except that the term shall not include any “subsidiary corporation” that the Board of Directors has expressly determined should not participate in the Plan. (b) “Board of Directors” means the Board of Directors of the Company. (c) “Code” means the Internal Revenue Code of 1986, as amended from time to time. (d) “Committee” means three or more Disinterested Persons designated by the Board of Directors to administer the Plan under Section 13. (e) “Common Stock” means the common stock, par value $.01 per share, of the Company. (f) “Company” means BUCA, Inc. (g) “Compensation” means the gross cash compensation (including wage, salary, commission, bonus, and overtime earnings) paid by the Company or any Affiliate to a Participant in accordance with the terms of employment. (h) “Disinterested Persons” means a member of the Board of Directors who is considered a disinterested person within the meaning of Exchange Act Rule 16b-3 or any successor definition. -------------------------------------------------------------------------------- (i) “Eligible Employee” means any employee of the Company or an Affiliate whose customary employment is at least 20 hours per week and who has been employed by the Company or an Affiliate for at least 1 year on the first day of the Purchase Period; provided, however, that “Eligible Employee” shall not include any person who would be deemed, for purposes of Section 423(b)(3) of the Code, to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company. (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. (k) “Fair Market Value” of a share of Common Stock as of any date means, if the Company’s Common Stock is listed on a national securities exchange or traded in the national market system, the mean between the high and low sale prices for such Common Stock on such exchange or market on said date, or, if no sale has been made on such exchange or market on said date, on the last preceding day on which any sale shall have been made. The determination of Fair Market Value shall be subject to adjustment as provided in Section 14. (l) “Participant” means an Eligible Employee who has elected to participate in the Plan in the manner set forth in Section 4. (m) “Plan” means this BUCA, Inc. Employee Stock Purchase Plan, as amended from time to time. (n) “Purchase Period” there will be twelve one-month purchase periods during each year. The purchase period beings on the first business day of each month and ends on the last business day of each month or such other period as may be selected by the Committee. (o) “Recordkeeping Account” means the account maintained in the books and records of the Company recording the amount withheld from each Participant through payroll deductions made under the Plan. 3. Scope of the Plan. Shares of Common Stock may be sold by the Company to Eligible Employees at any time after the Plan has been approved by the stockholders of the Company, but not more than 500,000 shares of Common Stock (subject to adjustment as provided in Section 14) shall be sold to Eligible Employees pursuant to this Plan. All sales of Common Stock pursuant to this Plan shall be subject to the same terms, conditions, rights and privileges. The shares of Common Stock delivered by the Company pursuant to this Plan may consist of any combination of authorized but unissued shares or newly issued shares. 4. Eligibility and Participation. To be eligible to participate in the Plan for a given Purchase Period, an employee must be an Eligible Employee on the first day of such Purchase Period. An Eligible Employee may elect to participate in the Plan by filing an enrollment form with the Company that authorizes regular payroll deductions from Compensation beginning with the first   2 -------------------------------------------------------------------------------- payday following the effective date of such election and continuing until the Eligible Employee withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee, as hereinafter provided. 5. Amount of Common Stock Each Eligible Employee May Purchase. 5.1. Subject to the provisions of this Plan, each Eligible Employee shall be offered the right to purchase on the last day of the Purchase Period the maximum number of shares of Common Stock (not including fractional shares) that can be purchased at the price specified in Section 5.2 with the entire credit balance in the Participant’s Recordkeeping Account; provided, however, that (i) no more than 500 shares of Common Stock may be purchased under the Plan by any Participant for a given Purchase Period and (ii) no more than $25,000 in Fair Market Value (determined at the beginning of each Purchase Period) of shares of Common Stock may be purchased under the Plan and all other employee stock purchase plans, if any, of the Company and its subsidiary corporations (as defined in Section 424(f) of the Code) by any Participant for each calendar year. If the purchases by all Participants would otherwise cause the aggregate number of shares of Common Stock to be sold under the Plan to exceed the number specified in Section 3, however, each Participant shall be allocated a ratable portion of the maximum number of shares of Common Stock which may be sold. 5.2. The purchase price of each share of Common Stock sold pursuant to this Plan will be the lesser of the following: (a) 85% of the Fair Market Value of such share on the first day of the Purchase Period; or (b) 85% of the Fair Market Value of such share on the last day of the Purchase Period. 6. Method of Participation. 6.1. The Company shall give notice to each Eligible Employee of the opportunity to purchase shares of Common Stock pursuant to this Plan and the terms and conditions for such offering. Such notice is subject to revision by the Company at any time prior to the date of purchase of such shares. The Company contemplates that for tax purposes the first day of a Purchase Period will be the date of the offering of such shares. 6.2. Each Eligible Employee who desires to participate in the Plan for a Purchase Period shall signify his or her election to do so by signing an election form developed by the Committee. An Eligible Employee may elect to have any whole percent of Compensation withheld, but not exceeding 15% per pay period. An election to participate in the Plan and to authorize payroll deductions as described herein shall remain in effect until such Participant withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee.   3 -------------------------------------------------------------------------------- 7. Recordkeeping Account. 7.1. The Company shall maintain a Recordkeeping Account for each Participant. Payroll deductions pursuant to Section 6 will be credited to such Recordkeeping Accounts on each payday. 7.2. No interest will be credited to a Participant’s Recordkeeping Account. 7.3. The Recordkeeping Account is established solely for accounting purposes, and all amounts credited to the Recordkeeping Account will remain part of the general assets of the Company. 7.4. A Participant may not make any separate cash payment into a Recordkeeping Account. 8. Right to Adjust Participation or to Withdraw. 8.1. A Participant may, at any time during a Purchase Period, direct the Company to increase or decrease the percentage amount of such deductions from future Compensation, subject to the limitation in Section 6.2. Upon any such action, future payroll deductions with respect to such Participant shall be increased or decreased in accordance with the Participant’s direction. A Participant may not change the percentage amount of deductions more than once during any Purchase Period. 8.2. At any time before the end of a Purchase Period, any Participant may withdraw from the Plan. In such event, all future payroll deductions shall cease and the entire credit balance in the Participant’s Recordkeeping Account will be paid to the Participant, without interest, in cash within 15 days. 8.3. Notification of a Participant’s election to increase, decrease, or terminate deductions, or to withdraw from the Plan, shall be made by filing an appropriate form with the Company. 9. Termination of Employment. If the employment of a Participant is terminated for any reason, including death, disability, or retirement, the entire balance in the Participant’s Recordkeeping Account at the date of such termination of employment will be paid to the Participant in cash within 15 days after termination of employment and may not be used to purchase shares of Common Stock pursuant to the Plan. 10. Purchase of Shares. 10.1. As of the last day of each Purchase Period, the entire credit balance in each Participant’s Recordkeeping Account will be used to purchase shares (not including fractional shares) of Common Stock (subject to the limitations of Section 5) unless the Participant has filed an appropriate form with the Company in advance of that date (which either elects to purchase a specified number of shares which is less than the number   4 -------------------------------------------------------------------------------- described above or elects to receive the entire credit balance in cash). Any amount in a Participant’s Recordkeeping Account that is not used to purchase shares pursuant to this Section 10.1 will be refunded to the Participant, except that any balance in such Recordkeeping Account resulting from the inability to purchase fractional shares shall be carried over to the immediately following Purchase Period unless the Participant elects to have such balance paid in cash. 10.2. A certificate for the number of shares of common stock purchased by all Participants in the Plan will be issued and delivered to him or her only upon request. Shares of common stock acquired by each Participant shall be held in a general securities brokerage account maintained for the benefit of all participants with an agent. The agent shall maintain individual sub accounts for each participant in such general account to which shall be allocated such participant’s shares of common stock. 11. Rights as a Stockholder. A Participant shall not be entitled to any of the rights or privileges of a stockholder of the Company with respect to such shares, including the right to receive any dividends which may be declared by the Company, until (i) he or she actually has paid the purchase price for such shares and (ii) certificates for such shares have been issued to him or her, both as provided in Section 10. 12. Rights Not Transferable. A Participant’s rights under this Plan are exercisable only by the Participant during his or her lifetime, and may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution. Any attempt to sell, pledge, assign or transfer the same shall be null and void and without effect. The amounts credited to a Recordkeeping Account may not be assigned, transferred, pledged or hypothecated in any way, and any attempted assignment, transfer, pledge, hypothecation or other disposition of such amounts will be null and void and without effect. 13. Administration of the Plan. This Plan shall be administered by the Committee, which is authorized to make such uniform rules as may be necessary to carry out its provisions. The Committee shall determine any questions arising in the administration, interpretation and application of this Plan, and all such determinations shall be conclusive and binding on all parties. 14. Adjustment upon Changes in Capitalization. In the event of any change in the Common Stock of the Company by reason of stock dividends, split-ups, corporate separations, recapitalizations, mergers, consolidations, combinations, exchanges of shares and the like, the aggregate number and class of shares available under this Plan and the number, class and purchase price of shares available but not yet purchased under this Plan, may be adjusted appropriately by the Committee. 15. Registration of Certificates. Stock certificates, if issued, will be registered in the name of the Participant, or jointly in the name of the Participant and another person, as the Participant may direct on an appropriate form filed with the Company. 16. Amendment of Plan. The Board of Directors may at any time amend this Plan in any respect which shall not adversely affect the rights of Participants pursuant to shares previously   5 -------------------------------------------------------------------------------- acquired under the Plan, except that, without stockholder approval on the same basis as required to originally approve the plan, no amendment will be made (i) to increase the number of shares to be reserved under this Plan, (ii) to decrease the minimum purchase price, or (iii) to change the definition of employees eligible to participate in the Plan. 17. Effective Date of Plan. This Plan shall be effective upon approval by the stockholders of the Company. The initial Purchase Period will commence on the date determined by the Board of Directors, but not before July 1, 1999. All rights of Participants in any offering hereunder shall terminate at the earlier of (i) the day that Participants become entitled to purchase a number of shares of Common Stock equal to or greater than the number of shares remaining available for purchase or (ii) at any time, at the discretion of the Board of Directors. Upon termination of this Plan, shares of Common Stock shall be issued to Participants in accordance with Section 10, and cash, if any, remaining in the Participants’ Recordkeeping Accounts shall be refunded to them, as if the Plan were terminated at the end of a Purchase Period. 18. Governmental Regulations and Listing. All rights granted or to be granted to Eligible Employees under this Plan are expressly subject to all applicable laws and regulations and to the approval of all governmental authorities required in connection with the authorization, issuance, sale or transfer of the shares of Common Stock reserved for this Plan, including, without limitation, there being a current registration statement of the Company under the Securities Act of 1933, as amended, covering the shares of Common Stock purchasable on the last day of the Purchase Period applicable to such shares, and if such a registration statement shall not then be effective, the term of such Purchase Period shall be extended until the first business day after the effective date of such a registration statement, or post-effective amendment thereto. If applicable, all such rights hereunder are also similarly subject to effectiveness of an appropriate listing application to a national securities exchange or a national market system, covering the shares of Common Stock under the Plan upon official notice of issuance. 19. Miscellaneous. 19.1. This Plan shall not be deemed to constitute a contract of employment between the Company and any Participant, nor shall it interfere with the right of the Company to terminate any Participant and treat him or her without regard to the effect which such treatment might have upon him or her under this Plan. 19.2. Wherever appropriate as used herein, the masculine gender may be read as the feminine gender, the feminine gender may be read as the masculine gender, the singular may be read as the plural and the plural may be read as the singular. 19.3. This Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Minnesota.   6

Exhibit 10.3   DATE: September 24, 2004       (1)   FLUENT ENTERTAINMENT, INC   (2)   PRODIGY DESIGN LIMITED, doing business as SIDHE INTERACTIVE       SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT                   {00017347.DOC/ / 08/20/2004 01:20 PM}   --------------------------------------------------------------------------------       THIS AGREEMENT is made on September 24, 2004   BETWEEN:   (1) Fluent Entertainment, Inc., a Nevada Corporation (“the Publisher”) whose principal address is 1701 Novato Blvd., Suite 300, Novato CA 94947; and   (2) Prodigy Design Limited, doing business as Sidhe Interactive, a New Zealand corporation whose principal address is Level 7, Willbank House, 57 Willis Street, PO Box 6203, Wellington New Zealand (the “Developer” or “Licensor”)   (A) The Developer has proposed to the Publisher to develop and license a Product to Publisher provisionally entitled “Super Stunt Buggy” (Product).   (B) The Developer is developing the Product provisionally entitled “Super Stunt Buggy” and has agreed to exclusively license certain rights to the Product on the terms and conditions of this Agreement.   AGREEMENT   1. DEFINITIONS   1.1 In this Agreement:   “Acceptance Date” in relation to any Gold Master means the date on which it is accepted unconditionally under paragraph 4.5;   “Affiliate” means any corporate entity that controls, is controlled by or is under the common control of a party to this Agreement;   “Alpha Version” means the Version of the Product that is written by or for the Developer that is a playable version of the Product containing substantially all features of the Product, as specified in the Specification with all software modules integrated and working together in a usable and testable fashion. The Alpha Version is expected to undergo further test and revision for levels, design tuning and elimination of possible Product Errors. Some assets may be placeholders for purposes of this Version and this Version may not include software theft protection, and title and legal screens. It also includes a draft of the User Manual and any Supporting Documentation reasonably requested by the Publisher to allow complete feature and functionality testing.   “Beta Version” means the Version of the Product that is written by or for the Developer that is a complete running software Product containing ALL FEATURES of the Product and final-quality game assets, as specified in the Specification plus the incorporation of improvements, corrections and any other errors identified through testing of the Alpha Version of the Product. The Beta Version is a Version which is   2     --------------------------------------------------------------------------------   ready for Publisher to do its quality assurance testing and Developer is ready to fix Errors which may be found by Publisher during its “QA” testing and will include all Original Language assets and be Multi Byte Language compatible. It also includes such information and user instructions that the Publisher reasonably and requires to finish producing a User Manual in the Original Language;   “Conversion” means the preparation of a Product which involves the adaptation or conversion of a Version into a new Version for use on a Machine other than the Initial Machine;   “Co-Publisher” means a licensee with whom Publisher shares to a substantial degree the costs of publishing the Product in a part of the Territory, as opposed to a licensee who bears all of those costs alone and “co-publishing” shall be interpreted accordingly   “Delivery Date” means the relevant Milestone Date specified for delivery of the Gold Master of each Version;   “Developer Trademark(s)” means Developer’s trademark or trade name or art work used in conjunction therewith to identify Developer’s software development business and/or the trademarks and/or trade names and/or artwork used in conjunction therewith;   “End User” means anyone who is the ultimate user of any Product;   “Error” means any known material defect relevant to an End User in a Product including:     (a) any failure to run the test procedure set out in the Specification;     (b) any inability to perform repeatedly without interruption, loss of data or erroneously or improperly formatted output;     (c) any misspelled incorrect text;     (d) any non-compliance of any Product with any part of the Specification;   “Gold Master” means:     (a) a non-copy protected and non-encrypted final gold master of a Product for use on an Initial Machine in such physical medium which (i) is sufficiently complete and correct to be released into the final manufacturing process in preparation for commercial release and shipment, in its Original Language and Translations in executable form; and (ii) is accepted for manufacturing and distribution by any applicable third-party licensor whose approval is contractually required prior to manufacturing and distribution of the Version for that Initial Machine. The Gold Master shall be the Beta Version with incorporation of any final improvements   3     --------------------------------------------------------------------------------   and correction of any Product Errors found in the testing of any and all elements of the Beta Version;     (b) a copy protected final Gold Master of the Version referred to in (a) in its Original Language and related Translations recorded in executable form; and     (c) in the case of (a) and (b), any necessary supporting software and data including all graphics and sound files.   “Hardware Manufacturer” means Sony Computer Entertainment.   “Initial Machine” means the Sony PSP for which the Product will be developed by the Developer under this Agreement;   “Intellectual Property Rights” means, without limitation, all present and future rights of copyright, patent, registered designs, design rights, trademarks and trade names, neighboring rights or rights analogous to any of the above under any jurisdiction, in each case registered or unregistered and existing now or in the future, including reversions and renewals of such rights and rights to make applications for registration of any such rights and Intellectual Property Rights shall include in particular all rights in any jurisdiction to copy, adapt, translate, broadcast, transmit, publish, perform, reproduce in any medium and otherwise exploit the work or materials concerned;   “Machine” means an object or system of any description, now known or coming into existence in the future, with which a Product may be viewed, played or otherwise used;   “Milestone” means each stage of development of the Product set out alongside a Milestone Date in Schedule 1;   “Milestone Date” means each of the dates for achieving a Milestone in Schedule 1;   “Milestone Payment” means each of the Development Advance payments set out in respect of a Milestone in Schedule 1;   “Minimum Guarantee” means any payments made by Publisher to Developer whether at the commencement of this Agreement or by installments during the course of the development of the Product under this Agreement;   “Multi Byte Character” means a character or single text letter whose character code consists of two or more bytes under a certain character-encoding scheme.   “Multi Byte Languages” means software code that supports Multi Byte Character represented text and characters for one dialect of the Japanese language to be determined by the parties in connection with the preparation of Translations (as defined below).   4     --------------------------------------------------------------------------------     “Net Royalty Receipts” means any funds received by or credited to Publisher for a sub-license where the Publisher is paid a net amount per unit sold and Publisher has no direct marketing responsibility.   “Net Sales Receipts” means the actual wholesale selling price of the Product invoiced by Publisher and/or Publisher’s authorized Co-Publisher less (to the extent actually paid, or actually issued, by Publisher or its Co-Publisher, as applicable, in respect of the Product): any credits for returns of Units, price protection or markdowns, credits in lieu of returns, any value added tax and any other sales taxes included in such invoice price and actual cost of goods sold (manufacturing costs).   “Original Language” means American English.   “Product” means the software Product currently known as “Super Stunt Buggy” to be developed by the Developer under this Agreement in respect of the Initial Machine and comprising each stage as existing from time to time:     (a) the Product plots, themes, story lines, characters and sequences;   (b)   all revised, amended and rejected prototypes and materials prepared in connection with the development of the Product;   (c)    all Object Code, graphics, sound effects and music and implementing copy protection routines in each of the Versions;   “Product Names” means all names of characters, scenes, themes, products, sets, processes or other aspects of the Product and all designs of characters, backgrounds and other visual features appearing in the Product;   “Product Title” means “Super Stunt Buggy” or such other title for the Product as may be mutually determined by Publisher and Developer;   “Project Manager(s)” means the person at Developer responsible for the project management of Product;   “Publisher’s Producer” means the person at Publisher responsible for the project management of Product and identified in Schedule 2;   “Quarter End” means 31 March, 30 June, 30 September and 31 December each year during the Term;   “Royalties” means the amounts in US Dollars payable by the Publisher to the Developer in accordance with paragraph 7 of this Agreement;     5     --------------------------------------------------------------------------------     “Royalty Statement” means the statement of Royalties provided by the Publisher to the Developer under this Agreement;   “Source Code” means all software code and listings (excluding the Developer’s Tools and Technology) generated by the Developer in human readable form in order to create any Version of the Product, together with accompanying sound code, Product notes, flow charts, diagrams, written script of text, audio track and other documentation relating to such code;   “Specification” means the specification for each Version of the Product current from time to time comprising a detailed specification of all game features, mechanics, game structure and technical specifications of the Product;   “Supporting Documentation” means documentation in English containing full and clear information enabling the Publisher and its licensees to support and maintain all aspects of the Product;   “Term” will mean beginning on the date shown on page one of this Agreement and ending three years hence. At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional three months (“Sell-off Period”) beyond the term. Royalties for sales of Products during the Sell-off Period shall be paid and remitted in accordance with Section 7.   “Territory” means the universe, excluding Australia and New Zealand;   “Translation” means a copy of a Version in which text and/or text related graphics and/or dialogue have been translated into French, German, Italian, Spanish and one dialect of Japanese, in accordance with paragraph 6 hereof;   “Unit” means a copy of a Version embodied in a medium or format (whether tangible, electronic or otherwise) which is customarily made commercially available to the public;   “User Manual” means a manual containing instructions for End Users clearly expressed and enabling them to operate the Product fully, in a style suitable for the intended age range of End Users;   “Version” means a form of the Product produced by the Developer under this Agreement designed to be compatible with a particular Initial Machine and (where relevant) a particular screen format PAL/NTSC including all prototypes and all Master Copies of that Version, and when used in connection with the name of a Machine shall mean a form of the Product readable and executable on that Machine;     6     --------------------------------------------------------------------------------     “Vertical Slice Demo” means a stand alone version of the Product in the Original Language and such Translations as may be agreed by the parties that demonstrates the functionality of Product for the purposes of marketing which will contain the following features: Challenge Mode, Race Mode, Practice Mode, and Time Attack Mode; 10 or more Challenge Mode levels across at least two themed worlds; 1 or more Race Mode levels; and 1 or more Bonus Games;   “Virus Free” means that at the time of delivery, the Product shall not contain any known computer Product (detectable by the McAfee anti-virus software current at that time) which copies itself to other storage machines including magnetic tape cassette, memory chip, electronic cartridge, optical disk and magnetic disk and which destroys data, causes damage or creates a nuisance or annoyance to the End User.   “Working Day” means Monday to Friday except for all public holidays observed in the United States or New Zealand;   1.2 As the context permits, references to people include any legal entity, and partnerships or unincorporated associations, references to the singular include the plural and vice versa, and references to any gender include each other gender.   1.3 “Include” or “including” are used without limitation.   1.4 Headings and titles are used for reference only and do not affect the interpretation of the Agreement.   1.5 Any reference to any paragraph or schedule is a reference to a paragraph or schedule in this Agreement.   2. PROPRIETARY RIGHTS.   2.1 Publisher’s Rights. Publisher acknowledges and agrees that, the intellectual property rights in the Product and Gold Master shall be the sole and exclusive property of Developer. Publisher’s sole rights shall be those granted elsewhere in this Agreement.   2.1.1 Other versions of the Product. Developer, as owner of the intellectual property known as Super Stunt Buggy, shall decide whether or not to create other video game versions of the Product. Fluent shall have the right of first refusal to publish any other version of the Product. Under this Agreement other versions include all video game formats know known and their successors (i.e., PS3 is a successor to PS2) and the P.C. The parties agree to negotiate in good faith the terms under which Publisher would publish such products. If the parties cannot agree on terms for Publisher to publish such products within forty-five (45) days of Developer noticing Publisher of its desire to create other versions, Publisher shall lose all rights to such other versions and Developer shall be free to license such rights to a third party.     7     --------------------------------------------------------------------------------     2.1.2 Sequels of the Product. Publisher shall have the first right of negotiation for the next sequel to the Product. (For sake of clarity, Fluent has this right for the first sequel. If Fluent and Publisher agree to terms for the first sequel, Fluent will have such rights for the second sequel, and so on. Once Fluent has lost to right to a particular sequel, it has lost the right to all future sequels.) If the parties are unable to negotiate an agreement within 30 days of Developer noticing Publisher of its desire to create a sequel, Developer shall be free to negotiate with other publishers. Prior to completing an agreement with another Publisher, Developer shall offer the Product to Publisher on the same terms and conditions as agreed to with the other publisher, or on the terms of the last offer made by Publisher to Developer during the negotiating period, whichever terms are more beneficial to Developer. Publisher shall have ten (10) days to elect to match the offer or lose its rights to the sequel and all future sequels.   8     --------------------------------------------------------------------------------       2.2 Developer’s Intellectual Property Rights. (a) Notwithstanding anything else contained herein, Developer will retain exclusive ownership and control of all of the Intellectual Property Rights in or relating to the Product. Developer hereby grants to Publisher a royalty-bearing, worldwide (excluding New Zealand and Australia), exclusive license to: (i) sell copies of the Product in the format delivered to Publisher by Developer only (excluding without limitation the right to modify the Product or exploit it in source code format or in connection with any other product); and (ii) sublicense such rights to sublicensees.   (b)For the avoidance of doubt Publisher shall not (and shall not authorize any third party to) (i) decompile, disassemble or otherwise reverse engineer the source code or underlying algorithms of the Product. This paragraph 2.2(b) shall not apply to software code delivered by Developer to Publisher in accordance with paragraph 6 provided that Publisher shall not use any such code for any purpose other than in order to create Translations.   3. DEVELOPMENT   3.1 The Developer shall develop the Product for the Initial Machine and in the Original Language in accordance with the Specification. Developer will provide or obtain at its sole cost and expense all necessary programming (including, without limitation, the application of technical knowledge, expertise and the services of personnel) and other production materials required to develop the Product. 3.2 The Developer shall achieve each of the Milestones by the relevant Milestone Date. On achieving each Milestone, the Developer shall, if requested to do so by the Publisher, deliver to the Publisher all materials relevant to the particular Milestone including in particular copies of the User Manual and Support Documentation with each Alpha and Beta Version. In addition, Publisher may request Developer deposit Source Code with a mutually agreed upon Escrow Agent in New Zealand. Publisher shall pay all fees of Escrow Agent. Under the terms of such escrow arrangement, Publisher may request release of the source code from escrow, only if Developer fails to perform such translations or refuses to create them and fails to cure such default as required by paragraph 6.2, below.   3.3 The Developer shall keep the Publisher promptly and regularly informed of all developments, problems, new concepts and ideas in relation to the Product.   3.4 In order to assist Publisher in selling the Product, Developer shall deliver a Vertical Slice Demo of the Product no later than November 8, 2004.   3.5 The Developer shall appoint a Project Manager who shall liaise with the Publisher during development of the Product.   9     --------------------------------------------------------------------------------     3.6 The Developer shall be responsible for initial testing on each Version prior to delivery in accordance with customary testing procedures. The Developer shall prior to delivery correct Errors discovered as a result of that testing, and also (in accordance with the procedure set out in paragraph 5 below) any Errors notified to the Developer by the Publisher following the Publisher’s testing of any Alpha or Beta Versions, Vertical Slice Demos, or other Product materials supplied before delivery of the Alpha Version, Beta Version and the Gold Master.   3.7 Publisher shall be responsible for submitting the game concept to the Hardware Manufacturer for approval within ten (10) days of receiving the game concept documents from the Developer. Developer and Publisher shall work together to obtain such approval from the Hardware Manufacturer. Should the game concept be rejected by the Hardware Manufacturer, and such rejection is not due to the acts or omissions of Publisher, and the Developer and Publisher together are unable to correct such deficiencies and obtain Hardware Manufacturer approval of the game concept, Publisher may terminate this Agreement in accordance with Paragraph 13.2.   3.8 Publisher shall be responsible for submitting the Gold Master candidate to the Hardware Manufacturer for approval within ten (10) days of receiving the Gold Master candidate from the Developer. Developer and Publisher shall work together to obtain approval of the Gold Master candidate from the Hardware Manufacturer. Should the Gold Master candidate be rejected by Sony Computer Entertainment America, Inc. (“SCEA”), and such rejection is not due to the acts or omissions of Publisher, and the Developer and Publisher together are unable to correct such deficiencies and obtain approval of the Gold Master by SCEA, Publisher may reduce the Minimum Guarantee made under this Agreement to US$250,000.   4. DELIVERY AND ACCEPTANCE   4.1 Developer shall submit to Publisher a Version of the Product at each Milestone, except Milestone 1, for approval. Publisher shall review the submission for compliance with the relevant parts of the Specification at that Milestone and for Publisher’s continued awareness as to the Product status.   4.2 As soon as reasonably practicable, but in any event within 10 (ten) business days following receipt of a Version of the Product at each Milestone, Publisher’s Producer shall notify the Developer in writing that:     4.2.1 it accepts and approves that Version unconditionally; or     4.2.2 it accepts and approves that Version conditionally on correction of the Errors specified; or     4.2.3 it does not accept or approve that Version     10     --------------------------------------------------------------------------------     and shall at the same time notify the Developer of the Errors that it is aware of which are contained in that Version which it has not accepted and approved unconditionally. Publisher shall accept and approve unconditionally each Version unless there is an Error in that Version.   4.3 If the Publisher shall not have given the Developer such notice under paragraph 4.2 within the said 10 (ten) business days, that Version shall be deemed accepted.   4.4 As soon as reasonably practicable, but in any event no later than 10 Calendar Days (or such other period as the parties may agree) after receiving notice of non-acceptance pursuant to paragraph 4.2, the Developer shall correct the specified Errors at its sole expense and deliver to the Publisher the corrected Version of the Product. Paragraphs 4.2, 4.3 and this paragraph 4.4 shall then apply again in respect of that corrected Version.   4.5 The Developer shall deliver to the Publisher the Gold Master of each Version by the relevant Delivery Date in a form free of Errors. For the avoidance of doubt, Developer shall deliver a Gold Master for the Original Language Version of the Product and a multi-language Version for all agreed Translations as required by the Hardware Manufacturer, i.e., a US Gold Master for SCEA and one (1) multi-language Gold Master each for SCEE and for SCEI, respectively. The parties acknowledge that in the case of PSP, the Hardware Manufacturer shall have the final right to accept or reject such Master. In the case of rejection, Developer shall respond as if such rejection was made by Publisher and shall respond to such rejection in accordance with this paragraph 4.   5. LICENSE   Developer hereby grants to Publisher, and Publisher hereby accepts, the exclusive right to manufacture, distribute, sell and market the Product in the Territory through any and all normal channels of distribution during the Term of this Agreement. Subject as provided in this Agreement, the publishing of the Product including manufacturing, pricing, distribution, marketing, packaging and artwork shall be the responsibility of the Publisher.   6. TRANSLATION   6.1 At its own cost, Developer shall be responsible for integrating localized text and voice over material and generating a multi-language Gold Master embodying the Translations at no additional charge, including multi-byte languages, as defined in Translations. Publisher shall be responsible for preparing and delivering, at its expense, the first 5,000 words of localized text in each language including the User Manuals necessary to enable Developer to integrate such files to create the Translations. The parties will share equally the cost of any localized text above 5,000 words in each language.   11     --------------------------------------------------------------------------------     6.2 If the Developer fails to perform such translations or refuses to create them and fails to cure such default within thirty (30) days of receipt of notice from Publisher, Publisher may use a third party for the Translation, the Developer shall supply the Publisher with all Original Language text and/or text related graphics and/or dialogue featured in the relevant Version, to the extent not previously delivered. Developer shall recover the cost of any such translations out of royalties earned.   6.3 If pursuant to this Paragraph 6, the Publisher uses a third party to carry out the Translation, the Publisher will sign, and will ensure that its chosen third party signs, a confidentiality undertaking reasonably specified by the Developer which will include, without limitation, undertakings that the Source Code, and any other material, information, data or other things of the Developer will not be used by the persons signing for any purpose other than the development of the Translation and that all such things will be held securely at all times and returned to the Developer when work on the Translation is complete. Developer shall deliver to Publisher any additional work (including part of the Developer’s Tools and Technology) which is necessary to the Publisher in order to complete a Translation. However, except as expressly provided in this Paragraph 6.3 neither Publisher nor any third party shall be entitled to use the Retained Materials in connection with a Translation.   7. ROYALTIES   7.1 The Publisher shall pay the Developer the following Royalties all of which are subject to recoupment of the Minimum Guarantee paid under Paragraph 8 (that is, the Minimum Guarantee regardless of which Version of the Product are cross-collateralized against all royalties earned under this paragraph 7):     7.1.1 in respect of the use of the Products developed under this Agreement and published or co-published by Publisher (which shall include any Translation of the Product): xxxxxxxxxxx%) of the Net Sales Receipts;     7.1.2 in respect to any sublicense or OEM agreement where Fluent does not have any “risk” (i.e., doesn’t pay for manufacturing, distribution, inventory or control and pay for the consumer marketing) the royalty rate shall be xxxxxxxxxxx) of the Net Royalty Receipts.   7.2 Within forty-five (45) days of the Quarter End following the date on which the Publisher first commercially releases a Version of the Product and of every subsequent Quarter End the Publisher shall provide the Developer with a written Royalty Statement specifying in sufficient detail (i) amounts spent in satisfaction of the Marketing Guarantee (as defined below) in respect of that quarter; and (ii) the calculations of Net Sales Receipts and Net Royalty Receipts, and the Royalty (if any) due to the Developer in respect of that quarter. Each Royalty Statement shall be accompanied by a wire transfer for any Royalty due, save that if the Publisher is prevented by the law of any   12     --------------------------------------------------------------------------------   country from making payments outside that country it shall be entities to pay the relevant sums to the Developer in that country. All sums payable to Developer pursuant to this Agreement (including the Minimum Guarantee and Royalties) shall be made in U.S. Dollars. At each Quarter End the Publisher may retain from Royalties payable a reserve against returns or other credits in respect of Units sold by the Publisher hereunder in the manner set out in paragraph 7.2.1.   7.2.1 The Publisher will withhold a general reserve against rebates, deductions, price protection, discounts, allowances or refunds for returned, defective or discounted units, exchanges, credits and the like (the “General Reserve”) in a pro rata amount of any such reserve withheld by Publisher’s co-publishers or sub-licensees of the product. Such pro-rata amount shall be based on the applicable Royalty Rate in Section 7.1. (For example, should a co-publisher withhold from Publisher $1,000 in payments which would fall under Section 7.1.1 above, Publisher would withhold $150 from Developer in a reserve. When co-publisher releases Publisher’s reserve, Publisher will release Developer’s reserve.)   7.3 Publisher will maintain accurate accounts, books and records that report the marketing, distribution and sales and other commercial exploitation of each Version of the Product which has been commercially released by the Publisher and any sub-licensing by the Publisher. Developer shall have the right to designate a certified public accountant (“the Auditor”) on Developer’s behalf to examine those accounts, books and records solely for the purpose of verifying the expenditures of the Marketing Guarantee and verifying the accuracy of the Royalty Statements under paragraph 7.2 and the Royalty payable under this Agreement. Developer’s Auditor may only make such examination during regular business hours and upon reasonable notice and in manner that is at the Publisher’s reasonable convenience and not disruptive to the Publisher’s business. Each examination will take place at the place the Publisher normally keeps the accounts, books and records to be examined, which is presently in Novato, California. Developer shall be limited to one such examination each 12 months while the Product is being commercially exploited and for 3 years thereafter. Publisher’s accounts, books and records relating to the Marketing Guarantee and to a particular Royalty Statement may be examined only within 36 months after the date the Statement was rendered. Developer shall not have the right to examine Publisher’s accounts, books or records relating to a particular Royalty Statement more than once. Prior to the commencement of any examination of the Publisher’s accounts, books and records under this Agreement, Developer shall cause the Auditor to sign a letter and/or agreement which acknowledges the confidentiality of the Publisher’s accounts, books and records in the form set out in Schedule 2. The fees of the Auditor shall be at the sole expense of Developer unless such audit discovers previously undiscovered errors in favor of Publisher exceeding both 5% and $2,500 for the entire time period covered by that audit, in which case the Publisher shall reimburse actual and reasonable Auditor’s fees for that audit to Developer in addition to make good the amounts of such errors and pay interest on such unpaid sums at the statutory rate of interest under California law.     13     --------------------------------------------------------------------------------     7.4 Each Royalty Statement shall be final and binding on Developer unless Developer has given Publisher written notice of objection stating the matters to which it disagrees within 3 years of the issue of the Royalty Statements, and (if the Publisher does not accept any of those objections), unless the Developer has issued and served legal proceedings within 2 years of the date of the Developer’s relevant notice of objection.   8. MINIMUM GUARANTEE   8.1 The Minimum Guarantee for the development of the Product for the Initial Machine in accordance with this Agreement shall be the relevant amount set out in Schedule 1 payable to the Developer in the separate Milestone Payments as set out in Schedule 1, each Milestone Payment being payable in accordance with the procedures set out in this Agreement, following acceptance under paragraph 5 above of the materials produced in respect of the corresponding Milestone.   8.2 Without prejudice to the provisions of paragraph 4 above, Publisher shall not unreasonably delay or withhold its acceptance of deliverables in relation to a Milestone.   8.3 Developer may raise an invoice on the Publisher for the relevant Milestone Payment on delivery of the relevant Milestone. Payment of the invoice is due within ten (10) calendar days of the acceptance of the milestone.   8.4 The Publisher shall have no obligation to make any payments to the Developer under this Agreement for anything save for the payment of the Minimum Guarantee referred to in this paragraph 8, Royalties under paragraph 7 and payments (if relevant) under paragraph 6. Nevertheless, any other additional payments that the Publisher, in its discretion, makes to the Developer in relation to the Developer’s work under this Agreement for any reason shall be treated as a further Minimum Guarantee payment and fully recoupable against Royalties payable under this Agreement, unless otherwise agreed in writing.   8.5 All Minimum Guarantees paid by Publisher to the Developer together with payments (if relevant) under paragraph 6 (except payment of Royalties) shall be recoupable out of the Royalties payable under this Agreement.   8.6 All Minimum Guarantees as well as all Royalties actually paid by Publisher to the Developer shall count towards the Repurchase Right Paragraph 8.3 of the Securities Purchase Agreement dated February 28, 2003.   8.7 The parties agree that no finder’s fees are to any party under this transaction.   9. INDEMNIFICATION.   9.1 Developer Indemnification. Subject to the provisions of paragraph 9.3 (Indemnification Procedures), Developer will indemnify, defend and hold harmless Publisher and its   14     --------------------------------------------------------------------------------   affiliates, officers, directors, employees and agents from and against any and all losses, liabilities, claims, obligations, costs and expenses (including, without limitation, reasonable attorneys’ fees) which arise in connection with any breach or alleged breach by Developer of any of its representations and warranties set forth in paragraph 11 (Warranties of Developer). Notwithstanding anything in this paragraph 9 to the contrary, in the event that, by reason of a claim by a third party of infringement based on the Product, Publisher is temporarily or permanently enjoined from distributing the Product developed under this Agreement, then, if Developer is unable, within sixty (60) days from the signing of the order of injunction, to provide Publisher with a non-infringing Product, Publisher shall have the right to obtain a license from the third party to continue with the marketing, distribution and sale of the Product(s) and Developer shall reimburse Publisher for any reasonable license/settlement fee and related reasonable legal expenses paid by Publisher to the third party, unless Developer ultimately prevails in the litigation; if Publisher elects this remedy and obtains such a license, such remedy shall be Publisher’s sole and exclusive remedy in connection with such claim..   9.2 Publisher Indemnification. Subject to the provisions of paragraph 9.3 (Indemnification Procedures), Publisher agrees to defend, indemnify and hold harmless Developer and its affiliates, officers, directors, employees and agents from and against any and all losses, liabilities, claims, obligations, costs and expenses (including, without limitation, reasonable attorneys’ fees) which arise in connection with the breach or an alleged breach by Publisher of any of its warranties set forth in paragraph 12(Warranties of Publisher).   9.3 Indemnification Procedures. If a third party asserts any claim or allegation which, if proven, would trigger the indemnification obligations set forth in paragraphs 9.1 and 9.2, the indemnifying party shall be notified promptly of such claim by the indemnified party and given control of the defense and/or settlement thereof. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this paragraph 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all such liability on claims that are the subject matter of such proceeding. Moreover Developer shall not, in the absence of the consent of Publisher (which shall not be unreasonably withheld or delayed), effect any settlement of any pending, threatened or actual proceeding or claim which has the effect of compromising in any way the rights, interests and licenses in the Product or the license granted to Publisher hereunder. The foregoing provisions of this paragraph 9 state the entirety of the parties’ obligations with respect to any claim by any third party.     15     --------------------------------------------------------------------------------     9.4 Developer shall procure and maintain for itself and its employees and contractors all insurance coverage required by New Zealand law. Developer also agrees to maintain general liability insurance, in the amount of at least NZ$1,000,000. Upon request, Developer shall furnish Publisher with an up-to-date certificate of insurance evidencing such coverage.   10. MARKETING   10.1 Publisher can replicate up to 1,000 Royalty-free Units for each Initial Machine for use including, but not limited to, promoting the game by sales and public relations and marketing teams on which no Royalty is payable to Developer.   10.2 The parties will work together to determine the optimal time and manner of announcing the Product and having the website “go live”. Developer will own, operate and maintain the “official” website for the Product (www.SuperStuntBuggy.com) and Publisher and Developer shall cooperate with each other on providing content for such website.   10.3 Publisher shall, subject to the terms of this Agreement and consistent with its own policies, practices and procedures, use its reasonable efforts to promote and exploit the Product throughout the Territory. Publisher agrees that it will release the Product in the United States and in Europe within six (6) months from the date that the Publisher accepts any Gold Master or within three (3) months from the date that Hardware Manufacturer releases the hardware within each region within the Territory, whichever is later. Publisher shall present a marketing plan to Developer no later than sixty days before the Product is to be released in each country or region of the world within the Territory for review and comment. Such plan shall include a sales forecast for the country or region. Publisher, or its co-publisher, shall spend a minimum of ten percent (10%) of the expected revenue, based on the sales forecast, in each country or region (the “Marketing Guarantee”).   10.4 Publisher shall furnish to Licensor without charge fifteen (15) samples of each Version of the Product distributed hereunder, such samples not to be resold by Developer. Developer shall have the right to purchase additional units of the Product at Publisher’s cost therefore, such copies not to be resold or used for any advertising or promotional activities (except with Publisher’s prior written consent).   11. WARRANTIES OF DEVELOPER   11.1 The Developer represents and warrants that:     (a) it is and will at all material times own or control all Intellectual Property Rights in the Product, free from any third party right or interest which would impair the rights of the Publisher under this Agreement;     16     --------------------------------------------------------------------------------     (b) it has and will at all material times have full power and authority to enter into and perform this Agreement and to grant the rights expressed to be granted by it;     (c) nothing contained in the Product will infringe a third party’s Intellectual Property Rights, of a right of privacy or name or image or likeness, or become liable under unfair competition law;   (d)nothing contained in the Product will be obscene or libelous or otherwise in breach of any relevant laws or regulations of any territory which relates to health and safety;     (e) each Gold Master will be Virus Free on its Acceptance Date and each Gold Master shall not contain any software routine designed to disable a computer Product automatically with the passage of time or by the intervention of a third party other than a licensee of the Gold Master or Publisher;     (f) the Product will be an original work created by the Developer;   (g) the execution of this Agreement will not put the Developer in breach of any other agreement including an exclusive term agreement;   (h) the Developer has received no notice of any claim pending or threatened against Developer based on infringement of the rights set forth in this Agreement;   (i) the Developer has not sold, assigned, leased, licensed or in any other way disposed of or encumbered the rights granted to Publisher hereunder in such a way as to materially affect the rights granted to Publisher hereunder, and Developer will not sell, assign, lease, license or in any other way dispose of or encumber any of such rights in such a manner as to encumber the rights granted to Publisher hereunder;   (j) Developer will not use Publisher’s name or logos or the names of any of Publisher’s products for any purpose, including, but not limited to, advertising or promotional purposes, except as provided in this Agreement or with the prior written consent of Publisher.   12. WARRANTIES OF PUBLISHER   12.1 The Publisher warrants and represents:   (a)        it has and will at all material times have full power and authority to enter into and perform this Agreement and to grant the rights granted;   (b)     nothing contained in this Agreement or in the performance of this Agreement will place Publisher in breach of any other contract or obligation.     17     --------------------------------------------------------------------------------     (c)       Publisher does not know or have reason to know that anything Publisher provides that is or will be contained in the Product does or will violate or infringe any Intellectual Property Rights, whether statutory or common law of any third party in any jurisdiction, or contain any libelous or otherwise unlawful material;   (d)       Publisher has received no notice of any claim pending or threatened against Publisher based on infringement of the rights set forth in this Agreement;   12.2 Disclaimer. EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES HEREBY DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS.   13. TERMINATION   13.1 Either party shall be entitled, without prejudice to its other rights, to terminate the Agreement with immediate effect by giving written notice to the other party if the other party is in breach of any of its material obligations under this Agreement and, if the breach is capable of remedy, it has continued unremedied for a period of thirty calendar 30 days after the other party has been given written notice specifying the breach and the steps required to remedy it.   13.2 If Sony Computer Entertainment of America disapproves the concept submittal, for any reason except due to Publisher’s act or omission, Publisher may cancel this agreement and any Minimum Guarantee payments made under this Agreement to such date are fully and immediately refundable to the Publisher.   13.4 Either party shall be entitled, without prejudice to its other rights, to terminate the Agreement with immediate effect by giving written notice to the other party if the other party shall have a receiver or an administrative receiver or an administrator or liquidator appointed over it (except a liquidator appointed for the purpose of amalgamation or reconstruction) or shall pass a resolution for winding up or shall enter into any voluntary agreement with its creditors or shall become bankrupt or file for voluntary bankruptcy or anything analogous to any of the above under the law of any jurisdiction occurs in relation to such party.   13.6 If at any time, Developer is more than thirty days late delivering a Milestone, and such event is not due to the acts or omissions of Publisher, Publisher may Terminate this Agreement. In such case, as Publisher’s sole remedy, Developer shall return all Minimum Guarantee payments paid to such date.   14. CONSEQUENCES OF TERMINATION     18     --------------------------------------------------------------------------------     14.1 Any termination of the Agreement shall not affect any accrued rights or liabilities of either party, nor any other rights of the terminating party in relation to the matter giving rise to the termination, nor shall it affect the coming into force or the continuance in force of any provisions of this Agreement which are expressly intended to come into or to continue in force on or after such termination. Termination of this Agreement by the Publisher under Paragraph 14 shall not affect any Version whose Acceptance Date has already occurred, and this Agreement shall continue to apply in all respects to any such Version.   15. CREDITS AND ARTWORK   15.1 Publisher acknowledges that Developer’s Name and logo shall appear on a splash screen during the “boot-up” sequence of the Product, subject to approval of the hardware manufacturer. Whenever Publisher’s name and/or logo appears, Developer’s name and/or logo shall appear on the front and back of the Product packaging, User Manuals, demo discs and self-playing demos, screenshots, and full-page print advertising, in approximately the same size of Publishers logo on the Product and in the credits of all Versions of the Product. In addition Developer may designate a reasonable number of persons to receive individual text credits in the Product whose names and capacities Developer shall submit to Publisher prior to final delivery of the Product. On Publisher’s request, Developer shall promptly supply Publisher with any transparencies that might be required by it for the purposes of this paragraph. Publisher’s obligations under this paragraph are subject to the final approval of the applicable Hardware Manufacturer. An inadvertent failure by Publisher to include Developer’s name or logo shall not be a material breach of this Agreement, provided that Publisher shall cure any such failure on a prospective basis once Publisher has been notified of same.   15.2 Developer shall supply Publisher on reasonable request (so as not to interfere with Developer’s efforts to complete and deliver the Product as contemplated hereunder) with any relevant materials it may have that may be useful to Publisher for artwork, packaging, merchandising, marketing and advertising including play through videos, demo discs, screenshots and graphics of characters.   15.3 Publisher shall cause copyright, patent and trademark notices to appear on each unit of the Product (other than on screen notices, the production and placement of which shall be Developer’s responsibility) and on the back of the Product packaging and User Manual and advertising materials as may be designated and approved by Developer.   16. SUPPORT   16.1 The Developer shall at its sole expense correct any Errors in any Gold Master which become apparent after that Gold Master has been accepted by the Publisher and which the Publisher notifies to the Developer, and shall carry out any other alterations to the Gold Master which the Publisher notifies the Developer are needed for any of the following reasons: to obtain the rating in the US from the ESRB as specified in the   19     --------------------------------------------------------------------------------   Specification; to obtain the approval of hardware manufacturers; or to ensure that the Product conforms with the Specification. The Developer shall start correction of Errors and making of alterations within 5 days of receiving the Publisher’s notice and shall rectify all Errors and make all alterations set out in the notice as soon as reasonably practicable thereafter. Developer’s obligations under this paragraph 6.1 in respect of each Version shall terminate twelve (12) months after the initial commercial release of the Product pursuant to this Agreement.   16.1.1 The parties shall work together so that the Product does not violate the guidelines for ratings issued by ESRB in the United States and ELSPA in the UK or censorship ratings in other countries in the Territory. In any case where the Product does not meet the guidelines, Developer shall be responsible at its own cost to promptly correct the Product.   16.2 From the date that the Publisher accepts any Gold Master, the Developer will provide technical support to the Publisher only (not to End Users under any circumstances) in respect of that Gold Master without further charge. This support will continue for a period of 7 calendar months from the date of first commercial release by Publisher and will be by means of e-mail and telephone on Working Days and during regular business hours, New Zealand Time. Developer will use reasonable endeavors to provide a service out of hours and on non-Working Days in the event of exigent circumstances. The support will be provided by a person with reasonable technical knowledge of the Product. Any questions that cannot be dealt with immediately will be responded to with reasonable promptness. Failure by Developer to provide such support shall not be a material breach of this Agreement.     20     --------------------------------------------------------------------------------     17.    NOTICES   Any notice required or permitted by this Agreement shall be in writing and shall be given by fax (if confirmed by delivery of the hard copy as provided herein), courier or other personal delivery or by registered or certified mail at the appropriate address below or at a substitute address designated by notice by the party concerned:   Sidhe Interactive, Inc. Level 7, Willbank House 57 Willis Street PO Box 6203 Wellington New Zealand Attn:     Mario Wynands, Managing Director Fluent Entertainment. 1701 Novato Blvd. Suite 300 Novato, CA 94947 Attention: CFO     Phone: 011 64 4 4712638 Fax: 011 64 4 4712639 Phone: 1 (415) 493-2300 Fax: 1 (415) 493-2303                  Notices shall be deemed given when faxed (if confirmed by delivery of the hard copy as provided herein), delivered by a courier or, in the case of mail, upon receipt. Copies of all notices to Developer should be sent to David S. Rosenbaum, Esq., 6303 Owensmouth Avenue, 10th Floor, Woodland Hills, California USA 91367 (Phone: 818-936-3455; Fax: 818-936-3055).   18 CONFIDENTIALITY   18.1 Each party to this Agreement acknowledges that it will have access to proprietary or confidential information of the other party including, but not limited to, the terms of this Agreement, the documentation and materials produced in accordance with this Agreement, marketing information, manufacturing information, customer or client information and development techniques and know-how (“the Confidential Information”). During the Term of this Agreement, each party will regard and preserve as strictly confidential the Confidential Information and will not use the Confidential Information or disclose the Confidential Information to a third party other than is strictly necessary in order to fulfil an obligation under this Agreement.   18.2 The obligations of confidentiality and non-use specified in paragraph 18.1 will not apply to any Confidential Information of one party which:     18.2.1 was known by the other party prior to the date of this Agreement and not obtained or derived, directly or indirectly, from such party or its Affiliates or if so obtained or derived, was lawfully obtained or derived and is not held subject to any confidentiality or non-use obligations;     21     --------------------------------------------------------------------------------       18.2.2 is or becomes public or available to the general public otherwise than through any act or default of the other party or any breach of a confidentiality obligation to the disclosing party by a third party;     18.2.3 is obtained or derived prior or subsequent to the date of this Agreement from a third party which, to the best knowledge of the party acquiring such information, is lawfully in possession of such information and does not hold such information subject to any confidentiality or non-use obligations;     18.2.4 is independently developed by such party without use of the other party’s confidential information; or     18.2.5 is required to be disclosed by one of the parties pursuant to an applicable law or under a government or court order provided that:-     (a) the obligations of confidentiality and non-use will continue to the fullest extend not in conflict with such law or order; and     (b) if and when a party is required to disclose such Confidential Information pursuant to any such law or order, such party will give notice to the other party to allow such party to make efforts to obtain a protective order or take such other actions as will prevent or limit, to the fullest extent possible, public access to, or disclosure of, such Confidential Information.   18.3 It is further understood and agreed that money damages would not be a sufficient remedy for any breach of either party’s obligations under this paragraph 18 by the other party, or any employees, consultants or other persons under the other party’s supervision and that the disclosing party shall be entitled to specific performance, including, without limitation, injunctive relief, as a remedy for any such breach. The parties agree that the damaging party shall reimburse the costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by the damaged party in connection with the enforcement of this Agreement.   18.4 In the event of any termination or expiration of this Agreement, each party shall promptly return to the other party all Confidential Information of such other party in tangible form, the receiving party shall certify in a writing signed by an authorized officer or representative that the foregoing have been shredded and disposed of in a secure manner.   19 GENERAL   19.1 No addition to or modification of any provision of this Agreement shall be binding upon the parties unless made by written instrument signed by a duly authorized representative of each of the parties. Each party confirms it is not relying on any representation or   22     --------------------------------------------------------------------------------   commitment by the other in entering into this Agreement except as set out in this Agreement. This paragraph 19.1 shall not apply to any deliberate misrepresentations made before this Agreement was made.   19.2 Developer may not assign this Agreement, nor delegate or subcontract any of its obligations hereunder, to any third party without the prior written consent of Publisher, which consent will not be unreasonably withheld; provided, however that Developer may assign its right to receive payments of the Minimum Guarantee and/or Royalties hereunder without the consent of Publisher. Publisher may assign this Agreement to a purchaser of the business of Publisher or substantially all the assets of the business without the consent of Developer, but save as aforesaid Publisher may not assign this Agreement, nor delegate or subcontract any of its obligations hereunder, to any third party without the prior written consent of Developer, which consent will not be unreasonably withheld. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the parties, and their respective successors and permitted assigns.   19.3 Neither party is the legal representative, agent, joint venturer, partner, or employee of the other party for any purpose whatsoever. Neither party has any right or authority to assume or create any obligations of any kind or to make any representation or warranty on behalf of the other party, whether express or implied, or to bind the other party in any respect whatsoever.   19.4 No failure or delay by either party in exercising any right, power, or remedy under this Agreement shall operate as a waiver of any such right, power or remedy. No waiver or modification of any provision of this Agreement shall be effective unless in writing and signed by both parties. Any waiver by either party of any provision of this Agreement shall not be construed as a waiver of any other provision of this Agreement, nor shall such waiver operate as or be construed as a waiver of such provision respecting any future event or circumstance.   19.5 If any provision or wording of this Agreement is held by a judicial authority having jurisdiction over the matter to be unlawful or unenforceable for any purpose, it shall be deemed excluded for that purpose and the rest of this Agreement shall remain in full force and effect. The parties will negotiate in good faith a valid and enforceable provision to replace the excluded provision as closely as reasonably possible.   19.6 FORCE MAJUERE. In the event that either party is prevented from fulfilling its material obligations hereunder or said obligations are materially interfered with by reason of events of war, fire, flood, earthquake, explosion or other natural disaster, industrial action or any other reason beyond the reasonable control of that party, such obligation shall be delayed until it can be performed. The party claiming excusable delay must promptly notify the other party of such delay. If the delay continues for more than 45 days the other party may terminate this Agreement by giving 45 days prior written notice to the delaying party provided that the Agreement will not terminate   23     --------------------------------------------------------------------------------   if the party claiming excusable delay substantially performs the material obligation which has been delayed within such 45 day notice period from the other party.   19.7 EXCEPT FOR THE OBLIGATIONS IN PARAGRAPH 9, NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR SPECIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR ANY OBLIGATION ARISING THEREFROM OR OTHERWISE, WHETHER LIABILITY IS ASSERTED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY), AND IRRESPECTIVE OF WHETHER IT HAS ADVISED OR HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.   19.8 Developer’s services and rights herein granted are special, unique, extraordinary and intellectual in character and value such that the loss thereof could not be reasonable compensable in damages in an action at law. Accordingly, Publisher shall be entitled to seek equitable relief by way of injunction or otherwise to prevent the breach or continued breach thereof. Should Publisher’s co-publisher in a particular country or region breach the Agreement, Developer may only seek injunction in the country or region where such breach occurred.   19.9 If any dispute arises in connection with this Agreement, either party may convene an extraordinary meeting on their respective Developer’s Project Manager and Publisher’s Producer by serving not less than 3 Working Days notice on the other. At such meeting the representatives shall negotiate in good faith, and in a timely manner, in an effort to resolve the dispute. If the Developer’s Project Manager and Producer’s Publisher cannot resolve the dispute, then either party may refer the dispute to the respective chief executive officers of the parties by serving notice on the other party. The chief executive officers shall negotiate in good faith, and in a timely manner, in an effort to resolve the dispute. Nothing in this paragraph shall limit the ability of either party to seek legal redress in respect of the dispute in a court of law.   19.10 Developer may change their Project Manager and Publisher may change the Publisher’s Producer at any time by giving the other party 5 Working Days’ notice of the change and such notice shall stipulate the new Developer’s Project Manager or Producer’s Publisher name, address, telephone number and any other relevant contact details.   19.11 This Agreement and all questions arising hereunder shall be governed by and construed in accordance with the laws and decisions of the State of California without giving effect to the principles thereof relating to conflicts of law. Any controversy arising out of this Agreement or because of any duty created thereby, shall be resolved in a federal or state court located in San Francisco, California. The parties consent to jurisdiction in such courts and waive objection to such venue and agree that service of the summons to such proceeding (and of any papers which accompany it), shall be deemed sufficient if made by certified or registered mail, postage prepaid, addressed to the parties’ addresses as designated in or hereafter changed under paragraph 17. The parties   24     --------------------------------------------------------------------------------   stipulate and agree that any judgment relating to this Agreement, which is entered in a court located within California, shall be binding throughout the world and may be sued upon, docketed, entered and/or enforced, without challenge or opposition on their part and without re-trial of any of the issues which give rise to such judgment in any state, county, province, commonwealth, or territory having jurisdiction over their respective persons or properties. The parties recognize that the above agreement to submit all controversies to forever-binding adjudication by a court located within San Francisco, California does not constitute a confession of judgment on anybody’s part, but is simply an agreement, similar to an arbitration agreement, to have particular controversies resolved, once and for all, by a specified tribunal. Notwithstanding the foregoing, all parties agree that equitable relief, including injunctive and specific performance, may be necessary and proper to enforce their obligations and commitments under this paragraph, including without limitation under Paragraphs 2, 10, 11, 12, 13, 14, 15 and 18 of this Agreement and this choice of jurisdiction or venue does not prevent either party from seeking such relief in any court of competent jurisdiction throughout the world.   19.12 In the event any provision of this Agreement shall be held invalid or unenforceable, it shall be deemed modified only to the extent necessary to make it lawful. To effect such modification, the said provision shall be deemed deleted, added to and/or rewritten, whichever shall most fully preserve the intention of the parties as originally expressed herein.   19.13 The prevailing party in any litigation between the parties shall recover from the other party its reasonable legal fees and expenses.   19.14 This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.   ACCORDINGLY this Agreement has been entered into by the parties on the date set out on page 1.     Fluent Entertainment, Inc. Prodigy Design Limited       /s/ Ed Roffman                                   /s/ Mario Wynands                                     Ed Roffman, CFO Mario Wynands,     Managing Director   25     --------------------------------------------------------------------------------         AMENDMENT #1 TO THE SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT DATED SEPTEMBER 24, 2004 BETWEEN RED MILE ENTERTAINMENT (AS SUCCESSOR-IN-INTEREST TO FLUENT ENTERTAINMENT, INC.) AND PRODIGY DESIGN LIMITED   This Agreement, when completely executed below, shall constitute an amendment (“Amendment #1”) to the Software Development and Licensing Agreement, dated September 24, 2004, (the “Agreement”) by and between Prodigy Design Limited (“Developer”) and Red Mile Entertainment, Inc. (“Publisher”).   The Agreement shall be amended in the following respects only:   1.             All terms used in this Amendment #1 to the Agreement shall, except as expressly provided herein, be used as defined in the Agreement.   2. The following Paragraph 3.1.1 is added to the Agreement:   3.1.1 The parties acknowledge that it is in the best interests of the Product to include a feature known as “Ghosting”. The use of such feature requires a license from Midway Games, Inc. (“Midway”), as successor-in-interest to Atari Games Corporation, under U.S. Patent No. 5,577,913. The cost of such license is a royalty advance to Midway of $xxxxx (the “Midway Advance”) plus a royalty of $xxxx per unit sold after recoupment of the Midway Advance (the “Midway Royalty”). The parties agree that Red Mile shall cause Midway to enter into a license agreement with Developer for the use of the ghosting feature in the Product. The terms of such license shall be subject to Developer’s approval, such approval not to be unreasonably withheld. The Midway Advance shall be treated as an additional Minimum Guarantee payment, which shall be subject to recoupment by Publisher as provided in paragraph 8.5 of the Agreement. In addition, the Midway Royalty shall be deducted from either Net Royalty Receipts or Net Sales Receipts, as appropriate, before calculating any Royalties due Developer.   In all other respects, the Agreement, as amended by this Amendment #1, remains in full force and effect and is hereby ratified and affirmed.   \\   \\   Accordingly, this Amendment #1 to the Agreement has been entered into by the parties on the date last set out below.   Red Mile Entertainment, Inc Prodigy Design Limited       /s/ Chester P. Aldridge                                     /s/ Mario Wynands                                      Chester P. Aldridge, CEO Mario Wynands, Managing Director     Date:March 9, 2005_____________ Date: March 9, 2005______________     26     --------------------------------------------------------------------------------     AMENDMENT #2 TO THE SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT DATED SEPTEMBER 24, 2004 BETWEEN RED MILE ENTERTAINMENT, INC. (AS SUCCESSOR-IN-INTEREST TO FLUENT ENTERTAINMENT, INC.) AND PRODIGY DESIGN LIMITED   This Agreement, when completely executed below, shall constitute an amendment (“Amendment #2”) to the Software Development and Licensing Agreement, dated September 24, 2004, as amended by Amendment #1, dated March 9, 2005 (the “Agreement”) by and between Prodigy Design Limited (“Developer”) and Red Mile Entertainment, Inc. (“Publisher”).   The Agreement shall be amended in the following respects only:   1.             All terms used in this Amendment #2 to the Agreement shall, except as expressly provided herein, be used as defined in the Agreement.   2.             Publisher desires to enter into a Co-Publishing Agreement with Sony Online Entertainment, Inc. (“SOE”) with respect to the Product (the “SOE Agreement”) and has requested Developer to enter into this Amendment #2 in order for Publisher to enter into the SOE Agreement. Developer is willing to enter into this Amendment #2 on the terms provided hereinbelow; provided, however, if Publisher does not enter into and execute such SOE Agreement, this Amendment #2 shall be deemed void ab initio and shall be of no force and effect.   3.             In Section 1 of the Agreement (Definitions), the definitions for “Net Royalty Receipts,” “Term” and Territory” are deleted and replaced with the following:   “Net Royalty Receipts” means any funds received by or credited to Publisher for a sub-license including without limitation, where Publisher is paid a development fee which is not recoupable from royalties or a net amount per unit sold and Publisher has no direct marketing responsibility.   For purposes of this Amendment #2, Publisher agrees that the SOE Agreement is a sublicense and will be accounted to Developer as a sublicense.   “Term” will mean beginning on the date shown on page one of this Agreement and ending on March 31, 2008. At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional six months (Sell-off Period”) beyond the Term. Royalties for sales of Products during the Sell-off Period shall be paid and remitted in accordance with Section 7.   “Territory” means the world.   4. All references in the Agreement to “Super Stunt Buggy” shall be replaced with “GripShift”.   5. All references to “Schedule 1” shall be changed to “Schedule 1-A”.   6. Schedule 1 is deleted in its entirety and replaced with Schedule 1-A.   7.             In Section 2.2 (a) of the Agreement, the following is added to the beginning of the first sentence “Except as granted in 2.3 , below,”   8. In Section 2.2 (a) of the Agreement, the phrase “excluding New Zealand and Australia” is deleted.     27     --------------------------------------------------------------------------------     9. Sections 2.3 and 2.4 are added as follows:   2.3 Publisher is granted a perpetual, irrevocable, royalty free, non-exclusive worldwide right and license to use and exploit all executable files within the Product (the “Licensed Executable Files”) for any and all purposes. Publisher shall not, directly or indirectly, modify, disassemble, decompile or otherwise reverse engineer or attempt to reverse engineer or derive source code from, all or any portion of the Licensed Executable Files.   2.4 Non-compete. Developer shall not directly or indirectly, commercially release (a) a competing PSP automobile/kart racing game within thirteen (13) months after Hardware Manufacturer approval of the Product and (b) a competing PSP automobile/kart puzzle game during the Term; provided, however, in the event that Publisher does not license the sequel of the Product as provided in Section 2.1.2 of this Agreement, Developer shall be free to directly or indirectly commercially release a sequel to the Product, provided that such sequel is not commercially released within thirteen (13) months of Hardware Manufacturer approval of the Product.   10. The following is added to the end of the final sentence of Section 3.8 “and any payments in excess of $250,000 shall be immediately refunded by Developer.”   10. Section 6.1 is deleted in its entirety and replaced with the following:   6.1 Publisher shall provide localized text and voices. Developer shall be responsible for integrating localized text and voice over material and generating a multi-language Gold Master embodying the Translations at no additional charge, including multi-byte languages, as defined in Translations.   11. Section 7.1.3 is added to the Agreement as follows:   7.1.3 in respect to any sales of the Product pursuant to the SOE Agreement into New Zealand and Australia Publisher shall remit one hundred (100) percent of the Net Royalty Receipts from SOE to Developer without deduction whatsoever and such Net Royalty Receipts shall not be cross-collateralized by Publisher with any other Net Royalty Receipts or other sums received by or credited to Publisher in respect of the Product.   12. The following is added at the end of Section 7.2 of the Agreement:   Notwithstanding the foregoing to the contrary, (i) Publisher shall cause SOE to provided separate royalty statements in respect to any sales of the Product into New Zealand and Australia, and (ii)Publisher shall provide Royalty Statements with respect to the exploitation of the Product by SOE and Developer’s Royalties within five (5) days of receipt by Publisher of royalty statements from SOE.   13. The following is added as Section 7.5:   Publisher shall permit Developer to participate in any audit or examination that Publisher may undertake of the books and records of SOE pursuant to the SOE Agreement, and if Publisher declines to conduct such audit, then Developer shall have the right to conduct such audit in Publisher’s stead.   14.           In all other respects, the Agreement, as amended by this Amendment #2, remains in full force and effect and is hereby ratified and affirmed.     28     --------------------------------------------------------------------------------     Accordingly, this Amendment #2 to the Agreement has been entered into by the parties on the date last set out below.   Red Mile Entertainment, Inc Prodigy Design Limited     /s/   Chester P. Aldridge      /s/   Mario Wynands      Chester P. Aldridge, CEO Mario Wynands, Managing Director   Date: March 31, 2005                        _____ Date: March 31, 2005                                      _____     29        

Exhibit 10.36 Employment Agreement April 5, 2006 This Employment Agreement (this “Agreement”) is between Saks Incorporated (“SKS”) and its subsidiaries listed on the signature page of this Agreement and Charles G. Tharp (the “Executive”). Terms and Conditions The parties to this Agreement agree as follows: 1. Employment. Effective January 9, 2006, the Company (as defined in the next sentence) employs the Executive, and during the Executive’s employment the Executive will serve, as SKS’s Executive Vice President-Human Resources or in such other capacity of equal or greater status and responsibility with SKS or its subsidiaries as the Chief Executive Officer of SKS designates. In this Agreement the term “the Company” means SKS or one of its subsidiaries that employs the Executive in accordance with this Agreement at the time of determination or reference. During the Executive’s employment the Executive’s place of business will be located in New York, New York and the Executive will report directly to the Chief Executive Officer of SKS. 2. Duties. During the Executive’s employment the Executive will (a) devote substantially all of the Executive’s working time, energies, and skills to the benefit of the Company’s business and (b) serve the Company diligently and to the best of the Executive’s ability and to use the Executive’s best efforts to follow the policies and directions of the Executive’s supervisors and the Board of Directors of Saks. 3. Compensation. During the Executive’s employment the Executive’s compensation and benefits under this Agreement will be as follows: (a) Base Salary. The Company will pay the Executive a base salary at a rate of not less than $500,000 per year (“Base Salary”). Base Salary will be paid in installments in accordance with the Company’s normal payment schedule but not less frequently than monthly. All payments will be subject to the deduction of payroll taxes and similar assessments as required by law. (b) Bonus. In addition to Base Salary, the Executive will be eligible for an annual cash bonus. The bonus for plan achievement at the target level will be 50% of Base Salary and the bonus for plan achievement at the maximum level will be 75% of Base Salary, in all circumstances in accordance with and subject to the terms and conditions of the Company’s bonus program in effect from time to time. (c) Effect Of Change in Control On Stock-Based Awards. Except as provided in section 5(b), SKS’s 2004 Long-Term Incentive Plan (the “2004 Plan”) will govern -------------------------------------------------------------------------------- the vesting of awards made to the Executive in accordance with such plan if a Change in Control (for all purposes of this Agreement as defined in the 2004 Plan) occurs. (d) Performance Shares. Subject to the terms and conditions of the 2004 Plan and the following sentences of this subsection (d), SKS will award to the Executive 30,000 performance shares pursuant to Section 8 of the 2004 Plan with respect to each of the SKS’s 2007 and 2008 fiscal years. Each of the two annual awards of 30,000 performance shares will include performance targets and performance measures as determined by the Human Resources and Compensation Committee of the SKS Board of Directors (the “Committee”) in accordance with Section 8(e) of the 2004 Plan. Each of the three annual awards of 30,000 performance shares will reflect (i) a 10,000-share payout at the threshold level of performance, (ii) a 20,000-share payout at the target level of performance, and (iii) a 30,000-share payout at the maximum level of performance. The Committee in accordance with the 2004 Plan will determine whether an award has been earned. To receive the performance shares subject to an award, the Executive must be continuously employed by the Company to the last day of the restriction period except as provided in section 5(a) of this Agreement. Each award to be made as described in this subsection (d) is subject to Committee authorization and the Executive’s execution and delivery to SKS of a performance share agreement in the form that in all material respects is the same form as executed and delivered by executives of the Company in positions that are comparable to the Executive’s position. Performance shares awarded in accordance with this subsection (d) but not earned by the Executive will terminate and will not be delivered to the Executive. (e) Substituted Cash Payment. The Company’s offer of employment to the Executive referred to an award by the Company of 20,000 shares of restricted stock that would vest in two installments of 10,000 shares each, the first installment to vest on the first anniversary of the award date and the second installment to vest on the second anniversary of the award date. Subject to the last sentence of this subsection, in lieu of, and in substitution for, the award of 20,000 shares of restricted stock, the Company will pay to the Executive within five business days after each of February 22, 2007 and February 22, 2008 an amount in cash equal to the sum of (i) and (ii), with (i) being the product of (A) the New York Stock Exchange closing price of the Company’s Common Stock on the applicable February 22 and (B) 10,000, and (ii) being the product of (A) the total per-share dividends paid with respect to the Company’s Common Stock (valued at fair market value if paid other than in cash) from and after the date of this Agreement to and including the applicable February 22 and (B) 10,000, in each case less deductions for payroll taxes and similar assessments as required by law. Each of the two payments referred to in the preceding sentence is referred to as a “Cash Payment.” Except as provided in subsection 5(a) of this Agreement, to receive the first Cash Payment the Executive must be continuously employed by the Company to and including February 22, 2007 and to receive the second Cash Payment the Executive must be continuously employed by the Company to and including February 22, 2008. 4. Insurance And Benefits. During the Executive’s employment the Company will allow the Executive to participate in each employee benefit plan and receive each executive benefit applicable to executives in positions that are comparable to the Executive’s position.   2 -------------------------------------------------------------------------------- 5. Termination Without Cause; Death; Disability. (a) Termination Without Cause. The Company may terminate this Agreement without Cause (as defined below in section 6) at any time and upon such termination the Executive’s employment will terminate. Except as provided in this subsection, if the Company terminates this Agreement without Cause, then (i)(A) SKS will pay to the Executive as severance in a lump sum an amount equal to the sum of (1) the Executive’s Base Salary for twenty-four months at the rate in effect at the time of termination and (2) the Executive’s target bonus potential amount for the fiscal year during which the termination of this Agreement occurs (and no other bonus will be payable) (such sum, the “Severance Payment”), and (B) each unvested restricted stock award (and not performance share awards) will immediately vest in an amount equal to the product of the number of shares subject to the award multiplied by a fraction the numerator of which is the number of days elapsed during the three-year vesting period for the award to and including the effective date of the termination of the Executive’s employment and the denominator of which is 1,095, and each unvested Cash Payment will immediately vest in an amount equal to the product of the Cash Payment multiplied by a fraction the numerator of which is the number of days elapsed during the one-year Cash Payment vesting period to and including the effective date of the termination of the Executive’s employment and the denominator of which is 365, and all awards of restricted stock that do not vest, all Cash Payments that do not vest, and all unvested performance share awards, will be immediately forfeited, and (ii) if the Company’s termination occurs primarily in anticipation of or as a result of or due to, directly or indirectly, a Change in Control (this and all subsequent references to “Change in Control” refer to the definition of that term in the 2004 Plan), in addition to the Company’s payment of the Severance Payment to the Executive, all of the Executive’s restricted stock awards, the target amount of performance share awards, and each unpaid Cash Payment will immediately vest. With respect to the immediate vesting of the unpaid Cash Payments, the Company will make them within five business days following the termination of the Executive’s employment. To calculate a Cash Payment any portion of which immediately vests in accordance with this subsection (a), the Company will use the New York Stock Exchange closing price of the Company’s common stock on the date of termination of the Executive’s employment, and if termination occurs as described in clause (ii) of this subsection (a) the Company will use the per-share consideration paid to the Company’s shareholders with respect to their shares of the Company’s common stock as a result of the Change in Control instead of the New York Stock Exchange closing price. SKS’s obligations to provide the benefits described in this subsection (a) are subject to SKS’s receipt of a written release, in form and substance reasonably satisfactory to SKS, executed and delivered by the Executive in which the Executive releases SKS and its affiliates from all claims of, and liabilities and obligations to, the Executive arising out of this Agreement and the Executive’s employment by the Company. Termination of this Agreement in accordance with   3 -------------------------------------------------------------------------------- this subsection (a) will not terminate the Executive’s obligations under section 8 of this Agreement or SKS’s obligations under section 7 of this Agreement. If the Company terminates this Agreement without Cause and as a result the Executive would be entitled to receive a severance payment in accordance with the terms of SKS’s 2000 Change of Control and Material Transaction Severance Plan, as amended from time to time (the “2000 Plan”), if then in effect, that would be greater than the Severance Payment, then only in that circumstance and solely for purposes of 2000 Plan the Executive may elect to waive the Executive’s rights to receive the Severance Payment and upon the waiver the Executive will not be entitled to receive the Severance Payment and this Agreement will not constitute an Existing Program as defined in the 2000 Plan. If the Executive directly or indirectly engages in an association that constitutes an Association (as defined in section 8(b)(iv)(D) of this Agreement), SKS’s obligations to provide the benefits described in the second sentence of this subsection will immediately terminate. (b) Medical Plan Benefits. If the termination of the Executive’s employment occurs in anticipation of, or on or after, a Change in Control, during the eighteen-month period following the termination of the Executive’s employment the Company will, subject to the next sentence, reimburse the Executive monthly for the costs of medical insurance for the Executive and the Executive’s family under COBRA less the then-applicable monthly associate contribution amount for comparable participation under the Company’s medical insurance plan. If prior to the end of the eighteen-month period and as a result of employment the Executive becomes eligible for medical insurance the coverage and the cost of which is comparable in all material respects to the coverage and the cost of participation in the Company’s medical insurance plan then in effect, the Company’s obligations in the preceding sentence will immediately terminate. Unless the Company’s obligations in the first sentence of this paragraph have terminated in accordance with the preceding sentence, at the end of the eighteen-month period the Company will pay to the Executive in a lump sum an amount sufficient to enable the Executive to obtain equivalent medical insurance plan coverage for six months, no amount of which the Executive will be obligated to return upon subsequent employment. If termination of the Executive’s employment occurs as described in clause (B) of the first sentence of paragraph (i) of this subsection (b), the Company’s obligation with respect to the Executive’s participation under the Company’s medical insurance plan will be limited to the Executive’s COBRA rights, which the Executive may exercise at the Executive’s expense. (c) Death. This Agreement will terminate upon the Executive’s death, except as to: (i) the right of the Executive’s estate to exercise all unexercised stock options, if any, in accordance with and subject to SKS’s stock option plan under which the unexercised stock options were granted, (ii) other entitlements under this Agreement that expressly survive death, (iii) any rights that the Executive’s estate or dependents may have under COBRA or any other federal or state law or that are derived independent of this Agreement by reason of the Executive’s participation in any employee benefit arrangement or plan maintained by the Company, and (iv) the right of the Executive’s estate to receive all shares of restricted awarded to the Executive that are vested as of the date of the Executive’s death. (d) Disability. If the Executive becomes disabled at any time prior to the termination of this Agreement, the Executive will after the Executive becomes disabled continue to receive all payments and benefits provided by this Agreement, less all disability payments   4 -------------------------------------------------------------------------------- received, for twelve months. The Executive will be deemed to be disabled when the Executive becomes entitled to receive disability benefits under SKS’s Long-Term Disability Plan. (e) Application of IRC Code Section 409A. If the Company or the Executive reasonably and in good faith determines that any payment to be made or benefit to be provided to the Executive upon the Executive’s termination of employment would be subject to Section 409A(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company will, to the extent necessary, delay making the payment or providing the benefit until the earliest date on which the Company in good faith determines that the payment can be paid or the benefit can be provided without causing the payment or the benefit to be subject to the Section 409A(a)(1). 6. Termination by the Company for Cause. The Company may terminate this Agreement for Cause at any time and upon such termination the Executive’s employment will terminate, in which event no salary or bonus will be paid after such termination. For purposes of this Agreement, the term “Cause” will mean and be strictly limited to: (i) conviction of the Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits the Company or is materially detrimental to the reputation or goodwill of the Company; (ii) commission of any material act of fraud or dishonesty by the Executive against the Company or commission of an immoral or unethical act that materially reflects negatively on the Company; if first the Executive is provided with written notice of the claim and with an opportunity to contest it before the Board of Directors; (iii) the Executive’s violation of the Company’s Code of Business Conduct and Ethics, which violation the Executive knows or reasonably should know could reasonably be expected to result in a material adverse effect on the Company, if first the Executive is provided with written notice of the violation and with an opportunity to contest it before the Board of Directors, or (iv) the Executive’s continual and material breach of the Executive’s obligations under section 2 of this Agreement as determined by the Committee after the Executive has been given written notice of the breach and a reasonable opportunity to cure the breach. Termination for Cause will be effective immediately upon notice sent or given to the Executive. Termination of this Agreement in accordance with this section 6 will not terminate the Executive’s obligations under section 8 of this Agreement or SKS’s obligations under section 7 of this Agreement. 7. Tax Gross-Up. (a) Amount of Gross-Up Payment. Anything in this Agreement to the contrary notwithstanding, if any payment or distribution by SKS or its affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this section 7) (a “Payment”) becomes or would become subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are together referred to as the “Excise Tax”), then, subject to the next sentences of this subsection (a), SKS will make an additional payment to the Executive (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the   5 -------------------------------------------------------------------------------- Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Executive will be entitled to a Gross-Up Payment in accordance with this section 7(a) only if the Executive’s “parachute payments” (as such term is defined in Section 280G of the Code) exceed three hundred thirty percent of the Executive’s “base amount” (as determined under Section 280G(b) of the Code) (such product, the “Threshold”). If the Payment does not exceed the Threshold, the Executive will not receive a Gross-Up Payment and the amount of the Payment will be reduced to an amount that is one dollar less than the largest amount that would not become subject to the tax imposed by Section 4999 of the Code and that SKS could pay to the Executive without loss of deduction under Section 280G(a) of the Code. (b) Calculations; When Paid. Subject to the provisions of section 7(c), all determinations required to be made under this section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized public accounting firm retained by SKS (the “Accounting Firm”) that will provide detailed supporting calculations both to SKS and the Executive as soon as practicable following the receipt of notice from the Executive that there has been a Payment. All fees and expenses of the Accounting Firm will be borne solely by SKS. All Gross-Up Payments, as determined pursuant to this section 7, shall be paid by SKS to the Executive promptly following the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, the Accounting Firm will furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return should not result in the imposition of a negligence or similar penalty or comparable opinion supporting such determination in accordance with the practices and procedures of the Accounting Firm. Any determination by the Accounting Firm will be binding upon SKS and the Executive absent manifest error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by SKS should have been made (“Underpayment”), consistent with the calculations required to be made in accordance with this section 7. If SKS exhausts its remedies pursuant to section 7(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by SKS to or for the benefit of the Executive. (c) IRS Claims. The Executive will notify SKS in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by SKS of the Gross-Up Payment. The Executive will give the notice as soon as practicable but no later than 10 business days after the Executive is informed in writing of the claim and will apprise SKS of the nature of the claim and the date on which such claim is requested to be paid. The Executive will not pay the claim prior to the expiration of the 30-day period following the date on which the Executive gives the notice to SKS (or such shorter period ending on the date that any payment of taxes with respect to the claim is due). If SKS notifies the Executive in writing prior to the expiration of the 30-day period that SKS desires to contest the claim, the Executive will (i) give SKS any information reasonably requested by SKS relating to the claim, (ii) take all action in connection with contesting the claim as SKS reasonably requests in writing from time to time, including,   6 -------------------------------------------------------------------------------- without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by SKS, (iii) cooperate with SKS in good faith in order effectively to contest the claim, and (iv) permit SKS to participate in all proceedings relating to the claim. SKS will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold the Executive harmless, on an after-tax basis, for all Excise Tax and income tax (including applicable interest and penalties) imposed as a result of the representation and payment of costs and expenses. Without limitation on the foregoing provisions of this section 7(c) and subject to the next two sentences, SKS will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as SKS determines. If SKS directs the Executive to pay the claim and sue for a refund, SKS will advance the amount of the payment to the Executive on an interest-free basis and will indemnify and hold the Executive harmless, on an after-tax basis, from all Excise Tax and income tax (including applicable interest and penalties) imposed with respect to the advance or with respect to any imputed income with respect to the advance. With respect to any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive as to which the contested amount is claimed to be due, the Executive may seek to limit the extension to the contested amount. SKS’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable in accordance with this section 7 and the Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) Refunds. If, after the receipt by the Executive of an amount advanced by SKS pursuant to section 7(c), the Executive becomes entitled to receive, and receives, any refund with respect to the claim, the Executive will (subject to SKS’s compliance with the requirements of section 7(c)) promptly pay to SKS the amount of the refund (together with all interest paid or credited on the refund after taxes applicable to it). If, after the receipt by the Executive of an amount advanced by SKS pursuant to Section 7(c), a determination is made that the Executive will not be entitled to any refund with respect to the claim and SKS does not notify the Executive in writing of its intent to contest the denial of refund prior to the expiration of 30 days after such determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, on a dollar-for-dollar basis, the amount of Gross-Up Payment required to be paid. (e) Survival. The rights of the Executive, and the obligations of SKS, in this section 7 will survive the termination of the Executive’s employment and the termination of this Agreement. 8. Protection of SKS’s Confidential Information and Goodwill. (a) Confidential Information. For purposes of this Agreement, “Confidential Information” includes, without limitation but subject to the next sentence, all   7 -------------------------------------------------------------------------------- documents and information of SKS or one of more of its subsidiaries, in all forms and mediums, concerning or evidencing one or more of the following: sales; costs; pricing; strategies; forecasts and long-range plans; financial and tax information; personnel information; business, marketing, and operational projections, plans, and opportunities; and customer, vendor, and supplier information. Confidential Information excludes any document or information that is or becomes available to the public other than as a result of any breach of this Agreement or other unauthorized disclosure by the Executive. Confidential Information does not have to be designated as such to constitute Confidential Information. (b) Non-Disclosure; Non-Competition; and Remedies. (i) The Executive acknowledges and agrees that (A) the business of the Company and its affiliates is highly competitive, (B) that the Company and its affiliates have expended considerable time and resources to develop good will with its customers, vendors, and others and to create, exploit, and protect Confidential Information, (C) the Company and its affiliates must continue to prevent the dilution of their goodwill and unauthorized use and disclosure of Confidential Information to avoid irreparable harm to their businesses, (D) the Executive’s participation in the business activities of the Company and its affiliates is and will be integral to the continued operation, goodwill, and success of the business of the Company and its affiliates, (E) the Executive will be creating Confidential Information, and (F) the Executive will have access to Confidential Information that could be used by third parties in a manner that would be detrimental to the competitive position of the Company or one of its affiliates. (ii) The Company acknowledges and agrees that the Executive will need the benefits and use of the goodwill of the Company and its affiliates and Confidential Information in order for the Executive to properly perform the Executive’s responsibilities in accordance with this Agreement. The Company will provide the Executive immediate access to new and additional Confidential Information and authorizes the Executive to engage in activities that will create new and additional Confidential Information. The Executive acknowledges and agrees that the Executive will benefit from access to Confidential Information, including without limitation as a result of the Executive’s increased earnings and earning capacity. (iii) Accordingly, the Executive agrees that: (A) All Confidential Information will remain the sole and exclusive property of the Company and its affiliates; (B) The Executive will protect and safeguard all Confidential Information; (C) The Executive will hold all Confidential Information in strictest confidence and not, directly or indirectly, disclose or divulge any Confidential Information to any person other than an employee of the Company or one of its affiliates to the extent necessary for the proper performance of the Executive’s responsibilities unless authorized to do so by the Company or compelled to do so by law or valid legal process;   8 -------------------------------------------------------------------------------- (D) If the Executive believes the Executive is compelled by law or valid legal process to disclose or divulge any Confidential Information, the Executive will notify the Company in writing sufficiently in advance of any such disclosure to give the Company the opportunity to take all actions necessary to protect the interests of the Company or its affiliates against such disclosure; (E) At the end of the Executive’s employment pursuant to this Agreement for any reason or at the request of the Company at any time, the Executive will return to the Company all copies of all Confidential Information in all tangible forms and mediums; and (F) Absent the promises and representations of the Executive in this paragraph (iii) and paragraph (iv) below, the Company would not provide the Executive with Confidential Information, would not authorize the Executive to engage in activities that would create new and additional Confidential Information, and would not enter into this Agreement. (iv) The Executive agrees to not engage in a Prohibited Activity for the period beginning on the date of this Agreement and ending twelve months from the date of termination of the Executive’s employment for any reason. “Prohibited Activity” means any one or more of the following: (A) Disparaging the Company or any of its affiliates, or any products, services, or operations of the Company or any of its affiliates, or any former, current, or future officer, director, or employee of any the Company or any of its affiliates; (B) Whether on the Executive’s own behalf or on behalf of any other individual, partner, firm, corporation, or business organization, either directly or indirectly soliciting or inducing or attempting to solicit or induce any person who is then employed by the Company or any of its affiliates to leave that employment; (C) Whether on the Executive’s own behalf or on behalf of any other individual, partnership, firm, corporation, or business organization, either directly or indirectly soliciting or inducing, or attempting to solicit or induce any person who is then a customer, supplier, or vendor of the Company or any of its affiliates to cease being a customer, supplier, or vendor of the Company or to divert all or any part of such person’s or entity’s business from the Company or any of its affiliates; (D) Associating, directly or indirectly, as an employee, officer, director, agent, partner, owner, stockholder, representative, consultant, or vendor with, for, or on behalf of any Competitor (as defined below in this subparagraph (D) (each an “Association”), unless the Company in the exercise of its reasonable discretion has approved each Association in accordance with the following sentence. The Company’s approval for an Association will be evidenced exclusively by a written agreement that has been executed and delivered by, and is legally binding on, the Company and the Executive, that includes terms and conditions that the Company deems reasonably necessary to preserve its goodwill and the confidentiality of the Confidential Information in accordance with this Agreement, and that includes all other terms and conditions that the Company determines in its sole discretion are reasonably necessary under   9 -------------------------------------------------------------------------------- the circumstances. The restrictions in the foregoing sentences of this subparagraph (D) apply to the Executive’s direct and indirect performance of the same or similar activities the Executive has performed for the Company or any of its affiliates and to all other activities that reasonably could lead to the disclosure of Confidential Information. The Executive will not have violated this subparagraph (D) solely as a result of the Executive’s investment in capital stock or other securities of a Competitor or any of its Affiliates listed on a national securities exchange or actively traded in the over-the-counter market if the Executive and the members of the Executive’s immediate family together do not, directly or indirectly, hold more than one percent of all such shares of capital stock or other securities issued and outstanding. For purposes of this subparagraph (D), the term “Competitor” means (i) prior to the completion of a Parisian Transaction (as defined below in this paragraph (D)), each of Federated Department Stores, Inc., Dillard’s, Inc., Kohls Corporation, Belk, Inc., Limited Brands, Inc., J. C. Penney Co, Inc., Sears Holding Corporation, The Bon-Ton Stores, Inc., Target Corporation, The Neiman Marcus Group, Inc., Barney’s New York, Inc., and Nordstrom, Inc., and the Affiliates and successors of each of them, and (ii) upon and after the completion of a Parisian Transaction, each of The Neiman Marcus Group, Inc., Barney’s New York, Inc., and Nordstrom, Inc., and the Affiliates and successors of each of them. For purposes of this subparagraph (D), “Affiliate” means with respect to a specific corporation, limited liability company, general or limited partnership, sole proprietorship, or other for profit or non-profit business organization or association (each the “subject entity”), any other corporation, limited liability company, general or limited partnership, sole proprietorship, or other for profit or non-profit business organization or association directly or indirectly controlling or controlled by or directly or indirectly under common control with the subject entity, and “Parisian Transaction” means the sale or other transfer for consideration, in one or more transactions, of SKS’s Parisian business. (v) The Executive acknowledges and agrees that (A) the restrictions contained in this section 8(b) are ancillary to an otherwise enforceable agreement, (B) the agreements and undertakings of the Company in this Agreement and the Executive’s position and responsibilities with the Company give rise to, and are valid consideration for, the Company’s interest in restricting the Executive’s post-employment activities, (C) the restrictions are reasonably designed to enforce the Executive’s agreements and undertakings in this section 8(b) and the Executive’s common-law obligations and duties owed to the Company and its affiliates, (D) the restrictions are reasonable and necessary, valid and enforceable under Tennessee law, and do not impose a greater restraint than reasonably necessary to protect the goodwill and other legitimate business interests of the Company and its affiliates and the Confidential Information, (E) the agreements and undertakings of the Company and the Executive in this section 8(b) are not contingent on the duration of the Executive’s employment with the Company; and (F) absent the agreements and undertakings made by the Executive in this section 8(b), the Company would not provide the Executive with Confidential Information, would not authorize the Executive to engage in activities that would create new and additional Confidential Information, and would not have entered into this Agreement. (vi) Without limiting the right of Company to pursue all other legal and equitable remedies available for violation by the Executive of the Executive’s agreements in this section 8, the Executive agrees that such other remedies cannot fully compensate Company for any such violation and that the Company will be entitled to injunctive relief to prevent any such   10 -------------------------------------------------------------------------------- violation or any continuing violation. The Company will be entitled to recover its attorneys’ fees, expenses, and court costs, in addition to any other remedies to which the Company may be entitled if the Executive breaches this Agreement. The Executive will be entitled to seek to recover its attorneys’ fees, expenses, and court costs, in addition to any other remedies to which the Executive may be entitled if the Executive prevails in such injunctive proceeding. (vii) The Executive will forfeit all unexercised, unearned, and unpaid awards under the 2004 Plan, including, but not by way of limitation, awards earned but not yet paid, all unpaid dividends and dividend equivalents, and all interest, if any, accrued on the foregoing if (i) the Executive, without the written consent of SKS, engages directly or indirectly in an association that constitutes an Association; or (ii) the Executive performs any act or engages in any activity which in the opinion of the Chief Executive Officer of SKS is inimical to the best interests of the SKS. (viii) If within six months following the Executive’s termination of employment the Executive, without the written consent of SKS, engages directly or indirectly in an association that constitutes an Association, the Executive will be required to pay to SKS an amount in cash equal to the sum of the following: (i) with respect to awards made under the 2004 Plan consisting of stock options and stock appreciation rights, the amounts realized in connection with the Executive’s exercise of the options or the settlement of the stock appreciation rights on or after, or within six months prior to, the Executive’s termination of employment; and (ii) with respect to awards made under the 2004 Plan consisting of restricted stock, restricted stock units, performance shares, performance share units, and performance units, the value of the awards that vested on or after, or within six months prior to, the Executive’s termination of employment, which value will be determined as of the date of vesting. (ix) Subsections (vii) and (viii) will be void and of no legal effect upon a Change in Control (as defined in the 2004 Plan). (x) If in any action before any court or agency legally empowered to enforce the agreements contained in this section 8 any term, restriction, or agreement contained in this section 8 is found to be unreasonable or otherwise not permitted by applicable law, then such term, restriction, or agreement will be deemed modified to the extent necessary to make it enforceable by such court or agency. (xi) The agreements of the Executive contained in this section 8 will survive the end of the Executive’s employment by the Company for any and all reasons. 9. General Provisions. (a) Notices. Any notice to be given hereunder by either party to the other may be effected in writing by personal delivery, mail, overnight courier, or facsimile. Notices will be addressed to the parties at the addresses set forth below, but each party may change its address by written notice in accordance with this section 9(a). Notices will be deemed communicated as of the actual receipt or refusal of receipt.   11 -------------------------------------------------------------------------------- If to the Executive:             Charles G. Tharp             12 East 49th Street             New York, New York 10017 If to the Company:         General Counsel             Saks Incorporated             750 Lakeshore Parkway             Birmingham, Alabama 35211 (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will, nevertheless, continue in full force and without being impaired or invalidated in any way. (c) Entire Agreement. Except for any prior grants of options, restricted stock, or other forms of incentive compensation evidenced by a written instrument or by an action of the Board or Directors, this Agreement supersedes any and all other agreements (including without limitation all employment agreements, which agreements are terminated), either oral or in writing, between the parties hereto with respect to employment of the Executive by the Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, will be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged. (d) Resignation. If the Executive’s employment is terminated, the termination will be deemed to constitute the Executive’s resignation as an officer of the Company (and all of its affiliates), as the case may be, effective as of the date of such termination. Upon termination of employment, the Executive will return to the Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of the Company or such subsidiary or affiliate. (e) Headings. The section and subsection headings are for convenience of reference only and will not define or limit the provisions of the sections and subsections. (f) Attorney’s Fees. If the Executive brings any action to enforce the Executive’s rights under this Agreement after a Change in Control (as defined in the 2004 Plan), the Company will reimburse the Executive for the Executive’s reasonable costs, including attorney’s fees, incurred. The Company will reimburse the Executive as the costs are incurred and without regard to the outcome of the action. (g) Successors and Assigns; Transfer of Obligations. This Agreement is binding upon the Company and its successors (including without limitation by merger or   12 -------------------------------------------------------------------------------- otherwise by operation of law) and permitted assigns of each and upon the Executive and the Executive’s heirs, executors and other legal representatives, and permitted assigns. If the Company complies with the following sentences of this subsection (g), the Company may transfer or delegate its obligations under this Agreement with respect to the Executive to any acquirer of, or other successor to, all or substantially all of the business of SKS (whether direct or indirect, by purchase of assets or SKS common stock, merger, consolidation, or otherwise) (the “Acquirer”), which transfer or delegation to the Acquirer will not terminate, or be deemed to constitute a termination of, this Agreement or termination of the Executive’s employment for any purpose, including with respect to this Agreement and the 2000 Plan. The Company’s rights in the preceding sentence are subject to the conditions that the Company first (i) obtains from the Acquirer its binding and enforceable written agreement (which expressly provides that the Executive is a third-party beneficiary of the Acquirer’s obligations) to assume and perform unconditionally the obligations of SKS and the Company in this Agreement in accordance with their terms and (ii) delivers the Acquirer’s agreement to the Executive. (h) Cooperation. The Executive will reasonably cooperate in good faith with the Company as and when requested by the Company with regard to all current and future internal and government inquiries and investigations, litigation and administrative agency proceedings, and other legal or accounting matters. The Executive’s cooperation will include, without limitation but subject to the Executive’s availability at times and places that does not unreasonably interfere with the Executive’s reasonable personal and business obligations, (1) being available for, and providing information to the Company and its legal, accounting, and other representatives during, in-person meetings and interviews and by telephone and (2) being available for and providing depositions and other sworn testimony. Following the termination of this Agreement the Company will reimburse the Executive for all reasonable out-of-pocket expenses the Executive incurs to comply with this subsection. (i) Arbitration. All disputes and controversies between the Company and the Executive, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, will be settled by arbitration before a single arbitrator in Nashville, Tennessee, administered by the American Arbitration Association (the “AAA”) in accordance with its Commercial Arbitration Rules then in effect, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. The single arbitrator will be selected by the mutual agreement of the Company and the Executive, unless they are unable to agree to an arbitrator, in which case, the arbitrator will be selected under the procedures of the AAA. The arbitrator will have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, the Company and the Executive each may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over the dispute or controversy and seek interim provisional, injunctive, or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. Except as necessary in court proceedings to enforce this subsection or an award rendered in accordance with it, or to obtain interim relief, none of the Company, the Executive, or an arbitrator may disclose the existence, content, or results of any arbitration without the prior written consent of the Company and the Executive. The Company and the Executive acknowledge that this Agreement evidences a transaction involving interstate   13 -------------------------------------------------------------------------------- commerce. Notwithstanding any choice of law provision included in this Agreement, the United States Federal Arbitration Act shall govern the interpretation and enforcement of this subsection. (j) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Tennessee.   Saks Incorporated By:   /s/ CHARLES J. HANSEN Charles J. Hansen Executive Vice President and General Counsel   Saks & Company Saks Direct, Inc. Saks Distribution Centers, Inc. Saks Fifth Avenue Distribution Company Saks Fifth Avenue, Inc. Saks Wholesalers, Inc. Saks Fifth Avenue of Texas, Inc. Saks Holdings, Inc. Tex SFA, Inc. SCCA Store Holdings, Inc. SCIL Store Holdings, Inc. SCCA, LLC SCIL, LLC SFAILA, LLC New York City Saks, LLC Saks Fifth Avenue Texas, L.P. Parisian Stores, Inc. Club Libby Lu, Inc. By:   /s/ CHARLES J. HANSEN Charles J. Hansen Executive Vice President /s/ CHARLES G. THARP Charles G. Tharp   14

-------------------------------------------------------------------------------- EXHIBIT 10.1 THIRD AMENDED AND RESTATED MARKETING AGREEMENT This THIRD AMENDED AND RESTATED MARKETING AGREEMENT (the "Agreement") is entered into as of the 28th day of August, 2006 by and between SunnComm International, Inc., a Nevada corporation with a principal place of business at 668 North 44th Street, Suite 248, Phoenix, Arizona 85008 ("SunnComm") and MediaMax Technology Corporation, a Nevada corporation with a principal place of business at 668 North 44th Street, Suite 241, Phoenix, Arizona 85008 ("MM"). WHEREAS, the parties hereto are parties to a Marketing Agreement regarding the subject matter hereof dated February 2, 2004 (the "Original Agreement") and a First Amended and Restated Exclusive Marketing Agreement regarding the subject matter hereof dated June 11, 2005 (the "First Amendment") and a Second Amended and Restated Exclusive Marketing Agreement regarding the subject matter hereof dated September 21, 2005 (the "Second Amendment"); WHEREAS, the parties have agreed to amend and restate the Original Agreement, as amended and restated by the First and Second Amendments, in its entirety as set forth herein, provided that this Agreement shall become retroactively effective as of July 1, 2006; WHEREAS, SunnComm has created certain products known as MediaMax, MediaCloQ, MusicMail, Perfect Placement, CDMX, IPT (InMOD Powered by TranzByte), OctiPod and All«Play, as more fully described herein, which are proprietary to SunnComm; WHEREAS, in furtherance of the marketing of SunnComm's products, SunnComm desires to engage MM to provide SunnComm with the marketing services described herein, and MM desires to provide such services to MM; and WHEREAS, the parties have executed an Agreement and Plan of Merger (the "Merger Agreement") on June 11, 2005, NOW, THEREFORE, in consideration of the anticipated MM revenue associated with the sale of SunnComm’s newest products and in consideration of their mutual promises set forth below and other valuable consideration, the parties agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: (a) "Customers" shall mean those persons and entities who license one or more Products from SunnComm or MM. (b) "Products" shall mean the object code version of the products described on Schedule A to this Agreement and any other products which at any time and from time to time after the date hereof SunnComm owns, develops or otherwise has the right to license in the manner provided herein, with all documentation provided with the products and any updates or enhancements to the products that SunnComm generally releases to its customers. (c) "Trademarks" shall mean the trademarks and service marks listed on Schedule B to this Agreement and any other names, designations, trademarks, and service marks used from time to time by SunnComm in connection with the Products. (d) Any other capitalized terms used herein and not defined herein shall have the meanings assigned to them in the Merger Agreement. 2. Effectiveness. This Agreement shall become effective as of July 1, 2006. The terms, conditions, rights and obligations set forth in the Original Agreement, as amended by the First and Second Amendments, shall be superseded by this Agreement. 1 --------------------------------------------------------------------------------   3. Appointment; Licenses. 3.1 Appointment. Subject to the terms and conditions of this Agreement, SunnComm hereby appoints MM, and MM hereby accepts such appointment and agrees to act, as the marketing representative of the Products throughout the world. 3.2 Grant and Term of License to MM. Subject to the terms and conditions of this Agreement, SunnComm hereby grants to MM, and MM hereby accepts, the following nontransferable licenses: (a) an irrevocable worldwide license to promote and market the Products, including any and all modifications, corrections, improvements and enhancements of the Products and any materials and documentation provided for use in connection with the Products for a term of five years after the effective date of this Agreement (the date on which the entirety of this Agreement becomes effective pursuant to Section 2 hereof); and (b) a non-exclusive license to use the Products solely for the following purposes: (i) demonstrating the operation and capabilities of the Products to prospective Customers, and (ii) training MM's marketing and support personnel. 3.3 Covenants and Duties of MM. (a) Promotion of Products. MM will use its best efforts to promote and maximize the licensing and use of the Products throughout the world. In furtherance of, but without limiting the generality of the foregoing, MM agrees to: (i) diligently seek out prospective licensees for the Products; (ii) diligently conduct demonstrations of Products; (iii) assist SunnComm in conducting trade shows and sales promotional campaigns; (iv) assist SunnComm in assessing customer-requested modifications and improvements to the Products; (v) assist SunnComm in the design, development and production of English language advertising and marketing materials generally released by SunnComm relating to the Products; (vi) distribute advertising and marketing literature supplied by SunnComm in accordance with Section 3.4(a) of this Agreement; (vii) in all correspondence or other dealings relating to or concerned with the Products, clearly indicate that it is acting as marketing representative and not as author or developer of the Products; and (viii) inform SunnComm promptly of any information received by MM which is likely to be of interest, use or benefit to SunnComm relating to marketing, support or development of the Products. (b) Sales Approach; Agreements with Customers. MM will typically be responsible for making the initial presentation of Products to Customers. MM and SunnComm will determine by mutual agreement when it is appropriate for SunnComm personnel to participate in sales opportunities. In no event shall MM purport to, or represent itself as having the authority to, make commitments on behalf of SunnComm. 2 -------------------------------------------------------------------------------- (c) Other Products. MM agrees that, during the term of this Agreement, it will not market, distribute or recommend products that are competitive with the Products ("Competing Products") or work with any other company with respect to Competing Products. (d) Trial Licenses. MM shall not provide trial or evaluation copies of the Products to Customers or others without the prior written consent of SunnComm. All trial or evaluation copies of the Products authorized by SunnComm shall be provided in accordance with the terms of this Agreement. (e) Adverse Comments. MM agrees that during the term of this Agreement and thereafter, MM shall not comment in a negative fashion about SunnComm or any of the Products or services provided hereunder. 3.5 Covenants and Duties of SunnComm. (a) Provision of Marketing Materials. SunnComm will provide to MM, at no cost to MM, copies of English language advertising and marketing materials generally released by SunnComm relating to the Products ("Marketing Materials") for distribution and use by MM in accordance herewith. MM may make and distribute a reasonable number of copies of the then-current versions of any Marketing Materials delivered to MM by SunnComm, provided that MM shall not use or distribute any Marketing Materials identified as rescinded by SunnComm. MM may translate the Marketing Materials into any other language or languages as necessary to effectively market the Products. (b) Provision of Products. Upon execution of this Agreement, SunnComm shall provide to MM one copy of each of the Products for use in accordance with this Agreement and shall provide to MM one copy of all additional Products at the time of development. (c) New Versions. SunnComm may from time to time and at its sole discretion release a new version (the "New Version") of any Product or Products, which new version shall supersede the prior version (a "Superseded Version"). In the event that SunnComm releases a New Version, SunnComm may cease to maintain or support the Superseded Version at any time after ninety (90) days following the release of the New Version. Upon notice to MM by SunnComm of the availability of the New Version, MM may not market the Superseded Version without the prior written approval of SunnComm. (d) Updates; New Products. SunnComm shall promptly provide MM with all updates, corrections, enhancements, and new versions (each, a "New Version," which supersedes a "Superseded Version") of the Products for purposes of exploitation pursuant to the terms of this Agreement. In the event any Products become part of a "bundle," are "displaced" by a similar product, are packaged with additional products such that such Product(s) are no longer offered as a separate product, are renamed, or are unbundled into separate products, such new or other products shall automatically be deemed to be Products covered by this Agreement. In the event that SunnComm releases a New Version, SunnComm may cease to maintain or support the Superseded Version at any time after ninety (90) days following the release of the New Version. Upon notice to MM by SunnComm of the availability of the New Version, MM may not market the Superseded Version without the prior written approval of SunnComm. All new products developed by SunnComm which are in any way related to the Products shall automatically be deemed "Products" hereunder without any further action by either party hereto. (e) Marketing Support. SunnComm will provide reasonable assistance to support MM's marketing efforts. Without limiting the generality of the foregoing, SunnComm will (i) attend sales calls and/or presentations with MM as reasonably requested by MM and agreed to by SunnComm in connection with the presentation of Products; (ii) provide reasonable support and aid in any response to a request for a proposal to which a response is prepared by MM involving one or more Products; (iii) provide reasonable support and assistance with any field trial of one or more Products; and (iv) keep MM reasonably informed of the status of significant product enhancements or new products. 3 -------------------------------------------------------------------------------- 3.6 Installation, Training and Support. SunnComm shall be responsible for installation of all Products, training of the Customer, maintenance of Products and systems used in connection with the products, and support for the Products. SunnComm shall deal directly with each Customer for purposes of providing and supporting the Products from and after the time a Customer Agreement is reached with each such Customer. 3.7 Prices, Licensing Fees and Royalties. (a) Price. Each Customer Agreement shall provide for prices for Products as determined by SunnComm. (b) Licensing Fees and Royalties. (i) Initial License Fee. MM has previously paid to SunnComm an initial  license fee in the amount of $2,030,000 pursuant to the Original Agreement. (ii) Amount of Royalty Payments. SunnComm shall pay royalties to MM in an amount equal to 40% of the Gross Licensing Revenues, (determined in accordance with Generally Accepted Accounting Principles consistently applied) realized on any and all sales or sublicenses of any Products or future developments thereto. (iii) Minimum Monthly Royalty. Effective July 1, 2006 MM shall not be required to pay a minimum monthly royalty to SunnComm. MM will pay SunnComm a monthly administrative support fee of Twelve Thousand Dollars ($12,000). (c) Payment. Each Customer Agreement shall provide for payment by the Customer to SunnComm. SunnComm shall be responsible for collection of all fees from Customers. SunnComm shall remit royalties due to MM monthly and reconcile with MM on a quarterly basis, within thirty (30) days after the end of each calendar quarter, with a detailed accounting of the calculation of the amounts remitted. 3.8 Records, Right to Audit. (a) SunnComm Reports. SunnComm shall report to MM the following information: (i) within thirty (30) days after the end of each calendar  quarter, a list of all Products licensed to Customers And the Gross Licensing  Revenues received during the preceding quarter; (ii) on a quarterly basis, a rolling forecast of orders for each Product; and (iii) such other information relating to the marketing of the Products as MM shall reasonably request from time to time. (b) Business Records; Right to Audit and Copy. During the term of this Agreement and for a period of two (2) years thereafter, SunnComm shall maintain accurate records relating to its performance of its obligations under this Agreement ("Business Records"). During the later of five (5) years thereafter or until SunnComm's obligation to MM is paid in full, MM or its designee shall have the right, at its own expense and under reasonable conditions of time and place, to from time to time audit the Business Records. In the event of judicial or governmental order or decree, SunnComm shall immediately make copies of the Business Records available to MM either at SunnComm's principal place of business or by forwarding such copies to MM, as instructed by MM. 4 -------------------------------------------------------------------------------- 3.8 Assignment of Revenues. In consideration of the mutual covenants contained herein, SunnComm hereby assigns to MM in accordance with Section 3.7 of this Agreement, in perpetuity, all revenues derived from the following: (a) that certain Software Licensing Agreement dated January 12, 2004, by and between SunnComm, as Licensor and Immediatek, Inc. as Licensee; and (b) other Agreements or contracts for revenue which SunnComm has or may obtain through the direct or indirect efforts of MM, until its obligations under Section 3.7 (c) are fulfilled. 4. Previous Agreements Superseded. Upon effectiveness, this Agreement shall amend and restate in its entirety the Exclusive Marketing Agreement dated February 2, 2004 between the parties hereto, which shall be superseded hereby. Upon execution, this Agreement supersedes the First Amended and Restated Marketing Agreement dated June 11, 2005. Upon execution, this Agreement supersedes the Second Amended and Restated Marketing Agreement dated September 21, 2005. 5. Confidentiality; Publicity. 5.1 Confidential Information. The confidentiality provisions of this Section 5 shall apply to all confidential and proprietary information disclosed by the parties to each other orally or in writing, including information disclosed prior to the date hereof, with respect to their respective businesses, operations and proprietary technologies ("Confidential Information"); provided, however, that for purposes of this Agreement, Confidential Information shall be deemed not to include information which at the time of disclosure or thereafter (a) is generally available to the public (other than as a result of a disclosure by the receiving party), (b) is available to the receiving party on a non-confidential basis from a source other than the disclosing party, provided such source is not and was not bound by a confidentiality agreement with the disclosing party or otherwise prohibited from transmitting such information to the receiving party by a contractual, legal or fiduciary obligation, (c) has been independently developed by the receiving party, as evidenced by its written records, or (d) which at the time of disclosure, and with respect to such disclosure only, is required to be disclosed pursuant to a requirement of law. 5.2 Nondisclosure. Each party agrees, in addition to all the other protections provided in this Agreement, to limit disclosure of competitively  sensitive information to those members of its senior management team and those Representatives (as hereinafter defined) whose evaluation or knowledge of such information is reasonably required with respect to the potential business transaction(s). MM and SunnComm mutually agree to hold each other's Confidential Information in strict confidence, to use it only for the purpose of pursuing a potential business transaction between them, and not to disclose such Confidential Information to any third party, except as provided herein, and to use its best efforts to protect such onfidential Information. MM and SunnComm may disclose each other's Confidential Information to their respective employees, accountants, financial advisors, outside counsel and other representatives with a bona fide need to know (collectively, "Representatives"), provided that prior to disclosing Confidential Information or any information described in Section 5.3 below to a Representative, MM or SunnComm, as the case may be, shall inform such Representative of the requirements of this Agreement and obtain from such Representative his or her agreement to be bound thereby. 5.3 Nondisclosure of Negotiations. Without the prior written consent of the other party, and subject to Section 5.4 below, MM and SunnComm will not, and will direct their respective Representatives not to, disclose to any third party (other than a Representative in accordance with Section 5.2 above or to potential investors in MM or SunnComm in connection with an offering of securities of such company) either the fact that any investigations, discussions or negotiations are taking place concerning a potential business transaction between them, or that each of them has requested or received information from the other party, or any of the terms, conditions or other facts with respect to any such potential business transaction, including the status thereof. 5 -------------------------------------------------------------------------------- 5.4 Required Disclosures. If MM or SunnComm or any of their respective Representatives is required by law to disclose any of the other party's Confidential Information or any of the terms, conditions or other facts with respect to the potential business transaction between MM and SunnComm, the party required to make such disclosure will promptly notify the other party of such requirement prior to making the disclosure. MM and SunnComm will then confer and use reasonable, good faith efforts to agree on a form and terms of disclosure reasonably acceptable to both MM and SunnComm in light of the circumstances under which the disclosure is required to be made, provided that if following such notice and conferring MM and SunnComm are unable to agree on a mutually acceptable form and terms of disclosure, then the party making the disclosure shall have no liability to the other party to the extent such disclosure is required by law provided such party makes reasonable efforts to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the other party's Confidential Information by the tribunal requiring disclosure. 5.5 No Representations. MM and SunnComm understand and acknowledge that neither party is making any representations or warranties, express or implied, as to the accuracy or completeness of the Confidential Information, and neither MM, SunnComm nor the officers, directors, employees, stockholders, owners, affiliates or agents of either will have any liability to the party receiving Confidential Information resulting from such party's use of or reliance on the Confidential Information. Only those representations or warranties that are made in a definitive agreement between MM and SunnComm when, as, and if it is executed, and subject to such limitations and restrictions as may be specified in such agreement, will have any legal effect. 5.6 Return or Destroy. Upon the written request of the other party, MM or SunnComm, as the case may be, shall return to the disclosing party, within ten days, all Confidential Information and all copies thereof if in written or other tangible form. Where impractical to return copies, such copies shall be destroyed. Within such ten-day period, if requested by the disclosing party, an affidavit of the receiving party, duly sworn by an officer of such party, shall be delivered to the disclosing party attesting to the return and destruction of all Confidential Information. 5.7 Publicity. Except to the extent required by applicable securities laws, neither MM nor SunnComm shall, except with the prior written consent of the other party hereto, make any public announcement regarding the execution of this Agreement or make use of or mention of SunnComm or MM's or any of their respective clients' name, logo, or other trademarks, including, but not limited to, in any press release, marketing materials, website, or any other communications written or otherwise. 6. SunnComm Warranties. SunnComm represents and warrants to MM that: (a) Rights. SunnComm has the right to enter into this Agreement and grant to MM the rights granted herein. (b) Non-Infringement. SunnComm warrants that the Products, as delivered by SunnComm, do not infringe on any copyright, patent, or trade secret, and that SunnComm possesses full and sufficient right to license the use of the Products under this Agreement.   6 --------------------------------------------------------------------------------   (c) Limited Warranty. For a period of thirty (30) days from the date of delivery to the Customer the Products will perform substantially in accordance with the functional specifications set forth in the documentation provided with such Products. SunnComm's entire liability and the Customer's sole remedy under this warranty shall be to require SunnComm to use reasonable efforts to repair or replace the nonconforming Product. Any replacement Products will be warranted for the remainder of the original warranty period or thirty (30) days from the date of receipt by the Customer, whichever is longer. SunnComm shall have no obligation under this limited warranty unless a written claim for breach of warranty is received by SunnComm within ten (14) days after the end of the applicable warranty period. 7. Limitation of Liability. In no event shall SunnComm be liable for special, incidental, consequential or punitive damages, including, without limitation, any damages resulting from loss of data, loss of profits, loss of business or loss of goodwill arising out of or in connection with this Agreement or the performance of the Products, whether or not SunnComm or its licensors has been advised of the possibility of such damages. 8. Indemnification. 8.1 Indemnification by MM. MM shall indemnify and hold harmless SunnComm and its officers, directors, employees and agents, from and against any and all claims, demands, liabilities, losses, costs and expenses (including reasonable attorneys fees and any fees of consulting professionals) of any kind whatsoever levied against or incurred by SunnComm, its officers, directors, employees or agents, arising directly or indirectly out of conduct of MM outside the scope of this Agreement or MM's failure to perform any of its obligations under this Agreement. 8.2 Indemnification by SunnComm. SunnComm shall indemnify and hold harmless MM and its officers, managers, members, employees and agents, from and against any and all claims, demands, liabilities, losses, costs and expenses (including reasonable attorneys fees and any fees of consulting professionals) of any kind whatsoever levied against or incurred by MM, its officers, directors, employees or agents, arising directly or indirectly out of conduct of SunnComm outside the scope of this Agreement or SunnComm's failure to perform any of its obligations under this Agreement. 8.3 Infringement Indemnity. Each party hereto shall immediately notify the other party of any infringements of rights in the Products which come to their attention. SunnComm shall defend or, at its option, settle, any claim, action or proceeding brought against MM that any Product infringes any United States patent, copyright or trade secret, and shall indemnify MM against all damages and costs finally awarded against MM in any such action or proceeding which results from any such claim. SunnComm shall have no liability under this Section 8.3 unl ess MM (a) promptly notifies SunnComm in writing of the claim, action or proceeding, (b) gives SunnComm full authority, information and assistance to defend such claim, action or proceeding, and (c) gives SunnComm sole control of the defense and settlement of such claim, action or proceeding and all negotiations relating thereto. MM retains the right to be present and represented by counsel, at its own expense, at all times during the litigation and/or other discussions related to the proceedings. If a Product or any part thereof becomes, or in SunnComm's opinion is likely to become, the subject of a valid claim of infringement or the like under any United States patent, copyright or trade secret law, SunnComm shall have the right, at its option and expense, either to obtain a license permitting the continued use of the Product or such part, to replace or modify it so that it becomes non-infringing, or to terminate the license granted herein to market the Product. SunnComm shall have no liability hereunder for any costs incurred or settlement entered into without its prior written consent. SunnComm shall have no liability hereunder with respect to any claim based upon (a) the combination of the Product with other products not furnished by SunnComm or (b) any addition or modification to the Product by any person or entity other than SunnComm. 7 -------------------------------------------------------------------------------- 9. Term and Termination. 9.1 Term. The term and effectiveness of this Agreement shall commence upon the effective date of July 1, 2006 and shall continue for a term of five years after the effective date of this Agreement (the date on which the entirety of this Agreement becomes effective pursuant to Section 2 hereof), unless earlier terminated in accordance with this Section 9 (the "Term") (and the parties hereby acknowledge that the following termination provisions apply only from and after the date of effectiveness of this Agreement). 9.2 Termination for Default. Either party may, at its option, terminate this Agreement effective upon written notice to the other party if the other party has materially breached any provision of this Agreement and has failed to cure the breach within thirty (30) days after receipt of written notice of the breach. Notwithstanding the foregoing, if either party shall fail to fulfill any of its material obligations hereunder and the other party has previously sent two notifications to such party pursuant to this Section 9.2 of a failure to fulfill the same or similar obligations, the other party may, despite any remedy or cure of such breaches in the past by the defaulting party, terminate this Agreement by giving written notice of termination to the defaulting party, effective immediately upon its sending. 9.3 Termination for Insolvency. SunnComm may terminate this Agreement upon written notice to MM if MM is liquidated or dissolved, or becomes insolvent, or suffers a receiver, administrator or trustee to be appointed for it or any of its undertakings or assets, or is deemed to be unable to pay its debts or shall cease to carry on business, or makes a general assignment for the benefit of its creditors or institutes or has instituted against it any proceeding under any law relating to bankruptcy or insolvency or the reorganization or relief of debtors. 9.4 Effect of Termination. Upon termination of this Agreement for any reason, MM shall immediately cease (i) marketing the Products, and (ii) using the Marketing Materials. The termination of this Agreement shall not affect or terminate the SunnComm’s payment obligations as set forth in Section 3.7(c) of this Agreement. 9.5 Effect of Termination on Customers. Any termination of this Agreement shall not affect any Customer Agreement, as long as the Customer is not in breach of such Agreement. 9.6 Return of Promotional Material and Confidential Information. Within five days after expiration or termination of this Agreement, MM shall promptly submit a current sales report to SunnComm a report for the period from the date of the last such report through the date of expiration or termination, (ii) return to SunnComm all copies of any Products, Confidential Information and Marketing Materials, (iii) to the extent any such Products, Confidential Information or Marketing Material can not be returned to SunnComm, erase or destroy all copies of such Products, Confidential Information and Marketing materials under MM's control, including all copies that are fixed or running in machines controlled by MM, and (iv) have an authorized representative of MM certify in writing to SunnComm that MM has complied with the requirements of this paragraph. 10. Dispute Resolution. 10.1 Matters Covered. Any dispute, controversy or claim between the parties arising out of this Agreement, including any dispute as to the existence,  construction, validity, interpretation, enforceability or breach of this Agreement (the "Dispute"), shall be exclusively and finally resolved as set forth hereafter. 8 -------------------------------------------------------------------------------- 10.2 Meeting; Mediation. In the event of any such Dispute, a meeting (the "Meeting") shall be held in Phoenix, Arizona promptly between the parties, attended by individuals with decision-making authority regarding the Dispute to attempt in good faith to negotiate a resolution of the Dispute. If within thirty (30) days after such Meeting the parties have not succeeded in resolving the Dispute, then the parties shall initiate non-binding mediation proceedings and submit the Dispute to a mutually acceptable third-party mediator in Phoenix, Arizona who is acquainted with dispute resolution methods. The parties will participate in good faith in the mediation and the mediation process. The mediation process shall be completed within sixty (60) days after the date of the Meeting. 10.3 Arbitration. If the Dispute is not resolved by mediation, then either party may initiate a binding arbitration action conducted in accordance with the Commercial Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA"). The parties shall attempt to select a single neutral arbitrator to hear the Dispute. Such arbitrator need not be affiliated with the AAA. If the parties fail to agree on a single neutral arbitrator within ten (10) days of the filing of the demand for arbitration, then three neutral arbitrators shall be appointed in accordance with the Rules. The arbitration award shall be in writing and shall specify the factual and legal basis for the award. The arbitration shall be conducted in Phoenix, Arizona, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Neither party shall be entitled to seek or recover punitive damages in considering or fixing any award under these proceedings. 10.4 Costs. The costs of the mediation and arbitration, including any mediator's fees, AAA administration fee, the arbitrator's fee, and costs for the use of facilities during the hearings, shall be borne equally by the parties. Attorneys' fees may be awarded to the prevailing or most prevailing party at the discretion of the arbitrator(s). 10.5 Other. Any dispute relating to or in connection with the enforceability of these dispute resolution provisions shall be brought only in a court in Phoenix, Arizona for that purpose. 11. General. 11.1 Independent Contractors. The relationship of SunnComm and MM shall be that of independent contractors and not employees, agents, joint venturers or partners. MM shall be solely responsible to determine the method, details and means of performing its services hereunder. MM assumes full and sole responsibility for the payment of all compensation and expenses of its employees and for all of their state and federal income tax, unemployment insurance, Social Security and other applicable employee withholdings. MM shall not hold itself out as an agent of SunnComm nor shall MM contract or otherwise make any commitments to any third party on SunnComm's behalf without SunnComm's prior consent. 11.2 Entire Agreement. This Agreement (including any and all attachments hereto), constitutes the entire understanding and agreement between the parties  with respect to the subject matter hereof, supersedes all prior oral and written communications between the parties with respect to the subject matter hereof, and may be amended, modified or changed only in writing when signed by both parties.   9 --------------------------------------------------------------------------------   11.3 Assignment. This Agreement may be assigned in whole or in part by MM pursuant to any merger, consolidation or other reorganization involving MM, with the prior express written consent of SunnComm, which will not be unreasonably withheld. SunnComm may not assign or transfer this Agreement, in whole or in part, without the prior express written consent of MM. This Agreement shall be binding upon, and shall inure to the benefit of, SunnComm and MM and each of their legal representatives, successors and permitted assigns. 11.4 Waiver; Consent. No term of this Agreement will be deemed waived, and no breach of this Agreement excused, unless the waiver or consent is in writing signed by the party granting such waiver or consent. 11.5 Governing Law. This Agreement, its construction and enforcement shall be governed by the laws of the State of Arizona, without giving effect to conflict of law principles. 11.6 Severability. If any term or provision of this Agreement shall be found by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable, the same shall not affect the other provisions hereof or the whole of this Agreement, but such terms or provisions shall be deemed modified to the extent necessary in the court's opinion to render such terms or provisions enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the parties herein set forth. 11.7 Force Majeure. Neither party shall be liable to the other for any failure or delay in performance of its obligations hereunder on account of terrorist attacks, strikes, shortages, riots, insurrections, fires, floods, storms, explosions, earthquakes, acts of God, war, governmental action or any other cause which is beyond the reasonable control of such party. 11.8 Notices. All notices, requests and other communications permitted or required under this Agreement must be in writing, and shall deemed to have been given if faxed (with transmission acknowledgement received), delivered personally or by overnight courier service, sent by electronic mail or mailed by certified or registered mail (return receipt requested) as follows: To SunnComm: SunnComm International, Inc.     668 North 44th Street, Suite 248     Phoenix, Arizona 85008     Facsimile: (602)267-7400     Email: [email protected]     Attention: Mr. Peter Jacobs With a copy to: Wees Law Firm, L.L.C.     2600 N. Central Ave., Suite 635     Phoenix, AZ 85004     Facsimile: (602) 288-1692     Email: [email protected]     Attention: James F. Wees To MM: MediaMax Technology Corporation     668 North 44th Street, Suite 241     Phoenix, Arizona 85008     Facsimile:     Email: [email protected]     Attention: Scott Stoegbauer or to such other address, fax number or electronic mail address of which any party may notify the other parties as provided above. Notices shall be deemed given as of the date of any fax transmission acknowledgement, upon personal delivery or delivery by overnight courier service, receipt of any reply e-mail confirming delivery of such e-mail or five days after deposit of any certified or registered letter in the mail. 10 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.     SUNNCOMM INTERNATIONAL, INC.  MEDIAMAX TECHNOLOGY CORPORATION         By ______________________________  Name: Peter H. Jacobs Title: President By___________________________ Name: Scott Stoegbauer Title: President   11 -------------------------------------------------------------------------------- SCHEDULE A Description of Products TranzByte CD and DVD multimedia enhancement software enables extra features like music videos, lyrics, biographies, photo galleries, banner and other online viral advertising, games, internet links and much more. It allows you to copy songs to a computer or portable player with the record labels approval. You can also share songs with family and friends using the MusicMail feature. CDMX is a multi-media CD enhancement technology is housed entirely on the CD itself and does not require the loading of any software components in order to access the music and bonus content. IPT is an enabling technology that was designed to offer companies an innovative alternative to traditional marketing media. Housed on a digitally-enhanced CD, I.PT provides branding, viral marketing, advertising and revenue-generating opportunities. OctiPod provides an environment and interface to include additional digital content on a Video DVD. The most common application might be a movie soundtrack or other audio content included on the same DVD as a movie. All«Play allows the use of electronic, optical and digital content across multiple applications, and more specifically, allows both content owners and end users to control how and where they can access content. For example, the delivery of music from an online music store to multiple destinations in multiple formats. DVD copy management, content protection and enhancement technology. This technology provides an alternative, authorized process to play, move and share content from Video-based (Movie) DVDs in a legally approved and controlled process. It provides a compromise solution that delivers limited rights and enhanced features to DVD buyers without allowing freedom to steal content from the producer, or studio. Perfect Placement is a product / service offering available through a graphic user interface. It is a centrally-served direct response marketing environment which provides a mechanism for the record labels, artists and movie studios to advertise their back catalogs, merchandise, web sites and take advantage of cross-promotional opportunities. Perfect Placement also allows record labels and Movie studios to generate third-party ad revenue based on targeted advertising and sponsorships available through the user interface. MusicMail is a software product that allows the owner of a SunnComm enhanced CD or DVD to legally share available music with a friend by providing the recipient with a song that can be downloaded and listened to for a limited number of days, a limited number of plays or with a specific expiration date or no expiration at all. Other products currently under development include, but are not limited to: MediaMax used in conjunction with a Music Kiosk that creates "enhanced CDs", MediaMax for CD+G (Karaoke CDs), MediaMax customized for confidential corporate audio/video content on CDs & DVDs. 12  --------------------------------------------------------------------------------

Exhibit 10.28   Today’s date: October 11, 2006   SEPARATION AGREEMENT, RELEASE AND WAIVER   THIS AGREEMENT IS by and between Dean E. Cherry (“Employee”) on behalf of himself, his agents, representatives, heirs, executors, attorneys, administrators, assigns and anyone claiming through him, and R.R. Donnelley & Sons Company, its subsidiaries, affiliates, predecessors, successors and assigns (the “Company” or “RR Donnelley”) in connection with Employee’s termination of employment with the Company.   IN CONSIDERATION OF the payments, covenants, obligations and promises set forth in this agreement (the “Separation Agreement”) and pursuant to the terms of the employment letter between Employee and the Company dated November 5, 2002 (as such letter was further amended on December 13, 2002, October 3, 2003 and April 29, 2005, the “Letter Agreement”) Employee and the Company agree as follows:     1. Date of Separation Agreement. This Separation Agreement is entered into on this date of October 11, 2006.     2. Separation Date. Employee agrees that he shall be separated from employment with the Company effective as of October 31, 2006 (the “Separation Date”). Employee will be relieved of the duties as Group President, Integrated Print Communications & Global Solutions and as an officer of the Company and its subsidiaries effective as of that date. Employee’s last day in office will be October 11, 2006.     3. Representations. Employee agrees that he is not aware of any fraudulent or other misconduct at the Company related to the Company’s financial statements, audit or accounting procedures, internal control functions, or otherwise and represents that he has not complained of or reported any such issues to anyone within or outside of the Company.     4. Cooperation with Transition. Through the Separation Date, Employee agrees to fully cooperate with the orderly transfer of his responsibilities as the Company may direct. Employee further agrees to make himself reasonably available even after his employment with the Company ends, upon reasonable notice from the Company in connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Company, to provide information or documents, provide declarations or statements to the Company, meet with attorneys or other representatives of the Company, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of such matters. Employee understands that the Company will reimburse Employee for all reasonable, documented out-of-pocket expenses he incurs, in accordance with the Company’s normal policies and practices in complying with the obligations of this provision. In the event Employee is asked to provide services after the 18-month anniversary of the Separation Date, the Company agrees to compensate Employee for such services at a reasonable rate.     --------------------------------------------------------------------------------   5. Return of Company Property. Employee agrees to return to the Company prior to the Separation Date, all Company documents, files, electronic information, equipment, and other property currently in Employee’s possession and all Company property in Employee’s possession, including notebooks, reports, manuals, programming data, listings and materials, engineering or patent drawings, patent applications, any other documents, files or materials which contain, mention or relate to Confidential Information (as defined below), and all copies and summaries of such materials, whether in human- or machine-readable-only form, that Employee has. Employee also agrees to promptly transfer to the Company any and all subscriptions, season tickets and memberships (except as otherwise provided in this Separation Agreement) currently in Employee’s name that are paid for by the Company.     6. Confidential Information     a. Definition of Confidential Information. Employee agrees that the confidentiality obligations set forth in the Company’s policies shall continue in full force and effect from and after the date hereof. In addition, Employee realizes that his/her position with the Company created a relationship of high trust and confidence with respect to Confidential Information owned by the Company, its customers or suppliers that may have been learned or developed by Employee while employed by the Company. For purposes of this Agreement, “Confidential Information” means all information that meets one or more of the following three conditions: (a) it has not been made available generally to the public either by RR Donnelley or by a third party with RR Donnelley’s consent, (b) it is useful or of value to RR Donnelley’s current or anticipated business or research and development activities or those of a customer or supplier of RR Donnelley, or (c) it either has been identified as confidential to Employee by RR Donnelley (orally or in writing) or it has been maintained as confidential from outside parties and is recognized as intended for internal disclosure only. Confidential Information includes, but is not limited to, “Trade Secrets” to the full extent of the definition of that term under Illinois law. It does not include “general skills, knowledge and experience” as those terms are defined under Illinois law.     b. Examples of Confidential Information. Confidential Information includes, but is not limited to: computer programs, unpatented inventions, discoveries or improvements; marketing, manufacturing, organizational research and development, and business plans; company policies; sales forecasts; personnel information (including the identity of RR Donnelley employees, their responsibilities, competence and abilities, and compensation); medical information about employees; pricing and nonpublic financial information; current and prospective customer lists and information on customers or their employees; information concerning planned or pending acquisitions or divestitures; and information concerning purchases of major equipment or property.     - 2 - --------------------------------------------------------------------------------   c. General Skills, Knowledge and Experience. Employee may take and use the general skills, knowledge and experience that Employee has learned or developed in Employee’s position or positions with the Company.     d. Confidentiality Obligations. Employee will not (a) disclose, directly or indirectly, any Confidential Information to anyone outside of the Company or to any employees of the Company not authorized to receive such information or (b) use any Confidential Information other than as may be necessary to perform Employee’s obligations under this Separation Agreement. In no event will Employee disclose any Confidential Information to, or use any Confidential Information for the benefit of, any current or future competitor, supplier or customer of the Company, whether Employee any subsequent employer, or any other person or entity.     e. Duration. With respect to Trade Secrets, Employee’s obligations under paragraph 6(d) shall continue indefinitely or until such Trade Secret information has been made available generally to the public either by the Company or by a third party with the Company’s consent or is otherwise not considered a Trade Secret under Illinois law. With respect to Confidential Information that is not a Trade Secret (hereinafter referred to as “Proprietary Information”), Employee’s obligations under paragraph 6(d) shall continue in duration until the first to occur of the following: (a) five years has elapsed since the Separation Date or (b) the Proprietary Information has been made available generally to the public either by the Company or by a third party with the Company’s consent.     7. Noncompetition and Non-Solicitation of Customers and Employees.     a. Noncompetition. In consideration of the covenants and agreements of the Company herein contained, the payments to be made by the Company pursuant to this Separation Agreement, the positions of trust and confidence Employee occupied with the Company and the information of a highly sensitive and confidential nature obtained as a result of such positions, Employee agrees that, from the Separation Date and for 18 months thereafter, Employee will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, engage in any business which is competitive with any portion of RR Donnelley’s business that has more than $25 million of revenues on the Separation Date, in the geographic areas covered by such businesses. The Company agrees that Employee may, however, own stock or the rights to own stock in a company, whether or not a competitor, that is publicly owned and regularly traded on any national exchange or in the over-the-counter market, so long as (i) Employee’s holdings of stock or rights to own stock do not exceed 1% of the capital stock entitled to vote in the election of directors and (ii) the combined value of the   - 3 - --------------------------------------------------------------------------------   stock or rights to acquire stock does not exceed Employee’s gross annual earnings from RR Donnelley.     b. Importance of Customer Relationships. Employee recognizes that the Company’s relationship with the customers that Employee served, and Employee’s relationships with other employees, are special and unique, based upon the development and maintenance of good will resulting from the customers’ and other employees’ contacts with the Company and its employees, including Employee. As a result of Employee’s position and customer contacts, Employee recognizes that he/she gained valuable information about (i) the Company’s relationship with its customers, their buying habits, special needs, purchasing policies, (ii) the Company’s pricing policies, purchasing policies, profit structures, and margin needs, (iii) the skills, capabilities and other employment-related information about the Company’s employees, and (iv) and other matters which Employee would not otherwise have known and which is not otherwise readily available. Such knowledge is essential to the business of RR Donnelley and Employee recognizes that upon Employee’s termination, the Company will be required to rebuild that customer relationship to retain the customer’s business. Employee recognizes that during a period following termination of Employee’s employment, the Company is entitled to protection from Employee’s use of the information and customer and employee relationships with which Employee has been entrusted by the Company during his/her employment.     c. Nonsolicitation of Customers. Employee acknowledges and agrees that any injury to the Company’s customer relationships, or the loss of those relationships, would cause irreparable harm to the Company. Accordingly, Employee agrees that he/she shall not, for a period of 18 months from the Separation Date, directly or indirectly, either on Employee’s own behalf or on behalf of any other person, firm or entity, solicit or provide services which are the same as or similar to the services the Company provided or offered while Employee was employed by the Company to any customer or prospective customer of the Company (i) with whom Employee had direct contact during the last two years of his/her employment with the Company or about whom Employee learned confidential information as a result of Employee’s employment with the Company or (ii) with whom any person over whom Employee had direct supervisory authority at any time had direct contact during the last two years of Employee’s employment with the Company or about whom such person learned confidential information as a result of his or her employment with the Company.     d. Nonsolicitation of Employees. Employee shall not for a period of 18 months from the Separation Date, either directly or indirectly solicit, induce or encourage any RR Donnelley employee(s) to terminate their employment with   - 4 - --------------------------------------------------------------------------------   the Company or to accept employment with any other employer, nor shall Employee cooperate with any others in doing or attempting to do so. As used herein, the term “solicit, induce or encourage” includes, but is not limited to, (i) initiating communications with an employee of the Company employee relating to possible employment, (ii) offering bonuses or additional compensation to encourage employees of the Company to terminate their employment with RR Donnelley and accept employment with any other employer, or (iii) referring RR Donnelley employees to personnel or agents employed by competitors, suppliers or customers of RR Donnelley.     e. Geographic Scope. Employee understands that the Company has sales and manufacturing facilities throughout the United States and in a number of foreign countries, that it purchases equipment and materials from suppliers located throughout the world, and that it expects to expand the scope of its international activities in the future. Employee therefore agrees that his/her obligations under paragraph 7 shall extend worldwide.     f. Remedies. Employee acknowledges that in the event of a breach or threatened breach of Employee’s obligations hereunder, the Company will be irreparably harmed and shall not have an adequate remedy at law. Accordingly, in the event of any breach or threatened breach of my obligations, the Company shall be entitled to such equitable and injunctive relief as may be available to restrain Employee and any business, firm, partnership, individual, corporation or entity participating in the breach or threatened breach from the violation of these provisions. Nothing in this Separation Agreement shall be construed as prohibiting the Company from pursuing any other remedies available at law or in equity for breach or threatened breach of these provisions, including the recovery of damages.     8. Payments and Benefits. In consideration for signing this Separation Agreement and signing the Release attached hereto as Exhibit A and not revoking either document within the applicable revocation periods, and provided that Employee is in compliance with all of the terms of and conditions of the Separation Agreement and has not breached Employee’s obligations hereunder, Employee will receive the following separation benefits.     a. Separation payments totaling $1,825,200, payable $608,400 on the date which is six months and one day after the Separation Date and the remaining $1,216,800 payable in semi-monthly installments of $50,700 over the following 12 months (so that all payments will be made within 18 months after the Separation Date).     b. All 65,800 unvested restricted stock units and 11,812 unvested restricted shares held by Employee will fully vest on the Separation Date and the   - 5 - --------------------------------------------------------------------------------   126,000 vested stock options will remain exercisable for the period specified in the stock option award agreement or underlying equity plan.     c. All amounts due Employee in respect of the 25,000 Company Performance Unit Awards held by Employee pursuant to the Employee Performance Unit Award (2004 PIP) dated March 25, 2004 and modified and clarified on March 24, 2005 (as modified, the “PSU Award Agreement”), will be calculated as if Employee had remained employed through the date of payment, except as follows: the measurement date for purposes of calculating the number of shares of Company common stock payable (1) in respect of the performance units that are linked to Cost Savings (as defined in the PSU Award Agreement) will be the Separation Date and (2) in respect of the performance units that are linked to Normalized Earnings Per Share (as defined in the PSU Award Agreement) will be March 31, 2007. Payment of the Company Performance Unit Awards will be made at the time payment is made to other holders of the Company performance unit awards.     d. A lump sum payment of $55,384.62 in lieu of all accrued but unused vacation as of the Separation Date.     e. An additional lump sum severance payment in the amount of $720,000.00, payable six months and one day after the Separation Agreement, subject to the Company achieving its 2006 Earnings per Share goal.     f. Employee’s short-term and long-term disability, group life insurance, accidental death and dismemberment insurance and FSA coverage will end on the Separation Date. Employee will have the option to continue group life insurance coverage by converting to an individual policy by applying through the life insurance carrier (Minnesota Life) within 30 days of the Separation Date. The Company will continue payment of premiums on Employee’s supplemental executive life insurance policy and supplemental executive disability insurance policy for a period of 18 months following the Separation Date.     g. A COBRA premium subsidy for a period of 18 months, as follows: During the initial 12-month period, the Company will invoice Employee for the employee portion of COBRA coverage. Employee must pay the Company’s invoices in a timely manner in order to continue COBRA coverage. Subsequently, during the remaining 6 months of COBRA coverage, the Hewitt Benefits Center will invoice Employee for the full COBRA premium (not just the employee portion). Employee must submit monthly payments to Hewitt for the premium, and must submit proof of such payments to the Company. Upon receipt of proof of payment, the Company will reimburse Employee for all but the employee portion of the monthly premiums.     - 6 - --------------------------------------------------------------------------------   h. The Company will provide Employee with outplacement services consistent with such services provided to other departing Company employees at Employee’s level, up to a maximum expenditure of $20,000. Employee must contact Andrew Panega, Senior Vice President of Human Resources, to initiate the outplacement process.     i. The Company will reimburse Employee for tax and financial planning services in accordance with past practice incurred during the 18-month following the Separation Date, up to a maximum expenditure of $18,000.     j. The Company agrees to provide Employee with either (i) access to a club membership which is similar to Employee’s currently provided club membership during the 18-month period following Separation Date or (ii) a lump sum payment of $30,000 in lieu of such club membership. Employee must notify the Company of which option he elects by the Separation Date.     k. Employee’s rights of indemnification under the Company’s organizational documents, any plan or agreement at law or otherwise and Employee’s rights thereunder to directors’ and officers’ liability insurance coverage for, in both cases, actions as an officer of the Company shall survive the Separation Date.     l. All payments made pursuant to this Separation Agreement shall be reduced by applicable tax withholdings. All separation payments made under this Separation Agreement shall be payable in accordance with the Company’s regular payroll practices, beginning on the first applicable paydate after the revocation period set forth in this Separation Agreement expires.     9. Nondisparagement. Employee agrees for himself and others acting on his behalf, that he (and they) have not and will not disparage, make negative statements about or act in any manner which is intended to or does damage to the good will of, or the business or personal reputations of the Company or any of their incumbent or former officers, directors, agents, consultants, employees, successors and assigns. Employee agrees that he shall refer all requests for employment references to Mark A. Angelson, CEO, and that, unless otherwise agreed between Employee and Mr. Angelson, Mr. Angelson shall provide only neutral information including Employee’s dates of employment, last job title, last salary, and employee benefits. Mr. Angelson (or his successor or designee) shall be the sole individual who is authorized to speak on behalf of the Company with respect to Employee. Nothing in this Section 9 shall prevent Employee from requesting personal references from other employees of the Company.     10. Release of Claims. For and in consideration of the separation payments and other things of value to be provided pursuant to this Separation Agreement, Employee agrees, knowingly and voluntarily, that by executing this Separation Agreement that he releases and forever discharges the Company and the current and former   - 7 - --------------------------------------------------------------------------------   shareholders, employees, officers, directors, benefit plans, benefit plan fiduciaries, benefit plan administrators, consultants, representatives and agents thereof, of and from any and all claims, liabilities, demands or causes of action known and unknown, that Employee has had or now has, arising through the date of this Separation Agreement, with respect to any and all of the following, except Employee does not hereby waive any claims that cannot be waived under applicable law. This Separation Agreement does not waive or otherwise impair any vested rights Employee may have under the terms of any tax-qualified retirement plan, stock option plan or any other equity award agreement. Employee hereby acknowledges that it is his responsibility to review any equity award agreement(s) to determine termination dates of his rights thereunder.     a. claims against the Company based upon the common law, including but not limited to, emotional distress; injury to personal reputation; defamation (including libel or slander); invasion of privacy; denial of employment in contravention of common law or any federal, state, local or public policy, law or regulation;     b. claims against the Company based upon any alleged written or oral employment agreement (including the Letter Agreement), policy, plan or procedure of the Company and/or any alleged understanding or arrangement between Employee and the Company;     c. claims against the Company based upon alleged violation(s) of any statute, regulation, or ordinance, whether federal, state or local, or based on any other federal, state or local law, including but not limited to, any and all claims under the Americans with Disabilities Act, 42 U.S.C. § 12101 (including the Older Workers Benefit Protection Act), et seq.; the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621, et seq.; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, et seq.; the Civil Rights Act of 1991, P.L. 102-166, 105 Stat. 1071, et seq.; 42 U.S.C. § 1981; the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.; the Equal Pay Act, 29 U.S.C. § 206(d), et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq.; Sarbanes Oxley Act of 2002, 18 U.S.C. § 1514, et. seq.; and any other federal, state, or local laws touching upon the employment relationship;     d. claims against the Company based upon the U.S. Constitution or any state constitution; and     e. claims against the Company based upon any theory of alleged equitable entitlement to relief.     - 8 - --------------------------------------------------------------------------------   11. Inquiry. In the event any third party inquires about Employee’s employment or separation from employment with the Company, Employee agrees to respond that Employee was treated fairly by the Company, its affiliates and subsidiaries.     12. Nonadmission. This Separation Agreement is not intended, and shall not be construed, as an admission that the Company has violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrong whatsoever against Employee. The Employee acknowledges and understands that the Company denies that it has engaged in any wrongful activity whatsoever in connection with the Employee.     13. Employee Acknowledgements. By signing this Separation Agreement Employee expressly acknowledges and agrees that:     a. Employee has read and fully understands the terms of this Separation Agreement;     b. Employee acknowledges and agrees that the payments, benefits and/or other things of value provided pursuant to this Separation Agreement: (i) are in full discharge of any and all liabilities and obligations of the Company to Employee, monetarily or with respect to employee benefits, COBRA subsidies, perquisites or otherwise, including but not limited to any and all obligations arising under any alleged written or oral employment agreement (including the Letter Agreement), policy, plan or procedure of the Company and/or any alleged understanding or arrangement between Employee and the Company; and (ii) exceed any payment, benefit, or other thing of value to which Employee might otherwise be entitled under any employment agreement, policy, plan or procedure of the Company and/or any understanding or agreement between Employee and the Company;     c. Employee understands that (i) this Separation Agreement sets forth the entire agreement between us, and fully supersedes any prior agreements or understandings between the parties; and (ii) this Separation Agreement constitutes a release by Employee of all claims, known and unknown, which relate to Employee’s employment or separation from employment;     d. The Company has hereby advised Employee to consult an attorney prior to signing this Separation Agreement;     e. Employee has had adequate opportunity to request, and has received, all information Employee needs to understand this Separation Agreement and, in accordance with the Older Workers Benefit Protection Act, has been offered at least 21 days to consider the terms of this Separation Agreement, and Employee agrees that any modifications, material or otherwise, made to this Separation Agreement shall not restart or affect in any manner the original 21 day consideration period;     - 9 - --------------------------------------------------------------------------------   f. Employee has knowingly and voluntarily entered this Separation Agreement, without any duress, coercion or undue influence by anyone.     14. Severability. If any provision contained in this Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provisions shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining such provisions shall not be affected thereby; provided, however, that if any provision is finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provisions will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.     15. Remedies Upon Breach. Employee acknowledges that all the provisions of this Separation Agreement are reasonable and necessary and narrowly tailored to protect the Company’s legitimate protectable interests in its Confidential Information, work force and customer, supplier and vendor relationships. In the event Employee breaches any obligation under this Separation Agreement (other than a breach which is both de minimus and inadvertent and that is promptly cured by Employee upon notice from the Company), the Company will be entitled to terminate any remaining separation payments to Employee, recover from the Employee any equity vesting that occurred in connection with this Separation Agreement, recover from Employee the full amount of past separation payments made by the Company to Employee for periods after the breach, and to obtain all other relief provided by law or equity. Employee agrees that, if the Company is required to take any legal action to enforce Employee’s obligations under this Separation Agreement for any reason, Employee shall be responsible for all costs incurred by the Company to enforce Employee’s obligations thereunder including, without limitation, reasonable attorneys fee and expenses. Since a breach of this Separation Agreement may not be compensated adequately by money damages, Employee agrees that the Company shall be entitled, in addition to any other remedy available to it, to an injunction restraining an actual or threatened breach of this Separation Agreement and Employee consents and agrees to the issuance of such an injunction. Employee does hereby waive any proof that such breach will cause irreparable injury to the Company or that the Company has no adequate remedy at law. In any proceeding, either at law or in equity, between the parties, Employee agrees that he shall not be entitled to raise as a defense either: (1) that the period of time or the nature of the restrictions are unfair, unnecessary or unreasonable, or (2) that anything in this Separation Agreement is in restraint of trade. In addition, Employee agrees to repay to the Company any payments received under this Separation Agreement prior to filing any lawsuit challenging the validity of the Separation Agreement. The release and waiver provisions shall continue and be in effect after the Company’s acceptance of any repayment by Employee.     16. Notices. All notices or communications under this Separation Agreement must be in writing, addressed; (i) if to the Company, to the attention of the Senior Vice   - 10 - --------------------------------------------------------------------------------   President, Human Resources, 111 South Wacker Drive, Chicago, IL 60606-4301 and (ii) if to Employee, at Employee’s last known address (or to any other addresses as either party may designate in a notice duly delivered as described in this paragraph). Any notice or communication shall be delivered by fax (with proof of transmission), by hand or by courier (with proof of delivery). Notices and communications may also be sent by certified or registered mail, return receipt requested, postage prepaid, addressed as above and the third business day after the actual date of mailing shall constitute the time at which notice was given.     17. Revocation Period. During the seven days after Employee signs this Separation Agreement, Employee may revoke it by giving written notice to the Company, in which event this Separation Agreement will not go into effect. This Separation Agreement will become effective on the eighth day, however, if the last day of the revocation period is a Saturday, Sunday or legal holiday in the State of Illinois, then the revocation period shall not expire until the next business day.     18. Entire Agreement. Except as specified herein, this Separation Agreement and its Exhibits constitute a single, integrated written contract expressing the entire agreement between Employee and the Company and it supersedes any and all other agreements between Employee and the Company, including but not limited to, those set forth in the Company’s policies. This Separation Agreement may not be modified except by written, signed agreement executed by Employee and the Company.     19. Arbitration and Governing Law. Except with respect to any actions by the Company to enforce its rights under Section 7 of this Separation Agreement, any controversy or claim arising out of or relating to Employee’s employment with or termination of employment with the Company, this Separation Agreement or the breach of this Separation Agreement that cannot be resolved by Employee and the Company, shall be determined by a single arbitrator in Chicago, Illinois, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The decision of the arbitrator, which shall be set forth in a reasoned opinion, detailing findings of fact and conclusions of law, shall be final and binding and may be entered in any court of competent jurisdiction. Any expenses of the arbitrator shall be shared equally by the parties. Except as required by law, neither party nor the arbitrator may disclose the existence, consent or results of any arbitration hereunder without the prior written consent of both parties. This Separation Agreement shall be governed by and interpreted in accordance with the laws of the State of Illinois, without giving effect to the conflict of laws provisions thereof. In the event of any dispute hereunder the parties hereby consent to the exclusive jurisdiction of the courts of the State of Illinois and the Federal courts of the United States of America located in the District of Illinois, and the parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and the parties agree not to plead or claim the same.     - 11 - --------------------------------------------------------------------------------   20. Assignment and Successors in Interest. Employee understands and agrees that the Company’s rights and obligations under this Separation Agreement shall inure to the benefit of and shall be binding on any successor in interest and that the Company may, at any time and without further action by Employee, assign this Separation Agreement to any affiliate of the Company or to a purchaser or transferee of all or a substantial part of the Company’s assets. Employee understands and agrees that he may not assign any rights or transfer any obligations he has under the Separation Agreement. Upon Employee’s death, any remaining obligations of the Company shall be paid to Jacqueline G. Cherry or such other beneficiary legally designated by Employee.     21. Execution. This Separation Agreement may be executed in counterparts, and any such executions will be held as if both the Company and Employee had signed the same, original document.     22. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and the regulations promulgated thereunder (“Section 409A”) so as not to subject Employee to the payment of interest or any additional tax under Section 409A. In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified in this Agreement would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or the provision of such amount or benefit could be made without incurring such additional tax (including paying any severance that is delayed in a lump sum upon the earliest possible payment date which is consistent with Section 409A). In addition, to the extent applicable, Employee and the Company agree to interpret this Agreement in a manner consistent with Section 409A to prevent Employee being subject to the payment of interest or any additional tax under Section 409A.     - 12 - -------------------------------------------------------------------------------- AGREED AND ACCEPTED: /s/ Dean E. Cherry Dean E. Cherry Acceptance Date: October 11, 2006 R.R. DONNELLEY & SONS COMPANY By:   /s/ Andrew B. Panega Name: Andrew B. Panega Title: SVP, Human Resources Receipt Date: October 11, 2006       - 13 - -------------------------------------------------------------------------------- Exhibit A   RELEASE   Dean E. Cherry, hereinafter referred to as “Releasor,” executes this Release this 31st day of October, 2006.   This Release is made in favor of R. R. Donnelley & Sons Company, 111 South Wacker Drive, Chicago, Illinois (“Donnelley”) and its current and former officers, directors, employees, partners, benefit plans, benefit plan fiduciaries, benefit plan administrators, successors, assigns, agents, divisions, parents, subsidiaries, affiliates, attorneys, and other related entities, including, but not limited to, Moore Wallace Incorporated, (“Released Parties”), on behalf of Releasor and Releasor’s heirs, executors, administrators, successors and assigns.   For and in consideration of the separation payments and other things of value to be provided pursuant to the Separation Agreement, Release and Waiver entered into between Donnelley and Employee, Employee agrees, knowingly and voluntarily, that by executing this Release he releases and forever discharges the Company and the current and former shareholders, employees, officers, directors, benefit plans, benefit plan fiduciaries, benefit plan administrators, consultants, representatives and agents thereof, of and from any and all claims, liabilities, demands or causes of action known and unknown, that Employee has had or now has, arising through the date of this Separation Agreement, with respect to any and all of the following, except Employee does not hereby waive any claims that cannot be waived under applicable law. This Separation Agreement does not waive or otherwise impair any vested rights Employee may have under the terms of any tax-qualified retirement plan, stock option plan or any other equity award agreement. Employee hereby acknowledges that it is his responsibility to review any equity award agreement(s) to determine termination dates of his rights thereunder.     a. claims against the Company based upon the common law, including but not limited to, emotional distress; injury to personal reputation; defamation (including libel or slander); invasion of privacy; denial of employment in contravention of common law or any federal, state, local or public policy, law or regulation;     b. claims against the Company based upon any alleged written or oral employment agreement, policy, plan or procedure of the Company and/or any alleged understanding or arrangement between Employee and the Company;     c. claims against the Company based upon alleged violation(s) of any statute, regulation, or ordinance, whether federal, state or local, or based on any other federal, state or local law, including but not limited to, any and all claims under the Americans with Disabilities Act, 42 U.S.C. § 12101 (including the Older Workers Benefit Protection Act), et seq.; the Age Discrimination in --------------------------------------------------------------------------------   Employment Act, as amended, 29 U.S.C. § 621, et seq.; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, et seq.; the Civil Rights Act of 1991, P.L. 102-166, 105 Stat. 1071, et seq.; 42 U.S.C. § 1981; the Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.; the Equal Pay Act, 29 U.S.C. § 206(d), et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et seq.; Sarbanes Oxley Act of 2002, 18 U.S.C. § 1514, et. seq.; and any other federal, state, or local laws touching upon the employment relationship;     d. claims against the Company based upon the U.S. Constitution or any state constitution; and     e. claims against the Company based upon any theory of alleged equitable entitlement to relief.   This Release shall be construed in accordance with the laws of the State of Delaware (the place of RR Donnelley’s incorporation) and construed in accordance therewith without giving effect to principles of conflicts of laws. In the event of any dispute hereunder the parties hereby consent to the exclusive jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located in the District of Delaware, and the parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and the parties agree not to plead or claim the same.   Releasor agrees that the provisions of this Release are severable, and if any part is found unenforceable, the other parts shall remain fully valid and enforceable.   In signing below, Releasor expressly acknowledges that he or she has read this Release carefully, that he or she fully understands its terms and conditions, that he or she has been advised of his or her rights and has been advised to consult an attorney prior to executing this Release, and that Releasor intends to be legally bound by the Release   RELEASOR ACKNOWLEDGES THAT HE OR SHE HAS HAD THE OPPORTUNITY TO HAVE AT LEAST 21 DAYS WITHIN WHICH TO DECIDE WHETHER OR NOT TO SIGN THIS RELEASE. RELEASOR FURTHER ACKNOWLEDGES THAT HE OR SHE HAS BEEN GIVEN THE RIGHT TO REVOKE THIS RELEASE BY SERVING, WITHIN A SEVEN DAY PERIOD AFTER SIGNING, A WRITTEN NOTICE OF REVOCATION. THE RELEASE SHALL BECOME EFFECTIVE ON THE EIGHTH DAY FOLLOWING ITS EXECUTION BY RELEASOR.   If Releasor revokes the Release, Donnelley and/or the Released Parties shall have no obligation under it.     -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Releasor has signed this Release at                                  (Place of execution).               (Signature of Releasor)                                   SOCIAL SECURITY NUMBER         EMPLOYEE ID NUMBER

Exhibit 10.15   THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.   THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.   Empire Financial Holding Company   Warrant for the Purchase of Shares of Common Stock, par value $0.01 per Share     No. W-____ ______ Shares     THIS CERTIFIES that, for value received, _____________, whose address is _________________________ (together with any person or entity to which this Warrant (or any portion hereof) may be transferred, the “Holder”), is entitled to subscribe for and purchase from Empire Financial Holding Company, a Florida corporation (the “Company”), upon the terms and conditions set forth herein, ______ shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), at a price of $4.50 per share (the “Exercise Price”). As used herein the term this “Warrant” shall mean and include this Warrant and any Common Stock or warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. Defined terms not otherwise defined herein shall have the meanings ascribed to such terms in the Securities Purchase Agreement dated as of March 10, 2006, among the Company, the Holder and certain other Purchasers listed on Exhibit A thereto (the “Purchase Agreement”).   The number of shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”) and the Exercise Price may be adjusted from time to time as hereinafter set forth. The Warrant Shares are entitled to the benefits, and subject to the obligations, set forth in Article IV of the Purchase Agreement.   1.            Exercise Price and Exercise Period. This Warrant may be exercised at any time or from time to time during the period commencing at 10:00 A.M. Eastern time on March 14, 2006 and ending at 5:00 P.M. Eastern Time on March 13, 2011 (the “Exercise Period”).     2. Procedure for Exercise; Effect of Exercise. 1 -------------------------------------------------------------------------------- (a)          Cash Exercise. This Warrant may be exercised, in whole or in part, by the Holder during normal business hours on any business day during the Exercise Period by (i) the presentation and surrender of this Warrant to the Company at its principal executive office along with a duly executed Notice of Exercise (in the form attached hereto) specifying the number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the Exercise Price for the number of Warrant Shares specified in the Notice of Exercise by cash, wire transfer of immediately available funds to a bank account specified by the Company, or by certified or bank cashier’s check.   (b)          Cashless Exercise. This Warrant may also be exercised by the Holder through a cashless exercise, as described in this Section 2(b). In such case, this Warrant may be exercised, in whole or in part, by the Holder during normal business hours on any business day during the Exercise Period by the presentation and surrender of this Warrant to the Company at its principal office along with a duly executed Notice of Exercise specifying the number of Warrant Shares to be applied to such exercise. The number of shares of Common Stock to be issued upon exercise of this Warrant pursuant to this Section 2(b) shall equal the value of this Warrant (or the portion thereof being canceled) computed as of the date of delivery of this Warrant to the Company using the following formula:   X = Y(A-B) A   Where:   X = the number of shares of Common Stock to be issued to Holder under this Section 2(b);   Y = the number of Warrant Shares identified in the Notice of Exercise as being applied to the subject exercise;   A = the Current Market Price on such date; and   B = the Exercise Price on such date   For purposes of this Section 2(b), Current Market Price shall have the definition provided in Section 6(g).   The Company acknowledges and agrees that this Warrant was issued on the date set forth at the end of this Warrant. Consequently, the Company acknowledges and agrees that, if the Holder conducts a cashless exercise pursuant to this Section 2(b), the period during which the Holder held this Warrant may, for purposes of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), be “tacked” to the period during which the Holder holds the Warrant Shares received upon such cashless exercise.   Notwithstanding the foregoing, the Holder may conduct a cashless exercise pursuant to this Section 2(b) only in the event that a registration statement covering the resale of the Warrant Shares is not then effective at the time that the Holder wishes to conduct such cashless exercise. 2 --------------------------------------------------------------------------------   (c) Effect of Exercise.   (i)           Delivery of Warrant Shares. Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three (3) Business Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 8 prior to the issuance of such shares, have been paid.   (ii)          Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.   (iii)        Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(c) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.   (iv)         Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common 3 -------------------------------------------------------------------------------- Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.   (d)          Holder’s Restrictions. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise, such Holder (together with such Holder’s affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Notes or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by a Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s 4 -------------------------------------------------------------------------------- Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by such Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of this Section 2(d) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this Section 2(d) shall continue to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be waived by such Holder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.   (e)          Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Company issue upon exercise of or otherwise pursuant to this Warrant, the other Warrants issued pursuant to the Purchase Agreement and the Shares (defined in the Purchase Agreement) issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Company can issue pursuant to any rule of the principal securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 19.5% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. In the event that the sum of (i) the aggregate number of shares of Common Stock issued upon exercise of this Warrant, the shares of Common Stock issued upon exercise of the other Warrants issued pursuant to the Purchase Agreement and the shares of Common Stock issued upon conversion of Shares issued pursuant to the Purchase Agreement plus (ii) the aggregate number of shares of Common Stock that remain issuable upon exercise of this Warrant, the shares of Common Stock that remain issuable upon exercise of the other Warrants issued pursuant to the Purchase Agreement and the shares of Common Stock that remain issuable upon conversion of Shares issued pursuant to the Purchase Agreement, represents at least one hundred percent (100%) of the Maximum Share Amount, the Company will use its best efforts to seek and obtain Shareholder Approval (or obtain such other relief as will allow exercises hereunder in excess of the Maximum Share Amount) as soon as practicable. As used herein, “Shareholder Approval” means approval by the shareholders of the Company to authorize the issuance of the full number of shares of Common Stock which would be issuable upon full exercise of the then outstanding Warrants but for the Maximum Share Amount. 5 -------------------------------------------------------------------------------- 3.            Registration of Warrants; Transfer of Warrants. Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares, upon surrender to the Company or its duly authorized agent.     4. Restrictions on Transfer.   (a)          The Holder, as of the date of issuance hereof, represents to the Company that such Holder is acquiring the Warrants for its own account for investment purposes and not with a view to the distribution thereof or of the Warrant Shares. Notwithstanding any provisions contained in this Warrant to the contrary, this Warrant and the related Warrant Shares shall not be transferable except pursuant to the proviso contained in the following sentence or upon the conditions specified in this Section 4, which conditions are intended, among other things, to insure compliance with the provisions of the Securities Act and applicable state law in respect of the transfer of this Warrant or such Warrant Shares. The Holder by acceptance of this Warrant agrees that the Holder will not transfer this Warrant or the related Warrant Shares prior to delivery to the Company of an opinion of the Holder’s counsel (as such opinion and such counsel are described in Section 4(b) hereof) or until registration of such Warrant Shares under the Securities Act has become effective or after a sale of such Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A under the Securities Act; provided, however, that the Holder may freely transfer this Warrant or such Warrant Shares (without delivery to the Company of an opinion of counsel) (i) to one of its nominees, affiliates or a nominee thereof, (ii) to a pension or profit-sharing fund established and maintained for its employees or for the employees of any affiliate, (iii) from a nominee to any of the aforementioned persons as beneficial owner of this Warrant or such Warrant Shares, (iv) to a qualified institutional buyer, so long as such transfer is effected in compliance with Rule 144A under the Securities Act, or (v) to an accredited investor (as such term is defined in Regulation D under the Securities Act). 6 -------------------------------------------------------------------------------- (b)          The Holder, by its acceptance hereof, agrees that prior to any transfer of this Warrant or of the related Warrant Shares (other than as permitted by Section 4(a) hereof or pursuant to a registration under the Securities Act), the Holder will give written notice to the Company of its intention to effect such transfer, together with an opinion of such counsel for the Holder, to the effect that the proposed transfer of this Warrant and/or such Warrant Shares may be effected without registration under the Securities Act. Upon delivery of such notice and opinion to the Company, the Holder shall be entitled to transfer this Warrant and/or such Warrant Shares in accordance with the intended method of disposition specified in the notice to the Company.   (c)          Each stock certificate representing Warrant Shares issued upon exercise or exchange of this Warrant shall bear the following legend unless the opinion of counsel referred to in Section 4(b) states such legend is not required:   “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO EMPIRE FINANCIAL HOLDING COMPANY OF AN OPINION OF COUNSEL THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED.”   The Holder understands that the Company may place, and may instruct any transfer agent or depository for the Warrant Shares to place, a stop transfer notation in the securities records in respect of the Warrant Shares.   (d)        In no event may the Holder exercise this Warrant in whole or in part unless the Holder is an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.   5.            Reservation of Shares. The Company shall at all times during the Exercise Period reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, and all shares of Common Stock issuable upon conversion of this Warrant, shall be validly issued, fully paid, non-assessable, and free of preemptive rights, and free from all taxes, claims, liens, charges and other encumbrances.   6.            Exercise Price Adjustments. The Exercise Price shall be subject to adjustment from time to time as follows: 7 -------------------------------------------------------------------------------- (a)          (i) In the event that the Company shall (A) pay a dividend or make a distribution to all its stockholders, in shares of Common Stock, on any class of capital stock of the Company or any subsidiary which is not directly or indirectly wholly owned by the Company, (B) split or subdivide its outstanding Common Stock into a greater number of shares, or (C) combine its outstanding Common Stock into a smaller number of shares, then in each such case the Exercise Price in effect immediately prior thereto shall be adjusted so that the Holder of a Warrant thereafter surrendered for Exercise shall be entitled to receive the number of shares of Common Stock that such Holder would have owned or have been entitled to receive after the occurrence of any of the events described above had such Warrant been exercised immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 6(a)(i) shall become effective immediately after the close of business on the record date in the case of a dividend or distribution (except as provided in Section 6(e) below) and shall become effective immediately after the close of business on the effective date in the case of such subdivision, split or combination, as the case may be. Any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clauses (ii) and (iii) below.   (ii)          If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall offer, sell, grant any option to purchase or offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock entitling any person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted hereunder (if the holder of the Common Stock so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Stock is issued. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock subject to this section, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms.   (iii)         No adjustment in the Exercise Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments that by reason of this Section 6(a) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(a) shall be made to the nearest cent or nearest 1/100th of a share. 8 -------------------------------------------------------------------------------- (iv)         The Company from time to time may reduce the Exercise Price by any amount for any period of time in the discretion of the Board of Directors. A voluntary reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of this Section 6(a).   (v)          In the event that, at any time as a result of an adjustment made pursuant to Sections 6(a)(i) through 6(a)(iv) above, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive any shares of the Company other than shares of the Common Stock, thereafter the number of such other shares so receivable upon exercise of any such Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 6(a)(i) through 6(a)(iv) above, and the other provisions of this Section 6(a) with respect to the Common Stock shall apply on like terms to any such other shares.   (b)          In case of any reclassification of the Common Stock (other than in a transaction to which Section 6(a)(i) applies), any consolidation of the Company with, or merger of the Company into, any other entity, any merger of another entity into the Company (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange, pursuant to which share exchange the Common Stock is converted into other securities, cash or other property (any such reclassification, consolidation, merger, sale, transfer or exchange shall be referred to herein as a “Reorganization Transaction”), there shall thereafter be deliverable upon exercise of any Warrant (in lieu of the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock that would otherwise have been deliverable upon the exercise of such Warrant would have been entitled upon such Reorganization Transaction if such Warrant had been exercised in full immediately prior to such Reorganization Transaction. In case of any Reorganization Transaction, appropriate adjustment, as reasonably determined in good faith by the Board of Directors shall be made in the application of the provisions herein set forth with respect to the rights and interests of the Holder so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any such shares or other securities or property thereafter deliverable upon exercise of Warrants. The Company shall not effect any Reorganization Transaction unless prior to or simultaneously with the consummation thereof the successor corporation or other entity (if other than the Company) resulting from such Reorganization Transaction or the corporation or other entity purchasing such assets shall expressly assume, by a supplemental warrant or other acknowledgment executed and delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase, and the due and punctual performance and observance of each and every covenant, condition, obligation and liability under this Warrant to be performed and observed by the Company in the manner prescribed herein. The provisions of this Section 6(b) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. 9 --------------------------------------------------------------------------------   (c) If:     (i) the Company shall take any action which would require an adjustment in the Exercise Price pursuant to Section 6(a); or     (ii) the Company shall authorize the granting to the holders of its Common Stock generally of rights, warrants or options to subscribe for or purchase any shares of any class or any other rights, warrants or options; or     (iii) there shall be any reclassification or change of the Common Stock (other than a subdivision or combination of its outstanding Common Stock or a change in par value) or any consolidation, merger or statutory share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all of the assets of the Company; or     (iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;   then, in each such case, the Company shall cause to be filed with the transfer agent for the Warrants and shall cause to be mailed to each Holder at such Holder’s address as shown on the books of the transfer agent for the Warrants, as promptly as possible, but at least 30 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights, warrants or options are to be determined, or (B) the date on which such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, change, consolidation, merger, statutory share exchange, sale, transfer, dissolution, liquidation or winding up. Failure to give such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 6(c).   (d)         Whenever the Exercise Price is adjusted as herein provided, the Company shall promptly file with the transfer agent for the Warrants a certificate of an officer of the Company setting forth the Exercise Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof. The Company shall promptly cause a notice of the adjusted Exercise Price to be mailed to each Holder. 10 -------------------------------------------------------------------------------- (e)          In any case in which Section 6(a) provides that an adjustment shall become effective immediately after a record date for an event and the date fixed for such adjustment pursuant to Section 6(a) occurs after such record date but before the occurrence of such event, the Company may defer until the actual occurrence of such event (i) issuing to the Holder of any Warrants exercised after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such exercise before giving effect to such adjustment, and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 6(i).   (f)           In case the Company shall take any action affecting the Common Stock, other than actions described in this Section 6, which in the opinion of the board of directors of the Company (the “Board of Directors”) would materially adversely affect the exercise right of the Holders, the Exercise Price may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances.   (g)          For the purpose of any computation under Section 2(b), this Section 6 or Section 7, the “Current Market Price” per share of Common Stock on any day shall mean: (i) if the principal trading market for such securities is a national or regional securities exchange, the closing price on such exchange on such day; or (ii) if sales prices for shares of Common Stock are reported by the NASDAQ National Market System (or a similar system then in use), the last reported sales price (regular way) so reported on such day; or (iii) if neither (i) nor (ii) above are applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-counter market by NASDAQ (or, if not so reported, by the National Quotation Bureau), the average of the high bid and low ask prices so reported on such day. Notwithstanding the foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as the case may be, for the day in question, then the Current Market Price shall be determined as of the latest date prior to such day for which such closing price, last reported sales price, or bid and ask prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 5 or more days immediately prior to the day in question, in which case the Current Market Price shall be determined by an Independent Financial Expert (and the costs of such determination shall be bourne entirely by the Company). An “Independent Financial Expert” shall mean a reputable accounting, appraisal or investment banking firm that is, in the reasonable judgment of the Board of Directors, qualified to perform the task for which such firm has been engaged hereunder, is nationally recognized and disinterested and Independent with respect to the Company and its affiliates and is reasonably acceptable to the Holder. “Independent” shall mean any person or entity that (A) is in fact independent, (B) does not have any direct financial interest or any material indirect financial interest in the Company or any of its subsidiaries, or in any affiliate of the Company or any of its subsidiaries (other than as a result of holding securities of the Company in trading accounts), and (C) is not an officer, employee, promoter, trustee, partner, director or person performing similar functions for the Company or any of its subsidiaries or any affiliate of the Company or any of its subsidiaries.   (h)          Upon each adjustment of the Exercise Price (other than an adjustment under Section 6(a)(ii) or Section 6(a)(iv)), this Warrant shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the number of shares purchasable upon exercise of this Warrant prior to adjustment of the number of shares by the Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the Exercise Price in effect after such adjustment of the Exercise Price. 11 -------------------------------------------------------------------------------- (i)           The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the Company shall purchase such fraction for an amount in cash equal to the same fraction of the Current Market Price of such share of Common Stock on the date of exercise of this Warrant.   7.            Call. At any time while this Warrant is outstanding, in the event that (a) the Current Market Price of the Common Stock has been greater than $9.00 per share (appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of the Common Stock occurring after the date hereof) for a period of twenty (20) consecutive Trading Days, and (b) the daily trading volume of the Common Stock during such twenty (20) consecutive Trading Day period is equal to or greater than 50,000 shares, the Company, upon thirty (30) days prior written notice (the “Call Notice Period”) given to the Holder, may call this Warrant at a redemption price equal to $0.05 per share of Common Stock then purchasable pursuant to this Warrant; provided that the Company simultaneously calls all Warrants issued pursuant to the Purchase Agreement on the same terms. Notwithstanding any such notice by the Company, the Holder shall have the right to exercise this Warrant prior to the end of the Notice Period.   8.            Transfer Taxes. The issuance of any shares or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.   9.              Loss or Mutilation of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement of the Company’s reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination.   10.          No Rights as a Stockholder. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant. 12 -------------------------------------------------------------------------------- 11.          Amendment and Waiver. Any term, covenant, agreement or condition in this Warrant may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument or written instruments executed by the Company and the Holder. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant unless the same consideration is also offered to the holders of all Warrants issued pursuant to the Purchase Agreement.   12.          Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Warrant shall not be interpreted or construed with any presumption against the party causing this Warrant to be drafted. The Company and the Holder agree that venue for any dispute arising under this Warrant will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue. The Company and the Holder irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York. The Company and the Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 12 shall affect or limit any right to serve process in any other manner permitted by law. The Company and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Warrant or the Purchase Agreement, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive all rights to a trial by jury.   13.          Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be delivered pursuant to Section 8.4 of the Purchase Agreement.   14.          Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and assigns of the Company, the Holder hereof and (to the extent provided herein) the Holders of Warrant Shares issued pursuant hereto, and shall be enforceable by any such Holder or Holder of Warrant Shares.   15.          Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained herein.   [SIGNATURE PAGE FOLLOWS] 13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.   Dated: March [  ], 2006   EMPIRE FINANCIAL HOLDING COMPANY   By: _____________________________________   Name:   Title:   14 -------------------------------------------------------------------------------- FORM OF ASSIGNMENT   (To be executed by the registered holder if such holder desires to transfer the attached Warrant.)   FOR VALUE RECEIVED, ____________________ hereby sells, assigns, and transfers unto __________________ a Warrant to purchase __________ shares of Common Stock, par value $0.01 per share, of Empire Financial Holding Company (the “Company”), together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint __________________________________ attorney to transfer such Warrant on the books of the Company, with full power of substitution.     Dated: ____________       By:                                                                  Print Name         ________________________________   Signature     The signature on the foregoing Assignment must correspond to the name as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. -------------------------------------------------------------------------------- To:          Empire Financial Holding Company 2170 West State Road 434, Suite 100 Longwood, Florida 32779 Attention: Chief Executive Officer   NOTICE OF EXERCISE   The undersigned hereby exercises his or its rights to purchase _______ Warrant Shares covered by the within Warrant and tenders payment herewith in the amount of $_________ by [tendering cash or delivering a certified check or bank cashier’s check, payable to the order of the Company] [surrendering ______ shares of Common Stock received upon exercise of the attached Warrant, which shares have a Current Market Price equal to such payment] in accordance with the terms thereof, and requests that certificates for such securities be issued in the name of, and delivered to:   _______________________________________   _______________________________________   _______________________________________   (Print Name, Address and Social Security or Tax Identification Number)   and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. By signing below the undersigned represents to the Company that it is an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.     Dated: _____________________       By:___________________________   Print Name         ______________________________   Signature   Address:   ____________________________________ ____________________________________ ____________________________________ --------------------------------------------------------------------------------

Exhibit 10.77 FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This Fourth Amendment To Amended and Restated Loan And Security Agreement (the “Amendment”) dated as of July 17, 2006, is entered into by and among WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a California corporation formerly known as Congress Financial Corporation (Western) (“Lender”), and GUESS ?, INC., a Delaware corporation (“Guess”), GUESS? RETAIL, INC., a Delaware corporation, and GUESS.COM, INC., a Delaware corporation, jointly and severally as co-borrowers (each a “Borrower” and collectively, the “Borrowers”), with reference to the following facts: RECITALS A.                                   Lender is extending various secured financial accommodations to the Borrowers upon the terms of that certain Amended and Restated Loan and Security Agreement dated as of December 20, 2002, as previously amended by that certain First Amendment to Amended and Restated Loan and Security Agreement, dated as of February 25, 2003, that certain Second Amendment to Amended and Restated Loan and Security Agreement dated as of December 30, 2004, and that certain Third Amendment to Amended and Restated Loan and Security Agreement dated as of April 4, 2005 (as the same now exists or may hereafter be amended, modified, supplement, extended, renewed or replaced, the “Loan Agreement”). B.                                     Each of the Borrowers and the Lender desires to amend the Loan Agreement upon the terms and conditions set forth herein. C.                                     Each of the Borrowers is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of the rights or remedies of the Lender as set forth in the Loan Agreement are being waived or modified by the terms of this Amendment. AMENDMENT NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each party hereto, the parties hereto hereby agree as follows: SECTION 1.  Amendment.  Clause (e) of Section 1.33 (“Change of Control”) of the Loan Agreement is hereby amended and restated to read in its entirety as follows:  “(e) the failure of the Permitted Holders to hold at least thirty percent (30%) of the voting power of the total outstanding Voting Stock of Parent, and the failure of Parent to own one hundred percent (100%) of the voting power of the total outstanding Voting Stock of the other Borrowers.” SECTION 2.  Conditions to Effectiveness.  The effectiveness of this Amendment is subject to the receipt by Lender of the following: (a)                                  Counterparts of this Amendment, duly executed and delivered by each of the parties hereto. -------------------------------------------------------------------------------- (b)                                 Such other documents related hereto or in furtherance hereof as Lender may reasonably require. SECTION 3.  No Other Changes.  Except as explicitly amended by this Amendment, all of the terms and conditions of the Loan Agreement shall remain in full force and effect and shall apply to any Loan or Letter of Credit Accommodation thereunder. SECTION 4.  Defined Terms.  Unless otherwise defined herein, terms used in this Amendment that are defined in the Loan Agreement shall have the same meanings herein as in the Loan Agreement.  In addition, it is expressly understood that the term Financing Agreements as used herein or in any other Financing Agreement includes this Amendment for all purposes, including for the purposes of Section 5 hereof. SECTION 5.  Representations and Warranties.  Each Borrower reaffirms that the representations and warranties made to Lender in the Loan Agreement and other Financing Agreements are true and correct in all material respects as of the date of this Amendment as though made as of such date and after giving effect to this Amendment.  In addition, each Borrower makes the following representations and warranties to Lender, which shall survive the execution of this Amendment. (a)                                  The execution, delivery and performance of this Amendment are within each Borrower’s powers, have been duly authorized by all necessary actions, have received all necessary governmental approvals, if any, and do not (i) contravene any other contractual restriction, law or governmental regulation or court decree or order binding on or affecting any Borrower or its assets, (ii) violate any Borrower’s organizational documents or instruments, or (iii) result in, or require the creation or imposition of, any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of any Obligor’s assets or properties, including the Collateral, except for liens, security interests and other encumbrances granted under the Financing Agreements. (b)                                 This Amendment is the legal, valid and binding obligation of each Borrower enforceable against each Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting the rights of creditors generally. (c)                                  Since the dates of the financial statements most recently provided by Borrowers to Lender pursuant to Sections 9.6(a)(i) and 9.6(a)(iii) of the Loan Agreement, there has been no Material Adverse Change. (d)                                 No event has occurred and is continuing, after giving effect to this Amendment, which constitutes a Default or an Event of Default under the Loan Agreement or any other of the Financing Agreements, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. SECTION 6.  Continuing Effect of Financing Agreements.  To the extent of any inconsistencies between the terms of this Amendment and the Loan Agreement, this Amendment shall govern.  In all other respects, the Loan Agreement and other Financing Agreements shall remain in full force and effect and are hereby ratified and confirmed. -------------------------------------------------------------------------------- SECTION 7.  Governing Laws.  This Amendment, upon becoming effective, shall be deemed to be a contract made under, governed by, and subject to, and shall be construed in accordance with, the internal laws of the State of California. SECTION 8.  No Waiver.  The execution of this Amendment and acceptance of any other documents related hereto shall not be deemed to be a waiver of any Event of Default under the Loan Agreement or breach, default or event of default under any other Financing Agreement, whether or not known to Lender and whether or not existing on the date of this Amendment. SECTION 9.  Integration.  The Loan Agreement as amended by this Amendment, together with the other Financing Agreements, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties; there are no oral agreements between the parties.  Without limiting the foregoing, in the event this Amendment conflicts with the terms of any letter agreement between Borrowers and Lender, the terms of this Amendment shall control. SECTION 10.  Reference to and Effect on the Financing Agreements. (a)                                  Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring to the Loan Agreement, and each reference in all other documents or agreements related thereto, including the other Financing Agreements, to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as modified and amended hereby. (b)                                 To the extent that any terms and conditions in any of the Financing Agreements or any documents or agreements related thereto shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby. SECTION 11.  Severability.  Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 12.  Execution in Counterparts.  This Amendment may be executed by facsimile and in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute one and the same instrument. SECTION 13.  Section Captions.  The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof. -------------------------------------------------------------------------------- SECTION 14.  Successors and Assigns.  This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. [Remainder of this page intentionally left blank] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have executed this Amendment as of the date first set forth above, to become effective in the manner set forth above. GUESS ?, INC.,   as a Borrower               By: /s/ Deborah Siegel     Name: Deborah Siegel   Title: Secretary               GUESS? RETAIL, INC.,   as a Borrower               By: /s/ Deborah Siegel     Name: Deborah Siegel   Title: Secretary               GUESS.COM, INC.,   as a Borrower             By: /s/ Deborah Siegel     Name: Deborah Siegel   Title: Secretary         --------------------------------------------------------------------------------   WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), as Lender           By: /s/ Gary Whitaker     Name: Gary Whitaker   Title: Director   --------------------------------------------------------------------------------

-------------------------------------------------------------------------------- Exhibit 10.1 THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE PROPOSED TO BE ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. UPON ANY SALE, SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT. REGULATION S SUBSCRIPTION AGREEMENT THIS AGREEMENT is made effective as of the_______ day of ______________________ , 2004. BETWEEN: ___________________________________ (hereinafter called the "Subscriber") OF THE FIRST PART AND: SILVERADO GOLD MINES LTD., a British Columbia company (hereinafter called the “Company") OF THE SECOND PART THE PARTIES HEREBY AGREE AS FOLLOWS: 1.               DEFINITIONS 1.1              The following terms will have the following meanings for all purposes of this Agreement. "Agreement" shall mean this Agreement, and all schedules and amendments to the Agreement. “Common Shares” means the common shares of the Company without par value. --------------------------------------------------------------------------------   "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended. “Subscriber” shall mean ____________________________________________ . "Offering" shall mean the offering of the Units by the Company. “Purchase Price” means the purchase price payable by the Subscriber to the Company in consideration for the purchase and sale of the Units in accordance with Section 2.1 of this Agreement. "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall mean the United States Securities Act of 1933, as amended. "Shares" means those common shares to be purchased by the Subscriber and comprising a portion of the Units; “Unit” means a unit consisting of __________________ Share and __________________________ Warrant; “Warrant” means one share purchase warrant entitling the Holder to purchase one common share of the Company at a price of $________ US per share during the _______________________ period from the date of issue; “Warrant Shares” means the common shares issuable upon exercise of the Warrants; 1.2               The following schedules are attached to and form part of this Agreement:   Schedule A British Columbia Definition of Accredited Investor Schedule B Declaration of Sale Pursuant to Rule 904 of Regulation S Schedule C Form of Escrow Agreement 1.3               All dollar amounts referred to in this agreement are in United States funds, unless expressly stated otherwise. 2.                 PURCHASE AND SALE OF UNITS 2.1 Subject to the terms and conditions of this Agreement, the Subscriber hereby subscribes for and agrees to purchase from the Company such number of Units as is set forth upon the signature page hereof at a price equal to $_________ US per Unit. Upon execution, the subscription by the Subscriber will be irrevocable. 2.2 The Purchase Price is payable by the Subscriber contemporaneously with the execution and delivery of this Subscription Agreement and will be advanced to the Company or its solicitors. The Subscriber acknowledges that if the funds are advanced to the Company’s solicitors, the solicitors shall release such funds to the Company on confirmation by the Company that it will accept the subscription. -------------------------------------------------------------------------------- 2.3 Upon execution by the Company, the Company agrees to sell such Units to the Subscriber for the Purchase Price subject to the Company's right to sell to the Subscriber such lesser number of Units as it may, in its sole discretion, deem necessary or desirable. 2.4 Any acceptance by the Company of the Subscription is conditional upon compliance with all securities laws and other applicable laws of the jurisdiction in which the Subscriber is resident. Each Subscriber will deliver to the Company all other documentation, agreements, representations and requisite government forms required by the lawyers for the Company as required to comply with all securities laws and other applicable laws of the jurisdiction of the Subscriber. 2.5 Pending acceptance of this subscription by the Company, all funds paid by the Subscriber shall be deposited by the Company and immediately available to the Company for its corporate purposes. In the event the subscription is not accepted, the subscription funds will constitute a non-interest bearing demand loan of the Subscriber to the Company. 2.6 The Subscriber hereby authorizes and directs the Company to deliver the securities to be issued to such Subscriber pursuant to this Agreement to the Subscriber’s address indicated on the signature page of this Agreement. 2.7 The Subscriber acknowledges and agrees that the subscription for the Units and the Company's acceptance of the subscription is not subject to any minimum subscription for the Offering. 3.               REGULATION S AGREEMENTS OF THE SUBSCRIBER 3.1 The Subscriber represents and warrants to the Company that the Subscriber is not a “U.S. Person” as defined by Regulation S of the Securities Act and is not acquiring the Units for the account or benefit of a U.S. Person. A “U.S. Person” is defined by Regulation S of the Act to be any person who is:   (a) any natural person resident in the United States;         (b) any partnership or corporation organized or incorporated under the laws of the United States;         (c) any estate of which any executor or administrator is a U.S. person;         (d) any trust of which any trustee is a U.S. person;         (e) any agency or branch of a foreign entity located in the United States;         (f) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and         (g) any partnership or corporation if: --------------------------------------------------------------------------------   (i) organized or incorporated under the laws of any foreign jurisdiction; and         (ii) formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited Subscribers [as defined in Section 230.501(a) of the Act] who are not natural persons, estates or trusts. 3.2 The Subscriber acknowledges that the Subscriber was not in the United States at the time the offer to purchase the Units was received. 3.3 The Subscriber acknowledges that the Units, the Shares, the Warrants and the Warrant Shares are “restricted securities” within the meaning of the Securities Act and will be issued to the Subscriber in accordance with Regulation S of the Securities Act. 3.4 The Subscriber agrees not to engage in hedging transactions with regard to the Units, the Shares, the Warrants or the Warrant Shares unless in compliance with the Securities Act. 3.5 The Subscriber and the Company agree that the Company will refuse to register any transfer of the Units, the Shares, the Warrants or the Warrant Shares not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, pursuant to an available exemption from registration, or pursuant to this Agreement. 3.6 The Subscriber agrees to resell the Units, the Shares, the Warrants and the Warrant Shares only in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act. 3.7 The Subscriber agrees not to resell the Units, the Shares, the Warrants and the Warrant Shares within the 41 day period from the date of the issuance of the Units to the Subscriber. 3.8 The Subscriber acknowledges and agrees that all certificates representing the Units, the Shares, the Warrants and the Warrant Shares will be endorsed with the following legend in accordance with Regulation S of the Securities Act: -------------------------------------------------------------------------------- “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT”. 3.9 The Subscriber will be entitled to sell the Units, the Shares and the Warrants after the expiry of the initial 41 day restrictive period in transactions that qualify as “offshore transactions” within the meaning of Rule 904 of Regulation S. The Subscriber agrees that the following criteria must be satisfied with respect to any sale in reliance of Rule 904 of Regulation S:   (a) the offer of the Securities must not made to a person in the United States;         (b) either : (i) the transaction must be executed in, on or through the facilities of the Berlin Stock Exchange, or the Frankfurt Stock Exchange, both designated offshore securities markets as defined in Regulation S under the 1933 Act, and neither the Subscriber nor any person acting on its behalf can have knowledge that the transaction had been prearranged with a buyer in the United States; or (ii) at the time the buy order for the Securities originates, the buyer must be outside the United States; or the Subscriber and any person acting on its behalf must reasonably believe that the buyer was outside the United States;         (c) the sale of the securities must not be executed in, on or through the facilities of any securities exchange or over the counter market in the United States, including the OTC Bulletin Board.         (d) no directed selling efforts may be made in the United States by the Subscriber, an affiliate of the Subscriber, or any person acting on their behalf;         (e) the Subscriber must not be an “affiliate” of the Company, as the term “affiliate” is defined in the Securities Act, a “distributor”, as defined in Rule 902(d) of the Securities Act or a “dealer”, as defined in Section 2(a)(12) of the Securities Act, or an affiliate of or a person acting on behalf of any of the foregoing and the Purchaser will not receive a selling concession, fee or other remuneration in respect of the sale of the Unit Shares. 3.10 In order to remove the legend from any Units, Shares, Warrants or Warrant Shares in order to facilitate sales by the Subscriber in qualifying offshore transactions pursuant to Rule 904 of Regulation S, the Company will require the delivery of a declaration of the Subscriber in the form of declaration attached hereto as Schedule B confirming the satisfaction of each of the above conditions in Section 3.09 prior to any legend removal (the “Rule 904 Declaration”) and must otherwise be satisfied that the conditions have been satisfied. The Company will cause the legend to be removed by Computershare Trust Company of Canada, as transfer agent for the Company (the “Transfer Agent”), from certificates representing the Shares for any resales pursuant to Rule 904 of Regulation S after the expiry of the initial forty-one day restrictive period. The legend will be removed in one of the following three scenarios, at the election of the Subscriber:   (a) upon delivery by the Subscriber of certificates representing the Shares and the Rule 904 Declaration signed by the Subscriber, the Company will submit the certificates to the Transfer Agent with the instruction to remove the legend from the certificates and will deliver to the Subscriber certificates representing the Shares without legend upon receipt from the Transfer Agent; --------------------------------------------------------------------------------   (b) the Company will, at the request of the Subscriber, deliver to the Transfer Agent the irrevocable instruction of the Company to remove the legend from the certificates representing the Shares upon expiry of the initial forty-one day restrictive period and delivery by the Subscriber of the Rule 904 Declaration to the Transfer Agent. In this event, the Subscriber will be entitled to deliver the certificates representing the Shares to the Transfer Agent with the Rule 904 Declaration and will be delivered certificates representing the shares without legend.       (c) the Company will, at the request of the Subscriber, enter into an escrow agreement with a third party acceptable to the Company and the Subscriber (an “Escrow Agent”), in substantially the form of agreement attached hereto as Schedule C, whereby:         (i) the certificates representing the Shares would be delivered to the Escrow Agent together with the irrevocable direction of the Company to the Transfer Agent to remove the legend from the certificates representing the Shares (the “Letter of Instruction”);         (ii) the Escrow Agent would agree to hold the certificates for the 41 day period from the date of the issuance of the Shares to the Subscriber;         (iii) After the expiry of the minimum forty-one day period, the Escrow Agent would agree to deliver the certificates and the Letter of Instruction to the Transfer Agent upon delivery by the Subscriber of the Rule 904 Declaration. Upon receipt of replacement share certificates without the restrictive legend, the Escrow Agent would deliver the replacement share certificates to the Subscriber;         (iv) The Escrow Agent will deliver the certificates to the Subscriber upon the expiry of the one year period from the date of the Subscription Agreement in the event that the certificates have not been released to the Subscriber by such date. In this event, the Letter of Instruction would be delivered to the Company;         (v) The Subscriber would be entitled to demand delivery of the certificates representing the Shares at any time without delivery of the Rule 904 declaration and in this event the certificates representing the shares would be delivered to the Subscriber, with the restrictive legend endorsed thereon, and the Letter of Instruction would be delivered to the Company. The Company further agrees to enter into similar arrangements on the terms outlined above with respect to any Warrant Shares that may be issued upon exercise by the Subscriber of any Warrants. 4.               REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER The Subscriber, represents and warrants to the Company as follows, and acknowledges that the Company is relying upon such covenants, representations and warranties in connection with the sale of the Units to such Subscriber: -------------------------------------------------------------------------------- 4.1 The Subscriber is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters such that it is capable of evaluating the merits and risks of the investment in the Units. The Subscriber can bear the economic risk of this investment, and was not organized for the purpose of acquiring the Units. 4.2 The Subscriber has had full opportunity to review the Company’s filings with the SEC pursuant to the Securities Exchange Act of 1934, including the Company’s annual reports on Form 10-KSB and quarterly reports on Form 10-QSB, and additional information regarding the business and financial condition of the Company. The Subscriber believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Units. The Subscriber further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Offering and the business, properties, prospects and financial condition of the Company. The Subscriber has had full opportunity to discuss this information with the Subscriber’s legal and financial advisers prior to execution of this Agreement. 4.3. The Subscriber acknowledges that the offering of the Units by the Company has not been reviewed by the SEC and that the Units are being issued by the Company pursuant to an exemption from registration under the Securities Act. 4.4 The Subscribers understands that the Units it is purchasing are characterized as "restricted securities" under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, the Subscriber represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. 4.5 The Units will be acquired by the Subscriber for investment for the Subscriber's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Subscriber has no present intention of selling, granting any participation in, or otherwise distributing the same. The Subscriber does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Units. 4.6 An investment in the Company is highly speculative and only Subscribers who can afford the loss of their entire investment should consider investing in the Company and the Units. The Subscriber is financially able to bear the economic risks of an investment in the Company. 4.7 The Subscriber recognizes that the purchase of the Units involves a high degree of risk in that the Company is in the early stages of development of its business and may require substantial funds in addition to the proceeds of this private placement. 4.8 The Subscriber is not aware of any advertisement of the Units. 4.9 This Agreement has been duly authorized, validly executed and delivered by the Subscriber. -------------------------------------------------------------------------------- 4.10 The Subscriber has satisfied himself or herself as to the full observance of the laws of his or her jurisdiction in connection with any invitation to subscribe for the Units or any use of this Agreement, including (i) the legal requirements within his jurisdiction for the purchase of the Units; (ii) any foreign exchange restrictions applicable to such purchase; (iii) any governmental or other consents that may need to be obtained; (iv) the income tax and other tax consequences, if any, that may be relevant to an investment in the Units; and (v) any restrictions on transfer applicable to any disposition of the Units imposed by the jurisdiction in which the Subscriber is resident. 5.                BRITISH COLUMBIA MATTERS 5.1 The Subscriber represents and warrants to the Company that the Subscriber is an “Accredited Investor” as defined by Subsection 1.1 of Multilateral Instrument 45-103 adopted by the British Columbia Securities Commission and as outlined in Schedule A attached to this Subscription Agreement. 5.2 The Subscriber represents and warrants to the Company that the Subscriber is not a resident of British Columbia. 5.3 The Subscriber acknowledges that the Shares, the Warrants and the Warrant Shares may not be sold or otherwise disposed of for value in British Columbia, except pursuant to either a prospectus or statutory exemption available only in specific and limited circumstances. 6.               MISCELLANEOUS 6.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, addressed to the Company, at its head office at Suite 505, 1111 West Georgia Street, Vancouver British Columbia V6E 4M3, Attention: Mr. Garry Anselmo, President, and to the Subscriber at his/her address indicated on the last page of this Subscription Agreement. Notices shall be deemed to have been given on the date of mailing, except notices of change of address, which shall be deemed to have been given when received. 6.2 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Subscription Agreement. -------------------------------------------------------------------------------- 6.3 This Agreement will be governed by and construed in accordance with the laws of the Province of British Columbia applicable to contracts made and to be performed therein. The parties hereby submit to personal jurisdiction in the Courts of the Province of British Columbia for the enforcement of this Agreement and waive any and all rights under the laws of any state to object to jurisdiction within the Province of British Columbia for the purposes of litigation to enforce this Agreement. IN WITNESS WHEREOF, this Subscription Agreement is executed as of the day and year first written above. Number of Units Subscribed For:       Signature of Subscriber:       Name of Subscriber:       Address of Subscriber:       ACCEPTED BY: SILVERADO GOLD MINES LTD.   Signature of Authorized Signatory:       Name of Authorized Signatory:       Position of Authorized Signatory:       Date of Acceptance:   -------------------------------------------------------------------------------- SCHEDULE A BRITISH COLUMBIA DEFINITION OF “ACCREDITED INVESTOR” “Accredited Investor” means: (a) a Canadian financial institution, or an authorized foreign bank listed in Schedule III of the Bank Act (Canada);     (b) the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);     (c) an association under the Cooperative Credit Associations Act (Canada) located in Canada;     (d) a subsidiary of any person or company referred to in paragraphs (a) to (c), where the person or company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;     (e) a person or company registered under the securities legislation, or under the securities legislation of another jurisdiction of Canada, as an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario);     (f) an individual registered or formerly registered under the securities legislation, or under the securities legislation of another jurisdiction of Canada, as a representative of a person or company referred to in paragraph (e);     (g) the government of Canada or a province, or any crown corporation or agency of the government of Canada or a province;     (h) a municipality, public board or commission in Canada;     (i) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;     (j) a pension fund that is regulated by either the Office of the Superintendent of financial Institutions (Canada) or a provincial pension commission or similar regulatory authority;     (k) a registered charity under the Income Tax Act (Canada);     (l) an individual who, either alone or jointly with a spouse, beneficially owns, directly or indirectly, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;     (m) an individual whose net income before taxes exceeded $200,000 in each of the two most recent years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent years and the current year;     (n) a corporation, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least $5,000,000 as shown on its most recently prepared financial statements;     (o) a mutual fund or non-redeemable investment fund that, in the local jurisdiction, distributes its securities only to persons or companies that are accredited investors;     (p) a mutual fund or non-redeemable investment fund that, in the local jurisdiction, distributes its securities under a prospectus for which the regulator has issued a receipt;     (q) an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (e) and paragraph (j) in form and function; or     (r) a person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are accredited investors. -------------------------------------------------------------------------------- SCHEDULE B DECLARATION OF SALE PURSUANT TO RULE 904 OF REGULATION S OF THE SECURITIES ACT OF 1933 TO: SILVERADO GOLD MINES LTD.   a British Columbia company   (the “Company”)     TO: COMPUTERSHARE TRUST COMPANY OF CANADA   as transfer agent for the Common Shares of the Company The undersigned security holder of the Company (the “Security Holder”) makes this declaration in connection with the sale of the securities of the Company described below in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act"). The Security Holder certifies that: 1. The Security Holder is not an “affiliate” of the Company, as the term “affiliate” is defined in the Securities Act, a “distributor”, as defined in Rule 902(d) of the Securities Act or a “dealer”, as defined in Section 2(a)(12) of the Securities Act, or an affiliate of or a person acting on behalf of any of the foregoing and the Security Holder will not receive a selling concession, fee or other remuneration in respect of the sale of the Securities; 2. The offer of the Securities that resulted in the sale was not made to a person in the United States; 3. Either : (i) The transaction was executed in, on or through the facilities of the Berlin Stock Exchange, or the Frankfurt Stock Exchange, both designated offshore securities markets as defined in Regulation S under the 1933 Act, and neither the seller nor any person acting on its behalf knows or knew that the transaction had been prearranged with a buyer in the United States; or (ii) At the time the buy order is originated, the buyer was outside the United States; or the Security Holder and any person acting on its behalf reasonably believe that the buyer was outside the United States; 4. The transaction was not executed in, on or through the facilities of any securities exchange or over the counter market in the United States, including the NASD Over the Counter Bulletin Board; 5. Neither the Security Holder nor any affiliate of the Security Holder nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities, as the term “directed selling efforts” is defined in Regulation S of the Securities Act; and 6. The contemplated sale of the Securities is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the Securities Act. Number of Securities:     Description of Securities:     Date of Declaration:     Signature of Security Holder:     Name of Security Holder:   -------------------------------------------------------------------------------- SCHEDULE C ESCROW AGREEMENT This agreement (the “Escrow Agreement”) dated the ____ day of _______________, ______made: BETWEEN: _______________________________ (the “Escrow Agent”)     AND: SILVERADO GOLD MINES LTD. A British Columbia company (the “Company”)     AND TO: _______________________________ (the “Subscriber”) WHEREAS:   A. The Company and the Subscriber have entered into a subscription agreement dated the ____ day of _______________, ______ (the “Subscription Agreement”).         B. The Company and the Subscriber have agreed to enter into this Escrow Agreement as contemplated in the Subscription Agreement. THIS AGREEMENT WITNESSES THAT: The Escrow Agent acknowledges receipt of the following documents delivered pursuant to a subscription agreement between the Company and the Subscriber (the “Escrow Documents”):   1. certificates representing ______________________ common shares of the Company in the name of the Subscriber (the “Certificates”); and         2. the irrevocable written instruction of the Company to Computershare Trust Company of Canada, the transfer agent for the Company (the “Transfer Agent”) to remove the legend from the Certificates (the “Letter of Instruction”). The Escrow Agent agrees to hold the Escrow Documents on the following terms and subject to the following conditions: --------------------------------------------------------------------------------   1. The Escrow Agent agrees will hold the Certificates for a minimum period of forty-one (41) days prior to delivery of the Certificates to the Subscriber, subject to paragraph 4 below;         2. After the expiry of the minimum forty-one day period, the Escrow Agent will deliver the Certificates and the Letter of Instruction to the Transfer Agent upon delivery by the Subscriber of the “Declaration of Sale Pursuant to Rule 904 of the Securities Act of 1933”, in the form attached as Schedule B to the Subscription Agreement and attached hereto as Schedule A (the “Rule 904 Declaration”). Upon receipt of replacement share certificates without the restrictive legend, the Escrow Agent will deliver the replacement share certificates to the Subscriber;         3. The Escrow Agent will deliver the Certificates to the Subscriber upon the expiry of the one year period from the date of the Subscription Agreement in the event that the Certificates have not been released to the Subscriber by such date. In this event, the Letter of Instruction will be delivered to the Company;         4. The Subscriber is entitled to demand delivery of the certificates representing the Shares at any time without delivery of the Rule 904 Declaration and in this event the certificates representing the Shares would be delivered to the Subscriber, with the restrictive legend endorsed thereon, and the Letter of Instruction would be delivered to the Company. The Escrow Agent acknowledges that the shares represented by the Certificates have been issued without registration pursuant to Regulation S of the Securities Act of 1933 (the “Securities Act”) and this Escrow Agreement has been entered into in order to ensure that any resale of the shares represented by Certificates is completed in accordance with Regulation S of the Securities Act . SILVERADO GOLD MINES LTD.     Signature of Authorized Signatory:     Name of Authorized Signatory:     Position of Authorized Signatory:     NAME OF ESCROW AGENT:     Signature of Authorized Signatory:   Name of Authorized Signatory:       Position of Authorized Signatory:       NAME OF SUBSCRIBER:       Signature of Authorized Signatory:       Name of Authorized Signatory:       Position of Authorized Signatory:   --------------------------------------------------------------------------------

Exhibit 10.3 Commonwealth Telephone Enterprises, Inc.   -------------------------------------------------------------------------------- DEFERRED COMPENSATION PLAN   -------------------------------------------------------------------------------- Effective January 1, 2007 -------------------------------------------------------------------------------- TABLE OF CONTENTS              Page ARTICLE 1    Definitions    1 ARTICLE 2    Selection, Enrollment, Eligibility    5 2.1    Selection by Committee    5 2.2    Enrollment and Eligibility Requirements; Commencement of Participation    5 ARTICLE 3    Deferral Commitments/Company Contribution Amounts/Vesting/Crediting/ Taxes    6 3.1    Maximum Deferrals    6 3.2    Short Plan Year    6 3.3    Election to Defer; Effect of Election Form    7 3.4    Withholding and Crediting of Annual Deferral Amounts    7 3.5    Company Contribution Amount    8 3.6    Crediting of Amounts after Benefit Distribution    8 3.7    Vesting    8 3.8    Crediting of Account Balances    8 3.9    FICA and Other Taxes    9 ARTICLE 4    Scheduled Distribution; Unforeseeable Emergencies    10 4.1    Scheduled Distribution and Form of Payment    10 4.2    Postponing Scheduled Distributions    10 4.3    Other Benefits Take Precedence Over Scheduled Distributions    10 4.4    Withdrawal Payout/Suspensions for Unforeseeable Emergencies    10 ARTICLE 5    Change In Control Benefit    11 5.1    Change in Control Benefit    11 5.2    Payment of Change in Control Benefit    11 ARTICLE 6    Retirement Benefit    11 6.1    Retirement Benefit    11 6.2    Payment of Retirement Benefit    11 ARTICLE 7    Termination Benefit    12 7.1    Termination Benefit    12 7.2    Payment of Termination Benefit    12 ARTICLE 8    Disability Benefit    13 8.1    Disability Benefit    13 8.2    Payment of Disability Benefit    13 ARTICLE 9    Death Benefit    13 9.1    Death Benefit    13 9.2    Payment of Death Benefit    13 ARTICLE 10    Beneficiary Designation    13 10.1    Beneficiary    13 10.2    Beneficiary Designation; Change; Spousal Consent    13 10.3    Acknowledgement    13   i -------------------------------------------------------------------------------- TABLE OF CONTENTS (Cont.)              Page 10.4    No Beneficiary Designation    13 10.5    Doubt as to Beneficiary    13 10.6    Discharge of Obligations    13 ARTICLE 11    Leave of Absence    14 11.1    Paid Leave of Absence    14 11.2    Unpaid Leave of Absence    14 11.3    Leaves Resulting in Separation from Service    14 ARTICLE 12    Termination of Plan, Amendment or Modification    14 12.1    Termination of Plan    14 12.2    Amendment    14 12.3    Plan Agreement    15 12.4    Effect of Payment    15 ARTICLE 13    Administration    15 13.1    Committee Duties    15 13.2    Administration Upon Change In Control    15 13.3    Agents    15 13.4    Binding Effect of Decisions    15 13.5    Indemnity of Committee    16 13.6    Employer Information    16 ARTICLE 14    Other Benefits and Agreements    16 14.1    Coordination with Other Benefits    16 ARTICLE 15    Claims Procedures    16 15.1    Presentation of Claim    16 15.2    Notification of Decision    16 15.3    Review of a Denied Claim    17 15.4    Decision on Review    17 15.5    Legal Action    17 ARTICLE 16    Trust    17 16.1    Establishment of the Trust    17 16.2    Interrelationship of the Plan and the Trust    18 16.3    Distributions From the Trust    18 ARTICLE 17    Miscellaneous    18 17.1    Status of Plan    18 17.2    Unsecured General Creditor    18 17.3    Employer’s Liability    18 17.4    Nonassignability    18 17.5    Not a Contract of Employment    18 17.6    Furnishing Information    18 17.7    Terms    19 17.8    Captions    19 17.9    Governing Law    19 17.10    Notice    19   ii -------------------------------------------------------------------------------- TABLE OF CONTENTS (Cont.)              Page 17.11    Successors    19 17.12    Spouse’s Interest    19 17.13    Validity    19 17.14    Incompetent    19 17.15    Court Order    19 17.16    Distribution in the Event of Income Inclusion Under 409A    20 17.17    Insurance    20   iii -------------------------------------------------------------------------------- COMMONWEALTH TELEPHONE ENTERPRISES, INC. DEFERRED COMPENSATION PLAN Effective January 1, 2007 Purpose The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated Employees who contribute materially to the continued growth, development and future business success of Commonwealth Telephone Enterprises, Inc., a Pennsylvania corporation, and its subsidiaries, if any, that sponsor this Plan. The Plan offers certain executives of Commonwealth Telephone Enterprises Inc. and its affiliated companies the opportunity to defer the receipt of a portion of their compensation on a pre-tax basis and to have the deferred amounts reflect the value of the common stock of Commonwealth Telephone Enterprises, Inc. Further, Commonwealth Telephone Enterprises, Inc., will credit matching contributions equal to 100% of the executive’s deferrals. Subject to certain limitations, as described herein, matching contributions will be credited to the executive’s matching account in the form of share units of common stock of Commonwealth Telephone Enterprises, Inc. Subject to the executive’s election regarding the timing of payment, a number of shares of common stock of Commonwealth Telephone Enterprises, Inc., equal to the number of share units credited to the executive’s matching contribution account will be paid to the executive if he or she remains an employee for twelve (12) consecutive full calendar quarters following the purchase. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. Any unvested benefits accrued by participants prior to December 31, 2004 in the Commonwealth Telephone Enterprises, Inc., Executive Stock Purchase Plan shall be transferred to this Plan effective as of January 1, 2007. ARTICLE 1 Definitions For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: “Account Balance” shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of (i) the Deferral Account balance and (ii) the Company Contribution Account balance. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. The Account Balance shall also be credited as of the Effective Date with the Participant’s Transferred Balance, if any. “Annual Deferral Amount” shall mean that portion of a Participant’s Base Salary and Bonus that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year. In the event of a Participant’s Retirement, Disability, death or Termination of Employment prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount withheld prior to such event. “Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the Participant’s vested Account Balance shall be calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion, and (ii) for remaining annual installments, the Participant’s vested Account Balance shall be calculated on every anniversary of such calculation date, as applicable. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method for the Retirement Benefit, the first payment shall be 1/10 of the vested Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition.   1 -------------------------------------------------------------------------------- “Base Salary” shall mean the annual cash compensation relating to services performed during any calendar year, excluding distributions from nonqualified deferred compensation plans, bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. “Beneficiary” shall mean one (1) or more persons, trusts, estates or other entities, designated in accordance with Article 10, that are entitled to receive benefits under this Plan upon the death of a Participant. “Beneficiary Designation Form” shall mean the form established from time-to-time by the Committee that a Participant completes, signs and returns to the Committee to designate one (1) or more Beneficiaries. “Benefit Distribution Date” shall mean the date that triggers distribution of a Participant’s vested Account Balance. A Participant’s Benefit Distribution Date shall be determined upon the occurrence of any one (1) of the following:     (a) If the Participant Retires, his or her Benefit Distribution Date shall be (i) the last day of the six-month period immediately following the date on which the Participant Retires if the Participant is a Key Employee, and (ii) for all other Participants, the date on which the Participant Retires; provided, however, in the event the Participant changes his or her Retirement Benefit election in accordance with Section 6.2(b), his or her Benefit Distribution Date shall be postponed in accordance with Section 6.2(b).     (b) If the Participant experiences a Termination of Employment, his or her Benefit Distribution Date shall be (i) the last day of the six-month period immediately following the date on which the Participant experiences a Termination of Employment if the Participant is a Key Employee, and (ii) for all other Participants, the date on which the Participant experiences a Termination of Employment; provided, however, in the event the Participant changes his or her Termination Benefit election in accordance with Section 7.2(b), his or her Benefit Distribution Date shall be postponed in accordance with Section 7.2(b); or     (c) The date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death, if the Participant dies prior to the complete distribution of his or her vested Account Balance; or     (d) The date on which the Participant becomes Disabled; or     (e) The date on which the Company experiences a Change in Control, as determined by the Committee in its sole discretion, if (i) the Participant has elected to receive a Change in Control Benefit, as set forth in Section 5.1 below, and (ii) if a Change in Control occurs prior to the Participant’s Termination of Employment, Retirement, death or Disability. “Board” shall mean the board of directors of the Company. “Bonus” shall mean any compensation earned by a Participant for services rendered during a Plan Year pursuant to the Employer’s annual bonus and cash incentive plans. “Change in Control” shall mean any “change in control event” as defined in accordance with Code Section 409A and related Treasury guidance and Regulations. “Change in Control Benefit” shall have the meaning set forth in Article 5.   2 -------------------------------------------------------------------------------- “Claimant” shall have the meaning set forth in Section 15.1. “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. “Committee” shall mean the committee described in Article 13. “Company” shall mean Commonwealth Telephone Enterprises, Inc., a Pennsylvania corporation, and any successor to all or substantially all of the Company’s assets or business. “Company Contribution Account” shall mean (i) the sum of the Participant’s Company Contribution Amounts, plus (ii) amounts credited or debited to the Participant’s Company Contribution Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant’s Company Contribution Account. “Company Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5. “Death Benefit” shall mean the benefit set forth in Article 9. “Deferral Account” shall mean (i) the sum of all of a Participant’s Annual Deferral Amounts, plus (ii) amounts credited or debited to the Participant’s Deferral Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. “Deferral Date” shall mean the date or dates on which Base Salary or Bonus, to which any Election Form relates, would otherwise have been paid. “Disability” or “Disabled” shall mean that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident or health plan covering employees of the Participant’s Employer. For purposes of this Plan, a Participant shall be deemed Disabled if determined to be totally disabled by the Social Security Administration, or if determined to be disabled in accordance with the applicable disability insurance program of such Participant’s Employer, provided that the definition of “disability” applied under such disability insurance program complies with the requirements in the preceding sentence. “Dividend Payment Date” shall mean the date on which a dividend is paid by the Company with respect to Shares. “Disability Benefit” shall mean the benefit set forth in Article 8. “Election Form” shall mean the form, which may be in electronic format, established from time-to-time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. “Employee” shall mean a person who is an employee of any Employer. “Employer(s)” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.   3 -------------------------------------------------------------------------------- “Fair Market Value” of a Share on any given day means:     (a) The closing price per Share on the national securities exchange on which the Shares are principally traded on the next preceding date on which there was a sale of Shares on such exchange; or     (b) If the Shares are not listed or admitted to trading on any such exchange, the closing price per Share on the Nasdaq National Market on the next preceding date on which there was a sale of Shares, or if such closing price is not available, the average of the highest reported bid and lowest reported asked prices per Share as reported by NASDAQ on the next preceding date on which such bid and asked prices were reported; or     (c) If the Shares are not then listed on any securities exchange or prices therefore are not then quoted in NASDAQ, the value determined by the Committee in good faith. “First Plan Year” shall mean the period beginning January 1, 2007 and ending December 31, 2007. “Fund” means the fund maintained under the Trust Agreement. “Key Employee” shall mean any Participant who is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof) of an Employer whose stock is publicly traded on an established securities market or otherwise, as determined by the Committee based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”). All Participants who are determined to be key employees under Code Section 416(i) (without regard to paragraph (5) thereof) during the identification period shall be treated as a Key Employee for purposes of the Plan during the 12-month period that begins on the first day of the 4th month following the close of such identification period. “Participant” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who submits an executed Plan Agreement, Election Form and Beneficiary Designation Form, which is accepted by the Committee, and (iii) whose Plan Agreement has not terminated. “Plan” shall mean the Commonwealth Telephone Enterprises, Inc., Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time-to-time. “Plan Agreement” shall mean a written agreement, as may be amended from time-to-time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant’s Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one (1) Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. “Plan Year” shall, except for the First Plan Year, mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. “Purchase Date” shall mean, with respect to a Deferral Date or a Dividend Payment Date, the date or dates on which the Trustee purchases Shares to reflect the Deferral Amounts and Company Contribution Amounts made on such Deferral Date or the dividends paid on such Dividend Payment Date. The Trustee may purchase Shares from the Company or on the open market. “Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee, separation from service with all Employers for any reason other than death or Disability, as determined in accordance with Code Section 409A and related Treasury guidance and Regulations, on or after the earlier of the attainment of (a) age sixty-five (65), or (b) age 55 with 5 Years of Service.   4 -------------------------------------------------------------------------------- “Retirement Benefit” shall mean the benefit set forth in Article 6. “Scheduled Distribution” shall mean the distribution set forth in Section 4.1. “Shares” means Common Stock of the Company, par value $1.00 per share. All Shares that are distributable pursuant to this Plan shall originate only from those Shares that were approved by stockholders, and remain available, pursuant to the Commonwealth Telephone Enterprises, Inc., Equity Incentive Plan, as amended and restated effective May 18, 2006. “Share Units” means units credited to a Participant’s Deferral Account and Company Contribution Account pursuant to Section 3.8 “Terminate the Plan”, “Termination of the Plan” shall mean a determination by an Employer’s board of directors that (i) all of its Participants shall no longer be eligible to participate in the Plan, (ii) no new deferral elections for such Participants shall be permitted, and (iii) such Participants shall no longer be eligible to receive company contributions under this Plan. “Termination Benefit” shall mean the benefit set forth in Article 7. “Termination of Employment” shall mean the separation from service with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability or death, as determined in accordance with Code Section 409A and related Treasury guidance and Regulations. “Transferred Balance” shall mean any unvested benefits accrued by Participants prior to December 31, 2004 in the Commonwealth Telephone Enterprises, Inc., Executive Stock Purchase Plan (the “ESPP”) that are transferred to this Plan effective as of January 1, 2007. Such Transferred Balance will be governed by the terms of this Plan, except for the vesting of such balance, which shall be governed by the terms of the ESPP. “Trust” shall mean one (1) or more trusts established by the Company in accordance with Article 16. “Trust Agreement” means the agreement of trust entered into between the Company and the Trustee for purposes of this Plan. “Trustee” shall mean the individual(s) or corporate trustee appointed as a trustee under the Trust. “Unforeseeable Emergency” shall mean a severe financial hardship of the Participant or his or her Beneficiary resulting from (i) an illness or accident of the Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or the Participant’s or Beneficiary’s dependent (as defined in Code Section 152(a)), (ii) a loss of the Participant’s or Beneficiary’s property due to casualty, or (iii) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or the Participant’s Beneficiary, all as determined in the sole discretion of the Committee. ARTICLE 2 Selection, Enrollment, Eligibility   2.1 Selection by Committee. Participation in the Plan shall be limited to, as determined by the Committee in its sole discretion, a select group of management or highly compensated Employees. From that group, the Committee shall select, in its sole discretion, those individuals who may actually participate in this Plan.   2.2 Enrollment and Eligibility Requirements; Commencement of Participation.     (a) As a condition to participation, each Employee who is eligible to participate in the Plan effective as of the first day of a Plan Year shall complete, execute and return to the Committee a Plan Agreement, an   5 --------------------------------------------------------------------------------   Election Form and a Beneficiary Designation Form, prior to the first day of such Plan Year, or such other earlier deadline as may be established by the Committee, in its sole discretion. In addition, the Committee shall establish from time-to-time such other enrollment requirements as it determines, in its sole discretion, are necessary. With respect to the First Plan Year, each selected Employee must complete these requirements within thirty (30) days of the date on which such Employee becomes eligible to participate in the Plan. Except as provided in Section 2.2(a) below, with respect to any Plan Year after the First Plan Year, each selected Employee must complete these requirements prior to the first day of such Plan Year, or such other earlier deadline as may be established by the Committee, in its sole discretion.     (b) A selected Employee who first becomes eligible to participate in this Plan after the first day of a Plan Year must complete, execute and return to the Committee a Plan Agreement, an Election Form and Beneficiary Designation Form within thirty (30) days after he or she first becomes eligible to participate in the Plan, or within such other earlier deadline as may be established by the Committee, in its sole discretion, in order to participate for that Plan Year. In such event, such person’s participation in this Plan shall not commence earlier than the date determined by the Committee pursuant to Section 2.2(c) and such person shall not be permitted to defer under this Plan any portion of his or her Base Salary or Bonus that are paid with respect to services performed prior to his or her participation commencement date, except to the extent permissible under Code Section 409A and related Treasury guidance or Regulations.     (c) Each selected Employee who is eligible to participate in the Plan shall commence participation in the Plan on the date that the Committee determines, in its sole discretion, that the Employee has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period. Notwithstanding the foregoing, the Committee shall process such Participant’s deferral election as soon as administratively practicable after such deferral election is submitted to and accepted by the Committee.     (d) If an Employee fails to meet all requirements contained in this Section 2.2 within the period required, that Employee shall not be eligible to participate in the Plan during such Plan Year. ARTICLE 3 Deferral Commitments/Company Contribution Amounts/ Vesting/Crediting/Taxes   3.1 Maximum Annual Deferral Amount for Plan Year. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, up to 20% of such Participant’s Base Salary, and up to 100% of such Participant’s Bonus, provided, however, that the maximum Annual Deferral Amount for any Plan Year shall not exceed twenty percent (20%) of the sum of the Participant’s Base Salary and Bonus for such Plan Year. If the Committee determines, in its sole discretion, prior to the beginning of a Plan Year that a Participant has made no election, the amount deferred shall be zero.   3.2 Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the First Plan Year of the Plan itself, the maximum Annual Deferral Amount shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance, except to the extent permissible under Code Section 409A and related Treasury guidance or Regulations. For compensation that is earned based upon a specified performance period, the Participant’s deferral election will apply to the portion of such compensation that is equal to (i) the total amount of compensation for the performance period, multiplied by (ii) a fraction, the numerator of which is the number of days remaining in the service period after the Participant’s deferral election is made, and the denominator of which is the total number of days in the performance period.   6 -------------------------------------------------------------------------------- 3.3 Election to Defer; Effect of Election Form.     (a) First Plan Year. In connection with a Participant’s commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections, as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee.     (b) General Timing Rule for Deferral Elections in Subsequent Plan Years. For each succeeding Plan Year, a Participant may elect to defer Base Salary and Bonus and make such other elections as the Committee deems necessary or desirable under the Plan by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, before the December 31st preceding the Plan Year in which such compensation is earned, or before such other deadline established by the Committee in accordance with the requirements of Code Section 409A and related Treasury guidance or Regulations. Any deferral election(s) made in accordance with this Section 3.3(b) shall be irrevocable; provided, however, that if the Committee requires Participants to make a deferral election for “performance-based compensation” by the deadline(s) described above, it may, in its sole discretion, and in accordance with Code Section 409A and related Treasury guidance or Regulations, permit a Participant to subsequently change his or her deferral election for such compensation by submitting an Election Form to the Committee no later than the deadline established by the Committee pursuant to Section 3.3(c) below.     (c) Performance-Based Compensation. Notwithstanding the foregoing, the Committee may, in its sole discretion, determine that an irrevocable deferral election pertaining to “performance-based compensation” based on services performed over a period of at least twelve (12) months, may be made by timely delivering an Election Form to the Committee, in accordance with its rules and procedures, no later than six (6) months before the end of the performance service period. “Performance-based compensation” shall be compensation, the payment or amount of which is contingent on pre-established organizational or individual performance criteria, which satisfies the requirements of Code Section 409A and related Treasury guidance or Regulations. In order to be eligible to make a deferral election for performance-based compensation, a Participant must perform services continuously from a date no later than the date upon which the performance criteria for such compensation are established through the date upon which the Participant makes a deferral election for such compensation. In no event shall an election to defer performance-based compensation be permitted after such compensation has become both substantially certain to be paid and readily ascertainable.     (d) Compensation Subject to Risk of Forfeiture. With respect to compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right, the Committee may, in its sole discretion, determine that an irrevocable deferral election for such compensation may be made by timely delivering an Election Form to the Committee in accordance with its rules and procedures, no later than the thirtieth (30th) day after the Participant obtains the legally binding right to the compensation, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse.   3.4 Withholding and Crediting of Annual Deferral Amounts. For each Plan Year, unless the Participant elects otherwise, the Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from time-to-time for increases and decreases in Base Salary. The Bonus portion of the Annual Deferral Amount shall be withheld at the time the Bonus is or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant’s Deferral Account at the time such amounts would otherwise have been paid to the Participant.   7 -------------------------------------------------------------------------------- 3.5 Company Contribution Amount. As of each Deferral Date, the Company shall pay the Trustee an amount, in cash or in shares, equal to the amount of the Participant’s deferrals and the Committee shall credit to each Participant’s Company Contribution Account, Share Units equal to the number of Share Units credited to the Participant’s Deferral Account, as further described in Section 3.8   3.6 Crediting of Amounts After Benefit Distribution. Notwithstanding any provision in this Plan to the contrary, should the complete distribution of a Participant’s vested Account Balance occur prior to the date on which any portion of (i) the Annual Deferral Amount that a Participant has elected to defer in accordance with Section 3.3 or (ii) the Company Contribution Amount, would otherwise be credited to the Participant’s Account Balance, such amounts shall not be credited to the Participant’s Account Balance, but shall be paid to the Participant in a manner determined by the Committee, in its sole discretion.   3.7 Vesting.     (a) A Participant shall at all times be 100% vested in his or her Deferral Account.     (b) A Participant shall be vested in each Share Unit credited to his or her Company Contribution Account upon the expiration of the twelfth (12th) full consecutive calendar quarter since such Share Units were credited to the Company Contribution Account, unless otherwise provided in his or her Plan Agreement, employment agreement or any other agreement entered into between the Participant and his or her Employer.     (c) Notwithstanding the foregoing, in the event of a Change in Control, or upon a Participant’s Retirement, death while employed by an Employer, or Disability, a Participant’s Company Contribution Account shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules).   3.8 Crediting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant’s Account Balance as follows:     (a) Share Units. On any Purchase Date, but as of the applicable Deferral Date, the Committee shall credit each Participant’s Deferral Account and Company Contribution Account with a number of Share Units, rounded to the nearest .0001 of a Share, which shall equal the product of (1) and (2), as follows: (1) an amount, rounded down to the next lowest whole number, obtained by dividing: (i) the amount of all Participants’ Annual Deferral Amounts and all Company Contribution Amounts attributable to such Deferral Date that is invested on such Purchase Date; by (ii) the average per Share cost paid by the Trustee on such Purchase Date with respect to such Deferral Date; provided, however, that if the Trustee purchases (or notionally purchases) the Shares from the Company, the Trustee’s average per Share cost, for purposes of this Section 3.8, shall be the Fair Market Value per Share on such Deferral Date; (2) a fraction: (i) the numerator of which is the Participant’s Annual Deferral Amount and the Participant’s Company Contribution Amount attributable to such Deferral Date; and (ii) the denominator of which is all Participants’ Annual Deferral Amounts and all Company Matching Contributions attributable to such Deferral Date.   8 --------------------------------------------------------------------------------   (b) Cash Dividends. If the Company pays a cash dividend with respect to Shares, then as of the Dividend Payment Date, the Company shall credit each Participant’s Deferral Account with a number of Share Units, which shall equal the product of (1) and (2), as follows: (1) an amount, rounded down to the nearest .0001 of a Share, obtained by dividing: (i) the amount of the dividend paid on such Dividend Payment Date with respect to a Share multiplied by the number of Share Units credited to all Participants’ Deferral Accounts on the record date for such Dividend; by (ii) the average per Share cost paid by the Trustee on such Purchase Date with respect to such Dividend Payment Date; provided, however, that if the Trustee purchases (or notionally purchases) the Shares from the Company, the Trustee’s average per Share cost, for purposes of this Section 3.8(b), shall be the Fair Market Value per Share on such Dividend Date; (2) a fraction: (i) the numerator of which is the number of Share Units credited to the Participant’s Deferral Account on the record date for such Dividend; and (ii) the denominator of which is the number of Share Units credited to all Participants’ Deferral Accounts on the record date for such Dividend.     (c) Share Dividends. If the Company pays a cash dividend with respect to Shares in the form of additional Shares, then as of the Dividend Payment Date, the Company shall credit each Participant’s Deferral Account with a number of Share Units equal to the product of (1) the Share Units credited to the Participant’s Deferral Account on the record date for such Dividend, and (2) the number of Shares payable as a dividend for each outstanding Share.     (d) No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Share Units represent a number of Shares for bookkeeping entry only, and shall not represent any investment made on any Participant’s behalf by the Company or the Trust. The Participant shall at all times remain an unsecured creditor of the Company. The Participant shall have no voting rights or any other rights of a shareholder with respect to such Share Units except that said Share Units will be taken into consideration for purposes of a Participant’s compliance with the Company’s Stock Ownership Guidelines.   3.9 FICA and Other Taxes.     (a) Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Salary and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.9.     (b) Company Contribution Account. When a Participant becomes vested in a portion of his or her Company Contribution Account, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Salary and Bonus that is not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Company Contribution Amount. If necessary, the Committee may reduce the vested portion of the Participant’s Company Contribution Account, as applicable, in order to comply with this Section 3.9.     (c) Distributions. The Participant’s Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust.   9 -------------------------------------------------------------------------------- ARTICLE 4 Scheduled Distribution; Unforeseeable Emergencies   4.1 Scheduled Distribution and Form of Payment. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a Scheduled Distribution, in the form of a lump sum payment, from the Plan with respect to all or a portion of the Annual Deferral Amount. The Scheduled Distribution shall be a lump sum payment in an amount that is equal to the portion of the Annual Deferral Amount the Participant elected to have distributed as a Scheduled Distribution, plus vested amounts credited or debited in the manner provided in Section 3.8 above on that amount, calculated as of the close of business on or around the date on which the Scheduled Distribution becomes payable, as determined by the Committee in its sole discretion. Subject to the other terms and conditions of this Plan, each Scheduled Distribution elected shall be paid out during a sixty (60) day period commencing immediately after the first day of any calendar quarter designated by the Participant (the “Scheduled Distribution Date”). The Scheduled Distribution shall be paid in the form of Shares equal to the number of whole Share Units credited to the Participant’s Account, plus an amount of cash in lieu of fractional Share Units if no subsequent distribution dates are anticipated. The calendar quarter designated by the Participant must be at least [one (1) Plan Year] after the end of the Plan Year to which the Participant’s deferral election described in Section 3.3 relates, unless otherwise provided on an Election Form approved by the Committee in its sole discretion. By way of example, if a Scheduled Distribution is elected for Annual Deferral Amounts that are earned in the Plan Year commencing January 1, 2007, the earliest Scheduled Distribution Date that may be designated by a Participant would be January 1, 2009, and the Scheduled Distribution would become payable during the sixty (60) day period commencing immediately after such Scheduled Distribution Date.   4.2 Postponing Scheduled Distributions. A Participant may elect to postpone a Scheduled Distribution described in Section 4.1 above, and have such amount paid out during a sixty (60) day period commencing immediately after an allowable alternative distribution date designated by the Participant in accordance with this Section 4.2. In order to make this election, the Participant must submit a new Scheduled Distribution Election Form to the Committee in accordance with the following criteria:     (a) Such Scheduled Distribution Election Form must be submitted to and accepted by the Committee in its sole discretion at least twelve (12) months prior to the Participant’s previously designated Scheduled Distribution Date;     (b) The new Scheduled Distribution Date selected by the Participant must be the first day of a Plan Year, and must be at least five (5) years after the previously designated Scheduled Distribution Date; and     (c) The election of the new Scheduled Distribution Date shall have no effect until at least twelve (12) months after the date on which the election is made.   4.3 Other Benefits Take Precedence Over Scheduled Distributions. Should a Benefit Distribution Date occur that triggers a benefit under Articles 5, 6, 7, 8, or 9, any Annual Deferral Amount that is subject to a Scheduled Distribution election under Section 4.1 shall not be paid in accordance with Section 4.1, but shall be paid in accordance with the other applicable Article. Notwithstanding the foregoing, the Committee shall interpret this Section 4.3 in a manner that is consistent with Code Section 409A and related Treasury guidance and Regulations.   4.4 Withdrawal Payout/Suspensions for Unforeseeable Emergencies.     (a) If the Participant experiences an Unforeseeable Emergency, the Participant may petition the Committee to receive a partial or full payout from the Plan, subject to the provisions set forth below.     (b) The payout, if any, from the Plan shall not exceed the lesser of (i) the Participant’s vested Account Balance, calculated as of the close of business on or around the date on which the amount becomes payable, as determined by the Committee in its sole discretion, or (ii) the amount necessary to satisfy the Unforeseeable Emergency, plus amounts necessary to pay Federal, state, or local income taxes or   10 --------------------------------------------------------------------------------   penalties reasonably anticipated as a result of the distribution. Notwithstanding the foregoing, a Participant may not receive a payout from the Plan to the extent that the Unforeseeable Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (C) by cessation of deferrals under this Plan.     (c) If the Committee, in its sole discretion, approves a Participant’s petition for payout from the Plan, the Participant shall receive a payout from the Plan within sixty (60) days of the date of such approval, and the Participant’s deferrals under the Plan shall be terminated as of the date of such approval.     (d) In addition, a Participant’s deferral elections under this Plan shall be terminated to the extent the Committee determines, in its sole discretion, that termination of such Participant’s deferral elections is required pursuant to Treas. Reg. §1.401(k)-1(d)(3) for the Participant to obtain a hardship distribution from an Employer’s 401(k) Plan. If the Committee determines, in its sole discretion, that a termination of the Participant’s deferrals is required in accordance with the preceding sentence, the Participant’s deferrals shall be terminated as soon as administratively practicable following the date on which such determination is made.     (e) Notwithstanding the foregoing, the Committee shall interpret all provisions relating to a payout and/or termination of deferrals under this Section 4.4, in a manner that is consistent with Code Section 409A and related Treasury guidance and Regulations. ARTICLE 5 Change in Control Benefit   5.1 Change in Control Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall irrevocably elect on an Election Form whether to (i) receive a Change in Control Benefit upon the occurrence of a Change in Control, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion, or (ii) to have his or her Account Balance remain in the Plan upon the occurrence of a Change in Control and to have his or her Account Balance remain subject to the terms and conditions of the Plan. If a Participant does not make any election with respect to the payment of the Change in Control Benefit, then Participant shall receive a Change in Control Benefit as described in Section 5.1(i), above.   5.2 Payment of Change in Control Benefit. The Change in Control Benefit, if any, shall be paid to the Participant in a lump sum no later than sixty (60) days after the Participant’s Benefit Distribution Date. Notwithstanding the foregoing, the Committee shall interpret all provisions in this Plan relating to a Change in Control Benefit in a manner that is consistent with Code Section 409A and related Treasury guidance and Regulations. ARTICLE 6 Retirement Benefit   6.1 Retirement Benefit. A Participant who Retires shall receive, as a Retirement Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee, in its sole discretion.   6.2 Payment of Retirement Benefit.     (a) A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of up to fifteen (15) years. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such Participant shall be deemed to have elected to receive the Retirement Benefit in a lump sum.   11 --------------------------------------------------------------------------------   (b) A Participant may change the form of payment of the Retirement Benefit by submitting an Election Form to the Committee in accordance with the following criteria:     (i) The election to modify the Retirement Benefit shall have no effect until at least twelve (12) months after the date on which the election is made; and     (ii) The first Retirement Benefit payment shall be delayed at least five (5) years from the Participant’s originally scheduled Benefit Distribution Date as described in Section 1. For purposes of applying the requirements above, the right to receive the Retirement Benefit in installment payments shall be treated as the entitlement to a single payment. The Committee shall interpret all provisions relating to changing the Retirement Benefit election under this Section 6.2 in a manner that is consistent with Code Section 409A and related Treasury guidance or Regulations. The Election Form most recently accepted by the Committee that has become effective shall govern the payout of the Retirement Benefit.     (c) The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant’s Benefit Distribution Date. ARTICLE 7 Termination Benefit   7.1 Termination Benefit. A Participant who experiences a Termination of Employment shall receive, as a Termination Benefit, his or her vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion.   7.2 Payment of Termination Benefit.     (a) A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Termination Benefit in a lump sum or pursuant to an Annual Installment Method of up to five (5) years. If a Participant does not make any election with respect to the payment of the Termination Benefit, then such Participant shall be deemed to have elected to receive the Termination Benefit in a lump sum.     (b) A Participant may change the form of payment of the Termination Benefit by submitting an Election Form to the Committee in accordance with the following criteria:     (i) The election to modify the Termination Benefit shall have no effect until at least twelve (12) months after the date on which the election is made; and     (ii) The first Termination Benefit payment is delayed at least five (5) years from the Participant’s originally scheduled Benefit Distribution Date as described in Section 1. For purposes of applying the requirements above, the right to receive the Termination Benefit in installment payments shall be treated as the entitlement to a single payment. The Committee shall interpret all provisions relating to changing the Termination Benefit election under this Section 7.2 in a manner that is consistent with Code Section 409A and related Treasury guidance or Regulations. The Election Form most recently accepted by the Committee that has become effective shall govern the payout of the Termination Benefit.     (c) The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant’s Benefit Distribution Date.   12 -------------------------------------------------------------------------------- ARTICLE 8 Disability Benefit   8.1 Disability Benefit. Upon a Participant’s Disability, the Participant shall receive a Disability Benefit, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as selected by the Committee, in its sole discretion.   8.2 Payment of Disability Benefit. The Disability Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the Participant’s Benefit Distribution Date. ARTICLE 9 Death Benefit   9.1 Death Benefit. The Participant’s Beneficiary(ies) shall receive a Death Benefit upon the Participant’s death which will be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as selected by the Committee in its sole discretion.   9.2 Payment of Death Benefit. The Death Benefit shall be paid to the Participant’s Beneficiary(ies) in a lump sum payment no later than sixty (60) days after the Participant’s Benefit Distribution Date. ARTICLE 10 Beneficiary Designation   10.1 Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.   10.2 Beneficiary Designation; Change. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time-to-time. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.   10.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Administrator or its designated agent.   10.4 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided in Sections 10.1, 10.2 and 10.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant’s estate.   10.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.   10.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.   13 -------------------------------------------------------------------------------- ARTICLE 11 Leave of Absence   11.1 Paid Leave of Absence. If a Participant is authorized by the Participant’s Employer to take a paid leave of absence from the employment of the Employer, and such leave of absence does not constitute a separation from service, as determined by the Committee in accordance with Code Section 409A and related Treasury guidance and Regulations, (i) the Participant shall continue to be considered eligible for the benefits provided in Articles 4, 5, 6, 7, 8, or 9 in accordance with the provisions of those Articles, and (ii) the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3.   11.2 Unpaid Leave of Absence. If a Participant is authorized by the Participant’s Employer to take an unpaid leave of absence from the employment of the Employer for any reason, and such leave of absence does not constitute a separation from service, as determined by the Committee in accordance with Code Section 409A and related Treasury guidance and Regulations, such Participant shall continue to be eligible for the benefits provided in Articles 4, 5, 6, 7, 8, or 9 in accordance with the provisions of those Articles. However, the Participant shall be excused from fulfilling his or her Annual Deferral Amount commitment that would otherwise have been withheld during the remainder of the Plan Year in which the unpaid leave of absence is taken. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan, provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.3 above.   11.3 Leaves Resulting in Separation from Service. In the event that a Participant’s leave of absence from his or her Employer does constitute a separation from service, as determined by the Committee in accordance with Code Section 409A and related Treasury guidance and Regulations, the Participant’s vested Account Balance shall be distributed to the Participant in accordance with Article 6 or 7 of this Plan, as applicable. ARTICLE 12 Termination of Plan, Amendment or Modification   12.1 Termination of Plan. The Plan shall remain in effect until termination by the Board. The Board shall have the power to terminate the Plan at any time. Following a Termination of the Plan, Participant Account Balances shall remain in the Plan until the Participant becomes eligible for the benefits provided in Articles 4, 5, 6, 7, 8 or 9 in accordance with the provisions of those Articles. The Termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination. Notwithstanding the foregoing, to the extent permissible under Code Section 409A and related Treasury guidance or Regulations, during the thirty (30) days preceding or within twelve (12) months following a Change in Control an Employer shall be permitted to (i) terminate the Plan by action of its board of directors, and (ii) distribute the vested Account Balances to Participants in a lump sum no later than twelve (12) months after the Change in Control, provided that all other substantially similar arrangements sponsored by such Employer are also terminated and all balances in such arrangements are distributed within twelve (12) months of the termination of such arrangements.   12.2 Amendment.     (a) The Board may, at any time, amend or modify the Plan in whole or in part. Notwithstanding the foregoing, (i) no amendment or modification shall be effective to decrease the value of a Participant’s vested Account Balance in existence at the time the amendment or modification is made, and (ii) no amendment or modification of this Section 12.2 or Section 13.2 of the Plan shall be effective unless   14 --------------------------------------------------------------------------------   and until two-thirds (2/3) of Participants with an Account Balance in the Plan as of the date of such proposed amendment or modification provide prior written consent in a time and manner determined by the Committee.     (b) Notwithstanding any provision of the Plan to the contrary, in the event that the Company determines that any provision of the Plan may cause amounts deferred under the Plan to become immediately taxable to any Participant under Code Section 409A, and related Treasury guidance or Regulations, the Company may (i) adopt such amendments to the Plan and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company determines necessary or appropriate to preserve the intended tax treatment of the Plan benefits provided by the Plan and/or (ii) take such other actions as the Company determines necessary or appropriate to comply with the requirements of Code Section 409A, and related Treasury guidance or Regulations.   12.3 Plan Agreement. Despite the provisions of Sections 12.1 and 12.2 above, if a Participant’s Plan Agreement contains benefits or limitations that are not in this Plan document, the Board may only amend or terminate such provisions with the written consent of the Participant.   12.4 Effect of Payment. The full payment of the Participant’s vested Account Balance under Articles 4, 5, 6, 7, 8, or 9 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan, and the Participant’s Plan Agreement shall terminate. ARTICLE 13 Administration   13.1 Committee Duties. Except as otherwise provided in this Article 13, this Plan shall be administered by the Compensation/Pension Committee of the Board of Directors. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and (ii) decide or resolve any and all questions, including benefit entitlement determinations and interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company.   13.2 Administration Upon Change In Control. Within one hundred and twenty (120) days following a Change in Control, the individuals who comprised the Committee immediately prior to the Change in Control (whether or not such individuals are members of the Committee following the Change in Control) may, by written consent of the majority of such individuals, appoint an independent third party administrator (the “Administrator”) to perform any or all of the Committee’s duties described in Section 13.1 above, including without limitation, the power to determine any questions arising in connection with the administration or interpretation of the Plan, and the power to make benefit entitlement determinations. Upon and after the effective date of such appointment, (i) the Company must pay all reasonable administrative expenses and fees of the Administrator, and (ii) the Administrator may only be terminated with the written consent of the majority of Participants with an Account Balance in the Plan as of the date of such proposed termination.   13.3 Agents. In the administration of this Plan, the Committee or the Administrator, as applicable, may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel.   13.4 Binding Effect of Decisions. The decision or action of the Committee or Administrator, as applicable, with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.   15 -------------------------------------------------------------------------------- 13.5 Indemnity of Committee. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.   13.6 Employer Information. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require. ARTICLE 14 Other Benefits and Agreements   14.1 Coordination with Other Benefits. The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 15 Claims Procedures   15.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.   15.2 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing:     (a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or     (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:     (i) the specific reason(s) for the denial of the claim, or any part of it;     (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;     (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;     (iv) an explanation of the claim review procedure set forth in Section 15.3 below; and     (v) a statement of the Claimant’s right to bring a civil action under ERISA, Section 502(a), following an adverse benefit determination on review.   16 -------------------------------------------------------------------------------- 15.3 Review of a Denied Claim. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):     (a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claim for benefits;     (b) may submit written comments or other documents; and/or     (c) may request a hearing, which the Committee, in its sole discretion, may grant.   15.4 Decision on Review. The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant’s written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:     (a) specific reasons for the decision;     (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;     (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and     (d) a statement of the Claimant’s right to bring a civil action under ERISA, Section 502(a).   15.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this Article 15 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE 16 Trust   16.1 Establishment of the Trust. The Company shall establish a trust by a trust agreement with a third party, the Trustee. On or as soon as administratively practicable following each Deferral Date, an amount equal to the amount, in cash or in common shares of Commonwealth Telephone Enterprises, Inc., deferred by all Participants and the Company Contribution Amount shall be paid by the Company to the Trustee, and shall thereafter be held by the Trustee in accordance with the terms of the Trust Agreement. Should the amount be paid in cash, the Trustee will, as soon as practical, purchase the maximum number of common shares of Commonwealth Telephone Enterprises, Inc. The Trustee shall have full discretion in the purchase of these shares. Amounts contributed to the Trustee under the Trust Agreement and assets purchased with such amounts shall be subject to the claims of the Company’s creditors. To the extent that any benefits provided under the Plan are actually paid from the Fund, the Company shall have no further obligation with respect to such benefits. Neither a Participant, nor any beneficiary nor any other person shall be deemed to have any property interest, legal or equitable, in any specific asset of the Company or of the Fund with respect to any right to payment of any amount pursuant to this Plan. To the extent that any person acquires any right to receive payments under the Plan of an amount credited to an Account, such right to payment shall be no greater than, nor shall it have any preference or priority over, the rights, of any unsecured general creditor of the Company.   17 -------------------------------------------------------------------------------- 16.2 Interrelationship of the Plan and the Trust. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.   16.3 Distributions From the Trust. Each Employer’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer’s obligations under this Plan. ARTICLE 17 Miscellaneous   17.1 Status of Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted (i) in a manner consistent with that intent, and (ii) in accordance with Code Section 409A and related Treasury guidance and Regulations.   17.2 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.   17.3 Employer’s Liability. An Employer’s liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.   17.4 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.   17.5 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.   17.6 Furnishing Information. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.   18 -------------------------------------------------------------------------------- 17.7 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.   17.8 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.   17.9 Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the Commonwealth of Pennsylvania without regard to its conflicts of laws principles.   17.10 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Commonwealth Telephone Enterprises, Inc. 100 CTE Drive Dallas, PA 18612 Attn: Vice President of Human Resources Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.   17.11 Successors. The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.   17.12 Spouse’s Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.   17.13 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.   17.14 Incompetent. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.   17.15 Court Order. The Committee is authorized to comply with any court order in any action in which the Plan or the Committee has been named as a party, including any action involving a determination of the rights or interests in a Participant’s benefits under the Plan. Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with Code Section 409A and other applicable tax law. In addition, if necessary to comply with a qualified domestic relations order, as defined in Code Section 414(p)(1)(B), pursuant to which a court has determined that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan, the Committee, in its sole discretion, shall have the right to immediately distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to such spouse or former spouse.   19 -------------------------------------------------------------------------------- 17.16 Distribution in the Event of Income Inclusion Under 409A. If any portion of a Participant’s Account Balance under this Plan is required to be included in income by the Participant prior to receipt due to a failure of this Plan to meet the requirements of Code Section 409A and related Treasury guidance or Regulations, the Participant may petition the Committee or Administrator, as applicable, for a distribution of that portion of his or her Account Balance that is required to be included in his or her income. Upon the grant of such a petition, which grant shall not be unreasonably withheld, the Participant’s Employer shall distribute to the Participant immediately available funds in an amount equal to the portion of his or her Account Balance required to be included in income as a result of the failure of the Plan to meet the requirements of Code Section 409A and related Treasury guidance or Regulations, which amount shall not exceed the Participant’s unpaid vested Account Balance under the Plan. If the petition is granted, such distribution shall be made within ninety (90) days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the Participant’s benefits to be paid under this Plan.   17.17 Insurance. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance.   Commonwealth Telephone Enterprises, Inc. By:        Michael J. Mahoney   President and Chief Executive Officer   20

Exhibit 10.90 CONTENT AGREEMENT This Content Agreement, dated as of May 11, 2006 (the “Agreement Date”), is by and between Worldspan, L.P., a limited partnership organized and existing under the laws of Delaware, USA (“Worldspan”), and Northwest Airlines, Inc., a corporation organized and existing under the laws of Minnesota (“Northwest”). RECITALS WHEREAS, Worldspan and Northwest are parties to a Participating Carrier Agreement effective as of February 1, 1991, (as otherwise amended, supplemented, or replaced from time to time, the “PCA”) pursuant to which Worldspan distributes Northwest’s products and services to travel agencies and other organizations that subscribe with Worldspan for that service (the “Worldspan Agency Base”); and WHEREAS, as a result of widespread and systemic changes in the airline industry and corresponding technological developments, Northwest feels that it is imperative for it to reduce its distribution costs and has endeavored to do so prior to the Agreement Date by entering into agreements with alternative distributors and supporting new distribution channels that provide lower distribution fees than those historically paid by Northwest to Worldspan; and WHEREAS, Northwest and Worldspan desire to, among other things, (i) clarify distribution relationships and create a focus on a long-term distribution arrangement that is intended to increase Northwest’s sales through Worldspan and the Worldspan Agency Base; (ii) reduce Northwest’s distribution costs through Worldspan and incent Northwest to continue to rely upon, and increase its reliance upon, Worldspan and the Worldspan Agency Base for distribution; (iii) provide the Worldspan Agency Base with the ability to obtain comprehensive content regarding Northwest’s products and services; and (iv) allow Worldspan to offer for the first time optional distribution products that provide the Worldspan Agency Base with enhanced access to merchandising capabilities, product functionality, consumer rewards, and agency compensation opportunities in order to consistently serve the traveling public; and WHEREAS, in order to accommodate Worldspan’s need to be able to offer optional products providing enhanced content and functionality to its subscribers and Northwest’s need to be able to reduce its distribution costs, the Parties desire to make available new optional distribution products that Worldspan can offer to its subscribers; NOW, THEREFORE, in consideration of their respective undertakings hereunder and intending to be legally bound, Worldspan and Northwest hereby agree as follows: ARTICLE 1 TERM AND DEFINITIONS 1.1           Term.  The term of this Agreement (the “Term”) will commence on August 1, 2006 (the “Effective Date”) and will continue until (i) the fifth anniversary of the Effective Date or such later date to which the Term may be extended by mutual agreement of the Parties, or (ii) any earlier date upon which this Agreement may be terminated in accordance with the provisions hereof. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. --------------------------------------------------------------------------------   1.2           Definitions.  For purposes of this Agreement, each of the terms listed in Appendix A will have the meaning set forth therein.  Other terms used in this Agreement are defined in the context in which they are used and will have the respective meanings specified there.  To the extent that the definitions in this Agreement are inconsistent with the definitions in the PCA, the definitions in this Agreement will prevail for purposes of this Agreement. ARTICLE 2 NORTHWEST CONTENT 2.1           Northwest Content Availability in the Territory.  During the Term, and subject to the provisions of this Agreement, Northwest will provide to Worldspan for distribution to applicable Worldspan Agencies in the Territory, at no additional charge to Worldspan, timely and complete access to, and the ability to generate Bookings from, each of the following types of Northwest Content: (a)           “General Content”, which consists of such Northwest Content as Northwest designates for distribution to the Worldspan Agencies then participating in the General Access Product. (b)           “Full Content”, which consists of all information and inventory relating to the Northwest Group’s Publicly Available Fares, including schedules, fare rules, and availability, that is used or is useful to make reservations or purchase air travel on Northwest Flights (but is not required to include any of the same pertaining to the Northwest Group’s [**], Promotional Fares, Opaque Fares, or [**]). (c)           “Super Content”, which consists of Full Content plus the following: (1)           Northwest Content.  Northwest will provide additional Northwest Content, including all of the Northwest Group’s Private Fares, Promotional Fares, and Opaque Fares, [**].  Northwest will provide those fares and associated inventory, together with any associated distribution restrictions, to Worldspan, and Worldspan will make the fares available only in accordance with the applicable restrictions. (2)           Merchandising Products and Services and Functionality Parity.  Northwest agrees to provide to Worldspan Agencies, via the Worldspan GDS and in connection with Bookings made through the Worldspan GDS (and/or tickets sold or issued by Worldspan Agencies in connection therewith), the same levels, types and amounts of products, services, cross-sell and up-sell opportunities, functionality, and enhancements, in whatever form and however calculated (“Products and Services”) that are made available by [**].  In accordance with and subject to the provisions of Section 5.2, Northwest will make available to Worldspan and Worldspan Agencies, for distribution in connection with Bookings made through the Worldspan GDS (and/or tickets sold or issued by Worldspan Agencies in connection therewith) [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 2 --------------------------------------------------------------------------------   [**]. (3)           [**].  [**]. (4)           [**].  [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 3 --------------------------------------------------------------------------------   [**]. The Parties will meet on an ongoing basis to review the composition of Super Content and agree upon enhancements thereto that will make Super Content more attractive to the Worldspan Agency Base.  Super Content will be provided to Worldspan only in accordance with the provisions of Section 3.4. Northwest agrees that it has and will maintain sufficient authorization and approvals to provide such information, access, and inventory on behalf of the Northwest Group.  Notwithstanding this Section 2.1, Northwest shall have no responsibility or liability to Worldspan hereunder due to any inability of any Worldspan Agency to view or book any fares included within General Content, Full Content or Super Content due to limitations inherent in the technology or processes of Worldspan or a Worldspan Agency so long as such fares are provided to Worldspan with no less timeliness or completeness than that which is required to implement such fares in the Internal Distribution Channels.  Northwest will make its fares and all other applicable information available to Worldspan through the automated filing services provided by Airline Tariff Publishing Company (ATPCO), Worldspan’s internal Private Fare product (which is an Internet-based system used to input Private Fares and associated rules directly into the Worldspan GDS), or other standard industry procedures that do not impose significant additional operating or other costs upon Worldspan. 2.2           [**].  During the Term, if and for so long as [**], and (ii) Northwest will make such Northwest Content available to Worldspan and the Worldspan Agencies outside of the Territory in that Region at levels and amounts, and on terms and conditions, [**].  In addition, Northwest will provide distribution parity for such Northwest Content in accordance with the provisions of Section 2.3.  Northwest acknowledges and agrees that, based upon the information available to it as of the Agreement Date, the [**]. 2.3           Distribution Parity.  In general and except as otherwise specified in this Agreement, in connection with the distribution of Northwest Content, Northwest will [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 4 --------------------------------------------------------------------------------   [**].  With respect to each particular type of Northwest Content, the Parties agree as follows: (a)           Northwest will make General Content available to Worldspan and the Worldspan Agencies in the Territory at levels and amounts, and on terms and conditions, [**]. (b)           Northwest will make Full Content available to Worldspan and the Worldspan Agencies in the Territory at levels and amounts, and on terms and conditions, [**]. (c)           Northwest will make Super Content available to Worldspan and the Worldspan Agencies in the Territory at levels and amounts, and on terms and conditions [**]. 2.4           Compliance.  Each Party may from time to time, at its discretion and expense, engage an independent third-party auditor to verify the other Party’s compliance with this Agreement.  The audited Party agrees to make relevant information available to the auditor, subject to the auditor agreeing to reasonable confidentiality restrictions and provided that the audit does not unreasonably interfere with the conduct of the audited Party’s business.  If the auditor reasonably concludes that the audited Party has failed to comply with its obligations set forth in this Agreement, then the audited Party will, within sixty days thereafter, either accept or reject the auditor’s conclusion.  If such conclusion is (i) accepted by the audited Party or (ii) rejected by the audited Party but validated pursuant to the dispute resolution process set forth in Section 6.7, then, in either such event, the audited Party will immediately correct the applicable failure to comply with its obligations and, in addition to any other remedies available to the other Party at law or equity, the audited Party will reimburse the other Party for the costs of the audit. ARTICLE 3 WORLDSPAN DISTRIBUTION PRODUCTS 3.1           General Access Product.  Worldspan will continue to offer to the Worldspan Agencies in the Territory a generally available distribution product (the “General Access Product”) that includes the following attributes: -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 5 --------------------------------------------------------------------------------   (a)           The Worldspan Agency receives General Content. (b)           [**]. The terms and conditions relating to the General Access Product will continue to be as provided in the subscriber agreement between the Worldspan Agency and Worldspan, including any other agreement that may modify or supplement that subscriber agreement. 3.2           Optional New Distribution Products.  In addition to the General Access Product, Worldspan will offer to the Worldspan Agencies in the Territory two new optional Worldspan Distribution Products, in accordance with and subject to the provisions of Sections 3.3 and 3.4, respectively.  Northwest will provide to Worldspan, for distribution to the Worldspan Agencies participating in either of these new optional Worldspan Distribution Products, the applicable type of Northwest Content, as specified in Sections 3.3 and 3.4, respectively, [**]. 3.3           Subscription Access Product.  Commencing as soon after the Effective Date as Worldspan determines it to be feasible, [**], Worldspan will make available to Worldspan Agencies in the Territory a new optional distribution product (the “Subscription Access Product”) that includes the following attributes: (a)           The Worldspan Agency receives Full Content. (b)           [**]. 3.4           Super Access Product.  Commencing as soon after the Effective Date as Worldspan determines it to be feasible, [**], Worldspan will make available to Worldspan Agencies in the Territory that agree not to receive Inducements from Worldspan with respect thereto, a new optional distribution product (the “Super Access Product”) that includes the following attributes: (a)           The Worldspan Agency receives Super Content. (b)           The Super Access Product [**]. If any [**], then [**].  [**].  Northwest acknowledges and agrees that to the extent and for so long as a Worldspan Agency generates [**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 6 --------------------------------------------------------------------------------   3.5           Administrative Matters.  Worldspan will promptly give Northwest written notice of any Worldspan Agency that elects to participate in the Subscription Access Product or the Super Access Product and of any such Worldspan Agency that ceases to participate in that Worldspan Distribution Product.  [**]. 3.6           Implementation Plan.  Within thirty days after the Agreement Date, appropriate representatives of the Parties will begin meeting to establish procedures for implementing the arrangements contemplated by this Agreement. ARTICLE 4 FEE ARRANGEMENTS 4.1           Pricing in the Territory.  The Parties agree that the Booking Fees for Bookings generated in the Territory by Worldspan Agencies during the Term will be as follows: (a)           The Booking Fees for such Bookings generated by a Worldspan Agency then participating in the Super Access Product will be as provided in Section 1 of Appendix B. (b)           The Booking Fees for all other such Bookings will be as provided in Section 2 of Appendix B. 4.2           [**].  Effective as of June 1, 2006, the [**]. 4.3           [**].  Effective as of June 1, 2006, [**]. 4.4           [**].  In consideration of [**], Northwest agrees that: -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 7 --------------------------------------------------------------------------------   (a)           If, for any calendar quarter [**]. (b)           Whenever [**]. (c)           Within thirty days after each anniversary of the Effective Date, or at any other time reasonably requested by Worldspan, [**]. 4.5           [**].  Promptly after the end of the calendar quarter [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 8 --------------------------------------------------------------------------------   [**]. (a)           If, for [**] (b)           If, for [**] (c)           Whenever [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 9 --------------------------------------------------------------------------------   ARTICLE 5 GENERAL PROVISIONS 5.1           Marketing Plan.  In order to maximize Northwest’s opportunities for reducing its distribution costs under this Agreement, the Parties will use commercially reasonable efforts to jointly develop, and periodically update, a [**] that will, among other things, [**].  [**]. 5.2           Merchandising Opportunities and Functional Parity.  Within ninety days after the Agreement Date and on a quarterly basis thereafter during the Term, appropriate representatives of the Parties will meet to identify any Products and Services relating to the Super Access Product that Worldspan can offer to Worldspan Agencies for the purpose of creating more revenue opportunities for Northwest, Worldspan, or the Worldspan Agency Base and any functional parities contemplated by this Agreement.  The Parties will mutually agree upon the terms and conditions relating to any such Products and Services, as well as any development or other work that may be required in connection with such Products and Services, and the Parties will take all actions necessary to implement the Products and Services as soon as commercially feasible after such agreement is reached.  However, any delay in Worldspan’s ability to implement any new Product and Service will not require Northwest to delay the implementation of that Product and Service for any Distribution Channel. 5.3           Other Business Opportunities.  At least once during each calendar quarter during the Term, appropriate representatives of Northwest and Worldspan will meet to discuss the Northwest Group’s distribution requirements and objectives and any ways in which Worldspan can assist Northwest with respect to those requirements and objectives.  If and when Northwest considers obtaining from an external service provider any of its requirements relating to distribution technology or the distribution of products or services provided by the Northwest Group, then Worldspan will be given the opportunity to submit a bid for providing those requirements and, if it chooses to bid, its bid will be fairly evaluated by Northwest. 5.4           Improper Use of Northwest Content.  In the event that either Party becomes aware that a Worldspan Agency is improperly using, or failing to use, the Northwest Content provided by Worldspan, then that Party will promptly bring such fact to the attention of the other Party, and the Parties will reasonably cooperate with each other with respect to any efforts taken with respect to such Worldspan Agency in connection with its improper use of, or failure to use, such Northwest Content. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 10 -------------------------------------------------------------------------------- 5.5           [**].  In no event shall [**]. 5.6           [**].  Upon either Party’s reasonable request from time to time, the other Party will negotiate in good faith with the requesting Party [**]. 5.7           Agency Restrictions.  Nothing in this Agreement shall be read as limiting (i) Northwest’s rights under the Airlines Reporting Corporation (ARC) agency appointment agreement with respect to the appointment or termination of any Worldspan Agency, (ii) Northwest’s ability to limit point of sale booking capabilities for any Worldspan Agency that is abusing Northwest’s inventory or services, or (iii) Northwest’s ability to charge fees to Worldspan Agencies for abusive, speculative, and/or non-productive Bookings.  [**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 11 --------------------------------------------------------------------------------   5.8           [**].  [**]. 5.9           [**].  If, for any Contract Year, any [**]. 5.10         [**].  Worldspan agrees that if, during the Term, [**], then Worldspan will [**]. 5.11         Worldspan Travel Discount Program.  For the period commencing on July 1, 2006 and continuing until the end of the Term, Northwest will establish and maintain a travel discount program pursuant to which Worldspan employees can travel on Northwest Flights for Worldspan business purposes at rates that are competitive with the rates that Northwest extends to other companies of a comparable size or with comparable relationships with Northwest. 5.12         [**].  Notwithstanding anything in this Agreement to the contrary, the Parties acknowledge and agree that (i) the provisions of this Agreement will not be applicable with respect to [**], (ii) any [**], and (iii) [**] will be determined in accordance with the provisions of the PCA, without taking into consideration the provisions of this Agreement. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 12 --------------------------------------------------------------------------------   5.13         [**].  Notwithstanding anything in this Agreement to the contrary, the Parties acknowledge and agree that [**]. 5.14         [**].  [**]. 5.15         Northwest Marketing Support Agreement.  The Parties acknowledge and agree that the provisions of this Agreement supersede and replace the provisions of Sections 2.04, 3.01A, and 3.01D of the Northwest Marketing Support Agreement, each of which Sections is hereby terminated and deleted from the Northwest Marketing Support Agreement effective as of the Effective Date. 5.16         [**].  If [**]. ARTICLE 6 TERMINATION AND DISPUTES 6.1           Termination for Cause.  If either Party defaults in the performance of any of its material obligations (or repeatedly defaults in the performance of any of its other obligations) under this Agreement and, after receipt of a written notice specifying the default in reasonable detail, does not substantially cure the default within fifteen days (or within thirty days, if the default cannot reasonably be cured within a 15-day period and the defaulting Party is diligently pursuing a cure of the default), then the non-defaulting Party may, by giving prior written notice of termination to the defaulting Party, terminate this Agreement effective as of the termination date specified in the notice of termination. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 13 --------------------------------------------------------------------------------   6.2           [**].  If, during the term of this Agreement, [**]. 6.3           Termination Upon Change in Control.  If, at any time during the period commencing on the Bankruptcy Reorganization Date and continuing for a period of sixty days thereafter, there has been a change in control of Northwest so that another air carrier that is not an Affiliate of Northwest as of the Agreement Date then owns more than fifty percent (50%) of the ownership interests in Northwest or has the ability to direct the management or affairs of Northwest, then, if Northwest so requests at any time prior to the end of such 60-day period, Worldspan, Northwest and such other air carrier will negotiate in good faith to agree upon and [**].  If such negotiations have not been successfully concluded within one hundred twenty days following Northwest’s request, then Northwest may, by giving Worldspan prior written notice thereof at any time after such 120-day period and before such negotiations are successfully concluded, terminate this Agreement effective as of the termination date specified in the notice of termination. 6.4           Termination Upon Liquidation.  If, at any time during the period commencing on the Agreement Date and ending sixty days after the Bankruptcy Reorganization Date, Northwest is being liquidated pursuant to Chapter 7 or 11 of the Bankruptcy Code or similar provisions and has terminated any agreements comparable to this Agreement that it may have with Amadeus, Galileo, or Sabre, then Northwest may, by giving Worldspan prior written notice thereof at any time prior to sixty days after the Bankruptcy Reorganization Date, terminate this Agreement effective as of the termination date specified in the notice of termination. 6.5           [**].  [**]. 6.6           Remedies.  If either Party breaches, or threatens to breach, any of its obligations in Article 2, Article 3, or Article 5, then the other Party may proportionately reduce or suspend -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 14 --------------------------------------------------------------------------------   the performance of its obligations hereunder and, in addition, may seek injunctive relief to preserve the status quo or prevent irreparable injury pending the resolution of any related Dispute in accordance with Section 6.7. 6.7           Dispute Resolution.  Any dispute, claim or controversy arising out of or relating in any way to this Agreement, or the relationship or rights and obligations of the Parties resulting from this Agreement, including any dispute as to the existence, validity, construction, interpretation, negotiation, performance, non-performance, breach, termination, or enforceability of this Agreement, (a “Dispute”) will be resolved in accordance with the following procedures: (a)           Upon the request of either Party, the Parties will immediately use all reasonable business efforts to resolve the Dispute at the operational level. (b)           If the Parties have not been able to resolve the Dispute at the operational level within twenty-four hours after the request described in subsection (a), then, upon the written request of either Party, which request must identify the Dispute in reasonable detail, each Party will designate a senior executive who will negotiate in good faith with the senior executive designated by the other Party in an effort to resolve the Dispute. (c)           If the senior executives do not resolve the Dispute within fifteen days after the request described in subsection (b), then, upon the written request of either Party, the Dispute will be settled through final, binding and confidential arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association, including the Expedited Procedures associated with such Rules.  Either Party may apply for emergency interim relief, and any such application will be governed by the American Arbitration Association’s Optional Rules for Emergency Measures of Protection.  The arbitration tribunal will consist of a single arbitrator agreed upon by the Parties or, in the absence of agreement, appointed in accordance with such Rules.  The venue for the arbitration will be St. Louis, Missouri, and the award of the arbitrator will be final and binding.  Each Party waives any right to appeal the arbitration award, to the extent a right to appeal may be lawfully waived.  Each Party retains the right to seek judicial assistance (i) to compel arbitration; (ii) to obtain interim measures to preserve the status quo or prevent irreparable injury pending arbitration; and (iii) to enforce any decision of the arbitrator, including the final award. (d)           Notwithstanding the existence of any Dispute or the fact that the dispute resolution procedures set forth in this Section have been or may be invoked, each Party will continue to perform its obligations under this Agreement, unless and until this Agreement is terminated in accordance with the provisions of this Agreement. ARTICLE 7 MISCELLANEOUS PROVISIONS 7.1           Participating Carrier Agreement.  This Agreement is intended to be an addendum to the PCA, which will continue in full force and effect during the term of this Agreement.  To the extent that there is any inconsistency between the terms and conditions of this Agreement and the terms and conditions of the PCA, the terms and conditions of this Agreement will prevail.  During the term of this Agreement, Northwest will not terminate the PCA, [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 15 --------------------------------------------------------------------------------   [**].  However, for [**]. 7.2           Successors and Assigns.  This Agreement will survive any change of control of either Party and will be binding upon, inure to the benefit of, and be enforceable by and against each Party and any successor thereto.  However, neither Party may, without the prior written consent of the other, assign this Agreement or any rights or obligations hereunder to any other entity unless that other entity (i) acquires all or substantially all of the assets of the assigning Party, and (ii) either agrees, or by operation of law is required, to comply with and be bound by the provisions of this Agreement to the same extent as the assigning Party. 7.3           Confidentiality.  Each Party agrees that all proprietary and confidential information of the other, including information relating to the negotiation and the terms and conditions of this Agreement, will be held in strict confidence and protected by the same degree of care as such Party uses to protect the confidentiality of its own information of a similar nature, but no less than a reasonable degree of care, will be used only for purposes of this Agreement, and will not be disclosed to any unauthorized third party by such Party or any of its employees or agents without the prior written consent of the other, except as may be reasonably necessary to perform its obligations under this Agreement or required by legal, accounting, or regulatory requirements. 7.4           Public Communications.  Worldspan and Northwest will jointly prepare one or more press releases regarding the provision of Northwest Content for Worldspan Agencies.  Northwest and Worldspan will issue and publicize any such release in a manner consistent with other press releases and promotional initiatives issued by Northwest and Worldspan.  In addition, Northwest will work with Worldspan in developing and implementing a communications campaign intended to communicate to Travel Agencies and similar organizations the benefits of subscribing to the Worldspan Distribution Products.  Notwithstanding the provisions of Section 7.3, each Party may make announcements intended for internal distribution within that Party’s organization and any disclosures required by legal, accounting, or regulatory requirements, and may publicly disclose the existence and general provisions, including the term, of this Agreement, including the fact that Worldspan Agencies may obtain access to the Northwest Content described in this Agreement through the Worldspan GDS. 7.5           Severability.  If any court of competent jurisdiction, arbitrator, regulatory body, or other legal authority, as the case may be, determines that any provision of this Agreement violates any applicable statute, law, rule, or regulation, whether now in existence or enacted or adopted at a later date, or is otherwise unlawful, invalid or unenforceable for any reason, the Parties will modify such provision to the extent necessary to render the provision enforceable, and such provision as so modified will be enforced.  Any such findings of invalidity or -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 16 --------------------------------------------------------------------------------   unenforceability of any provision of this Agreement will not affect the validity or enforceability of the other provisions of this Agreement, which will remain in full force and effect. 7.6           Waiver.  No waiver of any breach of this Agreement by either Party will constitute a waiver of any subsequent breach of the same or any other provisions hereof, and no waiver will be effective unless made in writing. 7.7           Force Majeure.  Neither Party will be deemed in default of this Agreement as a result of any failure to perform its obligations that is caused by an act of God or governmental authority, a strike or labor dispute, fire, war, failure of the other Party or third party suppliers, or for any other cause beyond the reasonable control of that Party. 7.8.          No Agency.  Nothing in this Agreement is intended to or will be construed to create or establish an agency, partnership, or joint venture relationship between the Parties. 7.9           Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 7.10         Governing Law.  This Agreement will be governed by, construed and enforced according to the laws of the State of New York, without regard to its principles of conflicts of laws. 7.11         Construction.  The captions used in this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement.  As used in this Agreement, the words “hereof” and “hereunder” and other words of similar import refer to this entire Agreement and not any separate portion hereof, unless otherwise specified.  The use in this Agreement of pronouns of the masculine, feminine, or neuter gender will be deemed to include the other genders, as the context may require.  Any reference in this Agreement to an Article, Section, or Appendix will be considered a reference to that Article or Section of, or that Appendix to, this Agreement, unless the context indicates otherwise.  As used in this Agreement, the word “including” and its derivatives (such as “include” and “includes”) will be interpreted as if it were followed by the phrase “without limitation” unless the context indicates otherwise. 7.12         Bankruptcy.  The Parties acknowledge that Northwest filed for bankruptcy protection pursuant to Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) on September 14, 2005, in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 17 --------------------------------------------------------------------------------   [**].  Northwest agrees that it will promptly file and diligently prosecute in the Bankruptcy Court all appropriate motions, and take all appropriate actions, to obtain the Bankruptcy Approval Order as soon as feasible after the Agreement Date.  Worldspan agrees that it will fully cooperate with Northwest in the preparation and filing of any such motions. 7.13         Entire Agreement.  This Agreement, including the Appendices attached hereto, constitutes the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect to such subject matter, including the Prior Content Agreement, the letters dated September 27, 2001, January 14, 2004, and July 1, 2004, and any other billing adjustments or credits previously agreed to by the Parties that are not reflected in this Agreement, each of which will be terminated effective as of the Effective Date.  Notwithstanding the foregoing, the Parties acknowledge and agree that neither the PCA nor the letter dated February 8, 2005 is superseded by this Agreement. IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the Agreement Date. Northwest Airlines, Inc.   Worldspan, L.P.             By: /s/ J. Timothy Griffin   By: /s/ Jeffrey C. Smith               Title: EVP Marketing and Distribution   Title: General Counsel, Secretary and Senior           Vice President—Human Resources -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 18 -------------------------------------------------------------------------------- APPENDIX A Definitions [**] “Affiliate” means, with respect to an entity, any other entity that owns or controls that entity, is owned or controlled by that entity, or is under common ownership or control with that entity, where “ownership” means owning fifty percent or more of the controlling interest in an entity, and “control” means the ability to direct the management or affairs of an entity. “Agreement Date” has the meaning specified in the first paragraph of this Agreement. “Annual Marketing Plan” has the meaning specified in Section 5.1. [**] “Bankruptcy Approval Order” has the meaning specified in Section 7.12. “Bankruptcy Code” has the meaning specified in Section 7.12. “Bankruptcy Court” has the meaning specified in Section 7.12. “Bankruptcy Reorganization Date” means the date upon which a plan of reorganization filed in Northwest’s bankruptcy case and confirmed by the Bankruptcy Court pursuant to the Bankruptcy Code becomes effective pursuant to the terms of that plan of reorganization. [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. 1 --------------------------------------------------------------------------------   [**] “Booking” means an airline passenger segment created by (or secured to) a Worldspan Agency in the itinerary portion of a passenger name record (PNR) for transportation on a Northwest Flight, including those types of segments treated as Bookings as of the Agreement Date, provided that a Booking is net of Cancellations for Non-Ticket to Confirm Bookings.  For example, one passenger on a direct flight will constitute one Booking, one passenger on a two-segment trip with connecting flights will constitute two Bookings, and multiple passengers within the same PNR segment will constitute multiple Bookings.  For the avoidance of doubt, “Booking” [**]. “Booking Fee” means, with respect to a Booking, the fee that Worldspan charges Northwest on a per-segment basis for that Booking. [**] “Cancellation” means a Booking generated in the Territory that is canceled by the applicable Worldspan Agency through the Worldspan GDS prior to the date of departure for that Booking. [**] “Contract Year” means a twelve-month period commencing on the Effective Date or any anniversary thereof during the Term. [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-2 --------------------------------------------------------------------------------   [**] [**] “Corporate Travel Product” means, for any Major Worldspan Agency, a corporate travel booking product that is offered to corporations by that Major Worldspan Agency pursuant to a separate Airlines Reporting Corporation (ARC) account number. [**] “Direct Connect” means, with respect to any air carrier, a direct connection to the air carrier’s internal reservations system or any other means that allows a Travel Agency, corporation, or other organization to reserve, purchase, or ticket travel on the air carrier’s flights without generating a booking through a GDS. “Dispute” has the meaning specified in Section 6.7. “Distribution Channel” means any Internal Distribution Channel or External Distribution Channel. “ECI” means the Employment Cost Index for Total Compensation for Civilian Workers (seasonally adjusted), as published by the Bureau of Labor Statistics of the U.S. Department of Labor from time to time or, if that index is discontinued, a mutually agreed equivalent index. “Effective Date” has the meaning specified in Section 1.1. [**] [**]. [**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-3 --------------------------------------------------------------------------------   [**]. [**]. [**]. [**]. “External Distribution Channel” means any channel for the distribution of Northwest Content that is not an Internal Distribution Channel and the operator of any such channel, including (i) any GDS or LTD in which Northwest is a participant, and (ii) any Direct Connect arrangement that Northwest may have.  For the avoidance of doubt, “External Distribution Channel” does not include Travel Agencies. [**] “Full Content” has the meaning specified in Section 2.1(b). “GDS” means a global distribution system [**] that provides information about the schedules, fares, or availability of the products and services of travel suppliers or enables the making of reservations or the issuance of tickets for such products and services. “GDS Fare” means, with respect to any air carrier, any fare, together with associated inventory, distributed by or on behalf of that air carrier through any GDS, but excluding its Private Fares, Promotional Fares, Opaque Fares, and Excluded Fares. “General Access Product” has the meaning specified in Section 3.1. “General Content” has the meaning specified in Section 2.1(a). [**] [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-4 --------------------------------------------------------------------------------   [**]. [**] [**] [**] [**] “Inducement” means an amount paid or credited to a Travel Agency, corporation, or other organization by an External Distribution Channel for bookings generated through that External Distribution Channel. “Internal Distribution Channel” means any channel for the distribution of Northwest Content that is owned, operated, or controlled by Northwest or any of its Affiliates, including (i) Northwest’s reservations or sales personnel, (ii) the internal reservations system used by Northwest, and (iii) any publicly accessible Internet web site owned, operated, or controlled by Northwest or any of its Affiliates. “Internet Channel” means any Internet web site that sells the products or services of travel suppliers to consumers. [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-5 --------------------------------------------------------------------------------   [**]. [**] [**] [**] [**] [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-6 --------------------------------------------------------------------------------   [**] [**] [**] [**] [**] [**] [**] “Northwest” has the meaning specified in the first paragraph of this Agreement. “Northwest Content” means any information, including information concerning schedules, fares, rules, and availability, that is used or useful in connection with making reservations for, or purchasing, any products or services provided by the Northwest Group, for Northwest Flights.  For the avoidance of doubt, Northwest Content excludes any products or services for MLT Inc. “Northwest Flight” means any flight that is marketed or operated by, and using the air carrier designator code of, Northwest or any of its Affiliates. “Northwest Group” means Northwest and its Affiliates. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-7 --------------------------------------------------------------------------------   “Northwest Marketing Support Agreement” means the Northwest Marketing Support Agreement, entered into as of June 30, 2003, by and between Northwest and Worldspan, as it may be amended or supplemented from time to time. “Online Travel Agency” or “OTA” means any Travel Agency (or group of Affiliated Travel Agencies that are marketed under the same brand name) whose primary business is operating one or more publicly accessible Internet Channels. “Online Worldspan Agency” means any Worldspan Agency that is an Online Travel Agency. “Opaque Fare” means, with respect to any air carrier, a fare, together with associated inventory, that is offered for sale by or on behalf of that air carrier in such a way that, until after an irrevocable commitment to purchase the particular air services has been made, there is no disclosure of (a) the air carrier identity, and (b) at least one of the following: (i) the exact time of departure, or (ii) the exact time of arrival. [**] [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-8 --------------------------------------------------------------------------------   [**]. “Party” means each of Northwest and Worldspan. “PCA” has the meaning specified in the recitals of this Agreement. “PCA Cure Amount” has the meaning specified in Section 7.12. “Prior Content Agreement” means the letter agreement regarding Fare Content, dated September 10, 2003, between Worldspan and Northwest, as amended by the First Amendment to Letter Agreement and the Second Amendment to Letter Agreement, each dated as of May 1, 2004, by and between Worldspan and Northwest. “Private Fare” means, with respect to any air carrier, a fare, together with associated inventory, specially negotiated between that air carrier and a limited group of travelers (or an organization or travel agency acting on behalf of such limited group), where (a) the air carrier limits sales of the fare to the limited group, and (b) there is a good faith effort to restrict access to the fare to the limited group (including, but not limited to, through passwords, code words, or separate URLs for booking).  For the avoidance of doubt, Private Fares include corporate fares, group and meeting fares, tour/wholesaler/consolidator fares, military fares, government fares, charitable institution fares, negotiated corporate/agency/small business fares, net fares, and charter fares. “Products and Services” has the meaning specified in Section 2.1(c)(2). “Promotional Fare” means, with respect to any air carrier, an unpublished fare, together with associated inventory, that is limited to a promotional event, period, or geography and that the air carrier (or an entity acting on its behalf) communicates as being so limited. “Publicly Available Fare” means, with respect to any air carrier, a fare, together with associated inventory, offered for sale by or on behalf of that air carrier to the general public in the Territory, including the air carrier’s Web Fares and GDS Fares, but excluding its Private Fares, Promotional Fares, Opaque Fares, and Excluded Fares. “Super Access Product” has the meaning specified in Section 3.4. “Subscription Access Product” has the meaning specified in Section 3.3. “Super Content” has the meaning specified in Section 2.1(c). “Super Content Booking” means a Booking generated in the Territory by a Worldspan Agency that is then a participant in the Super Access Product, [**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-9 --------------------------------------------------------------------------------   [**] [**] “Term” has the meaning specified in Section 1.1. “Territory” means the fifty United States and the District of Columbia. [**] [**] [**] [**] “Traditional Travel Agency” means any Travel Agency other than an Online Travel Agency. “Traditional Worldspan Agency” means any Worldspan Agency that is a Traditional Travel Agency.  For the avoidance of doubt, Traditional Worldspan Agencies include corporations and other organizations using Trip Manager or any successor or comparable product offered by Worldspan. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-10 --------------------------------------------------------------------------------   “Travel Agency” means an individual or entity that books, sells, or fulfills the products or services of travel suppliers through the use of a GDS. “Trip Manager” means Worldspan’s Internet-based corporate travel booking tool, as it may be modified by Worldspan from time to time, that allows a company’s authorized users to create, modify, and view airline and other travel reservations made through the Worldspan GDS. “TSA Booking” means any booking for transportation on a Northwest Flight with respect to which, as of the Agreement Date, Northwest is not required to pay a booking fee to any GDS provider, such as those bookings generated by Hotwire for Opaque Fares. “Web Fare” means, with respect to any air carrier, any type of fare, together with associated inventory, that is made generally available to the public by that air carrier through one or more Internet Channels.  However, an air carrier’s Web Fares do not include its Private Fares, Promotional Fares, Opaque Fares, or Excluded Fares. “Worldspan” has the meaning specified in the first paragraph of this Agreement. “Worldspan Agency” means, as of any time, a Travel Agency, corporation, government agency, or other organization that at that time has contracted with Worldspan to use the Worldspan GDS to shop for, price, book, sell, or fulfill the products or services of travel suppliers or to enable end users to shop for, reserve, book, and pay for the products and services of travel suppliers.  For the avoidance of doubt, “Worldspan Agency” includes both Traditional Worldspan Agencies and Online Worldspan Agencies and excludes an airline using Worldspan as its internal reservation system. “Worldspan Agency Base” has the meaning specified in the recitals of this Agreement. “Worldspan Distribution Product” means each of the General Access Product, the Subscription Access Product, and the Super Access Product. [**] “Worldspan GDS” means the GDS operated by Worldspan, including Trip Manager. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. A-11 --------------------------------------------------------------------------------   APPENDIX B Financial Provisions 1.             [**] Product Booking Fees. (a)           [**] Worldspan Agencies.  Except for any [**] Bookings for which the Booking Fees are determined pursuant to the provisions of Section 1(c) of this Appendix B, the Booking Fees payable to Worldspan by Northwest for [**] Bookings generated by [**] Worldspan Agencies during the Term will be [**] [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. --------------------------------------------------------------------------------   [**]. (b)           [**] Worldspan Agencies.  Except for any [**] Bookings for which the Booking Fees are determined pursuant to the provisions of Section 1(c) of this Appendix B, the Booking Fee payable to Worldspan by Northwest for each [**] Booking generated by [**]Agency during any Contract Year will be the applicable Booking Fee set forth in the following table, which is based upon the[**] for that [**], as set forth in the following table: [**] (c)           [**] Bookings.  Notwithstanding the provisions of Sections 1(a) and 1(b) of this Appendix B, if, prior to any Contract Year, Northwest has provided Worldspan with a [**], [**] then the Booking Fees payable to Worldspan by Northwest for [**] for any [**] will be [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-2 --------------------------------------------------------------------------------   [**] [**] [**] 2.             [**] and [**] Booking Fees.  The Booking Fees payable to Worldspan by Northwest for [**] Bookings generated during the Term will be [**] [**] 3.             [**].[**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-3 --------------------------------------------------------------------------------   [**]. 4.             Cancellation Fee.  [**]. 5.             [**]  [**] [**] 6.             [**]  [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-4 --------------------------------------------------------------------------------   [**] 7.             Invoice Reconciliation.  If, despite Worldspan’s good faith efforts to accurately prepare each monthly invoice, it is subsequently determined that the actual amount payable by Northwest for any month differs from the amount previously invoiced by Worldspan for that month, then the applicable Party will promptly make any additional payments, or issue any refunds or credits, that may be necessary to reconcile the amount previously invoiced for that month with the actual amount payable for that month. 8.             Time of Payment.  Any amounts to which either Party is entitled pursuant to this Appendix B will be payable in accordance with the payment procedures that the Parties use for amounts payable under the PCA.[**] 9.             Annual [**].  [**]. -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. B-5 --------------------------------------------------------------------------------   APPENDIX C Booking Fees [**] [**] [**] -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. --------------------------------------------------------------------------------   ATTACHMENT I TO APPENDIX C -------------------------------------------------------------------------------- [**] Confidential treatment requested for redacted portion; redacted portion has been filed separately with the Commission. --------------------------------------------------------------------------------

  Exhibit 10.14 SEPARATION AGREEMENT      This Separation Agreement (hereinafter “Agreement”) is made and entered into this 31st day of January, 2006 (hereinafter the “Effective Date”), by and between Kona Grill, Inc., a Delaware corporation (hereinafter referred to as the “Company”), and C. Donald Dempsey (hereinafter referred to as “Employee”). RECITALS      WHEREAS, Employee is currently employed by the Company as its President and Chief Executive Officer;      WHEREAS, Employee’s employment with the Company is governed by an “Employment Terms Letter,” which is Exhibit 10.1(a) to the Company’s Registration Statement on Form S-1 (File No. 333-125506) filed with the Securities and Exchange Commission on June 3, 2005, as amended by the “Amended Employment Terms Letter,” which is Exhibit 10.1(b) to the Company’s Registration Statement on Form S-1 (File No. 333-125506) filed with the Securities and Exchange Commission on June 3, 2005;      WHEREAS, Employee has elected to voluntarily resign his position as an officer of the Company, as well as his position on the Company’s Board of Directors, effective January 31, 2006;      WHEREAS, Employee’s status with the Company will end, effective April 30, 2006 (hereinafter the “Separation Date”);      WHEREAS, the Company and Employee, in order to settle, compromise and fully and finally release any and all claims and potential claims against the Company or Company Releasees (as defined below), arising out of Employee’s employment and the cessation thereof, have agreed to resolve these matters on the terms and conditions set forth herein; and      WHEREAS, Employee acknowledges he is waiving rights and claims described herein in exchange for consideration in addition to anything of value to which he is already entitled;      NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:      1. Recitals. The recitals set forth above are true, accurate, and correct, and are incorporated in this Agreement by this reference and made a material part of this Agreement.      2.1 Severance Benefits. Upon expiration of the revocation period referenced in Paragraph 12 of this Agreement, and provided Employee does not revoke   --------------------------------------------------------------------------------   this Agreement pursuant to Paragraph 12 of this Agreement, Employee shall be entitled to the following benefits from the Company:           a. Severance Payment: Pursuant to Section 7 of the Employment Terms Letter, as amended by the Amended Employment Terms Letter, twelve (12) months’ base salary, in the gross amount of $360,000 (Three Hundred Sixty Thousand Dollars and 00/100 Cents), minus all statutory deductions, to be paid to Employee in accordance with the Company’s ordinary payroll practices, over the period May 1, 2006 to April 30, 2007.           b. Annual Bonus: Notwithstanding any contrary provisions in the Employment Terms Letter or the Amended Employment Terms Letter, the gross amount of $157,500.00 (One Hundred Fifty-Seven Five Hundred and No/100 Dollars) in satisfaction of any and all annual bonus entitlement or obligation. Employee specifically acknowledges and agrees that this amount is an amount to which he was not otherwise entitled, and that it that it constitutes sufficient consideration for the additional promises set forth in this Agreement.           c. Stock Options/Bonus Options: Notwithstanding any contrary provisions in the Employment Terms Letter or the Amended Employment Terms Letter, Employee agrees and acknowledges that the Company has previously provided him with all Stock Options and Bonus Options to which he is entitled. To the extent any of those options are not currently vested, all options previously granted to Employee shall vest as of the Separation Date. The Company and Employee agree that Employee must exercise all options currently held by him by no later than May 1, 2006.           d. Medical Insurance: Subject to any applicable deductibles or co-payments, the Company shall provide to the Employee, and Employee’s eligible dependents, medical insurance benefits under the Company’s Group Medical Plan, or the plan then in effect for similarly situated employees, as amended from time to time, for a period of up to eighteen (18) months starting May 1, 2006, or until the date on which Employee obtains employment with a new employer that offers medical coverage for the Employee and Employee’s eligible dependents, which does not exclude coverage for any pre-existing conditions (regardless of any deductible or co-payments or Employee contribution requirements for such medical coverage), and becomes eligible for such coverage (“New Coverage”), whichever is earlier. Employee shall give the Company written notice of New Coverage. Employee acknowledges that Employee’s COBRA period shall begin on the Separation Date, and that the foregoing medical insurance coverage under the Company’s Group Medical Plan constitutes Company-paid COBRA. Coverage provided during this period of Company-paid COBRA shall be at the same level of coverage previously elected by or provided to Employee during his employment with the Company, subject to provider modification(s) to the applicable insurance benefits.      2.2 Other Payments. The Company will pay Employee all earned but unpaid compensation through the Separation Date, as well as accrued but unused   --------------------------------------------------------------------------------   vacation pay to which Employee is entitled through the Separation Date, under the Company’s vacation pay policy and/or practices, in accordance with applicable law.      2.3 Taxes. All payments and other benefits provided to Employee under this Agreement shall be subject to any withholding and employment taxes consistent with the character of the payments in accordance with applicable law.      2.4. Adequate Consideration. Employee acknowledges and agrees that Paragraph 2.1 of this Agreement includes and provides for substantial consideration to Employee in addition to anything of value to which he is, as a matter of law, otherwise entitled.      3. Release. In consideration of his receipt of the severance benefits set forth in Paragraph 2.1 of this Agreement, Employee, for himself, his spouse (if any), and their respective heirs, estates, representatives, executors, successors and assigns, hereby fully, forever, irrevocably, and unconditionally release and discharge the Company, including the Company’s past and present officers, directors, members, stockholders, parent companies, subsidiaries, affiliates, successors, assigns, agents, employees, representatives, lawyers, administrators, and all persons acting by, through, under, or in concert with them (collectively, the “Company Releasees”), from any and all claims which he or they may have against them, or any of them, which could have arisen out of any act or omission occurring from the beginning of time to the Effective Date of this Agreement, whether now known or unknown, asserted or unasserted. This release includes, but is not limited to, any and all claims brought or that could be brought pursuant to or under the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Civil Rights Act of 1991, the National Labor Relations Act, the Fair Labor Standards Act, the Employee Retirement and Income Security Act (ERISA), the Sarbanes-Oxley Act, the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Family and Medical Leave Act, the Equal Pay Act, the Minnesota Human Rights Act, the Minnesota Fair Labor Standards Act, or any other statute set forth in the Minnesota Statutes, or any other federal, state or local administrative statute, law, rule, regulation, ordinance, or order that pertains or relates to, or otherwise touches upon, the employment relationship between the Company and Employee; and any and all actions for breach of contract, express or implied, breach of the covenant of good faith and fair dealing, express or implied, promissory estoppel, wrongful termination in violation of public policy, all other claims for wrongful termination and constructive discharge, and all other tort claims, including, but not limited to, assault, battery, false imprisonment, intentional interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, negligence, negligent investigation, negligent hiring, supervision, or retention, defamation, intentional or negligent misrepresentation, fraud, and any and all other laws and regulations relating to employment, employment termination, employment discrimination, harassment, and/or retaliation, wages, hours, employee benefits, compensation, sexual harassment, and any and all claims for attorneys’ fees and costs, pursuant to or arising under any federal, state, or local statute, law, rule, regulation, ordinance, or order. This release of claims expressly includes, but is not limited to, any and all claims arising out of or in any way related to Employee’s employment with the   --------------------------------------------------------------------------------   Company, or both, whether known by him at the time of execution of this Agreement or not. By signing this Agreement, however, Employee does not waive any rights or claims that may arise after the Effective Date of this Agreement.      4. Form 8-K Disclosure. Employee acknowledges that the Company provided him with a proposed Form 8-K disclosure, a copy of which is attached hereto as Exhibit A. Employee represents that he reviewed this proposed disclosure, and that agrees with each and every material representation therein.      5. Covenant Not to Sue. Employee warrants that he has no pending complaints, charges, or claims for relief against the Company or Company Releasees, or any of them, with any local, state, or federal court or administrative agency. Employee understands and agrees that this Agreement may be pled as a complete bar to any action or suit before any administrative body or court with respect to any complaint, charge, or claim under federal, state, local, or other law relating to any possible claim that existed or may have existed against the Company or Company Releasees, or any of them, arising out of any event occurring from the beginning of time through the Effective Date of this Agreement.      6. Non-Disparagement. Employee agrees that neither he nor anyone acting on his behalf will make any derogatory or disparaging statement about the Company or Company Releasees, or any of them. Employee agrees and understands that the promise of non-disparagement is a material inducement to the Company in agreeing to provide the benefits set forth in Paragraph 2.1(a) and 2.1(d), and that in the event Employee breaches the provisions of this Paragraph, it shall constitute a material breach of this Agreement, and that the Company shall be entitled to cease making any payments to Employee under Paragraph 2.1(a) and to cease to provide Employee with any Company-paid COBRA under Paragraph 2.1(d), as well as the right to seek all damages caused by such breach, including, without limitation, reputational damages and punitive damages.      7. Restrictive Covenants. Employee acknowledges and agrees that he is bound and shall remain bound by the terms of the Confidentiality and Non-Compete Agreement he executed in connection with and pursuant to Paragraph 8 of the Employment Terms Letter, a copy of which is attached hereto as Exhibit B and incorporated herein by reference. The terms of that Confidentiality and Non-Compete Agreement shall survive the termination of his employment with the Company and remain enforceable. Consistent with the provisions set forth in the Confidentiality and Non-Compete Agreement, Employee reaffirms, agrees, and acknowledges that, at all times after the Separation Date, he will not, without the prior written consent of the Company, directly or indirectly, (i) misappropriate or otherwise make any use of Company trade secrets or Proprietary Information (as that term is defined in the Confidentiality and Non-Competition Agreement); or (ii) release or otherwise divulge such trade secrets or any other confidential, secret, or Proprietary Information of the Company to any third party, except as is reasonably necessary in furtherance of his employment duties hereunder. Notwithstanding anything set forth in this Paragraph 7, Employee shall not be deemed to be in breach of this Paragraph if Employee: (i)   --------------------------------------------------------------------------------   discloses information pursuant to express written authorization of the Company; or (ii) discloses information to any governmental authority or court, pursuant to a duty imposed by law (provided, however, that Employee shall notify the Company of the disclosure at least five (5) business days prior to such disclosure).      8. Non-Solicitation of Key Company Employees. Employee agrees that, for a period of eighteen (18) months immediately following Separation Date, or, in the alternative, in the event any reviewing court finds eighteen (18) months after the Separation Date to be overbroad in duration and unenforceable, for a period of twelve (12) months after the Separation Date, or, in the alternative, in the event any reviewing court finds twelve (12) months to be overbroad in duration and unenforceable, for a period of nine (9) months after the Separation Date, or, in the alternative, in the event any reviewing court finds nine (9) months to be overbroad in duration and unenforceable, for a period of six (6) months after the Separation Date, or, in the alternative, in the event any reviewing court finds six (6) months to be overbroad in duration and unenforceable, for a period of three (3) months after the Separation Date, Employee shall not solicit, encourage, influence, induce, or cause others to solicit, encourage, influence, or induce any executive employee or management employee of the Company (collectively referred to herein as “Key Company Employees”) to terminate their employment relationship with the Company, or solicit, induce, seek to hire, offer employment to and/or hire any Key Company Employee, either as an employee, consultant, or independent contractor. If Employee violates the obligations contained in this Section, the time periods hereunder shall be extended by a period of time equal to that period beginning when the activities constituting such violation commenced and ending when the activities constituting such violation terminated. Employee agrees that the consideration provided for in Paragraph 2.1 of this Agreement is adequate and sufficient consideration for the promises provided in this Paragraph 8.      9. Return of Company Property. Employee agrees to and shall return to the Company all Company property in his actual or constructive possession prior to or on the Separation Date.      10. Consultation with an Attorney. The Company has advised Employee to consult with an attorney of his choosing prior to executing this Agreement. Employee represents and agrees that he has thoroughly discussed all aspects of his rights and this Agreement, including his waiver of claims under the Age Discrimination in Employment Act, with an attorney, to the extent he wished to do so, prior to his placing of his signature on this Agreement.      11. Review. A copy of this Agreement was delivered to Employee on January 31, 2006. Employee has been advised that he has twenty-one (21) days from the date he is presented with this Agreement to consider this Agreement. If Employee executes this Agreement before the expiration of twenty-one (21) days, he acknowledges that he has done so for the purpose of expediting the payment of severance benefits, and that he has expressly waived his right to take twenty-one (21) days to consider this Agreement.   --------------------------------------------------------------------------------        12. Revocation. Employee may revoke this Agreement for a period of seven (7) days after he signs it. Employee agrees that if he elects to revoke this Agreement, he will notify Company (c/o Quinn P. Williams, Greenberg Traurig, LLP, 2375 East Camelback Road, Suite 700, Phoenix, Arizona, 85106) in writing, via certified mail, on or before the expiration of the revocation period. Receipt of proper and timely notice of revocation by the Company cancels and voids this Agreement. Provided that Employee does not provide notice of revocation, this Agreement will become effective upon expiration of the revocation period.      13. Confidentiality. Employee agrees that he will keep the terms and fact of this Agreement confidential. He will not disclose the existence of this Agreement or any of its terms to anyone except his immediate family, attorneys, or accountants, unless required by law.      14. Amendment. This Agreement shall be binding upon the parties and may not be amended, supplemented, changed, or modified in any manner, orally or otherwise, except by an instrument in writing of concurrent or subsequent date signed by both of the parties.      15. Entire Agreement. This Agreement contains and constitutes the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and, except as otherwise provided herein, cancels all prior or contemporaneous oral or written understandings, negotiations, agreements, commitments, representations, and promises in connection herewith, including but not limited to any contrary provisions set forth in the Employment Terms Letter and/or the Amended Employment Terms Letter.      16. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.      17. Construction. The parties hereto acknowledge and agree that each party has participated in the drafting of this Agreement and has had the opportunity to have this document reviewed by the respective legal counsel for the parties hereto and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be applied to the interpretation of this Agreement. No inference in favor of, or against, any party shall be drawn from the fact that one party has drafted any portion hereof.      18. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of the parties reflected hereon as the signatories.   --------------------------------------------------------------------------------        19. Choice of Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona. The parties agree that any claim, action, complaint, lawsuit, or other dispute arising between the parties related to the terms of this Agreement shall be brought and heard in the federal or state courts located in Maricopa County, Arizona, and Employee expressly consents to the exercise of personal jurisdiction over him by the Arizona courts.      20. Severability. Should any provision in this Agreement be declared or determined by any court to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected, and the illegal or invalid part, term, or provision shall be deemed not to be a part of this Agreement.      21. Effect of this Agreement. It is expressly understood and agreed that this Agreement shall not in any way be construed at any time or for any purpose as an admission by the parties that either of them has acted wrongfully with respect to the others.      22. Waiver. The failure of a party to insist upon strict adherence to any obligation of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver of any provision of this Agreement must be in a written instrument signed and delivered by the party waiving the provision.      23. Attorneys’ Fees. Should any legal action be commenced arising out of this Agreement, the prevailing party in any such action shall be entitled to an award of attorneys’ fees incurred therein. [Remainder of Page Intentionally Blank; Signatures on Following Page]   --------------------------------------------------------------------------------        By signing below, the parties acknowledge that they have carefully read and fully understand all of the provisions of this Agreement and that they are voluntarily entering into this Agreement.                       KONA GRILL, INC., a Delaware corporation               Dated:       By                           Its                                 Dated:                                   C. Donald Dempsey  

EXHIBIT 10.9 EXECUTION COPY AUTOVAXID, INC. SECOND-LIEN SECURITY AGREEMENT   To:    St. Louis New Markets Tax Credit Fund-II, LLC    c/o St. Louis Development Corporation 1015 Locust Street    Suite 1200    St. Louis, Missouri 63101    Attention: Rodney Crim   Date: December 8, 2006 To Whom It May Concern: 1. To secure the payment of all Obligations (as hereafter defined), AUTOVAXID, INC., a Florida corporation (the “Company”) hereby assigns and grants to St. Louis New Markets Tax Credit Fund-II, LLC (the “CDE”) a subordinated continuing security interest in all of the following property now owned or at any time hereafter acquired by the Company, or in which the Company now has or at any time in the future may acquire any right, title or interest (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable, deposit accounts, inventory, equipment, goods, fixtures, documents, instruments (including, without limitation, promissory notes), contract rights, commercial tort claims, general intangibles (including, without limitation, payment intangibles and an absolute right to license or sublicense on terms no less favorable than those current in effect among the Company’s affiliates), chattel paper, supporting obligations, investment property (including, without limitation, all partnership interests, limited liability company membership interests and all other equity interests owned by any Assignor), letter-of-credit rights, trademarks, trademark applications, tradestyles, patents, patent applications, copyrights, copyright applications and other intellectual property in which such Assignor now has or hereafter may acquire any right, title or interest, all proceeds and products thereof (including, without limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or therefor. All items of Collateral that are defined in the UCC shall have the meanings set forth in the UCC. For purposes hereof, the term “UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the CDE’s security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that the UCC is used to define any term herein and such term is defined differently in different Articles of the UCC, the definition of such term contained in Article 9 shall govern. 2. The term “Obligations” as used herein shall mean and include all debts, liabilities and obligations owing by the Company to the CDE arising under, out of, or in connection with -------------------------------------------------------------------------------- that certain QLICI Loan Agreement dated of even date herewith between the CDE and the Company (the “QLICI Loan Agreement”) and the promissory note from the Company to the CDE thereunder (the “Note”), and in connection with any notes, documents, instruments or agreements relating to or executed in connection with the QLICI Loan Agreement or any documents, instruments or agreements referred to therein or otherwise, including, without limitation, obligations and liabilities of the Company for post-petition interest, fees, costs and charges that accrue after the commencement of any case by or against such Assignor under any bankruptcy, insolvency, reorganization or like proceeding (collectively, the “Debtor Relief Laws”) in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of the Obligations in any case commenced by or against any Assignor under any Debtor Relief Law. 3. The liens and security interests created herein are second priority liens, and are the only liens and security interests to which the Collateral is subject other than any prior lien, security interest or right of set-off (the “First Lien”) from AutovaxID to Laurus Master Fund, Ltd. (“Laurus”) pursuant to that certain Master Security Agreement, dated March 31, 2006, among Laurus, Biovest International, Inc. and certain subsidiaries thereof (including, without limitation, the Company) (the “First-Lien Security Agreement”) in order to secure the obligations from Biovest International, Inc. and its subsidiaries to Laurus (the “First-Lien Obligations”). Notwithstanding anything herein to the contrary (and regardless of whether any provisions hereof are not specifically made subject to the First-Lien Security Agreement or the Subordination Agreement (as defined below)), all terms and conditions of this Agreement shall be subject to the terms of that certain Subordination Agreement, dated as of the date hereof, by and among Laurus, the CDE, US Bancorp Community Investment Corporation, the Company and Biovest International, Inc. (the “Subordination Agreement”) Without limiting the foregoing, all rights, remedies, privileges and benefits of the CDE hereunder shall be subject to the prior right of Laurus under the Documents (as such term is defined in the First-Lien Security Agreement), including without limitation the right of Laurus to control and possess the Collateral and to retake, hold, prepare for sale and sell the Collateral. 4. The Company hereby represents, warrants and covenants to the CDE that: (a) it is a corporation validly existing, in good standing and formed under the laws of the State of Florida; (b) its legal name is as set forth herein in its Articles of Incorporation or other organizational documents as amended through the date hereof, and it will provide the CDE with thirty (30) days’ prior written notice of any change in its legal name; (c) it will provide the CDE thirty (30) days’ prior written notice of any change in its employer identification number; (d) it is the lawful owner of its Collateral and it has the sole right to grant a security interest therein, subject to the prior written consent of Laurus, and will defend the Collateral against all claims and demands of all persons and entities, other than the First Lien;   - 2 - -------------------------------------------------------------------------------- (e) it will keep its Collateral free and clear of all attachments, levies, taxes, liens, security interests and encumbrances of every kind and nature (“Encumbrances”), except (i) the First Lien, (ii) Encumbrances securing the Obligations and (iii) Encumbrances securing indebtedness of the Company not to exceed $50,000 in the aggregate; (f) it will, at its cost and expense, keep the Collateral in good state of repair (ordinary wear and tear excepted) and will not waste or destroy the same or any part thereof other than ordinary course discarding of items no longer used or useful in its business; (g) it will not, without the CDE’s prior written consent, sell, exchange, lease or otherwise dispose of any Collateral, whether by sale, lease or otherwise, except for the sale of inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and worn-out equipment or equipment no longer necessary for its ongoing needs, and only to the extent that: (i) the proceeds of each such disposition are used to acquire replacement Collateral which is subject to the security interest herein, or are used to repay the First-Lien Obligations, to repay the Obligations or to pay general corporate expenses; or (ii) subject to the obligations of the Company under the First Lien Security Agreement, following the occurrence of an Event of Default which continues to exist, the proceeds of which are remitted to the CDE to be held as cash collateral for the Obligations; (h) it will insure or cause the Collateral to be insured in the CDE’s name (as an additional insured and loss payee, subject to Laurus’ right to insurance proceeds under the First-Lien Security Agreement) against loss or damage by fire, theft, burglary and such other hazards as the CDE shall specify in amounts acceptable to the CDE and all premiums thereon shall be paid by the Company. If the Company fails to do so, the CDE may procure such insurance and the cost thereof shall be promptly reimbursed by the Company, and shall constitute Obligations; (i) it will at all reasonable times allow the CDE or the CDE’s representatives free access to and the right of inspection of the Collateral; and (j) it hereby indemnifies and saves the CDE harmless from all loss, costs, damage, liability and/or expense, including reasonable attorneys’ fees, that the CDE may sustain or incur to enforce payment, performance or fulfillment of any of the Obligations and/or in the enforcement of this Second-Lien Security Agreement or in the prosecution or defense of any action or proceeding either against the CDE concerning any matter growing out of or in connection with this Second-Lien Security Agreement, and/or any of   - 3 - -------------------------------------------------------------------------------- the Obligations and/or any of the Collateral except to the extent caused by the CDE’s own default under the QLICI Loan Agreement, the Note or hereunder, negligence, bad faith or willful misconduct. 5. The occurrence of any of the following events or conditions shall constitute an “Event of Default” under this Second-Lien Security Agreement: (a) any covenant or any other term or condition of this Second-Lien Security Agreement is breached in any manner that would have a material adverse effect on the aggregate business operations of the Company or on the security interest granted hereunder, and such breach, to the extent subject to cure, shall continue without remedy for a period of thirty (30) days after the occurrence thereof; (b) any representation or warranty, or statement made or furnished to the CDE under this Second-Lien Security Agreement by the Company or on the Company’s behalf should prove at any time to be false or misleading on the date as of which made or deemed made in any manner that would have a material adverse effect on the aggregate business operations of the Company or on the security interest granted hereunder; (c) the loss, theft, substantial damage, destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon except to the extent: (i) such loss is covered by insurance proceeds which are used to replace the item, repay Laurus or repay the CDE; or (ii) said levy, seizure or attachment does not secure indebtedness in excess of $100,000 and such levy, seizure or attachment has been removed or otherwise released within ten (10) days of the creation or the assertion thereof; (d) an Event of Default shall have occurred under and as defined in the QLICI Loan Agreement and the Note. 6. Upon the occurrence of any Event of Default and at any time thereafter, the CDE may declare all Obligations immediately due and payable and the CDE shall have the remedies of a secured party provided in the UCC as in effect in the State of New York, this Agreement and other applicable law, subject to the First Lien. Upon the occurrence of any Event of Default and at any time thereafter, the CDE will have the right to take possession of the Collateral and to maintain such possession the Company’s premises or to remove the Collateral or any part thereof to such other premises as the CDE may desire, so long as the First-Lien Obligations have been satisfied. Upon the CDE’s request, but subject to the Laurus’ rights under the First-Lien Security Agreement, the Company shall assemble or cause the Collateral to be assembled and make it available to the CDE at a place designated by the CDE. Subject to the First Lien, any proceeds of any disposition of any of the Collateral shall be applied by the CDE to the payment of all expenses in connection with the sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and disbursements and the reasonable expenses of retaking, holding, preparing for sale, selling, and the like, and any balance of such proceeds may be applied by the CDE toward the payment of the Obligations in such order of application as the CDE may elect,   - 4 - -------------------------------------------------------------------------------- and the Company shall be liable for any deficiency. The parties hereto each hereby agree that the exercise by any party hereto of any right granted to it or the exercise by any party hereto of any remedy available to it (including, without limitation, the issuance of a notice of redemption, a borrowing request and/or a notice of default), in each case, hereunder, under the QLICI Loan Agreement or under any other document which has been publicly filed with the SEC shall not constitute confidential information and no party shall have any duty to the other party to maintain such information as confidential. 7. The Company appoints the CDE or any other person or entity whom the CDE may designate as the Company’s attorney, with power to execute such documents on the Company’s behalf and to supply any omitted information and correct patent errors in any documents executed by any Assignor or on any Assignor’s behalf; to file financing statements against such Assignor covering the Collateral (and, in connection with the filing of any such financing statements, describe the Collateral as “all assets and all personal property, whether now owned and/or hereafter acquired” (or any substantially similar variation thereof)); to sign the Company’s name on public records; and to do all other things the CDE deem necessary to carry out this Second-Lien Security Agreement. The Company hereby ratifies and approves all acts of the attorney and neither the CDE nor the attorney will be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law other than negligence, bad faith or willful misconduct. This power being coupled with an interest, is irrevocable so long as any Obligations remains unpaid. 8. No delay or failure on the CDE’s part in exercising any right, privilege or option hereunder shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by the CDE and then only to the extent therein set forth, and no waiver by the CDE of any default shall operate as a waiver of any other default or of the same default on a future occasion. Subject to the First Lien, the CDE shall have the right to enforce any one or more of the remedies available to the CDE, successively, alternately or concurrently. The Company agrees to join with the CDE in executing documents or other instruments to the extent required by the UCC in form satisfactory to the CDE, and in executing such other documents or instruments as may be required or deemed necessary by the CDE for purposes of affecting or continuing the CDE’s security interest in the Collateral. 9. The Company shall pay all of the CDE’s out-of-pocket costs and expenses, including reasonable fees and disbursements of in-house or outside counsel and appraisers, in connection with the prosecution or defense of any action, contest, dispute, suit or proceeding concerning any matter in any way arising out of, related to or connected with any the QLICI Loan Agreement, the Note or this Second-Lien Security Agreement. The Company shall also pay all of the CDE’s reasonable fees, charges, out-of-pocket costs and expenses, including fees and disbursements of counsel and appraisers, in connection with (a) the preparation, execution and delivery of any waiver, any amendment thereto or consent proposed or executed in connection with this Second-Lien Security Agreement, (b) the enforcement or defense of the CDE’s security interests, assignments of rights and liens hereunder as valid perfected security interests, (c) any attempt to protect, collect, sell, liquidate or otherwise dispose of any Collateral, and (d) any consultations in connection with any of the foregoing. All such costs and expenses together with all filing, recording and search fees, taxes and interest payable by the Company to the CDE shall be payable on demand and shall be secured by the Collateral.   - 5 - -------------------------------------------------------------------------------- 10. THIS SECOND-LIEN SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. All of the rights, remedies, options, privileges and elections given to the CDE hereunder shall inure to the benefit of the CDE’s successors and assigns. 11. The Company hereby consents and agrees that the state of federal courts located in the County of New York, State of New York shall have exclusive jurisdiction to hear and determine any claims or disputes between the Company, on the one hand, and the CDE, on the other hand, pertaining to this Second-Lien Security Agreement or to any matter arising out of or related to this Second-Lien Security Agreement, provided, that the CDE and the Company each acknowledges that any appeals from those courts may have to be heard by a court located outside of the County of New York, State of New York, and further provided, that nothing in this Second-Lien Security Agreement shall be deemed or operate to preclude the CDE from bringing suit or taking other legal action in any other jurisdiction to collect, the Obligations, to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of the CDE. The Company expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and the Company hereby waives any objection which it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens. 12. The parties desire that their disputes be resolved by a judge applying such applicable laws. Therefore, to achieve the best combination of the benefits of the judicial system and of arbitration, the parties hereto waive all rights to trial by jury in any action, suite, or proceeding brought to resolve any dispute, whether arising in contract, tort, or otherwise between the CDE an the Company in connection with this Second-Lien Security Agreement or the transactions related hereto. 13. All notices from the CDE to the Company shall be sufficiently given if provided to the Company in the manner set forth in the QLICI Loan Agreement.   Very truly yours, AUTOVAXID, INC. By:   /s/ Steven Arikian Name:   Steven Arikian, M.D. Title:   Chairman & CEO   - 6 - -------------------------------------------------------------------------------- ACKNOWLEDGED: ST. LOUIS NEW MARKETS TAX CREDIT FUND-II, LLC By:   St. Louis Development Corporation, its Managing Member By:   /s/ Rodney Crim Name:   Rodney Crim Title:   Executive Director   - 7 -

Exhibit 10.1     NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   AGREEMENT FOR DISTRIBUTION OF PRODUCTS This Agreement for Distribution of Products (the “Agreement”) is effective September 26, 2006 between Whole Foods Market Distribution, Inc., a Delaware corporation (“WFM”), and United Natural Foods, Inc., a Delaware corporation (“UNFI”). RECITALS A.          WFM and its affiliates and subsidiaries are primarily engaged in the sale of natural and organic products. Their operations include retail stores (“WFM Stores”), food production/repacking facilities and distribution centers (together, including WFM Stores, the “WFM Locations”). WFM and its affiliates and subsidiaries have WFM Locations in a number of separate regions, which currently include the Florida Region, Mid-Atlantic Region, Mid-West Region, Pacific Northwest Region, Northern Atlantic Region, Northeast Region, Northern California Region, Rocky Mountain Region, South Region, Southern Pacific Region, and the Southwest Region (each a “WFM Region” and collectively the “WFM Regions”). B.           UNFI and its affiliates, subsidiaries and related parties including but not limited to, all distribution arms of the foregoing parties and Select Nutrition (together with UNFI, the “UNFI Parties”) operate a group of distribution centers (individually a “UNFI DC” and collectively the “UNFI DCs”) that sell natural and organic products. For purposes of this Agreement UNFI Parties specifically excludes Albert’s Organics, Inc. and manufacturing arms and retail divisions of UNFI and its affiliates subsidiaries and related parties. C.           The parties desire to enter into this Agreement to set forth the terms upon which UNFI will sell and distribute to WFM Locations and WFM Locations will purchase certain goods and services. NOW, THEREFORE, the parties agree as follows: 1.            Term. This Agreement shall have an initial term of seven years (the “Term”) commencing as of September 26, 2006 (the “Effective Date”). 2.            Scope. This Agreement applies to any product purchased by a WFM Location in the continental United States from the UNFI Parties (in any case a “Product” and collectively “Products”). [*CONFIDENTIAL*]. 3. Distribution Arrangement. (a)            The pricing terms set forth in this Agreement will remain in effect as long as WFM uses UNFI as its “Primary Distributor.” WFM is deemed to have used UNFI as its Primary Distributor if the following two conditions are met: (i) each WFM Region (excluding [*CONFIDENTIAL*] and all WFM Stores outside of the continental United States) purchases [*CONFIDENTIAL*] in Products per “WFM Fiscal Year” (as identified on Exhibit A) as were purchased in [*CONFIDENTIAL*]; and (ii) if [*CONFIDENTIAL*] of the aggregate dollar amount of Product purchases by all WFM Stores (excluding [*CONFIDENTIAL*] and all WFM Stores outside of the continental United States) from wholesale natural grocery distributors during a WFM Fiscal Year are made from UNFI Parties. Orders submitted to the UNFI Parties NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   for Products that are out of stock (“OOS”) will be included in the calculation as purchases from UNFI Parties for determining whether both (a)(i) and (a)(ii) have been satisfied. The following purchases by WFM Stores are not considered to be purchases from a wholesale natural grocery distributor and therefore will not be included in determining the dollar amount of WFM Store product purchases for purposes of this Section 3(a)(ii): (A) purchases by WFM Stores from WFM or any of its affiliates or subsidiaries (collectively, the “WFM Parties”), including, but not limited to, purchases from a WFM distribution center, (B) purchases by WFM Store from the manufacturer of a product, (C) purchases by WFM Stores from non natural grocery distributors including, but not limited to, broad-line food service distributors, non-food distributors and specialty distributors such as but not limited to cheese, produce, meat, seafood, or alcoholic beverages distributors. If at any time UNFI believes that WFM has not satisfied the conditions set forth in Section 3(a)(i) or 3(a)(ii), UNFI will notify WFM in writing. WFM will have 3 WFM Periods from receipt of such notice to adjust purchases to meet the requirements. If WFM fails to cure the noncompliance in 3 WFM Periods (calculated on a consecutive 13 WFM Period basis) from the receipt of notice, UNFI’s sole remedy will be to renegotiate the “Gross Profit Margin Percent” identified on Exhibit B. (b)           UNFI agrees to (i) use commercially reasonable efforts to increase its distribution capacity in [*CONFIDENTIAL*] and (ii) establish a new distribution center in [*CONFIDENTIAL*]. If UNFI fails to provide fully functional UNFI DCs capable of servicing the applicable WFM Locations in the [*CONFIDENTIAL*] and [*CONFIDENTIAL*] (in each case, the “Online Date”), UNFI will be charged a penalty fee. The penalty fee begins on the applicable UNFI DCs Online Date and continues until the applicable UNFI DC is fully functional and is equal to [*CONFIDENTIAL*]. If there is an event of Force Majeure that prevents UNFI from meeting the applicable Online Date, the parties agree to negotiate a new Online Date. (c)            UNFI agrees to stock all new Products requested by WFM after the Effective Date if a majority of the WFM Stores (but in any case, not less than six WFM Stores or all the WFM Stores in a WFM Region if the WFM Region contains less than six WFM Stores) in the applicable WFM Region agree to stock the new Product, including, but not limited to, Exclusives (defined in Section 5(b)), Private Label SKUs (defined in Section 6(a)) and Control Label SKUs (defined in Section 6(a)). All new Product vendors must meet UNFI’s reasonable requirements for new vendors. Any single WFM Store requests for a new Product will be reviewed on a case by case basis. (d)           At any time during the term of this Agreement, the [*CONFIDENTIAL*] may choose to use UNFI as its Primary Distributor by executing a document substantially in the form of Exhibit C attached hereto.  Subject to the requirements in Exhibit C, UNFI will become the Primary Distributor for the [*CONFIDENTIAL*] effective the date of execution of Exhibit C.  Notwithstanding anything to the contrary in this Agreement, Exhibit C does not require the execution of UNFI although it will amend this Agreement. 4.            Reports. At WFM’s reasonable request, UNFI will provide reports to WFM that include all information and data relevant to an evaluation of the WFM account and UNFI’s performance under this Agreement, including, but not limited to, the following reports: (i) all reports requested by WFM [*CONFIDENTIAL*]; (ii) any reports of the type provided to WFM prior to   2 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   the Effective Date; and (iii) all reports requested in this Agreement. In addition, WFM may submit requests to UNFI for additional information and data relating to WFM’s account and UNFI will prepare reports for WFM setting forth the requested information and data. UNFI will use commercially reasonable efforts to provide all such information and data in a timely manner and in the format requested by WFM. WFM may specify either a hard copy or electronic copy. For electronic copies, WFM may specific whether the report will be delivered in CSV, Excel or Word or another format reasonably acceptable to UNFI 5. Branded Products. (a)            Quality Standards. WFM has a list of ingredients located at www.wholefoodsmarket.com (which the WFM Parties may modify from time to time) that WFM does not permit in any products sold at WFM Stores (the “Unacceptable Ingredient List”). UNFI agrees it will not knowingly sell WFM Products that contain ingredients listed on the Unacceptable Ingredient List. (b)           Exclusives. From time to time, WFM and certain Product manufacturers or suppliers may agree that a Product provided by such manufacturer or supplier will be sold exclusively to WFM (“Exclusives”). If a new Exclusive Product meets the requirements in Section 3(c), UNFI will purchase and stock Exclusives in inventory and for a period specified by WFM (not to exceed three UNFI Pricing Periods per UNFI DC unless mutually agreed upon by the parties), UNFI will sell the Product only to WFM Locations. 6. Private Label and Control Label Products. (a)            Inventory. “Private Label SKUs” will mean those Products that WFM Locations offer from time to time with packaging that includes WFM proprietary labels including, but not limited to, “Whole Foods” “365 Everyday Value” “365 Organic Everyday Value” “Whole Kids Organic” “Whole Body” “Whole Pantry” and such other trade names or marks used by WFM Parties from time to time. In addition to Private Label SKUs, certain manufacturers or suppliers may agree from time to time to produce products for WFM that include manufacturer or supplier proprietary labels used exclusively on products sold to WFM Locations (“Control Label SKUs”). UNFI will purchase and stock the Private Label SKUs and the Control Label SKUs requested by WFM from time to time in the UNFI DCs designated by WFM. UNFI will provide WFM with a current list of individuals designated as contacts for Private Label SKU and Control Label SKU inventory matters and will keep WFM informed of any changes to contact information. (b)           Report. UNFI recognizes the importance of delivering all information regarding Private Label SKUs and Control Label SKUs in a clear, concise and complete manner. UNFI will provide WFM with a report of UNFI’s Private Label SKU inventory and Control Label SKU inventory in a form mutually agreed upon by the parties once every WFM Period as identified on Exhibit A (the “Private Label Report”). The Private Label Report will be per UNFI DC and UNFI in total and will include information about usage, stock level, amount on order and how many times each Private Label SKU and Control Label SKU turned during a WFM Period (an “Inventory Minimum Turn Period”). UNFI agrees to deliver the first Private Label Report 60 days from the Effective Date.   3 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.     (c) Product Hold; Stock Recovery, Withdrawals and Recalls. (i)                         All notices relating to a Product hold, stock recovery, withdrawal or recall of a Private Label SKU or Control Label SKU may be communicated to UNFI by a member of the WFM Private Label Team (a “Product Action Notice”). UNFI will cooperate fully with the WFM Private Label Team, respond promptly to any Product Action Notice and confirm receipt of any such notice by email as soon as possible but in every case, within 24 hours. UNFI shall keep the WFM Private Label Team informed of the status of UNFI inventory subject to a Product Action Notice and all actions performed by a UNFI Party in response to any such notice. If UNFI receives notice from anyone other than a WFM Private Label Team member that involves a Product hold, stock recovery, withdrawal or recall associated with a Private Label SKU or a Control Label SKU, UNFI will immediately notify a member of the WFM Private Label Team. The Private Label SKU or Control Label SKU involved in this notice may be placed on hold; however, no other action should be taken until a directive is received from the WFM Private Label Team. (ii)                        Product subject to a Product hold, stock recovery, withdrawal or recall of a Private Label SKU or a Control Label SKU inventory whether due to a defect, damage, misbranding or quality issue is considered “Rejected Inventory.” [*CONFIDENTIAL*]. UNFI will indemnify WFM for any losses incurred by the WFM Parties resulting from a UNFI Party’s failure to comply with a Product Action Notice. (d)            Product Sales. UNFI agrees to take commercially reasonable efforts to prevent any UNFI Party from selling or donating or otherwise distributing or conveying any Private Label SKU or any Control Label SKU to any distribution network, stores, entities or persons not approved in advance by a WFM Private Label Team Member. UNFI agrees to fully cooperate with WFM Private Label Team members and their representatives and designees in any investigation or litigation relating to any unauthorized sale. [*CONFIDENTIAL*]. (e)            WFM Responsibility for Inventory. Except for (i) Rejected Inventory, (ii) inventory that is out of date or damaged or in unacceptable condition due to UNFI’s acts or omissions including, but not limited to, improper storage, improper rotation, improper ordering, damage incurred during transportation by UNFI or its designees or (iii) missing, short or lost Product (shrink), if WFM terminates a Private Label SKU or a Control Label SKU, WFM will be responsible for and will reimburse UNFI for the applicable Private Label SKU or Control Label SKU inventory held by UNFI not to exceed the greater of (i) a 90 day supply based upon the WFM Locations’ past purchasing practices, or, if a new Product, projections provided in writing by WFM, or (ii) the supplier’s minimum order quantity. If the WFM Private Label Team instructs UNFI to destroy a Private Label SKU or a Control Label SKU held in inventory, UNFI will promptly arrange for the destruction of the applicable Products and will promptly provide WFM with a certificate of destruction covering all applicable Products. (f)            [*CONFIDENTIAL*]. Private Label SKUs and Control Label SKUs will be priced for invoice purposes in the same manner as other Products purchased by WFM Locations from UNFI Parties except for [*CONFIDENTIAL*].   4 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   7. Invoicing Payment Terms.   (a) Product Invoices. (i)                          Standard Invoices. Except for the EDLC Program (defined in Section 7(a)(iii)), UNFI will invoice WFM Locations for all Products purchased by WFM Locations consistent with practices in effect between WFM and UNFI prior to the Effective Date. The current practice applies to Products other than produce, wine and non-branded bulk items (“Standard Products”). For Standard Products, the price shown on the invoice to WFM (the “Standard Invoice Product Price”) will equal UNFI’s Cost (defined below) plus [*CONFIDENTIAL*]. “Cost” equals the manufacturer’s list price (the “MLP”) to UNFI for the Product, plus (ii) the Freight Charge. The “Freight Charge” means either (i) [*CONFIDENTIAL*] or (ii) [*CONFIDENTIAL*]. A Freight Charge will not be applied to Products that include freight in the MLP (i.e. Products with delivered cost pricing). WFM may change the amount of [*CONFIDENTIAL*] at any time by giving UNFI written notice. The foregoing change will be reflected in the next EDI cost files transmitted to WFM and the new [*CONFIDENTIAL*] becomes effective at the start of the next UNFI Pricing Period for such EDI cost files, not to exceed nine weeks.   (ii) [*CONFIDENTIAL*] (iii)                       EDLC Program. Certain Products will be included in a new program known as the WFM Everyday Low Cost Program (the “EDLC Program”). A Product will be included in the EDLC Program if WFM and the Product supplier or manufacturer agree upon an every day low cost (an “EDLC Cost”) for a Product that is resold by UNFI to WFM Locations (“EDLC Products”). For EDLC Products, the invoice price (the “EDLC Invoice Price”) will equal [*CONFIDENTIAL*]. A Freight Charge will not be applied to Products that include freight in the EDLC Cost. UNFI will report to the supplier or manufacturer the applicable EDLC Product sales and deduct from or credit to the supplier or manufacturer the appropriate EDLC reconciliation amount (the “EDLC Reconciliation Amount”). The EDLC Reconciliation Amount will be equal to [*CONFIDENTIAL*]. The parties will work together to create forms and procedures to support the EDLC Program, including, but not limited to, a WFM EDLC Reconciliation Process and a WFM EDLC Program Form. WFM may change the amount of the [*CONFIDENTIAL*] at any time by giving UNFI written notice. The foregoing change will be reflected in the next EDI cost files transmitted to WFM and the new [*CONFIDENTIAL*] becomes effective at the start of the next UNFI Pricing Period for such EDI cost files, not to exceed nine weeks. (iv)                       Cross-Dock Billing UNFI will, from time to time, and based on UNFI space availability, ship goods and shipper displays on a cross-dock basis for WFM at a rate of $[*CONFIDENTIAL*]. (v)                        [*CONFIDENTIAL*]. From time to time, WFM or UNFI, on WFM’s behalf, may negotiate [*CONFIDENTIAL*] from the manufacturer and/or supplier. The [*CONFIDENTIAL*] will be reflected as a reduction in the applicable invoice price. For example, [*CONFIDENTIAL*]. The parties will work together to create a list of manufacturers and suppliers that have agreed to provide WFM [*CONFIDENTIAL*]. UNFI Authorization   5 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   forms for standing and one-time [*CONFIDENTIAL*] will be completed and submitted by WFM’s vendor or broker and submitted to UNFI designated personnel who will update and maintain this information and apply the specified reductions from the applicable invoice price. For any WFM specific [*CONFIDENTIAL*] UNFI will require manufacturer’s or supplier’s authorization. The foregoing WFM [*CONFIDENTIAL*] price will be reflected on the applicable invoice. UNFI Authorization forms will be submitted to UNFI with a minimum of two weeks lead time before desired delivery date. (vi)                       Fuel Surcharge Program. If during a “WFM Fiscal Quarter” (set forth on Exhibit A) the average price per gallon of diesel fuel exceeds [*CONFIDENTIAL*] based on the U.S. weekly average from the U.S. Department of Energy’s Weekly Retail On-Highway Diesel Prices report found on the US Energy Information Administration website, www.eia.doe.gov, WFM will incur a “Fuel Surcharge” as set forth on Exhibit D. The foregoing government report is currently located at http://tonto.eia.doe.gov/oog/info/wohdp/diesel_detail_report.asp. The Fuel Surcharge, if any, is calculated each WFM Fiscal Quarter based on the sum of the U.S. weekly average price per gallon, as found above, during the prior WFM Fiscal Quarter divided by the number of weeks in such prior WFM Fiscal Quarter, rounded to 2 decimal places using standard rounding procedures. The Fuel Surcharge, if any, shall be incurred for each delivery by UNFI fleet to a WFM Location. In accordance with current practices the Fuel Surcharge will be billed to each WFM Region per WFM Fiscal Quarter with supporting documentation reflecting the calculation of the Fuel Surcharge for each WFM Location. (vii)                      Pallet & Tote Program. The parties will develop a mutually agreeable pallet and tote exchange program. The pallet and totes received and returned by WFM will be tracked on each WFM Location invoice. WFM will pay UNFI a fee of [*CONFIDENTIAL*] per tote for totes not returned to UNFI (a “Tote Fee”). The Tote Fee will be invoiced to each WFM Region per WFM Fiscal Quarter with supporting documentation reflecting the calculation of the Tote Fee for each WFM Location. Upon Product deliveries, WFM will use its commercially reasonable efforts to provide UNFI with the number of empty pallets equal to the number of loaded pallets delivered to WFM. (viii)                     WFM’s Manufacturer/Supplier Relationship. UNFI agrees (i) to cooperate with WFM regarding any WFM arrangement with the Product manufacturer and/or supplier including, but not limited to, the EDLC Program, funding for new, remodeled and acquired WFM Stores, promotions and free or discounted Product and (ii) it will not attempt to circumvent any such arrangement including, but not limited to, the EDLC Cost (ix)                       Electronic Cost & Invoice Files. Consistent with past practices, UNFI will provide electronic cost files daily and each UNFI Pricing Period. Further, in addition to paper invoices submitted to WFM Locations, UNFI will provide daily electronic invoice files in EDI format. During the term of this Agreement, WFM intends to cross check the Product prices on the invoice against the electronic cost files. If there is a discrepancy in the Product price, WFM may adjust the applicable payment. [*CONFIDENTIAL*].              (b) Payment Terms.   6 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   (i)                         Amounts due UNFI. WFM will send a wire transfer every [*CONFIDENTIAL*] with payment for all acceptable invoices received by WFM Locations [*CONFIDENTIAL*]. UNFI may impose a finance charge of 1% per WFM Period for any undisputed amounts that are not paid timely. (ii)                        Amounts due WFM. Except as otherwise provided in this Agreement, any amount payable by UNFI to WFM will be due and payable within [*CONFIDENTIAL*] days from the beginning of the applicable WFM Period. WFM may impose a finance charge of 1% per WFM Period for any undisputed amounts that are not paid timely. 8. [*CONFIDENTIAL*] (a)            Purpose. The parties acknowledge that UNFI may realize income from sales of Products to WFM Locations through various means including, but not limited to, (i) [*CONFIDENTIAL*] and (ii) [*CONFIDENTIAL*]. [*CONFIDENTIAL*]. UNFI represents to WFM that it will not attempt to circumvent the intent of this Section 8.   (b) [*CONFIDENTIAL*]   (c) [*CONFIDENTIAL*].   (i) [*CONFIDENTIAL*]   (x) Definition of Total Sales: [*CONFIDENTIAL*].   (y) Definition of Total Cost of Goods Sold: [*CONFIDENTIAL*].   (ii) [*CONFIDENTIAL*].   (d) [*CONFIDENTIAL*]   (e) [*CONFIDENTIAL*].   (f) [*CONFIDENTIAL*] (g)           Accuracy of Information. In connection with the negotiation of this Agreement, UNFI has provided information to WFM relating to [*CONFIDENTIAL*]. UNFI acknowledges that WFM has relied upon this information in connection with the negotiation and execution of this Agreement. UNFI represents and warrants that all information provided to WFM during the negotiation of this Agreement is true and correct. If WFM determines that the above information is inaccurate or WFM was mislead, WFM may renegotiate the [*CONFIDENTIAL*]. If WFM chooses to renegotiate a reduction in the percentages listed on the [*CONFIDENTIAL*], UNFI agrees to negotiate in good faith.   (h) [*CONFIDENTIAL*].   7 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   9.            Credits.              UNFI’s Standard Credit Policy and UNFI’s Credit Allowance Policy are outlined on Exhibit E (“UNFI Credit Policy”). These policies set forth two separate procedures for providing credit for certain errors relating to Product orders including, but not limited to, Products which are billed but not received, wrong Product shipped, damaged Product, Products with less than agreed upon shelf life remaining, spoiled or infested Product, Product with defective packaging, consumer returns, withdrawn or recalled Products and pricing errors. Each WFM Region will select one of the two UNFI Credit Policy options. Each WFM Region may change its UNFI Credit Policy once per WFM Fiscal Year by giving UNFI 30 days written notice, such change to be effective beginning with the WFM Period following the 30 day notice. Notwithstanding the terms set forth in the UNFI Credit Policy, during the transition from the credit policy process in place between UNFI and WFM prior to the Effective Date and the new UNFI Credit Policy, UNFI’s DCs in the EAST (i) will implement a transitional credit submission timeline of four calendar days for the first three WFM Periods after the effective date of the new UNFI Credit Policy, and (ii) will accept one last cycle of suncare returns at the end of the 2006 season. 10. Other Rebates. (a)            Signing Bonus. In consideration of the execution of this Agreement, UNFI will pay WFM [*CONFIDENTIAL*]. The payment will be in the form of a check or wire transfer.   (b) [*CONFIDENTIAL*]   (c) [*CONFIDENTIAL*]   (d) [*CONFIDENTIAL*] 11.          New Product Slotting. WFM will submit a completed New Product Request Form (provided by UNFI) to request the addition of a new Product to UNFI’s inventory for sale to WFM Parties. The New Product Request Form will include a place to specify whether the new Product will be introduced by WFM on a national or regional basis. If the new Product will be introduced nationally, UNFI will purchase and slot the Product in all UNFI DCs for delivery to all WFM Locations. If the new Product will be introduced only in specific regions, UNFI will purchase and slot the new Product in the designated regions. UNFI will use commercially reasonable efforts to meet reasonable timelines requested by WFM for delivery of a new Product to WFM Locations. The parties agree that the following time frames are reasonable: (a)            if a supplier or manufacturer is new to any West or East division of UNFI, UNFI will submit purchase orders to the supplier or manufacturer within [*CONFIDENTIAL*] of the date WFM submits the New Product Request Form to UNFI (the “New Product Request Date”) and will use commercially reasonable efforts to deliver the requested new Product to WFM Locations within [*CONFIDENTIAL*] of the New Product Request Date; (b)           if the Product (but not the supplier or manufacturer) is new to any West or East division of UNFI, UNFI will submit purchase orders to the supplier or manufacturer within [*CONFIDENTIAL*] of the New Product Request Date and will use commercially reasonable efforts to deliver the Product to the designated WFM Locations within [*CONFIDENTIAL*] of the New Product Request Date; and   8 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   (c)            if UNFI has a Product number for a Product in the appropriate division requested by WFM, UNFI will submit all purchase orders for the new Product within [*CONFIDENTIAL*] of the New Product Request Date and will use commercially reasonable efforts to deliver the new Product to WFM Locations within [*CONFIDENTIAL*] of the New Product Request Date unless the supplier or manufacturer is not on a weekly ordering schedule, in which case, UNFI will submit the purchase order on the next possible order date and the timing of new Product delivery to WFM Locations will be adjusted accordingly. (d)           The parties acknowledge that supplier or manufacturer lead times, transportation schedules and other factors outside of UNFI’s control may affect the final WFM Location delivery timeline. WFM also acknowledges that a new Product orders involving an unusually large number of Product may require longer timelines. 12.          Fill Rate.          UNFI agrees to use commercially reasonable efforts to maintain a “fill rate” for each UNFI DC of at least [*CONFIDENTIAL*]% meaning that [*CONFIDENTIAL*]% or more of Products ordered by WFM Locations will be delivered on time and in good condition with the correct invoice and selection of Products. UNFI will provide a report to WFM once a week by UNFI DC of the actual dollar amount of Product filled and delivered on time by that UNFI DC and the dollar amount of the Products that would have been filled and delivered if that UNFI DC had a 100% fill rate. UNFI warrants and guarantees (excluding the [*CONFIDENTIAL*] Region) a [*CONFIDENTIAL*]% fill rate for each UNFI DC (the “Minimum Fill Rate”), which excludes mispicks, bills not received, short-code and quality, consistent with past practices. If any UNFI DC fails to meet the Minimum Fill Rate for [*CONFIDENTIAL*] consecutive weeks, every week following until the UNFI DC meets the Minimum Fill Rate, UNFI will pay each WFM Location affected an amount equal to [*CONFIDENTIAL*] of the difference between the dollar amount of Product represented by the Minimum Fill Rate and the dollar amount of Products delivered pursuant to those orders (in each instance a “Fill Rate Penalty Fee”). For example, if a UNFI DC fails to meet the Minimum Fill Rate for [*CONFIDENTIAL*] weeks in a row, each WFM Location that placed orders for Products from the UNFI DC that were due to be delivered during the 5th week would be entitled to a payment calculated as follows. If the dollar amount of Products received by the WFM Location from the UNFI DC during week five was $90,000 and there were $100,000 of Products ordered in corresponding purchase orders that were due to be delivered that week, the resulting fill rate would be [*CONFIDENTIAL*] for that WFM Location for that week. The difference between the actual fill rate dollar amount that week ($90,000) and the Minimum Fill Rate dollar amount [*CONFIDENTIAL*]. UNFI would owe that WFM Location a payment equal to [*CONFIDENTIAL*]. If the failure of UNFI to deliver any Product is a result of any of the following conditions, the Product will not be included in the calculations for determining the Minimum Fill Rate or the payment owed to a WFM Location: (i) if a Product is OOS as a result of a failure of the supplier or manufacturer (which can be independently verified by WFM) or as a result of a supply interruption due to natural disasters and UNFI has used commercially reasonable efforts to obtain the Product; (ii) promotional overpulls; (iii) applicable grocery strikes; (iv) interruptions in rail service or other transportation services other than those provided by UNFI; (v) mistakes in ordering on the part of WFM (e.g. WFM inadvertently requests the wrong amount of a Product on a purchase order). 13. Minimum Orders.   9 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   (a)            Select Nutrition. If the total purchase price of Select Nutrition Product ordered (including OOS Products) meets the $[*CONFIDENTIAL*] minimum order amount (until October 31, 2006) or the $[*CONFIDENTIAL*] minimum order amount (after October 31, 2006), UNFI will ship the Select Nutrition Products without a shipping fee. If WFM does not order the above minimum amount of Select Nutrition Products, WFM will be charged a $[*CONFIDENTIAL*] shipping fee. (b)            Other UNFI Parties. Except for the $[*CONFIDENTIAL*] minimum purchase requirement for all WFM Locations, all WFM Locations in [*CONFIDENTIAL*] and outside of the U.S. are excluded from this Section 13(b). WFM will use reasonable commercial efforts to maintain a national average minimum order amount of $[*CONFIDENTIAL*] for WFM Stores and $[*CONFIDENTIAL*] for other WFM Locations. Any WFM Store ordering on average less than $[*CONFIDENTIAL*] per order will make reasonable attempts towards increasing the WFM Store’s average order to at least $[*CONFIDENTIAL*]. In no event will UNFI be required to deliver an order that is less than $[*CONFIDENTIAL]. Order amounts will be based upon the total purchase price of Product ordered including the [*CONFIDENTIAL*] and OOS Products. UNFI will [*CONFIDENTIAL*]. If WFM fails to maintain a national average minimum order amount of $[*CONFIDENTIAL*] for WFM Stores and $[*CONFIDENTIAL*] for other WFM Locations, UNFI will notify WFM and WFM will take reasonable efforts to increase minimum order amounts. 14. Auditing. (a)            Support. Notwithstanding any language to the contrary, UNFI agrees to assist WFM with [*CONFIDENTIAL*] audit requests pertaining to this Agreement [*CONFIDENTIAL*]. In addition, UNFI agrees to [*CONFIDENTIAL*]. (b)           Records and Documentation. UNFI will maintain books, records, reports and documentation relating to its performance of this Agreement including, but not limited to, [*CONFIDENTIAL*] for a period of time, but in any case, not less than three years. Upon 21 days written notice UNFI will provide WFM and its designees access to [*CONFIDENTIAL*] for inspection during UNFI’s normal working hours. UNFI agrees to provide copies of any of the foregoing if requested by WFM. Alternatively, upon 21 days written notice from WFM, UNFI will send [*CONFIDENTIAL*] to a location of WFM’s choice for inspection by WFM or its designees. Upon WFM’s satisfactory conclusion of the audit, WFM will return all copies of books, records, reports and documentation. In addition, UNFI will provide WFM and its designees with [*CONFIDENTIAL*]. (c)            Payment. If, as a result of any WFM audit there is evidence that WFM was overcharged or did not receive any amount due, then UNFI will promptly pay WFM the amount thereof. In addition, UNFI will promptly pay [*CONFIDENTIAL*]. If the amount payable to WFM exceeds 2% of the aggregate amount that WFM should have been charged or was due, UNFI will promptly pay the applicable reasonable audit expense.   10 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   15. Personnel. (a)            National Account Manager. UNFI will continue to provide, [*CONFIDENTIAL*], a UNFI employee to serve as a National Account Manager for WFM’s account with UNFI. The primary responsibility for the National Account Manager is to be a liaison and singular point of contact between UNFI and WFM. The UNFI National Account Manager’s duties will be designated by UNFI but will all pertain to WFM’s account. The UNFI National Account Manager will reside in Austin, Texas and at WFM’s option, maintain an office at WFM Headquarters. (b)            National Promotions Coordinator. UNFI will designate a UNFI employee to serve as a WFM National Promotions Coordinator. The National Promotions Coordinator’s specific duties will be designated by UNFI but will all pertain to WFM’s account. The National Promotions Coordinator will draft WFM National Promotion Pre-orders subject to final approval by WFM and perform such other duties as the parties shall mutually agree. The Promotions Coordinator will reside in Austin, Texas and at WFM’s option, maintain an office at WFM Headquarters. UNFI has [*CONFIDENTIAL*] weeks from the Effective Date to hire a National Promotions Coordinator. (c)            Contract Manager. On or before September 26, 2006, UNFI will designate a UNFI employee to serve as a WFM Contract Manager. The Contract Manager’s specific duties will be designed by UNFI but will pertain to WFM’s account. The Contract Manager will help ensure that UNFI is in compliance with this Agreement and act as the liaison to WFM for auditing purposes. Further, the Contract Manager will conduct continuous self-auditing. (d)           Appointment Criteria. The individuals filling the National Account Manager and National Promotions Coordinator positions are subject to WFM’s reasonable satisfaction. If WFM requests the replacement of any UNFI personnel for any non-discriminatory reason, UNFI will use commercially reasonable efforts to promptly replace such individuals with new, competent personnel reasonably satisfactory to WFM. (e)            WFM Store Support. UNFI will [*CONFIDENTIAL*]. UNFI will continue to provide assistance for new and relocated WFM Stores as reasonably requested by WFM. 16. [*CONFIDENTIAL*]. 17. UNFI Distribution Centers; Delivery Standards. (a)            Standards for Distribution Centers. UNFI represents and warrants that all UNFI DCs will be maintained and operated in accordance with all applicable laws, in compliance with industry standards (including industry sanitation standards), and in all material respects in accordance with UNFI’s warehousing and delivery standards, which will be available for review upon request by WFM. WFM may inspect the physical plant and inventory of any UNFI DC during normal business hours upon reasonable advance notice to the designated UNFI personnel, but shall not impair or impede the business operations of the center. After 60 days prior notice and receipt of WFM’s consent, UNFI shall have the right to move service for WFM Stores from one UNFI DC to another. The proposed move shall not result in any increase in cost to WFM,   11 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   and the parties will have had the opportunity to prepare and implement a plan for a transition to any new UNFI DC. (b)            Covenants for Delivery. UNFI shall, at UNFI’s election, transport Products on UNFI fleet or WFM-approved carriers to individual WFM Locations. UNFI shall comply with all applicable laws, including any regional or national limitations or guidelines regarding deliveries (e.g., municipal, residential or property owner imposed restrictions on delivery hours, parking of trucks, unacceptable levels of noise in residential areas, etc.). (c)            Delivery Time Windows.          UNFI agrees to maintain the existing delivery time windows for delivery of Products to WFM Locations. If a WFM Location requests a change in a delivery time window that UNFI is unable to meet, UNFI and WFM may negotiate a [*CONFIDENTIAL*]. If the parties cannot agree on the amount of [*CONFIDENTIAL*], UNFI agrees it will meet the new delivery time window the WFM Location requested. If changes are required by municipal, residential or property owners on delivery hours, parking of trucks, delivery routes, curfews, noise ordinances, lease covenants, neighborhood covenants and/or operating hours, then WFM and UNFI will work together to make the scheduling changes necessary to comply with such restrictions. (d)            Code Date Policy; Inventory Management. Products shall be distributed to WFM Locations in compliance with the Code Date Policy attached as Exhibit G related to the minimum number of days prior to expiration of the final code date, for Products, under which such Products will be accepted upon delivery to the WFM Locations. The Code Date Policy may be amended from time to time upon mutual agreement of the parties. Product delivered with less than the minimum code date shall be deemed OOS for purposes of Sections 3(a) and 12. UNFI agrees to deliver all Products on a FEFO inventory management basis, to ensure proper inventory turns and maximize available Product Code Dates. Receipt of short-coded Product at any WFM Location that is not sold or used within the code date will be fully credited to WFM in accordance with the Code Date Policy. (e)            Quality Standards. Products will be delivered palletized and shrink-wrapped and meet WFM's quality standards and be free from damage including, but not limited to, temperature damage and be free from evidence of rodents or insects. (f)            Recalled Products. In the event that any Product is recalled or withdrawn (the “Recalled Product”), UNFI will use its personnel (or a third party retrieval service if UNFI reasonably believes the recall or withdrawal will be achieved faster, at less expense) to remove any Recalled Product from WFM Locations and shall dispose of or return any Recalled Products as required. In addition to the foregoing responsibilities, UNFI shall use its best efforts to cooperate with WFM in removing the Recalled Product and replenishing WFM Locations with replacement Products. Any credits for Recalled Products will be issued to WFM in compliance with the UNFI Credit Policy. (g)            Store Receiving. All Product shipments by UNFI to WFM Locations shall be evidenced by an invoice and signed by both parties. Shipments of Product shall be acknowledged as received by execution of the delivered invoice by a WFM employee at the WFM Location. A copy of each invoice shall be left with the WFM Location. In the event that   12 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   UNFI computer system issues prevent UNFI from delivering WFM product with invoices, WFM agrees to accept a Bill of Lading for such delivery in lieu of an invoice. (h)            Passage of Title and Risk of Loss. Title and risk of loss for Products purchased pursuant to this Agreement shall pass upon delivery to WFM Locations when delivered by UNFI fleet or by independent carrier. 18. Indemnification. (a)            UNFI Indemnity. UNFI shall indemnify, defend and hold harmless WFM and its parent, subsidiaries and affiliates, together with their stockholders, general and limited partners, members, managers, directors, officers, employees, agents, representatives, successors and assigns from and against any and all demands, claims, liabilities, losses, judgments, settlements, penalties, costs, expenses, fees (including reasonable fees of any attorneys, consultants or experts), interest, liens, encumbrances, causes of action, damages of any kind and any other obligations (together “Liabilities”) arising out of, relating to or otherwise based upon (i) any actual or alleged violation by UNFI of any federal, state or local law, including any statute, ordinance, administrative order, rule or regulation; (ii) any negligence or willful misconduct of any UNFI Parties or any of their employees or agents; (iii) the breach or alleged breach of any term of this Agreement; (iv) the employment, presence or activities of any UNFI Parties or their employee or contractor at any WFM Location or other property (including, but not limited to, all personal injury, wage and hour, wrongful termination, harassment, discrimination, workers compensation, disability, tort, strict liability or contract claims or demands); and (v) any Product recall or withdrawal or safety notice initiated as a result of a request by a government agency, local health authority or consumer protection agency or court action because of or resulting from a condition which existed at the time of delivery of the Product to the WFM Locations. (b)            WFM Indemnity. WFM shall hold indemnify, defend and hold harmless UNFI and its parent, subsidiaries and affiliates, together with their stockholders, general and limited partners, members, managers, directors, officers, employees, agents, representatives, successors and assigns from and against any and all Liabilities arising out of, relating to or otherwise based upon (i) any actual or alleged violation by WFM of any federal, state or local law, including any statute, ordinance, administrative order, rule or regulation; (ii) any negligence or willful misconduct of WFM or any of its employees or agents; (iii) the breach or alleged breach of any term of this Agreement; and (iv) the employment, presence or activities of WFM or its employee or contractor on any UNFI premises related to this Agreement (including, but not limited to, all personal injury, wage and hour, wrongful termination, harassment, discrimination, workers compensation, disability, tort, strict liability or contract claims or demands). (c)            Third Person Claims. Promptly after a party has received notice of or has actual knowledge of any Claim against it covered by a third party or the commencement of any action or proceeding by a third person with respect to any such Claim, such party (sometimes referred to as the “Indemnitee”) shall give the other party (sometimes referred to as the “Indemnitor”) written notice of such claim or commencement of such action or proceeding; provided, however, that the failure to give such notice will not affect the right to indemnification hereunder with respect to such Claim, action or proceeding, except to the extent that the other party has been actually prejudiced as a result of such failure. If the Indemnitor has notified the Indemnitee   13 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   within thirty (30) days from the receipt of the foregoing notice that it wishes to defend against the Claim, unless there exists a potential conflict of interest between the parties, then the Indemnitor shall have the right to assume and control the defense of the Claim by appropriate proceedings with counsel reasonably acceptable to the Indemnitee. The Indemnitee may participate in the defense, at its sole expense, of any such Claim for which the Indemnitor shall have assumed the defense pursuant to the preceding sentence, provided, however, that counsel for the Indemnitor shall act as lead counsel in all matters pertaining to the defense or settlement of such Claims, suit or proceeding other than Claims that in the Indemnitee’s reasonable judgment could have a material and adverse effect on Indemnitee’s business apart from the payment of money damages. The Indemnitee shall be entitled to indemnification for the reasonable fees and expenses of its counsel for any period during which the Indemnitor has not assumed the defense of any claim. The Indemnitor may not settle any Claim without obtaining a release for the benefit of the Indemnitee, unless the consent of the Indemnitee is obtained. (d)            Product Liability. UNFI acknowledges that it generally obtains indemnification agreements from the various manufacturers, suppliers, vendors or distributors of Products it purchases and sells. UNFI agrees to indemnify, defend and hold harmless WFM and its parent and affiliates, together with their stockholders, general and limited partners, members, managers, directors, officers, employees, agents, representatives, successors and assigns for any and all Liabilities (including but not limited to, personal injury, illness or death of any person) arising from or pertaining to the handling, shipment, delivery, condition of, consumption or use of any Product (other than Private Label SKUs), without regard to any negligence by UNFI related to such Product, except where the loss is determined to have arisen from the negligence of WFM. UNFI’s obligation to indemnify WFM for any Liabilities arising from any Products sold to WFM shall exist regardless of the existence or nonexistence of any such indemnification agreements from Product manufacturers, suppliers, vendors or distributors. Indemnification under this section does not extend to Liabilities arising out of any Private Label SKUs, except where the Liability is attributable to the negligence or intentional acts or omissions of UNFI. (e)            Insurance. At all times during the Term and for a two (2) year period after its termination or expiration, UNFI shall maintain, at its expense, occurrence based insurance coverage (the “Insurance Coverage”) in the types and amounts as follows: (i)                          Workers’ Compensation and Employer’s Liability insurance affording compensation benefits for all of its employees in an amount sufficient to meet all statutory requirements and employer’s liability insurance with limits of $[*CONFIDENTIAL*] for each accident or disease (with per incident or aggregate annual deductible of $[*CONFIDENTIAL*] or less). (ii)                        Commercial General Liability Insurance with a combined single limit of $[*CONFIDENTIAL*] per occurrence and $[*CONFIDENTIAL*] in the aggregate for personal injury, bodily injury (including wrongful death), and property damage liability inclusive of coverage for all premises and operations, broad form property damage, independent contractors, contractual liability for this Agreement and product/completed operations coverage.   14 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   (iii)                       Automobile Liability Insurance with a combined single limit of $[*CONFIDENTIAL*] per occurrence for injuries, including accidental death and property damage. (iv)                       Products Liability Insurance with limits not less than $[*CONFIDENTIAL*] per occurrence. (v)                        Umbrella or Excess Liability Insurance with limits not less than $[*CONFIDENTIAL*] per occurrence that provides additional limits for employer’s liability, commercial general liability, automobile liability and products liability insurance. The Insurance Coverage will be from an insurance company classified by A M Best as a Class IV or larger with a Financial Strength Rating of at least A, A-. None of the Insurance Coverage amounts will be construed as a limitation on UNFI’s potential liability. Except for Workers’ Compensation and Employer’s Liability insurance, the insurance policies will not have a per incident or aggregate annual deductible of greater than $[*CONFIDENTIAL*] without the prior written consent of WFM. In connection with UNFI’s execution of this Agreement, UNFI will provide WFM with certificates of insurance evidencing all of the referenced insurance policies, which will provide that: (i) such insurance will not be materially modified or cancelled unless WFM has been given at least 60 days’ advance written notice thereof; and (ii) such certificates will be renewed annually or as policy renewals occur. Except for Workers’ Compensation and Employers Liability, the required insurance policies will, at UNFI’s expense, name “Whole Foods Market Distribution, Inc. together with its direct and indirect affiliates and insurers as additional insureds.” 19. Compliance with Laws. (a)            General. Each party covenants and agrees during the Term it will fully comply with all applicable laws, ordinances, regulations, licenses and permits of or issued by any federal, state or local government entity, agency or instrumentality applicable to its responsibilities hereunder. Each party agrees that it shall comply with all certification procedures and regulations. Each party shall promptly notify the other party after it becomes aware of any material adverse proposed law, regulation or order that, to its knowledge, may or does conflict with the parties’ obligations under this Agreement. The parties will then use reasonable efforts to promptly decide whether a change may be made to the terms of this Agreement to eliminate any such conflict or impracticability. (b)            Organic Documentation. In connection with any organic Products, UNFI shall take all such actions as required by any federally recognized certifying organization (or as required by law) in order for such Products to be certified as organic, including, without limitation, the maintenance of any required documentation and the taking of the necessary precautions to prevent Product compromise. UNFI shall provide all documentation relating to the foregoing to WFM at WFM’s request.   15 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   20. Termination Provisions. (a)            Either party may terminate this Agreement immediately by providing written notice to the other party (unless otherwise provided below) for cause upon the occurrence of any one or more of the following: (i)                          a failure to make any material payment, credit, rebate or other remittance of monetary consideration provided for herein (other than in good faith in connection with a dispute of which notice was given) or failure to remedy any delinquent material payment, credit, rebate or other remittance within fifteen (15) business days after notice (which failure to cure shall be an event of default); and (ii)                        a breach of any non-monetary obligations under the Agreement, and failure to cure such breach after 30 days’ prior written notice of the breach. (b)            WFM may terminate this Agreement immediately by providing written notice to UNFI (unless otherwise provided below) for cause upon the occurrence of any one or more of the following:   (i) [*CONFIDENTIAL*]; (ii)                        The results of any audit of UNFI show evidence of willful misconduct on the part of UNFI or any of its employees or representatives of a nature that is material in either dollar amount or percentage to total amounts or to the operational units affected, or that could reasonably result in a material impact to the reputation or operational performance of WFM; (iii)                       It is determined by any regulatory agency, or UNFI publicly announces, that any certification given by officers of UNFI relating to internal controls was materially incorrect. Regulatory violations by UNFI where the violations or the corrective action required materially and adversely affect the continued ability of UNFI to perform all or any material portion of the Agreement; or (iv)                       The quality of service provided by UNFI does not meet industry standards, and UNFI has failed to remedy service problems within [*CONFIDENTIAL*] days after written notice of breach by WFM. 21.          Representations and Warranties of UNFI. UNFI represents and warrants to WFM as follows, and such representations and warranties shall survive the Effective Date: (a)            Sufficient Personnel to Perform Obligations. UNFI (i) has sufficient personnel with adequate training and expertise to perform its obligations as contemplated hereunder in the time frames contemplated herein and (ii) will use reasonable care in the performance of UNFI’s obligations under this Agreement. (b)            National Organic Standards. UNFI has adequate processes and systems in place, and has adequately educated its personnel, and that it will fully comply with all federal, state and local regulations relating to handling and labeling of organic Products, including, but   16 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   not limited to, the National Organic Standards as promulgated by the U.S. Department of Agriculture and as such applies to UNFI as a handler or processor of organic foods. UNFI acknowledges that WFM has placed substantial reliance on UNFI to handle various foods for human consumption so as to not invalidate any “organic” designation of such foods. (c)            Computer Systems. UNFI has proper security safeguards in place to ensure the confidentiality of all of WFM’s data as contained in UNFI’s computer systems. All such systems will perform without material defect or error in compliance with the performance standards set forth in this Agreement. UNFI has a disaster recovery program in place to ensure that, in the event of a catastrophic destruction of any portion of UNFI’s computer systems, wherever located, UNFI will be able to recover all necessary data to continue to perform its obligations hereunder in substantially the time frames contemplated herein. (d)           UNFI Distribution Center’s Condition and Capacity. All of the UNFI DCs servicing WFM will be maintained and operated in accordance with UNFI warehousing and delivery standards. Such UNFI DCs have the operational systems required to support the obligations of UNFI as set forth in this Agreement, and all such UNFI DCs have adequate capacity to order, store and deliver Products in accordance with the terms of this Agreement and in the amounts contemplated by WFM. All the UNFI DCs shall have sufficient security measures in place prior to receipt of Products for WFM to ensure that such Products are not tampered with or adulterated in any manner, and that all such Products shall be maintained at temperatures and other storage conditions necessary to preserve the freshness and integrity of the Products. (e)            Information Provided to Auditors. All information requested by WFM (i) will be provided by UNFI to WFM and/or its designated auditors, (ii) will be in the format required in this Agreement or agreed upon by the parties, and (iii) will be true and correct in all respects, except as otherwise disclosed to WFM and/or its designees at the time of disclosure.(f)  Transfer of Title. Upon delivery of Products, UNFI will transfer title and ownership of Products to WFM. Upon WFM’s purchase of Products, the Products will be free of any liens, claims or other encumbrances. (g)           Recall. UNFI has a reliable recall system and policies in place including appropriate tracking, coding and accounting systems for all Products. 22.          Representations and Warranties of WFM. WFM represents and warrants to UNFI as follows, and such representations and warranties shall survive the Effective Date: (a)            Sufficient Personnel to Perform Obligations. WFM represents that it has sufficient personnel with adequate training and expertise to perform its obligations as contemplated hereunder in the time frames contemplated herein.   (b)            Computer Systems. WFM has proper security safeguards in place to ensure the confidentiality of all of UNFI’s data as contained in WFM’s computer systems. All such systems will perform without material defect or error in compliance with the performance standards set forth in this Agreement. WFM has a disaster recovery program in place to ensure   17 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   that, in the event of a catastrophic destruction of any portion of WFM’s computer systems, wherever located, WFM will be able to recover all necessary data to continue to perform its obligations hereunder in substantially the time frames contemplated herein. 23. Miscellaneous. (a)            Binding Effect. This Agreement, including its exhibits, supersedes all prior agreements between UNFI and WFM and is the only agreement between UNFI and WFM, either oral or in writing relating to the subject matter hereof. (b)            Force Majeure. “Force Majeure” events shall be events beyond the reasonable control of a party (and not through the fault or negligence of such party) that make timely performance of an obligation not possible. Force Majeure events are those that are not reasonably foreseeable with the exercise of reasonable care, nor avoidable through the payment of nonmaterial additional sums. In the event of a Force Majeure, the party so affected shall give prompt written notice to the other party of the cause and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. (c)            Governing Law; Forum and Jurisdiction; Waiver of Punitive and Similar Types of Damages. The relationship of the parties hereto and all claims arising out of or related to that relationship, including, but not limited to, the construction and interpretation of any written agreements, including this Agreement, shall be governed by the substantive laws of the State of Delaware (without regard to conflicts of law principles). The parties agree and consent to the jurisdiction of the state and federal courts located in Chicago, Illinois and acknowledge that such courts are proper and convenient forums for the resolution of any actions between the parties with respect to the subject matter of this Agreement, and agree that, in such case, these courts shall be the sole and exclusive forums for the resolution of any actions between the parties with respect to the subject matter hereof. The parties hereby waive any right to a jury trial under any applicable law. The parties also waive any and all right to punitive, incidental or consequential damages, except to the extent such damages are included in any award for which indemnification is sought pursuant to the terms of this Agreement or an action is brought for breach of provisions relating to confidential information. The prevailing party in any action to enforce this Agreement shall be entitled to recover all related costs of the suit, including reasonable attorneys’ fees and court costs. (d)            Confidentiality. In connection with this Agreement, the parties may acquire or develop confidential information relating to each party and such party’s businesses that includes quality standards, business methods, sales data and trends, Intellectual Property, purchasing history, pricing, marketing and pricing strategies, technical data, general or specific customer information and the terms of this Agreement (“Confidential Information”). The term Confidential Information shall include computer software, source code, object code, hardware configurations and all other information relating to a party, its business and prospects, learned by the other party or disclosed by such party from time to time to the other party in any manner, whether orally, visually or in tangible form (including, without limitation, documents, devices and computer readable media) and all copies, improvements, derivatives and designs thereof, created by either party whether owned by or licensed to such party. The term Confidential Information shall also be deemed to include all notes, analyses, compilations, studies,   18 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   interpretations or other documents prepared by a party that contain, reflect or are based upon the information furnished to such party by the other party pursuant hereto. The parties (i) will hold all Confidential Information in strict confidence, (ii) will only use Confidential Information for the purpose of performing under this Agreement, and (iii) will not disclose any Confidential Information to any third party (other than to affiliates or subsidiaries and their own outside legal, accounting, insurance or financial advisors or other consultants as necessary) without the other party’s prior written consent. Without limiting the foregoing, UNFI will not use any Confidential Information in connection with the marketing, distribution or sale of UNFI’s Products other than to WFM. UNFI will not use, sell or share any Confidential Information, including, but not limited to, WFM sales data in connection with Infoshare, SIS or any other similar type of data compilation, without the written consent of WFM. The foregoing applies even if the WFM Confidential Information is in a generic format that does not specifically reference WFM. The parties will use the highest degree of care it uses to protect its own confidential information to maintain the confidentiality of all Confidential Information but in no event less than a reasonable degree of care. Confidential Information shall not include any information that: (i)                         was in a party’s possession, prior to disclosure by the other party hereunder, provided such information is not known by such party to be subject to another confidentiality agreement with or secrecy obligation to the other party; (ii)                        was generally known in the grocery industry at the time of disclosure to a party hereunder, or becomes so generally known after such disclosure, through no act of such party; (iii)                       has come into the possession of a party from a third party who is not known by such party to be under any obligation to the other party to maintain the confidentiality of such information; or (iv)                       was independently developed by a party without the use of any Confidential Information of the other party, to the extent that such independent development is reasonably established by such first party to the other party. Notwithstanding the foregoing, nothing herein shall prevent the filing of a copy of this Agreement as an exhibit to any filing required by a regulatory agency having jurisdiction over either party, provided that a party required to file a copy hereof shall notify the other party of the filing and request and use its best efforts to obtain confidential treatment of all financial terms of this Agreement prior to the filing thereof. In addition, either party may disclose the terms of this Agreement pursuant to a valid subpoena, provided such party gives the other party reasonable prior notice of the service of any subpoena to permit the other party to seek a protective order, and seeks confidential treatment of all financial terms hereof. If a party breaches or threatens to breach any provision of this Section 23(d), the parties agree that the non-breaching party’s remedy at law is inadequate. Therefore, in the event of such breach or threatened breach, in addition to any other remedy which may be available to the non-breaching party, the non-breaching party shall be entitled to seek, without posting a bond, preliminary or permanent injunctive and/or other equitable relief restraining the breaching party,   19 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   or any of its agents or employees, from breaching or acting in any manner inconsistent with the conduct or performance required by this Section 23(d). In addition to the foregoing, a party may demand from and be entitled to immediately receive payment from the other party, as liquidated damages for a breach of Section 23(d), if such breach is determined by a court of competent jurisdiction, the amount of $[*CONFIDENTIAL*] in immediately available funds. The disclosure of the same information at the same time to more than one third-party shall only be regarded as a single violation for purposes of this subsection (d). The parties agree that (A) the $[*CONFIDENTIAL*] in liquidated damages are a reasonable approximation of the injury that would be suffered by a party in the event of a breach of this Section 23(d) by either party; (B) the amount of actual loss cannot be precisely determined, but such liquidated damages provided for in this Section 23(d) are fair and reasonable; (C) all such payments made under this Section 23(d) shall be paid as liquidated damages and not as a penalty; (D) all such payments due under this Section 23(d) shall be made as an offset against all amounts due and owing under this Agreement. (e)            Amendment; Assignment. This Agreement may not be amended or modified except by a writing signed by an authorized officer of each party specifically referencing this Agreement and the intent to amend or modify. It is agreed that neither party shall transfer or assign this Agreement or any part hereof or any right arising hereunder, by operation of law or otherwise, without the prior written consent of the other party. A “Change of Control” shall be deemed to be an assignment for purposes of this Agreement. Any purported assignment (including a Change of Control) without consent shall be void and of no force or effect or, alternatively, a party may choose to consent to the assignment or terminate this Agreement. Subject to the foregoing, this Agreement shall be binding on the respective parties and their permitted successors and assigns. A “Change of Control” means (A) any transaction or series of related transactions in which a party or group, acting in concert, acquires beneficial ownership of more than 50% of the equity interests in a party or its direct or indirect parent, or (B) a merger or consolidation of another entity with or into a party or its direct or indirect parent, with the effect that any third party becomes beneficial owner of more than 50% of the equity interests of a party or its direct or indirect parent. Notwithstanding anything to the contrary stated above, WFM may assign this Agreement to any direct or indirect affiliate (whether or not such assignment results in a Change of Control) without obtaining the consent of UNFI. (f)            Entire Agreement; Survival. All exhibits to this Agreement are incorporated by reference. This Agreement (and any documents referred to herein) represents the entire agreement and understanding of the parties with respect to the matters set forth herein, and there are no representations, warranties or conditions or agreements (other than implementing invoices, purchase orders and the like necessary to implement this Agreement) not contained herein that constitute any part hereof or that are being relied upon by any party hereunder. In the event this Agreement terminates, all claims arising prior to such termination shall survive such termination, and in addition, the following sections shall survive any such termination: 5, 6(c), (d), (e) and (f), 7-10, 12-14, 17, 18 and 21-23. (g)            Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall be enforced.   20 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   (h)            Publicity. Both parties shall agree on any press release related to the signing of this Agreement; provided, however, that either party may release information reasonably deemed necessary by their respective securities counsel under applicable governing laws. Except for the foregoing, UNFI will not (i) use for any reason any name, logo or trademark of Whole Foods Market, Inc., WFM Purchasing or any of their respective affiliates or subsidiaries in any manner suggesting that UNFI has a relationship with Whole Foods Market, Inc., WFM Purchasing or any of their respective affiliates or subsidiaries (ii) issue any press release or make any other statement to the press or authorize any publication to print anything that mentions Whole Foods Market, Inc., WFM or any of their respective affiliates or subsidiaries by name or refers to this Agreement or the transactions contemplated herein or (iii) disclose the content or existence of this Agreement to any third party. (i)             Notices. Unless otherwise stated, all notices given in connection with this Agreement will be in writing and will be deemed delivered at the time of personal delivery or 3 business days after being sent by facsimile (with a confirmation) or mailed by express, certified or registered mail, or sent by a recognized national or international courier, as appropriate (in all cases postage prepaid and return receipt requested). Notices shall be addressed to the parties at the addresses set forth below or to such other address as shall have been so notified to the other party in accordance with this Section. Notices to UNFI shall be addressed to: Chief Financial Officer, 260 Lake Road, Dayville, CT 06241, Phone: 860.779.2800, fax: 860.779.5678 with a copy to legal counsel E. Colby Cameron, Cameron & Mittleman, LLP, 56 Exchange Terrace, Providence, Rhode Island 02903. Except as set forth herein, notices to WFM shall be addressed to: Jim Speirs, Vice President Procurement Non-Perishables, Whole Foods Market, Inc., 550 Bowie Street, Austin, Texas 78703, phone 512.542.0720, fax 512.482.7720 with a copy to General Counsel, Whole Foods Market, Inc., 550 Bowie Street, Austin, Texas 78703. (j)             No Third Party Beneficiaries. Nothing in this Agreement, whether expressed or implied, is intended to confer on any person other than the parties to this Agreement or their parent, affiliates or subsidiaries, respective successors or permitted assigns, any rights, remedies, obligations or liabilities. (k)            Independent Contractors. In all matters relating to this Agreement both parties shall be acting solely as independent contractors and shall be solely responsible for the acts of their respective employees, contractors and agents. Employees, agents or contractors of one party shall not be considered employees, agents or contractors of the other party. Nothing contained in this Agreement shall be deemed or construed to create a partnership or joint venture, to create the relationship of an employer-employee or principal-agent, or to otherwise create any liability for or obligation of either party whatsoever with respect to the indebtedness, liabilities, and obligations of the other party. Neither UNFI nor any employee or representative of UNFI shall at any time wear a “Whole Foods Market” (Registered Trademark) uniform or in any way hold himself out to be an employee of WFM or any WFM Affiliate. The parties specifically agrees that this Agreement shall not be deemed to grant or imply that either party or any employee of either party is authorized to sign, contract, deal, or otherwise act in the name of or on behalf of the other party. (l)            Titles and Headings; Counterparts; Facsimile/Electronic Signature; Preprinted Forms. The titles and headings to Sections herein are inserted for the convenience of reference   21 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement, and will become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party. Electronic or facsimile signatures shall be deemed original signatures for purposes of execution of this document. This Agreement, including its attachments, supersedes all prior agreements between UNFI and WFM or any WFM Affiliate and is the only agreement between WFM and UNFI, either oral or in writing, relating to the matters set forth herein. Each party agrees that use of pre-printed forms, including, but not limited to email, purchase orders, acknowledgements or invoices, is for convenience only and all pre-printed terms and conditions stated thereon, except as specifically set forth in this Agreement, are void and of no effect. (m)          Negotiation of Agreement, Each party and its counsel have cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any drafts relating thereto shall be deemed the work product of the parties and may not be construed against any party by reason of its preparation. Any rule of law or any legal decision that would require interpretation of any ambiguities in this Agreement against the party that drafted it is of no application and is hereby expressly waived. (n)           Termination of Prior Agreement. Upon execution of this Agreement, the Agreement for Distribution of Products dated January 1, 2005 between Whole Foods Market Distribution, Inc. and United Natural Foods, Inc. and its subsidiaries and affiliates that is due to expire on December 31, 2007 shall terminate.   [Signature Page to Follow]   22 NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   WHEREAS, the parties have entered into this Agreement as of the Effective Date. Whole Foods Market Distribution, Inc., a Delaware corporation   By:  /s/ Lee Valkenaar         Lee Valkenaar, President     UNITED NATURAL FOODS, INC.   By:  /s/ Michael D. Beaudry         Michael D. Beaudry, President of the Eastern Region     By:  /s/ Richard Antonelli         Richard Antonelli, Executive Vice President,         Chief Operating Officer and President of Distribution       23     NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.     Exhibit A Whole Foods Market, Inc Fiscal Period Calendar End of Period Dates End of Quarter Dates   Period Week   Fiscal 2006 2007 2008 2009 2010 2011 2012 2013 2014 1 1   10/02/2005 10/01/2006 10/07/2007 10/05/2008 10/04/2009 10/03/2010 10/02/2011 10/07/2012 10/06/2013   2   10/09/2005 10/08/2006 10/14/2007 10/12/2008 10/11/2009 10/10/2010 10/09/2011 10/14/2012 10/13/2013   3   10/16/2005 10/15/2006 10/21/2007 10/19/2008 10/18/2009 10/17/2010 10/16/2011 10/21/2012 10/20/2013   4   10/23/2005 10/22/2006 10/28/2007 10/26/2008 10/25/2009 10/24/2010 10/23/2011 10/28/2012 10/27/2013 2 5   10/30/2005 10/29/2006 11/04/2007 11/02/2008 11/01/2009 10/31/2010 10/30/2011 11/04/2012 11/03/2013   6   11/06/2005 11/05/2006 11/11/2007 11/09/2008 11/08/2009 11/07/2010 11/06/2011 11/11/2012 11/10/2013   7   11/13/2005 11/12/2006 11/18/2007 11/16/2008 11/15/2009 11/14/2010 11/13/2011 11/18/2012 11/17/2013   8   11/20/2005 11/19/2006 11/25/2007 11/23/2008 11/22/2009 11/21/2010 11/20/2011 11/25/2012 11/24/2013 3 9   11/27/2005 11/26/2006 12/02/2007 11/30/2008 11/29/2009 11/28/2010 11/27/2011 12/02/2012 12/01/2013   10   12/04/2005 12/03/2006 12/09/2007 12/07/2008 12/06/2009 12/05/2010 12/04/2011 12/09/2012 12/08/2013   11   12/11/2005 12/10/2006 12/16/2007 12/14/2008 12/13/2009 12/12/2010 12/11/2011 12/16/2012 12/15/2013   12   12/18/2005 12/17/2006 12/23/2007 12/21/2008 12/20/2009 12/19/2010 12/18/2011 12/23/2012 12/22/2013 4 13   12/25/2005 12/24/2006 12/30/2007 12/28/2008 12/27/2009 12/26/2010 12/25/2011 12/30/2012 12/29/2013   14   01/01/2006 12/31/2006 01/06/2008 01/04/2009 01/03/2010 01/02/2011 01/01/2012 01/06/2013 01/05/2014   15   01/08/2006 01/07/2007 01/13/2008 01/11/2009 01/10/2010 01/09/2011 01/08/2012 01/13/2013 01/12/2014 1st Qtr 16   01/15/2006 01/14/2007 01/20/2008 01/18/2009 01/17/2010 01/16/2011 01/15/2012 01/20/2013 01/19/2014 5 17   01/22/2006 01/21/2007 01/27/2008 01/25/2009 01/24/2010 01/23/2011 01/22/2012 01/27/2013 01/26/2014   18   01/29/2006 01/28/2007 02/03/2008 02/01/2009 01/31/2010 01/30/2011 01/29/2012 02/03/2013 02/02/2014   19   02/05/2006 02/04/2007 02/10/2008 02/08/2009 02/07/2010 02/06/2011 02/05/2012 02/10/2013 02/09/2014   20   02/12/2006 02/11/2007 02/17/2008 02/15/2009 02/14/2010 02/13/2011 02/12/2012 02/17/2013 02/16/2014 6 21   02/19/2006 02/18/2007 02/24/2008 02/22/2009 02/21/2010 02/20/2011 02/19/2012 02/24/2013 02/23/2014   22   02/26/2006 02/25/2007 03/02/2008 03/01/2009 02/28/2010 02/27/2011 02/26/2012 03/03/2013 03/02/2014   23   03/05/2006 03/04/2007 03/09/2008 03/08/2009 03/07/2010 03/06/2011 03/04/2012 03/10/2013 03/09/2014   24   03/12/2006 03/11/2007 03/16/2008 03/15/2009 03/14/2010 03/13/2011 03/11/2012 03/17/2013 03/16/2014 7 25   03/19/2006 03/18/2007 03/23/2008 03/22/2009 03/21/2010 03/20/2011 03/18/2012 03/24/2013 03/23/2014   26   03/26/2006 03/25/2007 03/30/2008 03/29/2009 03/28/2010 03/27/2011 03/25/2012 03/31/2013 03/30/2014   27   04/02/2006 04/01/2007 04/06/2008 04/05/2009 04/04/2010 04/03/2011 04/01/2012 04/07/2013 04/06/2014 2nd Qtr 28   04/09/2006 04/08/2007 04/13/2008 04/12/2009 04/11/2010 04/10/2011 04/08/2012 04/14/2013 04/13/2014 8 29   04/16/2006 04/15/2007 04/20/2008 04/19/2009 04/18/2010 04/17/2011 04/15/2012 04/21/2013 04/20/2014   30   04/23/2006 04/22/2007 04/27/2008 04/26/2009 04/25/2010 04/24/2011 04/22/2012 04/28/2013 04/27/2014   31   04/30/2006 04/29/2007 05/04/2008 05/03/2009 05/02/2010 05/01/2011 04/29/2012 05/05/2013 05/04/2014   32   05/07/2006 05/06/2007 05/11/2008 05/10/2009 05/09/2010 05/08/2011 05/06/2012 05/12/2013 05/11/2014 9 33   05/14/2006 05/13/2007 05/18/2008 05/17/2009 05/16/2010 05/15/2011 05/13/2012 05/19/2013 05/18/2014   34   05/21/2006 05/20/2007 05/25/2008 05/24/2009 05/23/2010 05/22/2011 05/20/2012 05/26/2013 05/25/2014   35   05/28/2006 05/27/2007 06/01/2008 05/31/2009 05/30/2010 05/29/2011 05/27/2012 06/02/2013 06/01/2014   36   06/04/2006 06/03/2007 06/08/2008 06/07/2009 06/06/2010 06/05/2011 06/03/2012 06/09/2013 06/08/2014 10 37   06/11/2006 06/10/2007 06/15/2008 06/14/2009 06/13/2010 06/12/2011 06/10/2012 06/16/2013 06/15/2014   38   06/18/2006 06/17/2007 06/22/2008 06/21/2009 06/20/2010 06/19/2011 06/17/2012 06/23/2013 06/22/2014   39   06/25/2006 06/24/2007 06/29/2008 06/28/2009 06/27/2010 06/26/2011 06/24/2012 06/30/2013 06/29/2014 3rd Qtr 40   07/02/2006 07/01/2007 07/06/2008 07/05/2009 07/04/2010 07/03/2011 07/01/2012 07/07/2013 07/06/2014 11 41   07/09/2006 07/08/2007 07/13/2008 07/12/2009 07/11/2010 07/10/2011 07/08/2012 07/14/2013 07/13/2014   42   07/16/2006 07/15/2007 07/20/2008 07/19/2009 07/18/2010 07/17/2011 07/15/2012 07/21/2013 07/20/2014   43   07/23/2006 07/22/2007 07/27/2008 07/26/2009 07/25/2010 07/24/2011 07/22/2012 07/28/2013 07/27/2014   44   07/30/2006 07/29/2007 08/03/2008 08/02/2009 08/01/2010 07/31/2011 07/29/2012 08/04/2013 08/03/2014 12 45   08/06/2006 08/05/2007 08/10/2008 08/09/2009 08/08/2010 08/07/2011 08/05/2012 08/11/2013 08/10/2014   46   08/13/2006 08/12/2007 08/17/2008 08/16/2009 08/15/2010 08/14/2011 08/12/2012 08/18/2013 08/17/2014   47   08/20/2006 08/19/2007 08/24/2008 08/23/2009 08/22/2010 08/21/2011 08/19/2012 08/25/2013 08/24/2014   48   08/27/2006 08/26/2007 08/31/2008 08/30/2009 08/29/2010 08/28/2011 08/26/2012 09/01/2013 08/31/2014 13 49   09/03/2006 09/02/2007 09/07/2008 09/06/2009 09/05/2010 09/04/2011 09/02/2012 09/08/2013 09/07/2014   50   09/10/2006 09/09/2007 09/14/2008 09/13/2009 09/12/2010 09/11/2011 09/09/2012 09/15/2013 09/14/2014   51   09/17/2006 09/16/2007 09/21/2008 09/20/2009 09/19/2010 09/18/2011 09/16/2012 09/22/2013 09/21/2014 4th 52   09/24/2006 09/23/2007 09/28/2008 09/27/2009 09/26/2010 09/25/2011 09/23/2012 09/29/2013 09/28/2014 Qtr 53     09/30/2007         09/30/2012             NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.     Exhibit B   [*CONFIDENTIAL*]                                               [*CONFIDENTIAL*]             [*CONFIDENTIAL*] [*CONFIDENTIAL*]               [*CONFIDENTIAL*] [*CONFIDENTIAL*]     [*CONFIDENTIAL*]     [*CONFIDENTIAL*] [*CONFIDENTIAL*]     [*CONFIDENTIAL*]     [*CONFIDENTIAL*] [*CONFIDENTIAL*]     [*CONFIDENTIAL*]     [*CONFIDENTIAL*] [*CONFIDENTIAL*]     [*CONFIDENTIAL*]     [*CONFIDENTIAL*] [*CONFIDENTIAL*]   [*CONFIDENTIAL*]                       NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   Exhibit C   Southern Pacific Region   This Exhibit C to the Agreement for Distribution of Products (the “Agreement”) dated September 26, 2006 between Whole Foods Market Distribution, Inc., a Delaware corporation (“WFM”), and United Natural Foods, Inc., a Delaware corporation (“UNFI”) amends the Agreement to allow the Southern Pacific Region to use UNFI as its Primary Distributor pursuant to the following terms and conditions:     1. WFM agrees to work with UNFI to develop a time-line for transition of UNFI as the Primary Distributor for the Southern Pacific Region.   2. [*CONFIDENTIAL*].   3. [*CONFIDENTIAL*].   All terms not defined herein will have the meeting set forth in the Agreement. This Exhibit C is dated __________ ___, ______.   Whole Foods Market Distribution, Inc., a Delaware corporation   By: Name Printed: __________________ Title: __________________________           NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   Exhibit D   Fuel Surcharge     The Fuel Surcharge amount, if any, will be set according to the table below.                   Price Per Gallon Surcharge Per Delivery Up to [*CONFIDENTIAL*] $0 [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*] [*CONFIDENTIAL*]         NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   Exhibit E   [*CONFIDENTIAL*]       i       NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   EXHIBIT F   [*CONFIDENTIAL*]         NOTE: A request for confidential treatment has been made with respect to the portions of the following document that are marked with [*CONFIDENTIAL*]. The redacted portions have been filed separately with the SEC.   Exhibit G   Code Date Policy     1. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   2. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   3. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   4. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   5. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   6. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   7. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   8. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   9. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   10. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]   11. [*CONFIDENTIAL*] – [*CONFIDENTIAL*]

Exhibit 10.3   AMENDED AND RESTATED SEVERANCE BENEFITS AGREEMENT   Mr. Michael Miles c/o Staples, Inc. 500 Staples Drive Framingham, MA 01702   Dear Mr. Miles:   You are employed by Staples, Inc. and/or one of its subsidiaries (“Staples”) and entered into a Severance Benefits Agreement with Staples on September 22, 2003 (the “Prior Agreement”). This letter agreement (this “Agreement”) amends and restates the Prior Agreement in its entirety. Staples agrees to provide you with the severance benefits set forth in this Agreement if your employment is terminated under the circumstances described below:   1.                                      Term of Agreement. The term of this Agreement shall begin on the date it is signed and shall continue in full force and effect until such time as you or Staples has delivered to the other 90-days advance written notice of your or its election to terminate this Agreement. This Agreement is not a contract to employ you for a definite time period, it being acknowledged that your employment is “at will” and that either you or Staples may terminate the employment relationship at any time.   2.                                      Notice of Termination and other Matters. Any termination of your employment, whether by you or Staples, will be communicated by written notice (“Notice of Termination”) to the other party. The Notice of Termination will specify the provisions of this Agreement, if any, upon which termination is based and its effective date, which in no case will be more than 180 days after the Notice of Termination. All notices and communications provided for in this Agreement will be in writing and will be effective when delivered or mailed by U.S. registered or certified mail, return receipt requested, postage prepaid, addressed to the Chairman of Staples, 500 Staples Drive, Framingham, MA 01702, and to you at the address shown above or to such other address as either Staples or you may have furnished to the other in writing.   3.                                      Compensation Upon Termination. Staples will provide you with the severance benefits listed below in the event of a Qualified Termination. A “Qualified Termination” means your employment is terminated for any reason other than because (i) you die or become Disabled, (ii) Staples terminates you for “Cause,” or (iii) you resign without “Good Reason.”   (a)  Staples will pay you 18 months severance pay, in equal monthly installments. Your monthly severance payments will equal the sum of (i) your monthly base salary rate in effect immediately prior to the Qualified Termination (or any higher rate in effect within the 90 days prior to the Notice of Termination) plus (ii) one-twelfth of an amount equal to the average annual bonus paid to (or accrued for) you by Staples during the three full fiscal years preceding such Qualified Termination. Annual salary rates will be prorated where applicable and annual bonus averages will be computed on years available if less than three years. Any partial year bonus you have earned will be annualized.   --------------------------------------------------------------------------------   (b) Staples will provide you with 18 months of life, dental, accident and group health insurance benefits substantially similar to those available to similarly situated officers (but not disability insurance); provided, however, that Staples will not provide any such benefit for any portion of this period that you receive an equivalent benefit from another party.   (c) The vesting schedule of any outstanding options to purchase shares of Staples’ Common Stock, shares of restricted Staples’ Common Stock and/or any other equity-based awards will not be accelerated in the event of a Qualified Termination, unless specifically provided to the contrary in the respective option, restricted stock or other equity agreements.   (d) Staples will provide you with 6 additional months of the benefits set forth in paragraphs (a) and (b) above if such Qualified Termination is within two years after a Change in Control.   You will not be entitled to any of the compensation or benefits set forth in this Section 3 if Staples determines, within 60 days after your termination, that your conduct prior to your termination would have warranted a discharge for “Cause,” or if, after your termination, you have violated the terms of any non-competition or confidentiality provision contained in any employment, consulting, advisory, non-disclosure, non-competition or other similar agreement between you and Staples.   4.                                      Definitions. For the purposes of this Agreement, the terms listed below are defined as follows:   (a) Change in Control. A “Change in Control” will be deemed to have occurred only if any of the following events occur:   (i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (other than Staples, any trustee or other fiduciary holding securities under an employee benefit plan of Staples, or any corporation owned directly or indirectly by the stockholders of Staples in substantially the same proportion as their ownership of stock of Staples) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Staples representing 30% or more of the combined voting power of Staples’ then outstanding securities;   (ii) individuals who constitute the Board (as of the date hereof, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Staples’ stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) will be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or   (iii) the stockholders of Staples approve a merger or consolidation of Staples with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Staples outstanding immediately prior thereto continuing to represent (either by   2 --------------------------------------------------------------------------------   remaining outstanding or by being converted into voting securities of the surviving entity) more than 75% of the combined voting power of the voting securities of Staples or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of Staples (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 50% of the combined voting power of Staples’ then outstanding securities; or   (iv) the stockholders of Staples approve a plan of complete liquidation of Staples or an agreement for the sale or disposition by Staples of all or substantially all of Staples’ assets.   (b) Disabled. You are “disabled” for the purposes of this Agreement, if you have been absent from the full-time performance of your duties with Staples for six (6) consecutive months because of incapacity due to physical or mental illness, and, within thirty (30) days after being sent a written Notice of Termination, you fail to resume performance of your essential job duties, with or without reasonable accommodation.   (c) Cause. A termination for “Cause” by Staples will occur whenever:   (i) you willfully fail to substantially perform your duties with Staples (other than any failure resulting from incapacity due to physical or mental illness); provided, however, that Staples has given you a written demand for substantial performance, which specifically identifies the areas in which your performance is substandard, and you have not cured such failure within 30 days after delivery of the demand. No act or failure to act on your part will be deemed “willful” unless you acted or failed to act without a good faith or reasonable belief that your conduct was in Staples’ best interest.   (ii) you breach any of the terms of the Proprietary and Confidential Information Agreement or Non-Competition Agreement (or other similar agreement) between you and Staples, or   (iii) you violate the Code of Ethics or attempt to secure any improper personal profit in connection with the business of Staples, or   (iv) you fail to devote your full working time to the affairs of Staples except as may be authorized in writing by Staples’ CEO or other authorized Company official, or   (v) you engage in business other than the business of Staples except as may be authorized in writing by Staples’ CEO or other authorized Company official, or   (vi) you engage in misconduct which is demonstrably and materially injurious to Staples;   provided that in each case Staples has given you written notice of its intent to terminate your employment under this Section 5(c) and an opportunity to present, in person, to the Executive Vice President of Human Resources or any other authorized Company official, any objections you may have to such termination.   3 --------------------------------------------------------------------------------   (d) Good Reason. A termination by you for “Good Reason” will occur whenever any of the following circumstances have taken place, without your written consent within 90 days prior to your Notice of Termination:   (i) your position, duties, responsibilities, power, title or office was significantly diminished (a change in your reporting relationship, standing alone, shall not be deemed significant);   (ii) your annual base salary was reduced;   (iii) you were not allowed to participate in a cash bonus program in a manner substantially consistent with past practice in light of Staples’ financial performance and attainment of your specified goals, your participation in any other material compensation plan (other than any stock option or stock award program which programs are within the full discretion of the Compensation Committee) was substantially reduced, both in terms of the amount of benefits provided and the level of participation relative to other participants; unless such circumstances are fully corrected prior to the Date of Termination specified in your Notice of Termination;   (iv) you were not provided with paid vacation or other benefits substantially similar to those enjoyed by you under any of Staples’ life insurance, medical, health and accident, or disability plans in which you were participating, or Staples took any action which would directly or indirectly materially reduce any of such benefits or the number of your paid vacation days; unless such circumstances are fully corrected prior to the Date of Termination specified in your Notice of Termination;   (v) in the event of a Change in Control, Staples or any person in control of Staples requires you to perform your principal duties in a new location outside a radius of 50 miles from your business location at the time of the Change in Control; or   (vi) Staples fails to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5.   Notwithstanding the foregoing, any general reduction of salary or reduction (or elimination) of other compensation, bonus and/or benefits for its officers which are substantially comparable for all such officers (but not occurring within 24 months after a Change of Control) will not be considered “Good Reason.”   5.                                      Successors; Binding Agreement. Staples will require any successor (whether direct, indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its business or assets expressly to assume and agree to perform this Agreement to the same extent that Staples would be required to perform it if no such succession had taken place. Any failure to obtain an assumption of this Agreement prior to the effectiveness of any succession will be a breach of this Agreement and will entitle you to compensation in the same amount and on the same terms as you would be entitled hereunder. As used in this Agreement, “Staples” means Staples as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. This Agreement will inure to the benefit of and be enforceable by your personal or legal representatives, executors,   4 --------------------------------------------------------------------------------   administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or if there is no such designee, to your estate.   6.                                      Arbitration. The parties agree that any legal disputes (including but not limited to claims arising under federal or state statute, contract, tort, or public policy) that may occur between you and Staples, and that arise out of, or are related in any way to, your employment with or termination of employment from Staples or the termination of this Agreement, and which disputes cannot be resolved informally, will be resolved exclusively though final and binding arbitration. The parties will be precluded from raising in any other forum, including, but not limited to, any federal or state court of law, or equity, any claim which could be raised in arbitration; provided, however that nothing in this Agreement precludes you from filing a charge or from participating in an administrative investigation of a charge before an appropriate government agency or Staples from initiating an arbitration over a matter covered by this Agreement.   Each party may demand arbitration, no later than three hundred (300) days after the date on which the claim arose, by submitting to the other party a written demand which states: (i) the claim asserted, (ii) the facts alleged, (iii) the applicable statute or principal of law (e.g., breach of contract) upon which the demand is based, and (iv) the remedy sought. Any response to such demand must be made, in writing, within twenty (20) days after receiving the demand, and will specifically admit or deny each factual allegation.   The arbitration will be conducted in accordance with the Rules for Employment Arbitration of the American Arbitration Association (AAA) and any arbitration will take place in Framingham, Massachusetts. Each party will bear its own costs and attorney’s fees. The arbitrator will have the power to award any types of legal or equitable relief that would be available in a court of competent jurisdiction, including, but not limited to, the costs of arbitration, attorney’s fees, emotional distress damages, and punitive damages for causes of action when such damages are available under law. Any relief or recovery to which you are entitled from any claims arising out of your employment, termination, or any claim of unlawful discrimination will be limited to that awarded by the arbitrator.   7.                                      Waiver of Jury Trial. If any claim arising out of your employment or termination is found not to be subject to final and binding arbitration, the parties agree to waive any right to a jury trial if such claim is filed in court.   8.                                      Miscellaneous.   (a)                                  The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.   (b)                                 The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the Commonwealth of Massachusetts.   5 --------------------------------------------------------------------------------   (c)                                  No waiver by you or Staples at any time of any breach of, or compliance with, any provision of this Agreement to be performed by Staples or you, respectively, will be deemed a waiver of that or any other provision at any subsequent time.   (d)                                 You must execute a legally enforceable separation agreement and general release in a form acceptable to Staples prior to the receipt of any payments or benefits set forth above. Any payments made to you will be paid net of any applicable withholding required under federal, state or local law.   (e)                                  This Agreement is the exclusive agreement with respect to the severance benefits payable to you in the event of a termination of your employment. All prior negotiations and agreements, including without limitation the Prior Agreement, are hereby merged into this Agreement.   [continued on next page]   6 --------------------------------------------------------------------------------   If this Agreement sets forth our agreement, kindly sign and return to Staples the enclosed copy of this Agreement.       Sincerely,       STAPLES, INC.           By:   /s/ Susan S. Hoyt       Executive Vice President,     Human Resources   7 --------------------------------------------------------------------------------   I have been advised of my right to consult with counsel regarding this Agreement and have decided to sign below knowingly, voluntarily, and free from duress or coercion.   Agreed to this 13th day of March, 2006     /s/ Michael A. Miles   (Associate Signature)     8 --------------------------------------------------------------------------------

  Exhibit 10.57 AGREEMENT      THIS AGREEMENT (the “Agreement”) is entered into this 14th day of August, 2006 (the “Agreement Date”), between Joseph M. Zelayeta (“Employee”) and LSI Logic Corporation (the “Company”), with respect to the following recitals of fact:      A. Employee is currently employed as an employee of the Company.      B. The Company and Employee desire to set forth the terms on which Employee is retiring from the Company.      NOW THEREFORE, in consideration of the promises and covenants contained in this Agreement, the parties agree as follows:      1. Employee hereby acknowledges and agrees that he has decided to retire and therefore is resigning all of his positions, and his employment, with the Company effective on the Agreement Date. If necessary, Employee shall execute any additional documents that may be necessary or appropriate to effect or memorialize such resignations.      2. Employee acknowledges receipt of a bonus payment in the amount of $85,000.00 in recognition of services rendered in conjunction with the successful sale of the Company’s wafer fabrication facility in Gresham, Oregon, less any and all statutory withholding and deductions as required by law or as authorized by Employee.      3. Company will make an additional payment to Employee in the amount of $207,499.76, less any and all statutory withholding and deductions as required by law or as authorized by Employee, within ten (10) days of the Agreement Date.      4. Company will provide medical coverage, at no cost to Employee, under Company’s then-existing medical plans for Employee and his eligible dependants, who are enrolled in a Company medical plan as of the Agreement Date. The amount of premiums paid on behalf of Employee and his eligible dependants may be taxable to Employee. Employee shall have the option to change medical plans during the Company’s annual open enrollment period. Such coverage shall end for each participant upon that participant reaching age sixty-five (65).      5. Employee acknowledges, agrees, and warrants that he will continue to maintain the confidentiality of all confidential and proprietary information of the Company and third parties. Employee represents and warrants that to the best of his knowledge and belief he has returned to the Company all tangible and intangible property of the Company in his possession, custody, or control. In addition, notwithstanding the foregoing representation and warranty, if Employee discovers he has retained any property of the Company, he shall promptly notify the Company thereof and take reasonable steps in accordance with the Company’s instructions to return such property to the Company. The provisions of this Section shall survive the expiration or termination, for any reason, of this Agreement. 1. --------------------------------------------------------------------------------        6. This Agreement shall be construed and interpreted in accordance with the laws of the State of Oregon, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of any other jurisdiction.      7. If any term, clause or provision of this Agreement is construed to be or adjudged invalid, void or unenforceable, such term, clause or provision will be construed as severed from this Agreement, and the remaining terms, clauses and provisions will remain in full force and effect.      8. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed to be an original and all of which taken together will constitute one and the same instrument.      9. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes any and all prior, contemporaneous or subsequent statements, representations, agreements or understandings, whether oral or written, between the parties with respect hereto. This Agreement shall inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties hereto. The terms of this Agreement may only be modified by a written instrument signed by Employee and an authorized officer of the Company.      10. All notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one day after being sent overnight by a well established commercial overnight service, or (c) four days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at their last known address.                   LSI LOGIC CORPORATION     a Delaware corporation               /s/ Joseph M. Zelayeta       By:   /s/ Jon Gibson               JOSEPH M. ZELAYETA       JON GIBSON         Vice President, Human Resources 2.

Exhibit No. 10.3 INCENTIVE STOCK OPTION AGREEMENT (Date) No. of Shares: __,000 Exercise Price per Share: $               Date of Grant: Expiration Date: Option Number: ______ PERSONAL AND CONFIDENTIAL: (Name and Address) Dear (Salutation): We are pleased to inform you that, as a key associate of United Retail Group, Inc. (herein called the “Company”) or one of its subsidiaries, you have been granted an option under the Company’s 2006 Equity-Based Compensation and Performance Incentive Plan (herein called the “Plan”). The option gives you the right to purchase units, consisting of one share of common stock, $.001 par value per share, with a stock purchase warrant attached (herein collectively called “shares”) of the Company, subject to your acceptance of the award as provided in Section 1 below and the terms and conditions that follow in this letter agreement or are contained in the Plan. The date of the grant evidenced by this letter agreement (herein called the date of grant), the date the option expires, the maximum number of shares the option entitles you to purchase and the exercise price per share are set forth above. (The option is intended to be an “incentive stock option” within the meaning of Section 422A of the Internal Revenue Code.) A copy of the Plan and a Notice of Exercise of Option form are enclosed. The terms and conditions of the option, including non-standard provisions permitted by the Plan, are set forth below, provided, however, that in the event of any inconsistency between the provisions of this letter agreement and the Plan, the provisions of the Plan shall prevail.   1.            Acceptance of Option. The option cannot be exercised unless you sign your name in the space provided on the enclosed copies of this letter agreement and cause one signed copy to be delivered to the Secretary of the Company, 365 West Passaic Street, Rochelle Park, New Jersey, 07662, before 4:30 p.m. Eastern time on the 30th day after the date of grant. If the Secretary does not receive your properly executed copy of this letter agreement before 4:30 p.m. Eastern time on the 30th day after the date of grant, then, anything in this letter agreement to the contrary notwithstanding, the option will be void ab initio and of no effect. (Your signing and delivering a copy of this letter agreement will not commit you to purchase any of the shares that are subject to the option but will evidence your acceptance of the option upon the terms and conditions herein stated.)   2. Exercise. •              Subject to the provisions of this Section 2 and of Sections 4, 5(b), 8(c) and 9, the option shall be exercisable, in integral multiples of 100 shares each, as to 20% of the shares subject to the option on the completion of the first full year after the date of grant and as to an additional 20% of such shares on the completion of each of the next four years. Except as otherwise provided in Section 4, the option shall lapse on the seventh anniversary of the date of grant. •             The option shall not become exercisable unless you shall have remained continuously in the employ or service of the Company or of one or more of its subsidiaries (as defined in the Plan) for at least one year beginning with the date of grant, except as provided in Sections 4 and 9. 3.            Transferability of Option. The option shall not be transferable by you otherwise than (i) by will, (ii) by the laws of descent and distribution, or (iii) pursuant to a domestic relations order. 4.            Death or Disability. Section 2 to the contrary notwithstanding, if your employment by or service with the Company or a subsidiary terminates by reason of your death or disability (as defined in the Plan), the option will become immediately exercisable in full and non-forfeitable and shall continue to be exercisable for a period of one year from the date of termination.     5. Other Termination of Employment or Service. •              Subject to Section 5(b), if your employment or other service with the Company or a subsidiary terminates otherwise than by reason of your death or disability, the option shall terminate and cease to be exercisable three months after termination, except in the case of termination by the Company for cause (as defined in the Plan), in which case, subject to Section 9, the option shall be forfeited and no longer exercisable. •              Section 2 to the contrary notwithstanding but subject to Section 9, if the Compensation Committee of the Company’s Board of Directors (the “Committee”) determines that you violated a non-competition agreement with the Company in any material respect, the option shall be forfeited at the time the Committee’s determination is made and no shares shall be issued thereafter. (c)            For the purposes of this letter agreement, your employment by a subsidiary of the Company shall be considered terminated on the date that the company by which you are employed is no longer a subsidiary of the Company 6.            Listing Requirements. The Company shall not be obligated to deliver any certificates representing shares until all applicable requirements imposed by federal and state securities laws and by any stock exchanges or NASDAQ upon which the shares may be listed have been fully met. No fractional shares will be delivered. 7.            Transfer of Employment; Leave of Absence. A transfer of your employment from the Company to a subsidiary or vice versa, or from one subsidiary to another, without an intervening period, shall not be deemed a termination of employment. If you are granted an authorized leave of absence, you shall be deemed to have remained in the employ of the Company or a subsidiary during such leave of absence.   8. Adjustments in Option. •             The existence of this letter agreement and the option shall not affect or restrict in any way the right or power of the Board of Directors or the stockholders of the Company to make or authorize any reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the shares or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business.   •             In the event of any change in or affecting the outstanding shares by reason of a stock dividend or split, merger or consolidation (whether or not the Company is the surviving corporation), recapitalization, spin-off, reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend in cash, securities or other property, the Board of Directors shall make such amendments to the Plan, this letter agreement and the option and make such adjustments and take actions thereunder as it deems appropriate, in its sole discretion, under the circumstances. Such amendments, adjustments and actions may include, but are not limited to, (i) changes in the number and kind of shares then remaining subject to the option, (ii) changes in the exercise price per share without any change in the aggregate exercise price to be paid therefor upon exercise of the option, and (iii) accelerating the vesting of the option. The determination by the Board as to the terms of any of the foregoing adjustments shall be conclusive and binding. (c)         In the event that changes in the number and kind of shares subject to the option or the exercise price per share referred to in Section 8(b) take effect upon a change in control, you shall have the right (herein called a “limited right”) in lieu of exercising the option to receive cash in lieu of shares equal to the excess of the fair market value of the shares on the date of change in control over the aggregate exercise price, less applicable income tax withholding. (d)        The limited right may be exercised for 10 business days after you first become aware of the change in control by delivering a signed notice of the exercise of the limited right to the Treasury Desk at the home office of the Company or the equivalent at its successor, as the case may be (a fax received there qualifies as delivery). Delivery of a signed notice constitutes your legally binding irrevocable commitment to accept cash in lieu of exercising the option, which shall be cancelled when the cash payment is made to you. Payment by the Company shall be made within seven calendar days after timely delivery of the notice of exercise of the limited right. 9.            Change in Control. In the event the option remains outstanding when a change in control of the Company occurs, the option shall automatically become fully exercisable and non-forfeitable, Sections 2 and 5 to the contrary notwithstanding. However, the Committee may provide, at any time prior to the occurrence of a change in control, that the shares that may be issued pursuant to the option shall be cashed out on the basis of a net issuance using the fair market value on the date of the change in control and applicable income tax withholding.   10.          Stockholder Rights. Neither you nor any other person shall have any rights of a stockholder as to shares underlying the option until, after proper exercise of the option, such shares shall have been recorded by the Company’s registrar, Continental Stock Transfer and Trust Company (herein called “Continental”), as having been issued or transferred, as the case may be. 11.          Notice of Exercise. Subject to the terms and conditions of this letter agreement, the option may be exercised, in whole at any time or in part from time to time in integral multiples of 100 shares each, during the period permitted by the terms of this letter agreement. Options are exercised by delivering a signed Notice of Exercise of Option form to the Treasury Desk at the Home Office (a fax received there qualifies as delivery). Delivery of a signed form constitutes your legally binding irrevocable commitment to purchase the number of shares indicated on the form. In the case of any such delivery by facsimile transmission, the original Notice of Exercise of Option form shall be promptly forwarded by you by hand or mail to the Treasury Desk, but delivery thereof to the Treasury Desk shall not be a condition to exercise of the option and the receipt of the facsimile transmission by the Treasury Desk shall be sufficient therefor. If a properly executed Notice of Exercise of Option form is not received by the Treasury Desk of the Company by the applicable expiration date specified in Sections 2(a), 4 or 5, or if a properly executed notice of exercise of limited right is not received by the Treasury Desk of the Company or the equivalent at its successor by the expiration date specified in Section 8(d), such notice will be deemed void and of no effect. If notice of exercise of the option is given by a person other than you, the Company may require as a condition to exercise of the option the submission to the Company of appropriate proof of the right of such person to exercise the option. Certificates for any shares purchased upon exercise will be issued and delivered as soon as practicable, subject to Section 6.   12. Payment of Exercise Price. (a)          Subject to Section 12(d), payment of the full price per share plus taxes, if applicable, is due by the seventh calendar day after delivery of the Notice of Exercise of Option form. Payment for the shares to be issued is generally made by delivering to the Treasury Desk at the Home Office either a certified or cashier’s check or a check drawn by a stock brokerage firm to the order of United Retail Group, Inc. or stock certificates for shares that you have owned beneficially for at least six months together with a stock power signed in blank (the stock certificates are then cancelled and the shares are placed in the Company’s treasury to complete what is called a “swap.”) A combination of the two payment methods is allowed. Funds may also be delivered by a bank wire to the Company’s account (call the Treasury Desk for bank wire instructions). Shares of Company stock to be used in a swap may also be deposited with Continental electronically by DWAC for transfer to the Company’s treasury stock account (have your stock brokerage firm call the Company’s General Counsel for details). (b)          You may inquire of the Treasury Desk about the total amount due (including Federal, State and local taxes). The Treasury Desk will also advise you of the number of outstanding shares that need to be surrendered for cancellation, if you elect a swap in lieu of cash tender.   (c)          If a Registration Statement on Form S-8 is in effect with respect to the option, you can arrange with your stockbroker to have the broker exercise your stock options on your behalf and have the shares withdrawn from Continental electronically by DWAC for deposit in your brokerage account. In that case, it is preferable send the signed Notice of Exercise of Option form to your broker for forwarding to the Treasury Desk with its check rather than sending the Notice directly to the Treasury Desk yourself. (If the stockbroker also sells shares, the transaction is called a “cashless exercise.”)   (d)         Section 12(a) to the contrary notwithstanding, in lieu of paying the exercise price, you may direct the Company to satisfy the exercise price payable by withholding shares that would otherwise be issued to you upon exercise of the option having a fair market value equivalent to the exercise price, in which case the Company will issue to you only the net number of shares.     13. Tax Matters. Before exercising the option, you should consult your tax accountant about tax consequences.   14. Employment. Nothing contained in this letter agreement shall confer any right to continue in the employ or other service of the Company or a subsidiary or limit in any way the right of the Company or a subsidiary to change your compensation or other benefits or to terminate your employment or other service with or without cause.       15. Short-Swing Trading. An executive officer of the Company or one of its subsidiaries or a member of the Board of Directors of the Company who exercises an option or whose option is cashed out must report the disposition of the option on a Form 4 Statement of Changes in Beneficial Ownership filed within two trading days with the EDGAR database of the Securities and Exchange Commission. (The General Counsel of the Company will draft the Form 4 on request but the filing is the personal responsibility of the optionholder.) Further, executive officers and Board members should review the Company’s Policy Statement On Insider Trading before making arrangements for the sale of shares to be issued upon exercise of the option, such as a cashless exercise procedure.   16. Recruiting Company Associates. For a period of ten years after the date of grant set forth above, you shall not, directly or indirectly, (i) induce or attempt to influence any employee of, or consultant under contract with, the Company to leave its employ; or (ii) take an active part in aiding any competitor of the Company or any other person in any attempt to induce or influence any employee of, or consultant under contract with, the Company to leave its employ.   17. Confidential Information. You shall never use, disclose or divulge, furnish or make accessible to anyone, directly or indirectly, any (i) trade secrets, confidential or proprietary information, and any other non-public knowledge, information, documents or materials, owned, developed or possessed by the Company, whether in tangible or intangible form, and learned or obtained while in the employ of the Company, including, but not limited to, the Company’s research and development operations, identities of employees, business relationships, products (including prices, costs, sales or content), processes, techniques, contracts, financial information or measures, business methods, future business plans, data bases, computer programs, designs, models and operating procedures, and (ii) private information about any of the Company’s other employees learned or obtained while in the employ of the Company (collectively, “Information”), but excluding any Information that shall become generally known to the public or in the trade without violation of this Section 17.   18. Making Disparaging Statements. Neither you nor the Company shall ever make or authorize any public statement disparaging the other party, provided, however, that neither party shall be restricted in responding to any legal process.   19. Time of Essence. Time is of the essence of the provisions of this letter agreement with respect to delivering notices and making payments. There is no grace period.   20. Successors. This letter agreement is binding on your heirs and personal representatives and permitted transferees and on the successors of the Company.   21. Equitable Remedies. Each party acknowledges and agrees that the other party may be irreparably injured by a breach of this letter agreement by such party and that money damages may be an inadequate remedy for breach of this letter agreement because of the difficulty of ascertaining the amount of damage that may be suffered in the event that this letter agreement is breached. Accordingly, each party agrees that the other party may seek specific performance of this letter agreement and injunctive or other equitable relief as a remedy for any such breach, without proof of actual damages, and further agrees to waive any requirement for the securing or posting of any bond in connection with any such remedy. Such remedy shall not be deemed to be the exclusive remedy for a breach of this letter agreement, but shall be in addition to all other remedies available at law or equity. In the event of litigation relating to this letter agreement, the non-prevailing party (as determined by a court of competent jurisdiction in a final, nonappealable order) will reimburse the prevailing party for its reasonable out-of-pocket expenses (including, without limitation, reasonable out-of-pocket legal fees and expenses) incurred in connection with all such litigation.         22.          Counterparts. This letter agreement may be executed in duplicate counterparts each of which shall be determined to be an original. Very truly yours, UNITED RETAIL GROUP, INC.   By     Chief Executive Officer   I hereby agree to the terms and conditions set forth above and acknowledge that I have received and read a copy of the United Retail Group, Inc. 2006 Equity-Based Compensation and Performance Incentive Plan.     _________________________________   (please sign your name) (date stamp of Company Secretary)        

Exhibit 10.15   FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT   THIS FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Amendment”) is made effective as of the 3rd day of February, 2006 (the “Effective Date”) by and between BEAZER HOMES USA, INC., a Delaware corporation (the “Company”), and LOWELL BALL, an individual resident of the State of Georgia (“Executive”).   WITNESSETH:   WHEREAS, the Company and Executive have heretofore entered into an Amended And Restated Employment Agreement made effective as of September 1, 2004 (the “Existing Agreement”); and   WHEREAS, the Company and Executive desire to amend certain provisions of the Existing Agreement as provided herein.   NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:   1.     Section 6(a)(i) of the Existing Agreement is hereby amended by deleting the second (2nd) sentence thereof and substituting the following in place thereof:   “Anything contained herein to the contrary notwithstanding, the timing of payment by the Company of any deferred compensation shall remain subject to the terms and conditions of the applicable deferred compensation plan and any payment election previously made by the Executive; provided, however, that, if at the time of Termination, Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code, as amended, then payments shall not be made before the date which is six (6) months after the date of separation from service with the Company (or, if earlier, the date of the Executive’s death).”   2.     Section 7(a) of the Existing Agreement is hereby amended by adding New Mexico to the list of the States in which the existing Business of the Company currently extends.   3.     Subsection (v) of Section 7(a) of the Existing Agreement is hereby amended by deleting same and substituting the following in place thereof:   “(v)         Be or become a shareholder, joint venturer, owner (in whole or in part), or partner, or be or become associated with or have any proprietary or financial interest in or of any firm, corporation, association or other entity which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company in the Restricted Area (a “Competing Entity”). Notwithstanding the preceding sentence, (A) passive equity investments by Executive of $100,000 or less in any Competing Entity, or (B) investments, in any amount, in any publicly traded mutual fund, index fund or similar investment vehicle which fund or investment vehicle owns any proprietary or financial interest in any Competing Entity, shall not be deemed to violate this Section 7(a)(v).”   3.     Except as and to the extent amended hereby, the Existing Agreement is hereby ratified and confirmed in all respects and remains in full force and effect in accordance with the terms thereof. By signing below, the Company and Executive hereby (i) consent to all of the terms of this First Amendment, (ii) ratify and confirm their respective obligations under the Existing Agreement, (iii) agree that said obligations are and shall remain in full force and effect, as amended by this First Amendment.   --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have executed this FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT effective as of the date first written above.     BEAZER HOMES USA, INC.           By:   /s/ Ian J. McCarthy     Name: Ian J. McCarthy   Title: President and Chief Executive Officer       EXECUTIVE           /s/ Lowell Ball     LOWELL BALL   --------------------------------------------------------------------------------

Exhibit 10.1 EXECUTION COPY PURCHASE AGREEMENT This Purchase Agreement (this “Agreement”) is dated as of March 12, 2006 between Broadwing Corporation, a Delaware corporation (the “Company”), and the purchasers identified on the signature pages hereto (each, a “Purchaser” and collectively, the “Purchasers”). WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to the Purchasers, and the Purchasers, severally and not jointly, desire to purchase from the Company, securities of the Company as more fully described in this Agreement. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers agree as follows: ARTICLE I. DEFINITIONS 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated: “Advice” has the meaning set forth in Section 6.5. “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144. “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed. “Closing” means the closing of the purchase and sale of the Company Shares pursuant to Section 2.1. “Closing Date” means the date of the Closing. “Company Counsel” means Mayer, Brown, Rowe & Maw LLP, counsel to the Company. “Company Shares” means an aggregate of 7,400,000 shares of Common Stock, which are being issued and sold by the Company to the Purchasers at the Closing. “Commission” means the Securities and Exchange Commission. “Common Stock” means the common stock of the Company, par value $0.01 per share. “Disclosure Materials” has the meaning set forth in Section 3.1(g). -------------------------------------------------------------------------------- “Effective Date” means the date that the Registration Statement is first declared effective by the Commission. “Effectiveness Period” has the meaning set forth in Section 6.1(b). “Event Payment Date” has the meaning set forth in Section 6.1(c). “8-K Filing” has the meaning set forth in Section 4.4. “Event” has the meaning set forth in Section 6.1(c). “Event Payments” has the meaning set forth in Section 6.1(c). “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Excluded Events” has the meaning set forth in Section 6.1(c). “Form 10-K” has the meaning set forth in Section 3.1(a). “GAAP” has the meaning set forth in Section 3.1(g). “Indemnified Party” has the meaning set forth in Section 6.4(c). “Indemnifying Party” has the meaning set forth in Section 6.4(c). “Intellectual Property Rights” has the meaning set forth in Section 3.1(u). “Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction. “Losses” means any and all losses, claims, damages, liabilities, settlement costs and expenses, including, without limitation, costs of preparation, investigation and litigation and reasonable attorneys’ fees. “Material Adverse Effect” has the meaning set forth in Section 3.1(b). “Material Permits” has the meaning set forth in Section 3.1(v). “Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind. “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced, threatened, brought, conducted or heard by or before, or otherwise involving, any governmental entity or arbitrator.   2 -------------------------------------------------------------------------------- “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A or Rule 430B, as applicable, promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. “Purchaser Counsel” has the meaning set forth in Section 6.2(a). “Registrable Securities” means any Common Stock issued or issuable pursuant to the Transaction Documents, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing. “Registration Statement” means each registration statement required to be filed under Article VI, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. “Related Person” has the meaning set forth in Section 4.6. “Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the Commission pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. “SEC Reports” has the meaning set forth in Section 3.1(g). “Subsidiary” means any “significant subsidiary,” as defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission pursuant to the Exchange Act. “Trading Day” means any day on which the Common Stock is listed or quoted and traded on the Trading Market. “Trading Market” means the Nasdaq National Market. “Transaction Documents” means this Agreement, the Transfer Agent Instructions and any other documents or agreements executed in connection with the transactions contemplated hereunder. “Transfer Agent Instructions” means the Irrevocable Transfer Agent Instructions, in the form of Exhibit A, executed by the Company and delivered to and acknowledged in writing by the Company’s transfer agent.   3 -------------------------------------------------------------------------------- ARTICLE II. PURCHASE AND SALE 2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not jointly, purchase from the Company, such number of Company Shares set forth on such Purchaser’s signature page attached hereto following the heading “Number of Shares.” The Closing shall take place at the offices of Company Counsel within five Business Days immediately following the execution hereof, or at such other location or time as the parties may agree. 2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following: (i) one or more stock certificates, free and clear of all restrictive and other legends (except as expressly provided in Section 4.1(b) hereof), evidencing such number of Company Shares equal to the number of Company Shares set forth opposite such Purchaser’s name on Schedule A hereto under the heading “Purchased Shares,” registered in the name of such Purchaser; (ii) legal opinions of the Company’s internal counsel and Company Counsel, in the form of Exhibit B-1 and B-2 respectively, executed by such counsel and delivered to the Purchasers; and (iii) duly executed Transfer Agent Instructions acknowledged by the Company’s transfer agent. (b) At the Closing, each Purchaser shall deliver or cause to be delivered to the Company the purchase price set forth set forth on such Purchaser’s signature page attached hereto following the heading “Purchase Price” in United States dollars and in immediately available funds, by wire transfer to an account designated in writing to such Purchaser by the Company for such purpose. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Purchasers as follows (which representations and warranties shall be deemed to apply, where appropriate, to each Subsidiary of the Company): (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than those listed in the SEC Report on Form 10-K for the year ended December 31, 2005 (the “Form 10-K”) or Schedule 3.1(a). Except as disclosed in the Form 10-K or in Schedule 3.1(a), the Company owns, directly or indirectly, the capital stock or comparable equity interests of each Subsidiary free and clear of any Lien and all the issued and outstanding shares of capital stock or   4 -------------------------------------------------------------------------------- comparable equity interest of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. (b) Organization and Qualification. Each of the Company and the Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any Transaction Document, (ii) reasonably be expected to have or result in a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole on a consolidated basis, or (iii) adversely impair the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”). (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents to which it is a party by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further consent or action is required by the Company, its Board of Directors or its stockholders. Each of the Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms. (d) No Conflicts. The execution, delivery and performance of the Transaction Documents to which it is a party by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, except to the extent that such conflict, default or termination right could not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities   5 -------------------------------------------------------------------------------- laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or its securities are subject), or by which any property or asset of the Company or a Subsidiary is bound or affected. (e) Issuance of the Company Shares. The Company Shares are duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and shall not be subject to preemptive rights or similar rights of stockholders. (f) Capitalization. As of February 28, 2006, the outstanding capital stock of the Company consists of 76,165,407 shares, 76,165,407 shares of which are common stock, $0.01 par value per share, and zero shares of which are preferred stock, $0.01 par value per share. As of February 28, 2006, the authorized capital stock of the Company consists of 1,900,000,000 shares of common stock. As of December 31, 2005, there were 74,038,257 shares of common stock issued and outstanding. There were no shares of preferred stock outstanding on December 31, 2005. Except as disclosed in the SEC Reports (as defined below), there has been no material change in the Company’s capitalization since December 31, 2005. All outstanding shares of capital stock are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with all applicable securities laws. Except as disclosed in Schedule 3.1(f) here are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as disclosed in Schedule 3.1(f), the issue and sale of the Company Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. To the knowledge of the Company, except as specifically disclosed in the proxy statement for the Company’s annual meeting of stockholders held on May 13, 2005, no Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the Company, beneficial ownership of in excess of 5% of the outstanding Common Stock, ignoring for such purposes any limitation on the number of shares of Common Stock that may be owned at any single time. (g) SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials (together with any materials filed by the Company under the Exchange Act, whether or not required) being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and   6 -------------------------------------------------------------------------------- regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or specifically identified in the SEC Reports to the extent required by the rules and regulations of the Commission as in effect at the time of filing. (h) Material Changes. Since the date of the audited financial statements included in the Form 10-K, (i) there has been no event, occurrence or development that, individually or in the aggregate, has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, except as disclosed in its SEC Reports, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock-based plans. (i) Absence of Litigation. Except as disclosed in the Form 10-K, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (j) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) to the Company’s knowledge, is or has been in violation of any   7 -------------------------------------------------------------------------------- statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect. (k) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not materially affect the value of such property, do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and could not, individually or in the aggregate, have or result in a Material Adverse Effect. To the Company’s knowledge, any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance except, in each case, as could not reasonably be expected to result in a Material Adverse Effect. (l) Certain Fees. Other than fees to Jefferies & Company, Inc. and Davidson Capital Group for which the Company will be solely liable and which will be fully paid at Closing, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement, and the Company has not taken any action that would cause any Purchaser to be liable for any such fees or commissions pursuant to any agreement or arrangement to which the Company is a party. (m) Private Placement. Neither the Company nor any Person acting on the Company’s behalf has sold or offered to sell or solicited any offer to buy the Company Shares by means of any form of general solicitation or advertising. Neither the Company nor any of its Affiliates nor any person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Company Shares as contemplated hereby or (ii) cause the offering of the Company Shares pursuant to the Transaction Documents to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market. The Company is not, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company is not a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980. No consent, license, permit, waiver approval or authorization of, or designation, declaration, registration or filing with, the Commission or any state securities regulatory authority is required in connection with the offer, sale, issuance or delivery of the Company Shares, other than the possible filing of a Form D with the Commission.   8 -------------------------------------------------------------------------------- (n) Well-Known Seasoned Issuer; Form S-3 Eligibility. The Company is currently, and will be at the time of filing of the Registration Statement, a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act. The Registration Statement will be at the time of filing an “automatic shelf registration statement,” as defined in Rule 405 under the Securities Act, the Company has not received from the Commission any notice pursuant to Rule 401(g)(2) under the Securities Act objecting to use of the automatic shelf registration statement form, and the Company is eligible to register the Company Shares for resale by the Purchasers using Form S-3 promulgated under the Securities Act. (o) Company Not Ineligible Issuer. The Company is not an “ineligible issuer” (as defined in Rule 405 under the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary under the circumstances that the Company be considered an ineligible issuer. (p) Listing and Maintenance Requirements. Since October 8, 2004, the Company has been in compliance with all listing and maintenance requirements for the Trading Market on which the Common Stock is listed or quoted except, in each case, as could not reasonably be expected to result in de-listing or suspension from the Trading Market. (q) Registration Rights. The Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied and extinguished. (r) Application of Takeover Protections. There is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to any of the Purchasers solely as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including, without limitation, as a result of the Company’s issuance of the Company Shares and the Purchasers’ ownership or disposition of the Company Shares. (s) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, nonpublic information. The Company understands and confirms that each of the Purchasers will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company taken as a whole is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which   9 -------------------------------------------------------------------------------- has not been so publicly announced or disclosed. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2. (t) Acknowledgment Regarding Purchasers’ Purchase of Company Shares. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchasers’ purchase of the Company Shares. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. (u) Patents and Trademarks. Except as disclosed in the Form 10-K, to the Company’s knowledge, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the Form 10-K and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person except as may be described in the Form 10-K or as could not reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights, in each case except as may be described in the Form 10-K or as could not reasonably be expected to result in a Material Adverse Effect. (v) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Form 10-K, except where the failure to possess such permits could not, individually or in the aggregate, have or result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit, except as described in the Form 10-K or as could not reasonably be expected to result in a Material Adverse Effect. (w) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company, is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors) exceeding $60,000, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the   10 -------------------------------------------------------------------------------- knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (x) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business. (y) Solvency. Based on the financial condition of the Company as of the Closing Date, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). (z) Internal Accounting and Disclosure Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company maintains disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that comply with the requirements of the Exchange Act; such disclosure controls and procedures are effective. (aa) Internal Control Over Financial Reporting. The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act. The Company’s internal control over financial reporting is effective and the Company is not aware of any material weaknesses in its internal control over financial reporting. Since the date of the audited financial statements included in the Form 10-K, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. (bb) Sarbanes-Oxley Act. The Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are   11 -------------------------------------------------------------------------------- effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof. (cc) Labor Relations. No labor or employment dispute exists or, to the knowledge of the Company, is imminent or threatened, with respect to any of the employees or consultants of the Company that has, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, as to itself only and for no other Purchaser, represents and warrants to the Company as follows: (a) Organization; Authority. Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Purchaser of the Company Shares hereunder has been duly authorized by all necessary action on the part of such Purchaser. This Agreement has been duly executed and delivered by such Purchaser and constitutes the valid and binding obligation of such Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. Such Purchaser is acquiring the Company Shares as principal for its own account for investment purposes only and not with a view to or for distributing such Company Shares or any part thereof, without prejudice, however, to such Purchaser’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Company Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold Company Shares for any period of time. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Company Shares. (c) Purchaser Status. At the time such Purchaser was offered the Company Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. (d) Experience of such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Company Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Company Shares and, at the present time, is able to afford a complete loss of such investment. (e) Access to Information. Such Purchaser acknowledges that it has reviewed the Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Company Shares and the merits and risks of investing in the Company Shares; (ii) access to information about the Company and the   12 -------------------------------------------------------------------------------- Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s representations and warranties contained in the Transaction Documents. (f) Certain Fees. Except for the fees that will be payable by the Company under Section 3.1(l), such Purchaser has not entered into any agreement or arrangement that would entitle any broker or finder to compensation by the Company in connection with the sale of the Company Shares to such Purchaser. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 4.1 Transfer Restrictions. (a) Company Shares may only be disposed of pursuant to an effective registration statement under the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws. In connection with any transfer of Company Shares other than pursuant to an effective registration statement or to the Company or pursuant to paragraph (k) of Rule 144, except as otherwise set forth herein, the Company may require that the transferor provide to the Company an opinion of counsel, selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books of the Company and with its transfer agent, without any such legal opinion, any transfer of Company Shares by a Purchaser to an Affiliate of such Purchaser, provided that the transferee certifies to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities Act. (b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1(b), of the following legend on any certificate evidencing Company Shares: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE   13 -------------------------------------------------------------------------------- SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, (I) THESE SECURITIES MAY BE TRANSFERRED TO AN AFFILIATE (AS SUCH TERM IS USED IN RULE 144 UNDER THE SECURITIES ACT) PROVIDED SUCH AFFILIATE IS AN “ACCREDITED INVESTOR” (AS SUCH TERM IS DEFINED IN RULES AND REGULATIONS PROMULGATED UNDER THE SECURITIES ACT), AND (II) THESE SECURITIES MAY BE PLEDGED TO AN “ACCREDITED INVESTOR” (AS SUCH TERM IS DEFINED IN RULES AND REGULATIONS PROMULGATED UNDER THE SECURITIES ACT) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES. Certificates evidencing Company Shares shall not be required to contain such legend or any other legend (i) while a Registration Statement covering the resale of such Company Shares is effective under the Securities Act, or (ii) following any sale of such Company Shares pursuant to Rule 144, or (iii) if such Company Shares are eligible for sale under paragraph (k) of Rule 144, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission). The Company shall cause its internal counsel and Company Counsel to issue the legal opinion included in the Transfer Agent Instructions to the Company’s transfer agent on the Effective Date. Following the Effective Date or at such earlier time as a legend is no longer required for certain Company Shares, the Company will no later than three Trading Days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a legended certificate representing such Company Shares, deliver or cause to be delivered to such Purchaser a certificate representing such Company Shares that is free from all restrictive and other legends. Following the Effective Date and upon the delivery to any Purchaser of any certificate representing Company Shares that is free from all restrictive and other legends, such Purchaser agrees that any sale of such Company Shares shall be made pursuant to the Registration Statement and in accordance with the plan of distribution described therein. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section. For so long as any Purchaser owns Company Shares, the Company will not effect or publicly announce its intention to effect any exchange, recapitalization or other transaction that effectively requires or rewards physical delivery of certificates evidencing the Common Stock. (c) The Company acknowledges and agrees that a Purchaser may from time to time pledge or grant a security interest in some or all of the Company Shares to a pledgee or secured party that is an “accredited investor” (as defined in Rule 501(a) under the Securities Act) in connection with a bona fide margin agreement or other loan or financing arrangement secured by the Company Shares and, if required under the terms of such agreement, loan or arrangement, such Purchaser may transfer pledged or secured Company Shares to such pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Company Shares may reasonably request in connection with a pledge or transfer of the Company Shares pursuant to this Section 4.1(c), including the preparation and filing of any   14 -------------------------------------------------------------------------------- required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. 4.2 Filing of Information. As long as any Purchaser owns Company Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns Company Shares, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and make publicly available in accordance with paragraph (c) of Rule 144 such information as is required for the Purchasers to sell the Company Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Company Shares may reasonably request to satisfy the provisions of Rule 144 applicable to the issuer of securities relating to transactions for the sale of securities pursuant to Rule 144. 4.3 Integration. The Company shall not, and shall use its commercially reasonably efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Company Shares in a manner that would require the registration under the Securities Act of the sale of the Company Shares to the Purchasers or that would be integrated with the offer or sale of the Company Shares for purposes of the rules and regulations of any Trading Market. 4.4 Securities Laws Disclosure; Publicity. The Company shall, on or before 9:30 a.m., Eastern Daylight Time on March 17, 2006, issue a press release reasonably acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby. No later than the first Business Day following the Closing Date, the Company shall file a Current Report on Form 8-K (the “8-K Filing”) with the Commission describing the terms of the transactions contemplated by the Transaction Documents and including as an exhibit to the 8-K Filing, this Agreement, in the form required by the Exchange Act. Thereafter, the Company shall timely file any filings and notices required by the Commission or applicable law with respect to the transactions contemplated hereby. Except with respect to the 8-K Filing (a copy of which will be provided to the Purchasers for their review as early as practicable prior to its filing), the Company shall, at least two Trading Days prior to the filing or dissemination of any disclosure required by this paragraph, provide a copy thereof to the Purchasers for their review. The Company and the Purchasers shall consult with each other in issuing any press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or Trading Market with respect to the transactions contemplated hereby, and neither party shall issue any such press release or otherwise make any such public statement, filing or other communication without the prior consent of the other, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except to the extent such disclosure (but not any disclosure as to the controlling Persons thereof) is required by law or Trading   15 -------------------------------------------------------------------------------- Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure. The Company shall not, and shall cause each of its Subsidiaries and its and each of their respective officers, directors, employees and agents not to, provide any Purchaser with, any material nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of the 8-K Filing without the express written consent of such Purchaser. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser shall have the right to require the Company to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material nonpublic information. No Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents for any such disclosure. Subject to the foregoing, neither the Company nor any Purchaser shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Purchaser, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) each Purchaser shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Each press release disseminated during the 12 months preceding the date of this Agreement did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. 4.5 Use of Proceeds. Except as set forth on Schedule 4.5, the Company shall use the net proceeds from the sale of the Securities hereunder for general corporate purposes. 4.6 Reimbursement. If any Purchaser or any of its Affiliates or any officer, director, partner, controlling person, employee or agent of a Purchaser or any of its Affiliates (a “Related Person”) becomes involved in any capacity in any Proceeding brought by or against any Person in connection with or as a result of the transactions contemplated by the Transaction Documents (other than transactions brought by the investors or shareholders of such Purchaser against such Purchaser), the Company will indemnify and hold harmless such Purchaser or Related Person for its reasonable legal and other expenses (including the costs of any investigation, preparation and travel) and for any Losses incurred in connection therewith, as such expenses or Losses are incurred, excluding only Losses that result directly from such Purchaser’s or Related Person’s gross negligence or willful misconduct. In addition, the Company shall indemnify and hold harmless each Purchaser and Related Person from and against any and all Losses, as incurred, arising out of or relating to any breach by the Company of any of the representations, warranties or covenants made by the Company in this Agreement or any other Transaction Document, or any allegation by a third party that, if true, would constitute such a breach. The conduct of any Proceedings for which indemnification is available under this paragraph shall be governed by Section 6.4(c) below. The indemnification obligations of the Company under this paragraph shall be in addition to any liability that the Company may otherwise have and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Purchasers and any such Related Persons. The Company also agrees that neither the Purchasers   16 -------------------------------------------------------------------------------- nor any Related Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the transactions contemplated by the Transaction Documents, except to the extent that any Losses incurred by the Company result from the gross negligence or willful misconduct of the applicable Purchaser or Related Person in connection with such transactions. If the Company breaches its obligations under any Transaction Document, then, in addition to any other liabilities the Company may have under any Transaction Document or applicable law, the Company shall pay or promptly reimburse the Purchasers on demand for all costs of collection and enforcement (including reasonable attorneys’ fees and expenses). Without limiting the generality of the foregoing, the Company specifically agrees to promptly reimburse the Purchasers on demand for all costs of enforcing the indemnification obligations in this paragraph. ARTICLE V. CONDITIONS 5.1 Conditions Precedent to the Obligations of the Purchasers. The obligation of each Purchaser to acquire Company Shares at the Closing is subject to the satisfaction or waiver by such Purchaser, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date; and (b) Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing. 5.2 Conditions Precedent to the Obligations of the Company. The obligation of the Company to sell Company Shares at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Purchasers contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date; and (b) Performance. The Purchasers shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Purchasers at or prior to the Closing. ARTICLE VI. REGISTRATION RIGHTS 6.1 Shelf Registration. (a) As promptly as possible following the Closing, and in no event more than 10 Business Days following the Closing, the Company shall file with the Commission a “Shelf”   17 -------------------------------------------------------------------------------- Registration Statement covering the resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415 (a copy of such Registration Statement is attached hereto as Exhibit C-1). The Registration Statement shall be on Form S-3 and shall contain (except if otherwise directed by the Purchasers) the “Plan of Distribution” attached hereto as Exhibit C-2. Notwithstanding the Company’s representation that it is Form S-3 eligible, and without relieving the Company of any liability it should have for such breach of such representation, if the Company is at the time of filing not eligible to register for resale the Registrable Securities on Form S-3, such registration shall be on another appropriate form in accordance herewith as the Purchasers may consent. Notwithstanding the Company’s representation that the Registration Statement shall be an “automatic shelf registration statement,” and without relieving the Company of any liability it should have for such breach of such representation, if the Registration Statement is not automatically effective upon filing, the Company shall use its reasonable best efforts to cause the Registration Statement to become effective as soon as possible after filing. The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading, except with respect to any information provided by a Purchaser furnished in writing to the Company by such Purchaser expressly for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Purchaser expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto. (b) The Company shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until the earlier of (i) the date that all Registrable Securities covered by such Registration Statement have been sold or (ii) the second anniversary of the Closing Date (the “Effectiveness Period”). (c) Upon the occurrence of any Event (as defined below) and on every monthly anniversary thereof until the applicable Event is cured, as partial relief for the damages suffered therefrom by the Purchasers (which remedy shall not be exclusive of any other remedies available under this Agreement, at law or in equity), the Company shall pay to each Purchaser an amount in cash, as liquidated damages and not as a penalty, equal to 0.5% of the aggregate purchase price paid by such Purchaser for the first month and 1.0% for each month thereafter for all the Company Shares. The payments to which a Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to herein as “Event Payments.” Any Event Payments payable pursuant to the terms hereof shall apply on a pro-rata basis for any portion of a month prior to the cure of an Event, and any such Event Payments shall be due and payable monthly on or before the 10th Business Day following the earlier to occur of either (i) the cure of an Event or (ii) the monthly anniversary of the Event (and each monthly anniversary thereafter until the cure of the Event) (an “Event Payment Date”). In the event the Company fails to make Event Payments by the Event Payment Date, such Event Payments shall bear interest at the rate of 1.0% per month (prorated for partial months) until paid in full.   18 -------------------------------------------------------------------------------- For such purposes, each of the following shall constitute an “Event”: (i) except (A) as provided for in Section 6.1(d), (B) if the Company is involved in a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or (C) a merger or consolidation of the Company or a sale of more than one-half of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company’s securities prior to the first such transaction continue to hold at least 50% of the voting rights and equity interests of the surviving entity or acquirer (clauses (B) and (C), collectively, the “Excluded Events”) after the Effective Date, a Purchaser is not permitted to sell Registrable Securities under the Registration Statement (or a subsequent Registration Statement filed in replacement thereof) for any reason for a period of at least five consecutive Trading Days, provided that such an Event shall be deemed “cured” for purposes of this Section 6.1(c) upon the termination of such period; or (ii) the Common Stock is not listed or quoted, or is suspended from trading, on the Trading Market for a period of at least three consecutive Trading Days at any time during the first 12 months after the Effective Date, provided that such an Event shall be deemed “cured” for purposes of this Section 6.1(c) upon the termination of such period; (iii) the Company fails for any reason to deliver a certificate evidencing any Company Shares to a Purchaser within three Trading Days after delivery of such certificate is required pursuant to any Transaction Document, provided that such an Event shall be deemed “cured” for purposes of this Section 6.1(c) upon the delivery of such certificate; or (iv) the Company fails for any reason to file the Registration Statement pursuant to Section 6.1(a) or such Registration Statement does not become effective within 10 Business Days following the Closing Date. (d) Notwithstanding anything in this Agreement to the contrary, the Company may, by written notice to the Purchasers, suspend sales under a Registration Statement after the Effective Date thereof and/or require that the Purchasers immediately cease the sale of shares of Common Stock pursuant thereto and/or defer the filing of any Registration Statement if the Company determines in good faith, by appropriate resolutions or a certificate executed by the Company’s CEO and CFO, that (A) it would be materially detrimental to the Company (other than as relating solely to the price of the Common Stock) to file a Registration Statement at such time and (B) it is in the best interests of the Company to defer proceeding with such registration at such time. Upon receipt of such notice, each Purchaser shall immediately discontinue any sales of Registrable Securities pursuant to such registration until such Purchaser has received copies of a supplemented or amended Prospectus or until such Purchaser is advised in writing by the Company that the then-current Prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. In no event, however, shall this right be exercised to suspend sales beyond the period during which (in the good faith determination of the Company’s Board of Directors) the failure to require such suspension would be materially detrimental to the Company. The Company’s rights under this Section 6.1(d) may not be exercised (x) more than twice in the 60 Trading Days immediately subsequent to the Effective Date or for a period of greater than 10   19 -------------------------------------------------------------------------------- Trading Days during such period, or (y) more than twice or for a period greater than 45 days in any twelve-month period after the 60 Trading Days immediately subsequent to the Effective Date. Immediately after the end of any suspension period under this Section 6.1(d), the Company shall take all necessary actions (including filing any required supplemental prospectus) to restore the effectiveness of the applicable Registration Statement and the ability of the Purchasers to publicly resell their Registrable Securities pursuant to such effective Registration Statement. (e) The Company shall not, prior to the Effective Date of the Registration Statement, prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities. 6.2 Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall: (a) Not less than three Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference (other than any documents containing material non-public information)), the Company shall (i) furnish to each Purchaser and any counsel designated by any Purchaser (each, a “Purchaser Counsel”) copies of all such documents proposed to be filed and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements (other than periodic reports required under the Exchange Act) thereto to which Purchasers holding a majority of the Registrable Securities shall reasonably object in writing within two Trading Days of receipt. Notwithstanding the foregoing, this paragraph (a) shall not apply to the initial filing of the Registration Statement attached hereto as Exhibit C-1. (b) (i) Subject to Section 6.1(d), prepare and file with the Commission such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide each Purchaser true and complete copies of all correspondence from and to the Commission relating to the Registration Statement (other than correspondence containing material nonpublic information); and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with   20 -------------------------------------------------------------------------------- the intended methods of disposition by the Purchasers thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Purchasers of Registrable Securities to be sold and each Purchaser Counsel as promptly as reasonably possible, and (if requested by any such Person) confirm such notice in writing no later than one Trading Day thereafter, of any of the following events: (i) the Commission notifies the Company whether there will be a “review” of any Registration Statement; (ii) the Commission comments in writing on any Registration Statement (in which case the Company shall deliver to each Purchaser a copy of such comments and of all written responses thereto (other than any correspondence containing material nonpublic information)); (iii) any Registration Statement or any post-effective amendment is declared effective; (iv) the Commission or any other Federal or state governmental authority requests any amendment or supplement to any Registration Statement or Prospectus or requests additional information related thereto; (v) the Commission issues any stop order suspending the effectiveness of any Registration Statement or initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the financial statements included in any Registration Statement become ineligible for inclusion therein or any statement made in any Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference is untrue in any material respect or any revision to a Registration Statement, Prospectus or other document is required so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Use its reasonable best efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as soon as possible. (e) Furnish to each Purchaser and Purchaser Counsel, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (f) Promptly deliver to each Purchaser and Purchaser Counsel, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Purchasers in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto to the extent permitted by federal and state securities laws and regulations. (g) (i) In the time and manner required by the Trading Market, prepare and file with the Trading Market an additional shares listing application covering all of the Registrable Securities; (ii) take all steps necessary to cause such Registrable Securities to be   21 -------------------------------------------------------------------------------- approved for listing on the Trading Market as soon as possible thereafter; (iii) provide to the Purchasers evidence of such listing; and (iv) except as a result of the Excluded Events, during the Effectiveness Period, maintain the listing of such Registrable Securities on the Trading Market. (h) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling Purchasers and each Purchaser Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Purchaser requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. (i) Cooperate with the Purchasers to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by this Agreement and applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Purchasers may request. (j) With respect to any event that would cause the Registration Statement not to be continuously effective as required by Section 6.1(b), including for any event described in Section 6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Cooperate with any reasonable due diligence investigation undertaken by the Purchasers in connection with the sale of Registrable Securities, including, without limitation, by making available any documents and information; provided that the Company will not deliver or make available to any Purchaser material, nonpublic information unless such Purchaser specifically requests in advance to receive material, nonpublic information in writing and, if requested by the Company, such Purchaser agrees in writing to treat such information confidentially. (l) Comply with all applicable rules and regulations of the Commission in all material respects. 6.3 Registration Expenses. The Company shall pay (or reimburse the Purchasers for) all fees and expenses incident to the performance of or compliance with Article VI of this   22 -------------------------------------------------------------------------------- Agreement by the Company, including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the Commission, any Trading Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of printing certificates for Registrable Securities and of printing prospectuses requested by the Purchasers), (c) messenger, telephone and delivery expenses incurred by the Company, (d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market. 6.4 Indemnification. (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Purchaser, the officers, directors, partners, members, agents, investment advisors and employees of each of them, each Person who controls any such Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all Losses, as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Purchaser furnished in writing to the Company by such Purchaser expressly for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Purchaser expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective Prospectus after the Company has notified such Purchaser in writing that the Prospectus is outdated or defective and prior to the receipt by such Purchaser of the Advice contemplated in Section 6.5. The Company shall notify the Purchasers promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Purchasers. Each Purchaser shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses arising solely out of any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement   23 -------------------------------------------------------------------------------- thereto, or arising solely out of any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Purchaser to the Company specifically for inclusion in such Registration Statement or such Prospectus or to the extent that (i) such untrue statements or omissions are based solely upon information regarding such Purchaser furnished in writing to the Company by such Purchaser expressly for use therein, or to the extent that such information relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Purchaser expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence of an event of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective Prospectus after the Company has notified such Purchaser in writing that the Prospectus is outdated or defective and prior to the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no event shall the liability of any selling Purchaser hereunder be greater in amount than the dollar amount of the gross proceeds in respect of the sale by such Purchaser of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). It being understood, however, that the Indemnifying Party shall not, in connection with any one such Proceeding be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified   24 -------------------------------------------------------------------------------- Parties, which firm shall be appointed by a majority of the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder. (d) Contribution. If a claim for indemnification under Section 6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6.4(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.4(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be required to contribute, in the aggregate, any amount in excess of the total amount for which the Registrable Securities were sold by such Purchaser. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.   25 -------------------------------------------------------------------------------- 6.5 Dispositions. Each Purchaser agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. Each Purchaser further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Sections 6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such Registrable Securities under the Registration Statement until such Purchaser’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 6.2(j), or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. 6.6 No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Purchasers in such capacity pursuant hereto) may include securities of the Company in the Registration Statement other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right to any of its security holders. 6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Purchaser written notice of such determination and if, within fifteen days after receipt of such notice, any such Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Purchaser requests to be registered, provided that the including of the Registrable Securities in such registration statement shall not relieve the Company of its obligations under this Article VI. ARTICLE VII. MISCELLANEOUS 7.1 Termination. This Agreement may be terminated by the Company or any Purchaser, by written notice to the other parties, if the Closing has not been consummated by the third Business Day following the date of this Agreement; provided that no such termination will affect the right of any party to sue for any breach by the other party (or parties). 7.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company   26 -------------------------------------------------------------------------------- shall pay all fees of its transfer agent, stamp taxes and other taxes and duties levied in connection with the sale and issuance by the Company of Company Shares hereunder. 7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, each party hereto will execute and deliver to any other party hereto such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents. 7.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, (d) the third Trading Day after the date of deposit, first class postage prepaid, in the U.S. mails, or (e) upon actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such notices and communications are those set forth on the signature pages hereof, or such other address or facsimile number as may be designated in writing hereafter, in the same manner, by any such Person. 7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each of the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Purchasers under Article VI and that does not directly or indirectly affect the rights of other Purchasers may be given by Purchasers holding at least a majority of the Registrable Securities to which such waiver or consent relates. 7.6 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 7.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign   27 -------------------------------------------------------------------------------- this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers. Any Purchaser may assign its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Company Shares, provided such transferee agrees in writing to be bound, with respect to the transferred Company Shares, by the provisions hereof that apply to the “Purchasers.” Notwithstanding anything to the contrary herein, Company Shares may be assigned to any Person in connection with a bona fide margin account or other loan or financing arrangement secured by such Company Shares, provided such Person is an “accredited investor” as such term is defined in the rules and regulations under the Securities Act. 7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Related Person is an intended third party beneficiary of Section 4.6 and each Indemnified Party is an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of such Sections directly against the parties with obligations thereunder. 7.9 Governing Law; Venue; Waiver Of Jury Trail. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY. 7.10 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery and/or exercise of the Company Shares, as applicable.   28 -------------------------------------------------------------------------------- 7.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 7.12 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights. 7.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 7.15 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser hereunder or any Purchaser enforces or exercises its rights hereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company by a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 7.16 Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date   29 -------------------------------------------------------------------------------- hereof, each reference in any Transaction Document to a number of shares or a price per share shall be amended to appropriately account for such event. 7.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. The decision of each Purchaser to purchase Company Shares pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment hereunder. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. [SIGNATURE PAGES FOLLOW]   30 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.       BROADWING CORPORATION     By:   /s/ Kim Larsen       Name:   Kim Larsen       Title:   Senior Vice President and General Counsel       Address for Notice:       1122 Capital of Texas Highway Austin, Texas 78746 Facsimile No.: (443) 259-4416 Attn: Chief Financial Officer With a copy to:     Mayer, Brown, Rowe & Maw LLP 71 South Wacker Drive Chicago, Illinois 60606 Facsimile No.: (312) 701-7711 Attn: Philip J. Niehoff, Esq.   31 -------------------------------------------------------------------------------- Purchaser Signature Page By its execution and delivery of this signature page, the undersigned Purchaser hereby joins in and agrees to be bound by the terms and conditions of the Purchase Agreement dated as of March 12, 2006 (the “Purchase Agreement”) by and among Broadwing Corporation and the Purchasers (as defined therein), as to the number of shares of Common Stock set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.   Name of Purchaser: TCS Capital, L.P. By:   /s/ Eric Semler   Title: Managing Member, TCS Capital GP, LLC Its general partner Record   Address:   888 Seventh Avenue, Suite 1504   New York, NY 10019   Telecopy No.: (212) 621-8790   Number of Shares: 405,900   Purchase Price: $10.00/Share Agreed to and accepted this 12th day of March, 2006   BROADWING CORPORATION By:   /s/ Kim Larsen Name:   Kim Larsen Title:   Senior Vice President and General Counsel   32 -------------------------------------------------------------------------------- Purchaser Signature Page By its execution and delivery of this signature page, the undersigned Purchaser hereby joins in and agrees to be bound by the terms and conditions of the Purchase Agreement dated as of March 12, 2006 (the “Purchase Agreement”) by and among Broadwing Corporation and the Purchasers (as defined therein), as to the number of shares of Common Stock set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.   Name of Purchaser: TCS Capital II, L.P. By:   /s/ Eric Semler   Title: Managing Member, TCS Capital GP, LLC Its general partner Record   Address:   888 Seventh Avenue, Suite 1504   New York, NY 10019   Telecopy No.: (212) 621-8790   Number of Shares: 2,375,400   Purchase Price: $10.00/Share Agreed to and accepted this 12th day of March, 2006   BROADWING CORPORATION By:   /s/ Kim Larsen Name:   Kim Larsen Title:   Senior Vice President and General Counsel   33 -------------------------------------------------------------------------------- Purchaser Signature Page By its execution and delivery of this signature page, the undersigned Purchaser hereby joins in and agrees to be bound by the terms and conditions of the Purchase Agreement dated as of March 12, 2006 (the “Purchase Agreement”) by and among Broadwing Corporation and the Purchasers (as defined therein), as to the number of shares of Common Stock set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.   Name of Purchaser: TCS Capital Investments, L.P. By:   /s/ Eric Semler   Title: Managing Member, TCS Capital GP, LLC Its general partner Record   Address:   c/o Goldman Sachs (Cayman) Trust, Ltd.   P.O. Box 896 GT Harbour Centre, 2nd Floor North Church Street Grand Cayman, Cayman Islands British West Indies   Telecopy No.: (345) 949-6773   Number of Shares: 4,618,700   Purchase Price: $10.00/Share Agreed to and accepted this 12th day of March, 2006   BROADWING CORPORATION By:   /s/ Kim Larsen Name:   Kim Larsen Title:   Senior Vice President and General Counsel   34 -------------------------------------------------------------------------------- Exhibit A IRREVOCABLE TRANSFER AGENT INSTRUCTIONS BROADWING CORPORATION Continental Stock Transfer & Trust Company 17 Battery Place, 8th Floor New York, NY 10004 Ladies and Gentlemen: Reference is made to that certain Purchase Agreement, dated as of March [__], 2006 (the “Purchase Agreement”), by and among Broadwing Corporation, a Delaware corporation (the “Company”), and the purchasers named therein (collectively, the “Holders”), pursuant to which the Company is issuing to the Holders shares of the Company’s common stock, par value $0.01 per share (the “Shares”). The Company has agreed with the Holders that it will instruct you to: (A) issue the Shares free of all restrictive and other legends if, at the time of such issue, (i) a registration statement covering the resale of such Shares has been declared and is effective by the Commission under the Securities Act, (ii) such Shares are eligible for sale under Rule 144(k) or (iii) such legend is not required under applicable requirements of the Securities Act; or (B) reissue the Shares (if such shares were originally issued with a restrictive legend) free of all restrictive and other legends (i) upon the effectiveness of a registration statement covering the resale of the Shares, (ii) following any sale of such Shares pursuant to Rule 144, (iii) such Shares are eligible for sale under Rule 144(k) or (iv) if such legend is not required under applicable requirements of the Securities Act. In furtherance of this instruction, upon the effectiveness of the Registration Statement (as defined in the Purchase Agreement) we have instructed our counsel to deliver to you their opinion letter in the form attached hereto as Exhibit I to the effect that the Registration Statement is effective and that the Shares are freely transferable by the Holders and accordingly may be issued (or reissued, as applicable) and delivered to the Holders free of all restrictive and other legends. You need not require further letters from us or our counsel to effect any future issuance or reissuance of Shares to the Holders as contemplated by the Purchase Agreement and this letter. This letter shall serve as our standing irrevocable instructions with regard to this matter. Please be advised that the Holders have relied upon this instruction letter as an inducement to enter into the Purchase Agreement. Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Very truly yours,   A-1 -------------------------------------------------------------------------------- BROADWING CORPORATION By:      Name:   Kim D. Larsen Title:   Senior Vice President, General Counsel and Secretary   ACKNOWLEDGED AND AGREED: Continental Stock Transfer & Trust Company By:      Name:   Title:     A-2 -------------------------------------------------------------------------------- Exhibit I [Counsel’s Letterhead] [Transfer Agent] Re: BROADWING CORPORATION To Whom It May Concern: We are writing on behalf of our client, Broadwing Corporation, a Delaware corporation (the “Company”), in connection with the Company’s recent filing of a Registration Statement on Form S-3 (File No.                     ) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to                      shares of the Company’s common stock, par value $0.01 per share (the “Registrable Securities”), issued to the selling stockholders (the “Selling Stockholders”) listed in the selling stockholders table at page                      of the final prospectus, a copy of which is attached hereto as Exhibit A. In connection with the foregoing, we advise you that the Registration Statement is effective under Rule 462(e) of the Securities Act of 1933, as amended. We have no knowledge that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC. This letter shall serve as our standing opinion to you that the Shares are freely transferable by the Holders pursuant to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance of Shares to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated                     , 2006. If you have any questions relating to the foregoing, please feel free to call me at                         . Very truly yours, [Counsel]   A-3 -------------------------------------------------------------------------------- Exhibit B-1 [List of Purchasers] Ladies and Gentlemen: As general counsel, I represented Broadwing Corporation, a Delaware corporation (the “Company”), in connection with the transactions contemplated in that certain Purchase Agreement dated as of March [__], 2006 (the “Purchase Agreement”), by and among the Company and the purchasers identified on the signature pages thereto (the “Purchasers”) providing for, among other things, the issuance and sale by the Company of shares of common stock of the Company, par value $0.01 per share (the “Shares”). This opinion is rendered pursuant to Section 2.2(a)(ii) of the Purchase Agreement. All capitalized terms not otherwise defined herein are defined as set forth in the Purchase Agreement. I have reviewed the Purchase Agreement, the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”) and the By-laws of the Company, in each case as amended to date, and the records of the meetings of the Board of Directors of the Company. I have made such inquiry of the officers of the Company and have examined such corporate and other records, documents, agreements and instruments, certificates of officers of the Company and of public officials and have made such investigation as to matters of law as I have considered necessary for the purposes of this opinion. In making such investigation, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to original documents of all copies of documents, whether certified or not. In rendering this opinion, I have relied, as to all questions of fact material to this opinion, upon certificates of public officials and officers of the Company, and representations and warranties by you and the Company contained in the Purchase Agreement. All opinions contained herein with respect to the enforceability of agreements and instruments are qualified to the extent that (i) the enforceability of such agreements and instruments may be limited by general principles of equity, and the availability of the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceedings therefor may be brought, (ii) the enforceability of such agreements and instruments may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally, (iii) I express no opinion as to the enforceability of any rights of indemnification relating to liabilities under the securities laws, (iv) the remedies of specific performance and injunctive and other forms of injunctive relief may be subject to equitable defenses and (v) I express no opinion as to the enforceability of any provisions of the Transaction Documents (as identified below) which waive rights granted by law where such waivers are against public policy.   B-1-1 -------------------------------------------------------------------------------- The opinions expressed in this opinion letter are limited to the laws of the State of Maryland, federal laws of the United States of America and the General Corporation Law of the State of Delaware. I am not opining on, and I assume no responsibility with respect to, the applicability to or effect on any of the matters covered herein of the laws of any other jurisdiction or the local laws of any jurisdiction. Based on the foregoing, I am of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority, and all material governmental licenses, authorizations, consents and approvals, required to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted (all as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) (the “Form 10-K”). The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to qualify would reasonably be expected to have a material adverse effect on the Company. 2. Each of the significant subsidiaries (as defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission pursuant to the Exchange Act) set forth in the Form 10-K (the “Subsidiaries”) is an entity duly organized and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable). 3. The Company has all requisite power and authority to enter into and perform the Purchase Agreement and the Transfer Agent Instructions (together, the “Transaction Documents”), to issue, sell and deliver the Shares pursuant to the Transaction Documents and to carry out and perform its obligations under, and to consummate the transactions contemplated by, the Transaction Documents. 4. All corporate action on the part of the Company, its directors and its stockholders necessary for the authorization, execution and delivery by the Company of the Transaction Documents, the authorization, issuance, sale and delivery of the Shares pursuant to the Purchase Agreement and the consummation by the Company of the transactions contemplated by the Transaction Documents has been duly taken. The Transaction Documents have been duly and validly executed and delivered by the Company and constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, except as set forth above. 5. The Company’s authorized and outstanding stock is as set forth in Section 3.1(f) of the Purchase Agreement. All presently issued and outstanding shares of common stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable and free of any preemptive or similar rights, and have been issued in compliance with applicable securities laws and regulations. The Shares which are being issued on the date hereof pursuant to the Purchase Agreement have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive or similar rights. Except for rights described in Schedule 3.1(f) of the Purchase Agreement, I am not aware of any other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire from the Company any capital stock or other securities of the Company, or any other agreements to issue any such securities or rights. The rights, privileges and preferences of the common stock of the Company are as stated in the Company’s Certificate of Incorporation.   B-1-2 -------------------------------------------------------------------------------- 6. The execution, delivery and performance by the Company of, and the compliance by the Company with the terms of, the Transaction Documents, and the issuance, sale and delivery of the Shares pursuant to the Purchase Agreement do not (a) conflict with or result in a violation of any provision of any existing Delaware corporate law or, to my knowledge, any federal law, rule or regulation thereunder having applicability to the Company or its Subsidiaries (except that no opinion is expressed in this Paragraph 6 with respect to state and federal securities laws or the laws of any foreign jurisdiction), (b) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws of the Company, (c) to my knowledge, conflict with, result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in or permit the termination or modification of, any agreement, instrument, order, writ, judgment or decree known to us to which the Company or its Subsidiaries is a party or is subject, except in each case as would not cause a material adverse effect on the Company, or (d) to my knowledge, result in the creation or imposition of any lien, claim or encumbrance on any of the Company’s or its Subsidiaries’ assets or properties, except in each case as would not reasonably be expected to cause a material adverse effect on the Company. 7. To my knowledge, there is no claim, action, suit, proceeding, arbitration, investigation or inquiry, pending or threatened, before any court or governmental or administrative body or agency, or any private arbitration tribunal, against the Company or its Subsidiaries, or any of its officers, directors or employees (in connection with the discharge of their duties as officers, directors and employees), or affecting any of its properties or assets, except as disclosed in the Form 10-K or as would not reasonably be expected to cause a material adverse effect on the Company. 8. All consents, approvals, permits, orders or authorizations of, and all qualifications, registrations, designations or declarations with any federal or Delaware governmental authority on the part of the Company that are required in connection with the execution and delivery of the Purchase Agreement, the offer, sale, issuance or delivery of the Shares and the consummation of the transactions contemplated thereby have been obtained and are effective, except that no opinion is expressed in this Paragraph 8 with respect to state and federal securities laws governing the purchase and distribution of the Shares or the laws of any foreign jurisdiction. This opinion is furnished to you as the purchaser of Shares, and is solely for your benefit and may not be relied upon by any other person. The foregoing opinions are rendered as of the date of this letter. I assume no obligation to update or supplement any of my opinions to reflect any changes in law or fact that may occur.   Sincerely,     Kim D. Larsen General Counsel   B-1-3 -------------------------------------------------------------------------------- Exhibit B-2 [List of Purchasers] Ladies and Gentlemen; This opinion is being rendered to you pursuant to Section 2.2(a)(ii) of the Purchase Agreement, dated March [__], 2006 (the “Purchase Agreement”), by and among Broadwing Corporation, a Delaware corporation (the “Company”), and the Purchasers named therein, relating to the sale to the Purchasers by the Company of shares of common stock of the Company, par value $0.01 per share (the “Shares”). Capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Purchase Agreement. We have acted as special counsel to the Company in connection with the sale of the Shares. In rendering opinions expressed herein, we have examined originals or certified, conformed, reproduced or photostatic copies of all such records, agreements, instruments and documents as we have deemed relevant and necessary as the basis for the opinions hereinafter expressed. In all such examinations, we have assumed the genuineness of all signatures, the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form and the legal competence of each individual executing any document. We have assumed the due authorization, execution and delivery of all documents and the validity and enforceability of all documents against all parties thereto, in accordance with their respective terms. As to questions of fact relevant to such opinions, we have relied upon representations, warranties and covenants contained in the documents, records, certificates of officers or representatives of the Company and others. With respect to any opinions below with respect to the Company, we have relied, with your permission, as to matters of fact, solely on the representations and warranties made by the Company in the Purchase Agreement. All opinions contained herein with respect to the enforceability of agreements and instruments are qualified to the extent that (i) the enforceability of such agreements and instruments may be limited by general principles of equity, and the availability of the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceedings therefor may be brought, (ii) the enforceability of such agreements and instruments may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally, (iii) we express no opinion as to the enforceability of any rights of indemnification relating to liabilities under the securities laws, (iv) the remedies of specific performance and injunctive and other forms of injunctive relief may be subject to equitable defenses and (v) we express no opinion as to the enforceability of any provisions of the Transaction Documents (as identified below) which waive rights granted by law where such waivers are against public policy.   B-2-1 -------------------------------------------------------------------------------- Based upon and subject to the foregoing, and having regard for legal considerations which we deem relevant, we are of the opinion that: 1. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 2. The Company has all requisite power and authority to enter into and perform the Purchase Agreement and the Transfer Agent Instructions dated as of the date hereof (together, the “Transaction Documents”), to issue, sell and deliver the Shares pursuant to the Transaction Documents and to carry out and perform its obligations under, and to consummate the transactions contemplated by, the Transaction Documents. 3. All corporate action on the part of the Company, its directors and its stockholders necessary for the authorization, execution and delivery by the Company of the Transaction Documents, the authorization, issuance, sale and delivery of the Shares pursuant to the Purchase Agreement and the consummation by the Company of the transactions contemplated by the Transaction Documents has been duly taken. The Transaction Documents have been duly and validly executed and delivered by the Company and constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, except as set forth above. 4. The Company meets the eligibility requirements for the use of Form S-3 for the registration of the Shares in the twelve months ending on the date hereof, and to our knowledge, the Company is a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act of 1933, as amended. 5. To our knowledge, the Company has filed all reports (the “SEC Documents”) required to be filed by it under Sections 13(a) and 15(d) of the Exchange Act of 1934, as amended (the “Exchange Act”), in the twelve months ending on the date hereof. As of their respective filing dates, the SEC Documents complied in all material respects as to form with the requirements of the Exchange Act and the rules and regulations of the Securities and Exchange Commission. 6. Based in part upon the representations of the Purchasers contained in the Purchase Agreement, the Shares may be issued to the Purchasers without registration under the Securities Act of 1933, as amended. 7. The Company is not an Investment Company within the meaning of the Investment Company Act of 1940, as amended. 8. No consent, license, permit, waiver approval or authorization of, or designation, declaration, registration or filing with, the Securities and Exchange Commission or any state securities regulatory authority is required in connection with the offer, sale, issuance or delivery of the Shares, other than the filing of a Form 8-K with respect to the closing of the transaction contemplated by the Transaction Documents and the possible filing of a Form D with the Securities and Exchange Commission. Whenever an opinion or statement herein is qualified by the words “to our knowledge” or other words of similar import, it is intended to indicate that the attorneys practicing law with this firm who represented the Company in connection with the transactions contemplated by the Purchase Agreement have no actual knowledge of any facts or information contrary to such opinion or statement.   B-2-2 -------------------------------------------------------------------------------- Members of our firm are admitted to practice law in the States of Illinois and New York and our opinions expressed herein are limited solely to the federal laws of the United States of America, the laws of the State of Illinois, the laws of the State of New York and the corporate laws of the State of Delaware, and we express no opinion herein concerning the laws of any other jurisdiction. The opinions and statements expressed herein are as of the date hereof. We assume no obligation to update or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in applicable law which may hereafter occur. The opinions expressed herein have been rendered at your request solely for the purposes of the transaction contemplated by the Purchase Agreement, are solely for your benefit and may not be used or relied upon in any manner by any other person or by you for any other purpose without our express written consent.   Very truly yours,   MAYER, BROWN, ROWE & MAW LLP   B-2-3 -------------------------------------------------------------------------------- Exhibit C-1 [Registration Statement to be attached]   C-1-1 -------------------------------------------------------------------------------- Exhibit C-2 Plan of Distribution The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:     •   ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;     •   block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;     •   purchases by a broker-dealer as principal and resale by the broker-dealer for its account;     •   an exchange distribution in accordance with the rules of the applicable exchange;     •   privately negotiated transactions;     •   short sales;     •   broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;     •   a combination of any such methods of sale; and     •   any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any   C-2-1 -------------------------------------------------------------------------------- agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act. The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. The selling stockholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act. The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling stockholders.   C-2-2 -------------------------------------------------------------------------------- Exhibit D INSTRUCTION SHEET FOR PURCHASER (to be read in conjunction with the entire Purchase Agreement)   A. Complete the following items in the Purchase Agreement: 1. Complete and execute the Purchaser Signature Page. The Agreement must be executed by an individual authorized to bind the Purchaser. 2. Exhibit F-1 - Stock Certificate Questionnaire: Provide the information requested by the Stock Certificate Questionnaire; 3. Exhibit F-2 - Registration Statement Questionnaire: Provide the information requested by the Registration Statement Questionnaire. 4. Return, via facsimile, the signed Purchase Agreement including the properly completed Exhibits F-1 and F-2, to: Mayer, Brown, Rowe & Maw LLP Facsimile: (312) 706-8540 Attn: Michael A. Serafini, Esq. 5. After completing instruction number four (4) above, deliver the original signed Purchase Agreement including the properly completed Exhibits F-1 and F-2 to: Mayer, Brown, Rowe & Maw LLP 71 South Wacker Drive Chicago, Illinois 60606-4637 Attn: Michael A. Serafini, Esq.   B. Instructions regarding the transfer of funds for the purchase of Company Shares will be telecopied to the Purchaser by the Company at a later date.   C. Upon the resale of any Company Shares by the Purchaser after the Registration Statement covering any Company Shares is effective, as described in the Purchase Agreement, the Purchaser: 1. Must deliver a current prospectus, and annual and quarterly reports of the Company to the buyer (prospectuses, and annual and quarterly reports may be obtained from the Company at the Purchaser’s request).   D-1 -------------------------------------------------------------------------------- Exhibit D-1 Broadwing Corporation STOCK CERTIFICATE QUESTIONNAIRE Please provide us with the following information:   1.    The exact name that the Company Shares are to be registered in (this is the name that will appear on the stock certificate(s)). You may use a nominee name if appropriate:    ___________________________ 2.    The relationship between the Purchaser of the Company Shares and the registered holder listed in response to item 1 above:    ___________________________ 3.    The mailing address, telephone and telecopy number of the registered holder listed in response to item 1 above:    ___________________________ 4.    The Tax Identification Number of the registered holder listed in response to item 1 above:    ___________________________   D-2 -------------------------------------------------------------------------------- Exhibit D-2 Broadwing Corporation REGISTRATION STATEMENT QUESTIONNAIRE In connection with the Registration Statement, please provide us with the following information regarding the Purchaser. 1. Please state your organization’s name exactly as it should appear in the Registration Statement: 2. Have you or your organization had any position, office or other material relationship within the past three years with the Company or its affiliates? ¨        Yes                     ¨        No If yes, please indicate the nature of any such relationship below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 3. Are you the beneficial owner of any other securities of the Company? ¨        Yes                     ¨        No If yes, please describe the nature and amount of such ownership.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   D-3 -------------------------------------------------------------------------------- 4. Have you made or are you aware of any arrangements relating to the distribution of the shares of the Company pursuant to the Registration Statement? ¨        Yes                     ¨        No If yes, please describe the nature and amount of such arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   D-4 -------------------------------------------------------------------------------- Schedule 3.1(a) List of Subsidiaries Broadwing Communications Corporation CIII Communications LLC Broadwing Communications LLC   D-1 -------------------------------------------------------------------------------- Schedule 3.1(f) Warrants, Options and Other Convertible Securities As of February 28, 2006, the Company had outstanding options to purchase 3,650,811 shares of Common Stock. As of February 28, 2006, the Company had outstanding warrants to purchase 3,457,838 shares of Common Stock. The exercise price of warrants to purchase 2,732,838 shares of Common Stock will be adjusted from $23.70 to $22.49 as a result of the issuance and sale of the Shares to the Purchasers.   D-2 -------------------------------------------------------------------------------- Schedule 4.5 Use of Proceeds None.   D-3

Exhibit 10.1 CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH "***".   A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE EXCHANGE ACT OF 1934. AMENDMENT NO. 1 TO EXCLUSIVE LICENSE AND MARKETING AGREEMENT This Amendment No. 1 (the “Amendment”) to Exclusive License and Marketing Agreement is made as of July 24, 2006 by and between Depomed, Inc., a California corporation (“Depomed”), and Esprit Pharma, Inc., a Delaware corporation (“Esprit”). BACKGROUND A.            Depomed and Esprit are parties to that certain Exclusive License and Marketing Agreement is made as of July 21, 2005 (the “Agreement”).  Capitalized terms used here without definition have the meanings given to them in the Agreement. B.            Depomed and Esprit desire to amend the Agreement as set forth herein. Accordingly, the parties agree as follows: 1.               AMENDMENTS. 1.1           SECTION 2.3(B).  SECTION 2.3(B) IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS: (B)           NOTWITHSTANDING THE FOREGOING PROVISIONS OF SECTION 2.3(A), DEPOMED WILL BE ENTITLED TO THE MINIMUM ROYALTY PAYMENTS SET FORTH ON EXHIBIT B (EACH, A “MINIMUM ANNUAL ROYALTY AMOUNT”) FOR EACH CALENDAR YEAR OF THE TERM OF THIS AGREEMENT BEGINNING ON OR AFTER JANUARY 1, 2006; PROVIDED, HOWEVER ROYALTIES PAID BY ESPRIT FOR NET SALES RECORDED IN THE FOURTH FISCAL QUARTER OF 2005 SHALL BE CREDITED AGAINST ANY MINIMUM ROYALTY AMOUNT PAYABLE IN RESPECT OF NET SALES RECORDED IN 2006; PROVIDED, HOWEVER, THAT (I) “DEPOMED NET SALES”, AS DEFINED IN THAT CERTAIN CO-PROMOTION AGREEMENT, DATED AS OF JULY 24, 2006, BETWEEN DEPOMED AND ESPRIT (THE “CO-PROMOTION AGREEMENT”), SHALL BE EXCLUDED FROM NET SALES FOR PURPOSES OF DETERMINING THE MINIMUM ANNUAL ROYALTY AMOUNT, AND (II) ANY MINIMUM ANNUAL ROYALTY AMOUNT PAYABLE PURSUANT TO THIS SECTION 2.3(B) SHALL BE PRO-RATED FOR ANY PORTION OF ANY CALENDAR YEAR OF THE TERM OF THIS AGREEMENT DURING WHICH DEPOMED FAILS TO MEET ITS SUPPLY OBLIGATIONS TO ESPRIT PURSUANT TO THE SUPPLY AGREEMENT.  THE PARTIES ACKNOWLEDGE THAT THE CREDIT AGAINST ANY MINIMUM ROYALTY AMOUNT PAYABLE IN RESPECT OF THE NET SALES RECORDED IN 2006 IS BEING MADE DUE TO THE PARTIES’ UNDERSTANDING THAT NET SALES RECORDED IN 2005 WERE PRIMARILY RELATED TO THE INITIAL STOCKING OF THE LICENSED PRODUCT IN THE TERRITORY IN CONNECTION WITH THE COMMERCIAL LAUNCH OF THE PRODUCT. 1.2           ARTICLE 3.  ARTICLE 3 OF THE AGREEMENT IS AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS (IT BEING UNDERSTOOD THAT ESPRIT HAS MADE THE LICENSE FEE PAYMENTS SET FORTH IN SECTIONS 3(A) AND 3(B) BELOW): --------------------------------------------------------------------------------   “3.           LICENSE FEES. ESPRIT SHALL MAKE THE FOLLOWING LICENSE FEE PAYMENTS TO DEPOMED: (A)                                  FIVE MILLION DOLLARS ($5,000,000) ON THE EFFECTIVE DATE; (B)                                 TWENTY-FIVE MILLION DOLLARS ($25,000,000) ON OR BEFORE THE FIFTEENTH DAY AFTER THE EFFECTIVE DATE; (C)                                  TEN MILLION DOLLARS ($10,000,000) ON OR BEFORE DECEMBER 15, 2006; AND (D)                                 TEN MILLION DOLLARS ($10,000,000) ON THE SECOND ANNIVERSARY OF THE EFFECTIVE DATE.” 1.3           SECTIONS 5.5, 5.6, 5.7 AND 5.8.  THE FOLLOWING SECTIONS 5.5, 5.6, 5.7 AND 5.8 ARE HEREBY ADDED TO THE AGREEMENT: “5.5         DETAILS.  NOTWITHSTANDING THE FOREGOING PROVISIONS OF SECTION 5.4, DURING THE PERIOD BEGINNING ON AUGUST 1, 2006 AND ENDING ON DECEMBER 31, 2006, ESPRIT SHALL CONDUCT DETAIL CALLS WITH RESPECT TO THE LICENSED PRODUCT ***. 5.6           JOINT MARKETING TEAM.  A JOINT MARKETING TEAM (“JMT”) SHALL BE ESTABLISHED BY THE PARTIES AND SHALL BE COMPRISED OF FOUR (4) MEMBERS.  THE PARTIES HAVE IDENTIFIED THEIR RESPECTIVE INITIAL APPOINTMENTS TO THE JMT.  A PARTY MAY CHANGE ANY OF ITS REPRESENTATIVES AT ANY TIME IF A NEW PERSON (WITH APPROPRIATE EXPERTISE TO REPLACE THE OUTGOING MEMBER) IS APPOINTED TO ANY OF THE FOREGOING POSITIONS BY GIVING WRITTEN NOTICE TO THE OTHER PARTY.  THE TOTAL NUMBER OF JMT MEMBERS MAY BE CHANGED BY UNANIMOUS VOTE OF THE JMT FROM TIME TO TIME AS APPROPRIATE; PROVIDED, THAT THE JMT SHALL IN ALL CASES BE COMPRISED OF AN EQUAL NUMBER OF MEMBERS FROM EACH OF ESPRIT AND DEPOMED.  ONE REPRESENTATIVE OF DEPOMED AND ONE REPRESENTATIVE OF ESPRIT SHALL SERVE AS CO-CHAIRS OF THE JMT (THE “CO-CHAIRS”).  THE MEMBERS APPOINTED TO THE JMT BY EACH PARTY SHALL BE VESTED WITH APPROPRIATE DECISION-MAKING AUTHORITY AND POWER BY SUCH PARTY. 5.7           JMT RESPONSIBILITIES.  THE JMT SHALL REVIEW AND DISCUSS ALL PROMOTIONAL AND MARKETING ACTIVITIES RELATED TO THE LICENSED PRODUCT, INCLUDING, AT A MINIMUM, ESPRIT’S COMMERCIALIZATION PLANS AND STRATEGIES RELATED TO THE LICENSED PRODUCT, WHICH SHALL INCLUDE, AMONG OTHER MATTERS, THE FOLLOWING: (A)                                  ACTUAL (DURING THE SIX-MONTH PERIOD PRIOR TO EACH JMT MEETING) AND ANTICIPATED (DURING THE SIX-MONTH PERIOD FOLLOWING EACH JMT MEETING) NUMBER OF CALLS (BY POSITION) OF ESPRIT’S SALES FORCE; (B)                                 ESPRIT’S LIST OF PHYSICIANS WHO RECEIVE CALLS (WITH ME NUMBER); 2 --------------------------------------------------------------------------------   (C)                                  LICENSED PRODUCT POSITIONING, STRATEGY AND TACTICS WITH SUPPORTING ADVERTISING AND PROMOTIONAL ACTIVITY TO BE UNDERTAKEN; (D)                                 ANY TRAINING AND/OR SAMPLING PROGRAMS TO BE CONDUCTED; (E)                                  MEDICAL EDUCATION PROGRAMS TO BE CONDUCTED; (F)                                    PLANNED PUBLIC RELATIONS ACTIVITIES; (G)                                 LICENSED PRODUCT SAMPLING PLANS AND STRATEGIES; (H)                                 PRICING AND CONTRACTING STRATEGIES TO THE EXTENT PERMITTED BY LAW; (I)                                     SALES, MARKETING AND EDUCATIONAL MATERIALS; (J)                                     MANAGED HEALTH CARE STRATEGIES AND TACTICS; (K)                                  ADVERTISING PLACEMENT AND MARKET RESPONSES; (L)                                     SALES INCENTIVE COMPENSATION FOR ESPRIT’S SALES FORCE; (M)                               CUSTOMER TARGETS; (N)                                 POST-MARKETING CLINICAL STUDIES; AND (O)                                 BUDGETING FOR COSTS AND EXPENSES ASSOCIATED WITH LICENSED PRODUCT COMMERCIALIZATION. 5.8           MEETINGS OF THE JMT.  MEETINGS OF THE JMT MAY BE CALLED BY EITHER CO-CHAIR FROM TIME TO TIME ON AT LEAST FIVE (5) BUSINESS DAYS’ NOTICE; PROVIDED, HOWEVER, THAT MEETINGS OF THE JMT SHALL BE HELD ON AT LEAST A MONTHLY BASIS, ON THE FIRST BUSINESS DAY OF EACH MONTH THROUGH 2006 AND THEN QUARTERLY THEREAFTER, UNLESS THE PARTIES OTHERWISE AGREE IN WRITING.  IF POSSIBLE, THE MEETINGS SHALL BE HELD IN PERSON OR WHERE APPROPRIATE, BY VIDEO OR TELEPHONE CONFERENCE.  UNLESS OTHERWISE AGREED, THE LOCATION OF ANY IN-PERSON MEETINGS OF THE JMT SHALL ALTERNATE BETWEEN THE PRINCIPAL CORPORATE OFFICES OF THE PARTIES.  THE PARTIES SHALL DETERMINE THE FORM OF THE MEETING.  EITHER PARTY MAY INVITE UP TO FIVE (5) ADDITIONAL PARTICIPANTS TO ANY MEETING OF THE JMT.  EACH PARTY SHALL BEAR ITS OWN TRAVEL AND RELATED COSTS INCURRED IN CONNECTION WITH PARTICIPATION IN THE JMT AND THE JMT.” 3 --------------------------------------------------------------------------------   1.4           SECTION 9.10.  THE FOLLOWING SECTION 9.10 IS HEREBY ADDED TO THE AGREEMENT: “9.10       CLINICAL STUDIES.  NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY, DEPOMED SHALL BE ENTITLED TO CONDUCT CLINICAL STUDIES OR TRIALS UTILIZING THE LICENSED PRODUCT (“CLINICAL STUDIES”) AT ITS SOLE EXPENSE (A) FOR THE PURPOSE OF SUPPORTING REGULATORY APPROVAL OF ONE OR MORE ADDITIONAL INDICATIONS FOR THE LICENSED PRODUCT, OR (B) THAT OTHERWISE COULD ENHANCE OR SUPPORT THE MARKETING OF THE LICENSED PRODUCT.  THE JMT SHALL REVIEW AND APPROVE THE DESIGN OF, AND ANY PROTOCOL RELATED TO AND THE DISSEMINATION OF, ANY CLINICAL STUDY CONDUCTED BY OR ON BEHALF OF DEPOMED.  ESPRIT HEREBY GRANTS A NON-EXCLUSIVE LICENSE UNDER THE PATENT RIGHTS SOLELY FOR THE PURPOSE OF CONDUCTING, OR HAVING CONDUCTED, CLINICAL STUDIES.  ALL REGULATORY DATA GENERATED IN ANY SUCH CLINICAL STUDY CONDUCTED BY OR ON BEHALF OF DEPOMED SHALL BE OWNED BY DEPOMED. HOWEVER DEPOMED SHALL ALLOW ESPRIT, AT NO ADDITIONAL COST, TO UTILIZE SUCH DATA IN CONNECTION WITH ITS PROMOTIONAL ACTIVITIES. DEPOMED SHALL BE PERMITTED TO PUBLISH THE RESULTS OF ANY SUCH CLINICAL STUDY CONDUCTED BY OR ON BEHALF OF DEPOMED, AFTER AFFORDING ESPRIT AT LEAST TWENTY (20) DAYS TO REVIEW AND COMMENT ON ANY SUCH PUBLICATION, AND CONSIDERING IN GOOD FAITH ANY COMMENTS PROVIDED BY ESPRIT.  IF REQUESTED BY DEPOMED, ESPRIT SHALL COOPERATE WITH DEPOMED IN FACILITATING ANY NECESSARY FILINGS OR APPROVALS WITH THE FDA.” 1.5           SECTION 20.2.  SECTION 20.2 IS HEREBY AMENDED AND RESTATED TO READ IN ITS ENTIRETY AS FOLLOWS: “20.2  ENTIRE AGREEMENT.  THIS AGREEMENT, THE SUPPLY AGREEMENT AND THE CO-PROMOTION AGREEMENT REPRESENT THE ENTIRE AGREEMENT BETWEEN THE PARTIES CONCERNING THE SUBJECT MATTER HEREIN (EXCEPT AS SPECIFICALLY NOTED HEREIN) AND SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS ORAL OR WRITTEN AGREEMENTS OF THE PARTIES; EXCEPT THAT INFORMATION DISCLOSED PURSUANT TO THE CONFIDENTIALITY AGREEMENT BETWEEN THE PARTIES DATED JUNE 22, 2005 SHALL CONTINUE TO BE SUBJECT TO THE TERMS OF THAT AGREEMENT UNTIL THE EFFECTIVE DATE OF THIS AGREEMENT, FROM WHICH DATE IT WILL BE TREATED AS PROPRIETARY INFORMATION PURSUANT TO ARTICLE 8 OF THIS AGREEMENT.  THIS AGREEMENT MAY BE MODIFIED, AMENDED OR CHANGED ONLY BY A WRITTEN INSTRUMENT SIGNED AND DELIVERED BY THE PARTIES, WITH CLEAR INTENT TO MODIFY, AMEND OR CHANGE THE PROVISIONS HEREOF.” 2.               MISCELLANEOUS. 2.1           FULL FORCE AND EFFECT.  EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT WILL CONTINUE IN FULL FORCE AND EFFECT IN ACCORDANCE WITH THE PROVISIONS THEREOF ON THE DATE HEREOF. 2.2           NO WAIVER.  DEPOMED’S AGREEMENT TO ENTER INTO THIS AMENDMENT DOES NOT CONSTITUTE A WAIVER BY DEPOMED OF ANY DEFAULT OR BREACH OR SUCCESSION OF DEFAULTS OR BREACHES BY ESPRIT UNDER THE LICENSE AGREEMENT, AND SHALL NOT DEPRIVE DEPOMED OF ANY RIGHT UNDER THE LICENSE AGREEMENT OR CONTROLLING LAW IN RESPECT OF ANY BREACH OR DEFAULT THEREOF BY ESPRIT. 4 --------------------------------------------------------------------------------   2.3           COUNTERPARTS.  THIS AMENDMENT MAY BE SIGNED IN ONE OR MORE COUNTERPARTS, ALL OF WHICH WILL BE CONSIDERED ONE AND THE SAME INSTRUMENT. 2.4           Consent to Grant of Security Interest.  Depomed does hereby consent to the granting of a security interest in this Amendment in favor of any Fortress Credit Corp. pursuant to that certain Loan Agreement, dated as of March 9, 2006, among Esprit, Fortress Credit Corp. and the lenders identified therein.   Depomed agrees to execute such other documentation may be reasonably requested by Fortress Credit Corp. to evidence such consent. 5 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, Depomed and Esprit have caused this Amendment to be duly executed as of the day and year first above written. DEPOMED, INC.: ESPRIT PHARMA, INC.:             By: /s/ Carl A. Pelzel   By: /s/ Steven M. Bosacki     Name: Carl A. Pelzel Name: Steven M. Bosacki Title: Executive Vice President & COO Title: VP, General Counsel & Assistant Secretary   6 --------------------------------------------------------------------------------

  Exhibit 10.11 This Network Lease Agreement has been filed to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Tennessee Valley Authority. The representations and warranties of the parties in this Network Lease Agreement were made to, and solely for the benefit of, the other parties to this Network Lease Agreement. The assertions embodied in the representations and warranties may be qualified by information included in schedules, exhibits or other materials exchanged by the parties that may modify or create exceptions to the representations and warranties. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of facts at the time they were made or otherwise.   --------------------------------------------------------------------------------   Final NETWORK LEASE AGREEMENT (A1) Dated as of September 26, 2003 between NVG NETWORK I STATUTORY TRUST, as Owner Lessor and Tennessee Valley Authority, as Lessee   Lease of Control, Monitoring and Data Analysis Network CERTAIN OF THE RIGHT, TITLE AND INTEREST OF THE OWNER LESSOR IN AND TO THIS NETWORK LEASE AND THE RENT DUE AND TO BECOME DUE HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL SECURITY TO, AND ARE SUBJECT TO, A SECURITY INTEREST IN FAVOR OF, WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS LEASE INDENTURE TRUSTEE UNDER AN INDENTURE OF TRUST AND SECURITY AGREEMENT (Al), DATED AS OF SEPTEMBER 26, 2003, BETWEEN SAID LEASE INDENTURE TRUSTEE, AS SECURED PARTY, AND THE OWNER LESSOR, AS DEBTOR. SEE SECTION 22 HEREOF FOR INFORMATION CONCERNING THE RIGHTS OF THE ORIGINAL HOLDER AND THE HOLDERS OF THE VARIOUS COUNTERPARTS HEREOF.   --------------------------------------------------------------------------------   TABLE OF CONTENTS                 Page SECTION 1. DEFINITIONS     1   SECTION 2. LEASE OF THE UNDIVIDED INTEREST; ASSIGNMENT OF SOFTWARE RIGHTS     1   SECTION 3. NETWORK LEASE TERM AND RENT     2   Section 3.1 Network Lease Term     2   Section 3.2 Rent     2   Section 3.3 Supplemental Lease Rent     3   Section 3.4 Adjustment of Lease Schedules     3   Section 3.5 Manner of Payments     5   SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT     5   Section 4.1 Disclaimer of Warranties     5   Section 4.2 Quiet Enjoyment     7   SECTION 5. RETURN OF NETWORK     7   Section 5.1 Return     7   Section 5.2 Condition Upon Return     8   SECTION 6. LIENS     8   SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS     9   Section 7.1 Maintenance     9   Section 7.2 Replacement and Removal of Components     9   SECTION 8. MODIFICATIONS     10   Section 8.1 Required Modifications     10   Section 8.2 Optional Modifications     10   Section 8.3 Title to Modifications     10   Section 8.4 Report of Modifications     11   SECTION 9. NET LEASE     11   SECTION 10. EVENTS OF LOSS     12   Section 10.1 Occurrence of Events of Loss     12   Section 10.2 Payment of Termination Value; Termination of Basic Lease Rent     13   Section 10.3 Repair or Replace     14   -i- --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                 Page Section 10.4 Application of Payments Not Relating to an Event of Loss     16   SECTION 11. INSURANCE     17   Section 11.1 Insurance by Owner Lessor     17   Section 11.2 Insurance by the Lessee     17   SECTION 12. INSPECTION     17   SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS     18   Section 13.1 Election to Terminate     18   Section 13.2 Payments Upon Termination     19   Section 13.3 Procedure for Exercise of Termination Option     19   Section 13.4 Assumption of the Lessor Note     20   SECTION 14. TERMINATION FOR OBSOLESCENCE     20   Section 14.1 Termination     20   Section 14.2 Solicitation of Offers     21   Section 14.3 Right of Owner Lessor to Retain the Owner Lessor’s Interest     21   Section 14.4 Procedure for Exercise of Termination Option     22   SECTION 14A. PARTIAL TERMINATION IN CONSEQUENCE OF SALES OF TRANSMISSION ASSETS     23   Section 14A.1 Partial Termination     23   Section 14A.2 Appraisal     24   Section 14A.3 Substituted Components; Substituted Non-Network Equipment     24   Section 14A.4 Partial Termination Payment     26   Section 14A.5 Conveyance of Terminated Portion     27   SECTION 15. EARLY PURCHASE OPTION     27   Section 15.1 Election of Early Purchase     27   Section 15.2 Procedure for Exercise of Early Purchase Option     27   SECTION 16. PURCHASE OPTION     28   Section 16.1 Election of Purchase Option     28   Section 16.2 Procedure for Exercise of Purchase Option     29   SECTION 17. EVENTS OF DEFAULT     29   SECTION 18. REMEDIES     31   -ii- --------------------------------------------------------------------------------   TABLE OF CONTENTS (continued)                 Page Section 18.1 Remedies for Lease Event of Default     31   Section 18.2 Cumulative Remedies     34   Section 18.3 No Delay or Omission to be Construed as Waiver     34   Section 18.4 Rent Trueup     34   SECTION 19. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS     35   SECTION 20. LESSEE’S RIGHT TO SUBLEASE; ASSIGNMENT     35   Section 20.1 Right to Sublease     35   Section 20.2 Right to Assign     35   Section 20.3 Right to Assign or Sublease to Regional Transmission Organizations     36   Section 20.4 Operation     36   SECTION 21. OWNER LESSOR’S RIGHT TO PERFORM     37   SECTION 22. SECURITY FOR OWNER LESSOR’S OBLIGATIONS TO THE LEASE INDENTURE TRUSTEE     37   SECTION 23. WAIVER OF RIGHT TO PARTITION     37   SECTION 24. MISCELLANEOUS     38   Section 24.1 Amendments and Waivers     38   Section 24.2 Notices     38   Section 24.3 Survival     39   Section 24.4 Successors and Assigns     39   Section 24.5 “True Lease”     40   Section 24.6 Business Day     40   Section 24.7 Governing Law     40   Section 24.8 Severability     40   Section 24.9 Counterparts     40   Section 24.10 Headings and Table of Contents     40   Section 24.11 Further Assurances     40   Section 24.12 Effectiveness     40   Section 24.13 Owner Lessor Covenant     40   Section 24.14 Limitation of Liability     41   -iii- --------------------------------------------------------------------------------   Network Lease Agreement (A1)      This NETWORK LEASE AGREEMENT (A1), dated as of September 26, 2003 (this “Network Lease”), between NVG NETWORK I STATUTORY TRUST, a Delaware statutory trust (the “Owner Lessor”), and TENNESSEE VALLEY AUTHORITY, a wholly owned corporate agency and instrumentality of the United States (the “Lessee” or “TVA”). WITNESSETH:      WHEREAS, the Lessee (i) holds title to the Network (other than the Software Rights) and (ii) owns, or has a license to use, the Software Rights;      WHEREAS, pursuant to the Head Lease, the Lessee has leased an undivided interest equal to the Owner Lessor’s Percentage in the Network (other than the Software Rights) to the Owner Lessor (which undivided interest, other than the Software Rights, is referred to herein as the “Undivided Interest”);      WHEREAS, pursuant to the Head Lease, the Lessee has assigned the Software Licenses and/or granted a license to use the Software Rights owned by the Lessee, to the Owner Lessor for the Head Lease Term, and the Owner Lessor has accepted such assignment of, or grant of, such license to use, such Software Rights from the Lessee; and      WHEREAS, pursuant to this Network Lease, the Owner Lessor will lease the Undivided Interest to the Lessee for the term provided herein and will assign its rights in the Software Rights to the Lessee for the term provided herein.      NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS      Unless the context hereof otherwise requires, capitalized terms used in this Network Lease, including those in the recitals, and not otherwise defined herein shall have the respective meanings set forth in Appendix A hereto. The general provisions of such Appendix A shall apply to the terms used in this Network Lease and specifically defined herein. SECTION 2. LEASE OF THE UNDIVIDED INTEREST; ASSIGNMENT OF SOFTWARE RIGHTS      The Owner Lessor hereby leases the Undivided Interest and assigns its interest in the Software Rights, upon the terms and conditions set forth herein, to the Lessee for the Network Lease Term, and the Lessee hereby leases the Undivided Interest and accepts the assignment of the Software Rights, upon the terms and conditions set forth herein, from the Owner Lessor. The   --------------------------------------------------------------------------------   Lessee and the Owner Lessor understand and agree that (i) this lease of the Undivided Interest and assignment of the Software Rights is subject and subordinate to the interest of the Head Lessee under the Head Lease, (ii) legal title to the Undivided Interest remains vested in the Head Lessor, and (iii) ownership of the software constituting the Software Rights is vested in (a) the vendors of the software in the case of software that is the subject of the Software Licenses, or (b) the Lessee in the case of software owned by the Lessee. The Undivided Interest shall also include an undivided interest equal to the applicable Owner Lessor’s Percentage in (x) all Modifications which are incorporated in the Network and which pursuant to Section 8.3 hereof become subject to this Network Lease, (y) all Replacement Components which become part of the Network pursuant to Section 7.2 hereof and (z) all Substituted Components and Substituted Non-Network Equipment that become subject to the Head Lease and this Network Lease pursuant to Section 14A.3 hereof. The Undivided Interest and Software Rights shall be subject to the terms of this Network Lease from the date on which this Network Lease is executed and delivered. SECTION 3. NETWORK LEASE TERM AND RENT      Section 3.1 Network Lease Term. The term of this Network Lease (the “Network Lease Term”) shall commence on the Closing Date and shall terminate at 11:59 p.m. (New York City time) on September 26, 2027 subject to earlier termination in whole or in part pursuant to Section 10, 13, 14, 14A, 15, or 18 hereof.      Section 3.2 Rent. (a) The Lessee hereby agrees to pay to the Owner Lessor basic lease rent payable with respect to the Network Lease Term (“Basic Lease Rent”) for the lease of the Undivided Interest and assignment of the Software Rights as follows: each payment of Basic Lease Rent shall be payable on each Rent Payment Date in the amount equal to the product of the Owner Lessor’s Cost and the percentage set forth opposite such Rent Payment Date on Schedule 1A hereto, subject to adjustment in accordance with Section 3.4 hereof. In the event this Network Lease shall have been terminated in part pursuant to Section 14A with respect to the Termination Percentage of the Network, Basic Lease Rent payable on any Rent Payment Date thereafter shall be reduced by an amount equal to the product of the Termination Percentage and the amount otherwise determined pursuant to the preceding sentence. All Basic Lease Rent to be paid pursuant to this Section 3.2(a) shall be payable in the manner set forth in Section 3.5.           (b) Basic Lease Rent shall be allocated to each full or partial calendar year during the Network Lease Term (each, a “Rental Period”) as set forth on Schedule 1B hereto, and within each Rental Period, Basic Lease Rent shall be allocated on a level daily basis. The Owner Lessor and the Lessee agree that such allocation is intended to constitute an allocation of fixed rent within the meaning of Treasury Regulation §1.467-1 (c)(2)(ii)(A) to each Rental Period. The Basic Lease Rent payable on each Rent Payment Date pursuant to Section 3.2(a) shall be in satisfaction of the Lessee’s obligation to pay the Basic Lease Rent allocated to the related Rental Period, as set forth on Schedule 1C hereto.           (c) Basic Lease Rent payable on any Termination Date and the Early Purchase Price, the Purchase Option Price and the Termination Values have been determined on a net basis, by taking into account any Underpayment of Basic Lease Rent or Overpayment of 2 --------------------------------------------------------------------------------   Basic Lease Rent as of the Early Purchase Date, the date of the exercise of the Purchase Option or Termination Date. Accordingly, on any such date, the Lessee’s obligation to pay to the Owner Lessor any Underpayment of Basic Lease Rent and the Owner Lessor’s obligation to pay to the Lessee any Overpayment of Basic Lease Rent shall be satisfied in full by the payment by the Lessee to the Owner Lessor of the Early Purchase Price, Purchase Option Price or Termination Value due and payable on such date.      Section 3.3 Supplemental Lease Rent. The Lessee also agrees to pay to the Owner Lessor, or to any other Person entitled thereto as expressly provided herein or in any other Operative Document, as appropriate, any and all Supplemental Lease Rent, promptly as the same shall become due and owing, or where no due date is specified, promptly after demand by the Person entitled thereto, and in the event of any failure on the part of the Lessee to pay any Supplemental Lease Rent, the Owner Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise for the failure to pay Basic Lease Rent. The Lessee will also pay as Supplemental Lease Rent, to the extent permitted by Applicable Law, an amount equal to interest at the Overdue Rate on any part of any payment of Basic Lease Rent not paid when due for any period for which the same shall be overdue and on any Supplemental Lease Rent not paid when due (whether on demand or otherwise) for the period from such due date until the same shall be paid. All Supplemental Lease Rent to be paid pursuant to this Section 3.3 shall be payable in the manner set forth in Section 3.5.      Section 3.4 Adjustment of Lease Schedules.           (a) The Lessee and the Owner Lessor agree that Basic Lease Rent shall be adjusted after the Closing Date, either upwards or downwards, to reflect the principal amount, amortization and interest rate on any Additional Lessor Notes issued pursuant to Section 2.12 of the Lease Indenture in connection with a refinancing of the Lessor Note pursuant to Section 11.1 or 11.2 of the Participation Agreement, provided that in connection with an adjustment relating to a refinancing pursuant to Section 11.2, the adjustment shall reflect only the interest rate on such Additional Lessor Notes. To the extent not inconsistent with the prior sentence, any adjustments pursuant to this Section 3.4(a) shall be calculated (i) first, to preserve the Owner Participant’s Net Economic Return through the end of the Network Lease Term; (ii) second, consistent with (i), to minimize the present value to the Lessee of the Basic Lease Rent; and (iii) third, to be consistent with any uneven rent safe harbor provided under Section 467 of the Code and the Treasury Regulations promulgated thereunder, but only to the extent that Basic Lease Rent prior to such adjustment was so consistent (other than, with respect to the limitation on the criterion established by this clause (iii), if there shall have occurred a Tax Law Change), thereby not increasing the possibility, if any, of the Network Lease being determined to be a “disqualified leaseback or long term agreement” within the meaning of Section 467 of the Code and the Treasury Regulations thereunder. Adjustments will be made using the same method of computation originally used in the calculation of the Basic Lease Rent and the Pricing Assumptions as set forth on Schedule 3 hereto (other than those that have changed as the result of the event giving rise to the adjustment). The adjustments contemplated by this Section 3.4(a) will result in corresponding adjustments to the Termination Values. Any adjustment pursuant to this Section 3.4(a) shall be made subject to and in compliance with Sections 3.4(c) and (d) hereof. 3 --------------------------------------------------------------------------------             (b) The Lessee and the Owner Lessor agree that Basic Lease Rent, Termination Values and the Early Purchase Price shall each be reduced by an amount equal to the product of the Termination Percentage and each of such amounts, respectively, to reflect a partial termination of this Network Lease pursuant to Section 14A.           (c) Anything herein or in any other Operative Document to the contrary notwithstanding, Basic Lease Rent payable on any Rent Payment Date, whether or not adjusted in accordance with this Section 3.4, shall, in the aggregate, be in an amount at least sufficient to pay in full scheduled principal and interest payments on the Lessor Note on such Rent Payment Date. Anything herein or in any other Operative Document to the contrary notwithstanding, Termination Values and the Early Purchase Price under this Network Lease, whether or not adjusted in accordance with this Section 3.4, shall in the aggregate, together with all other Rent due and owing on such date, exclusive of any portion thereof that is an Excepted Payment, be in an amount at least sufficient to pay in full the principal of, premium, if any, and accrued interest on the Lessor Note payable on such date (excluding, however, principal and interest payable on a Lease Indenture Event of Default not caused by a Lease Event of Default).           (d) Any adjustment pursuant to this Section 3.4 shall initially be computed by the Owner Participant, subject to the verification procedure described in this Section 3.4(d). Once computed, the results of such computation shall promptly be delivered by the Owner Participant to the Lessee. Within 20 days after the receipt of the results of any such adjustment, the Lessee may request that a lease advisory firm or nationally recognized firm of independent public accountants jointly selected by the Owner Participant and the Lessee (the “Verifier”) verify, after consultation with the Owner Participant and the Lessee, the accuracy of such adjustment in accordance with this Section 3.4. The Owner Participant and the Lessee hereby agree, subject to the execution, by the Verifier of an appropriate confidentiality agreement, to provide the Verifier with all information and materials (other than income tax returns and books) as shall be necessary in connection therewith. If the Verifier confirms that such adjustment is in accordance with this Section 3.4, it shall so certify to the Lessee, the Owner Lessor and the Owner Participant and such certification shall be final, binding and conclusive on the Lessee, the Owner Participant and the Owner Lessor. If the Verifier concludes that such adjustment is not in accordance with this Section 3.4, and the adjustments to Basic Lease Rent or Termination Value calculated by the Verifier are different from those calculated by the Owner Participant, then it shall so certify to the Lessee, the Owner Lessor and the Owner Participant and the Verifier’s calculation shall be final, binding and conclusive on the Lessee, the Owner Lessor and the Owner Participant. If the Lessee does not request verification of any adjustment within the period specified above, the computation provided by the Owner Participant shall be final, binding and conclusive on the Lessee, the Owner Lessor and the Owner Participant. The final determination of any adjustment hereunder shall be set forth in an amendment to this Network Lease, executed and delivered by the Owner Lessor and the Lessee and consented to by the Owner Participant; provided, however, that any omission to execute and deliver such amendment shall not affect the validity and effectiveness of any such adjustment. The reasonable fees, costs and expenses of the Verifier in verifying an adjustment pursuant to this Section 3.4 shall be paid by the Lessee; provided, however, that, in the event that such Verifier determines that the implicit financing rate of Basic Lease Rent to be made under this Network Lease as calculated by the Owner Participant is greater than the implicit financing rate of the correct Basic Lease Rent as certified by the Verifier by more than two basis points, then such expenses of the Verifier 4 --------------------------------------------------------------------------------   shall be paid by the Owner Participant. Notwithstanding anything herein to the contrary, the sole responsibility of the Verifier shall be to verify the calculations hereunder and matters of interpretation of this Network Lease or any other Operative Document shall not be within the scope of the Verifier’s responsibilities.      Section 3.5 Manner of Payments. All Rent (whether Basic Lease Rent or Supplemental Lease Rent) shall be paid by the Lessee in lawful currency of the United States of America in immediately available funds to the recipient not later than 11:00 a.m. (New York City time) on the date due. All Rent payable to the Owner Lessor (other than Excepted Payments) shall be paid by the Lessee to the Owner Lessor by payment to the Owner Lessor’s Account, or to such other place as the Owner Lessor shall notify the Lessee in writing; provided, however, that so long as the Lien of the Lease Indenture has not been discharged, the Owner Lessor hereby irrevocably directs (it being agreed and understood that such direction shall be deemed to have been revoked after the Lien of the Lease Indenture shall have been fully discharged in accordance with its terms), and the Lessee agrees, that all payments of Rent (other than Excepted Payments) payable to the Owner Lessor shall be paid by wire transfer directly to the Lease Indenture Trustee’s Account or to such other place as the Lease Indenture Trustee shall notify the Lessee in writing pursuant to the Lease Indenture. Payments constituting Excepted Payments shall be made to the Person entitled thereto at the address for such Person set forth in the Participation Agreement, or to such other place as such Person shall notify the Lessee in writing. SECTION 4. DISCLAIMER OF WARRANTIES; RIGHT OF QUIET ENJOYMENT      Section 4.1 Disclaimer of Warranties.           (a) Without waiving any claim the Lessee may have against any manufacturer, vendor or contractor, THE LESSEE ACKNOWLEDGES AND AGREES SOLELY FOR THE BENEFIT OF THE OWNER LESSOR AND THE OWNER PARTICIPANT THAT (i) THE NETWORK AND EACH COMPONENT THEREOF IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE ACCEPTABLE TO THE LESSEE, (ii) THE LESSEE IS SATISFIED THAT THE NETWORK AND EACH COMPONENT THEREOF IS SUITABLE FOR THEIR RESPECTIVE PURPOSES, (iii) NONE OF THE OWNER LESSOR, THE OWNER PARTICIPANT OR THE LEASE INDENTURE TRUSTEE IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (iv) THE UNDIVIDED INTEREST IS LEASED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE NETWORK LEASE TERM SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED, INCLUDING (1) ZONING REGULATIONS, (2) ENVIRONMENTAL LAWS OR (3) BUILDING RESTRICTIONS, AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS NETWORK LEASE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE OWNER LESSOR, THE OWNER PARTICIPANT OR THE LEASE INDENTURE TRUSTEE, (v) THE SOFTWARE RIGHTS ARE ASSIGNED HEREUNDER TO THE EXTENT PROVIDED HEREBY FOR THE NETWORK LEASE TERM SPECIFIED HEREIN SUBJECT TO ALL APPLICABLE LAWS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (vi) THE OWNER LESSOR LEASES FOR THE NETWORK LEASE TERM SPECIFIED HEREIN AND THE LESSEE 5 --------------------------------------------------------------------------------   TAKES THE UNDIVIDED INTEREST AND THE SOFTWARE RIGHTS UNDER THIS NETWORK LEASE “AS-IS”, “WHERE-IS” AND “WITH ALL FAULTS”, AND THE LESSEE ACKNOWLEDGES THAT NONE OF THE OWNER LESSOR, THE OWNER PARTICIPANT OR THE LEASE INDENTURE TRUSTEE MAKES NOR SHALL BE DEEMED TO HAVE MADE, AND EACH EXPRESSLY DISCLAIMS, ANY AND ALL RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION, MERCHANTABILITY OF THE NETWORK (OR ANY RELATED SOFTWARE) OR AS TO THE TITLE OF THE UNDIVIDED INTEREST OR THE SOFTWARE RIGHTS, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE NETWORK (OR ANY RELATED SOFTWARE) OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO, except that the Owner Lessor represents and warrants that on the Closing Date, the Undivided Interest and the Software Rights will be free of Owner Lessor’s Liens. It is agreed that all such risks, as between the Owner Lessor, the Owner Participant and the Lease Indenture Trustee on the one hand and the Lessee on the other hand are to be borne by the Lessee with respect to acts, occurrences or omissions prior to or during the Network Lease Term. None of the Owner Lessor, the Owner Participant or the Lease Indenture Trustee shall have any responsibility or liability to the Lessee or any other Person with respect to any of the following: (x) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Network (or any related software) or any Component or by any inadequacy thereof or deficiency or defect therein or by any other circumstances in connection therewith; (y) the use, operation or performance of the Network (or any related software) or any Component thereof or any risks relating thereto; or (z) the delivery, operation, servicing, maintenance, repair, improvement, replacement or decommissioning of the Network (or any related software) or any Component thereof. The provisions of this paragraph (a) of this Section 4.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties of the Owner Lessor, the Owner Participant or the Lease Indenture Trustee, express or implied, with respect to the Undivided Interest, the Network (or any related software), the Software Rights, or any Components thereof that may arise pursuant to any Applicable Law now or hereafter in effect, or otherwise.       (b) During the Network Lease Term, so long as no Lease Event of Default shall have occurred and be continuing, the Owner Lessor hereby appoints irrevocably and constitutes the Lessee its agent and attorney-in-fact, coupled with an interest, to assert and enforce, from time to time, in the name and for the account of the Owner Lessor and the Lessee, as their interests may appear, but in all cases at the sole cost and expense of the Lessee, whatever claims and rights the Owner Lessor may have in respect of the Undivided Interest, the Network, the Software Rights, or any Component thereof, against any manufacturer, vendor or contractor, or under any express or implied warranties relating to the Undivided Interest, the Network, the Software Rights, or any Component thereof. 6 --------------------------------------------------------------------------------        Section 4.2 Quiet Enjoyment. The Owner Lessor expressly, as to its own actions only, agrees that, notwithstanding any provision of any other Operative Document, so long as no Lease Event of Default shall have occurred and be continuing, it shall not interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Lessee of the Network. SECTION 5. RETURN OF NETWORK      Section 5.1 Return. Upon the Expiration Date or early termination of this Network Lease pursuant to Section 18, the Lessee, at its own expense, shall return the Undivided Interest and Software Rights (together with an undivided interest equal to the Owner Lessor’s Percentage in all Modifications to the Network, all rights in software that shall have become subject to the Head Lease pursuant to Section 10 of the Head Lease and Section 8.3 of this Network Lease, and an undivided interest equal to the Owner Lessor’s Percentage in all Substituted Components and Substituted Non-Network Equipment that shall have become subject to the Head Lease and this Network Lease pursuant to Section 10 of the Head Lease and Section 14A of this Network Lease) to the Owner Lessor or any permitted transferee or assignee of the Owner Lessor. Promptly following the Expiration Date or early termination of this Network Lease (or, if later, the last “Expiration Date” or date of termination of any Other Network Lease), the Lessee shall effect delivery of the Undivided Interest and Software Rights at its own cost and expense by assembling and preparing the Network (including any related software) and each Component thereof for shipment to a site or sites designated by the Owner Lessor in order to permit the efficient reinstallation of the Network at such site or sites. The Lessee further agrees to pay any and all installation costs necessary to install the Network (including any related software) at such site or sites in conformity with Prudent Industry Practice. Unless the Measurement and Analysis System shall no longer be operating as part of the Network as a consequence of a Partial Termination under Section 14A, or as otherwise agreed between the Owner Participant and the Lessee, the Lessee shall cause the Network to be returned and installed pursuant to this Section 5.1 as a single integrated “system” which shall include the presence of an automated data-communication, link established between the Energy Management, Protection and Billing System and the Measurement and Analysis System, which link will allow for the automatic exchange and retrieval of data between the two systems. In addition, the Lessee shall execute and deliver to the Owner Lessor or such transferee or assignee an instrument or instruments in form and substance reasonably acceptable to the Owner Lessor evidencing surrender by the Lessee of the Lessee’s right to the Undivided Interest and Software Rights under this Network Lease and to the possession thereof. In connection with such return, the Lessee shall (a) assign, to the extent permitted by Applicable Law, an undivided interest equal to the Owner Lessor’s Percentage in, and shall cooperate with all reasonable requests of the Owner Participant, the Owner Lessor or a permitted transferee or assignee of either of such parties For purposes of obtaining, or enabling the Owner Participant, the Owner Lessor or such transferees or assignees to obtain, any and all licenses, permits, approvals and consents of any Governmental Entities that are or will be required to be obtained by the Owner Participant, the Owner Lessor or such transferee or assignee in connection with the use, operation or maintenance of the Network on or after such return in compliance with Applicable Law; and (b) provide the Owner Lessor or a permitted transferee or assignee of the Owner Lessor, subject to any equipment manufacturer-imposed conditions of confidentiality, originals or copies of all documents, instruments, plans, maps, specifications, manuals, drawings and other documentary materials relating to the installation, maintenance, operation, construction, design, modification and repair of the 7 --------------------------------------------------------------------------------   Network (including any related software) or any portion thereof, as shall be in the Lessee’s possession and shall be reasonably appropriate or necessary for the ownership, possession, operation or maintenance of the Network (including any related software).      Section 5.2 Condition Upon Return. At the time of a return of the Undivided Interest and the Software Rights by the Lessee to the Owner Lessor or any permitted transferee or assignee of the Owner Lessor pursuant to Section 5.1, the following conditions shall be complied with, all at the Lessee’s sole cost and expense:           (a) the Network and any related software (including all Modifications and Substituted Components (and any related software), and all Substituted Non-Network Equipment (and any related software)) will be in at least as good condition as if it had been maintained, repaired and operated during the Network Lease Term in compliance with the provisions of this Network Lease, ordinary wear and tear and degradation excepted, and there shall be no deferred maintenance in respect of the Network (or any related software);           (b) the Undivided Interest and the Software Rights shall be free and clear of all Liens other than Permitted Post Network Lease Term Liens;           (c) if the Network (including any related software) has been reconfigured or upgraded after the Closing Date in compliance with this Network Lease, the Network (including any related software) shall be returned in its reconfigured or upgraded form;           (d) the Network shall have at least the capability and functional ability to perform as an integrated system substantially all of the Network Functions (normal wear and tear and degradation excepted);           (e) no Component shall be a temporary Component and any Replacement Component shall comply with Prudent Industry Practice; and           (f) rights in respect of any software necessary for the efficient operation of the Network at the standard required by the other provisions of this Section 5.2 will, to the extent requiring the consent of any vendor or other Person, be subject to a consent of such vendor or other Person in a form substantially similar to the Software License Consents or in a form reasonably acceptable to the Owner Lessor. SECTION 6. LIENS      The Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to the Network, the Undivided Interest, the Software Rights or any interest therein or in, to or on its interest in this Network Lease or its interest in any other Operative Document, except Permitted Liens, and the Lessee shall promptly notify the Owner Lessor of the imposition of any such Lien of which the Lessee is aware and shall promptly, at its own expense, take such action as may be necessary to fully discharge or release any such Lien. 8 --------------------------------------------------------------------------------   SECTION 7. MAINTENANCE; REPLACEMENTS OF COMPONENTS      Section 7.1 Maintenance. The Lessee, at its own cost and expense, will (a) cause the Network (including any related software) to be maintained in good condition, repair and working order, ordinary wear and tear and degradation excepted, and will operate the Network (including any related software) in compliance with all Applicable Laws of any Governmental Entity having jurisdiction, and (b) cause to be made all necessary repairs, renewals and replacements thereof, (i) as may be necessary so that the business carried on in connection with the Network may be properly and advantageously conducted at all times, (ii) in accordance with Prudent Industry Practice, (iii) as may be necessary to preserve the functional capability of the Network (including any related software) to perform as an integrated “system” the Network Functions, and (iv) as may be necessary to cause the Network to be operated in a manner which does not discriminate against the Network when compared to any other similar equipment owned or leased by the Lessee.      Section 7.2 Replacement and Removal of Components. In the ordinary course of maintenance, service, repair or testing, the Lessee, at its own cost and expense, may remove or cause or permit to be removed from the Network any Component (including any related software); provided, however, that the Lessee shall (a) cause such Component to be replaced by a replacement Component which shall be free and clear of all Liens (except Permitted Liens) and in as good operating condition as the Component replaced, assuming that the Component replaced, was maintained in accordance with this Network Lease (each such replacement Component being herein referred to as a “Replacement Component”) and (b) cause such replacement to be performed in a manner which does not diminish the current or residual value of the Network (taking into account any related software) or the remaining useful life or utility of the Network (taking into account any related software) by more than a de minimis amount or cause the Network or any related software to become “limited-use” property within the meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 and 2001-29, 2001-19 I.R.B. 1160, such current value, residual value, utility and remaining useful life of any Replacement Component shall be determined based on appropriate factors relating to the current value, residual value, utility and remaining useful life of the Network as a whole both immediately prior to and subsequent to such replacement (i.e., the contribution of such Replacement Component to the Network’s function and capacity) rather than the specific current value, residual value, utility or remaining useful life of the Replacement Component and replaced Component itself. If any Component subject to the Head Lease and this Network Lease is at any time removed from the Network, such Component shall remain subject to the Head Lease and this Network Lease, wherever located, until such time as such Component shall be replaced by a Replacement Component, which has been incorporated in the Network and which meets the requirements for Replacement Components specified above. Immediately upon any Replacement Component becoming incorporated in the Network, without further act (and at no cost to the Owner Lessor and with no adjustment to Head Lease Rent, Basic Lease Rent or Termination Value), (i) the removed or replaced Component shall no longer be subject to the Head Lease and this Network Lease, (ii) title to the removed Component shall remain vested in the Lessee or vest in such other Person as shall be designated by the Lessee, free and clear of all rights of the Owner Lessor and the Lease Indenture Trustee, (iii) title to the Replacement Component shall thereupon vest with the Lessee and an undivided interest equal to the applicable Owner Lessor’s Percentage in such Replacement Component shall (x) become subject to the Head Lease, this Network Lease and 9 --------------------------------------------------------------------------------   the Lien of the Lease Indenture, and (y) be deemed a part of the Undivided Interest for all purposes of this Network Lease. Throughout the Network Lease Term the Lessee shall be permitted to temporarily replace Components or portions of the Network with Components in order to keep the Network in commercial operation or to return it to commercial operation provided that any such Components shall he removed or replaced with proper Components as soon as commercially practicable. Notwithstanding anything in this Section 7.2 or elsewhere in this Network Lease to the contrary, if the Lessee has determined that a Component (including related software) is surplus or obsolete, it shall have the right to remove such Component without replacing it: provided, that no such Component may be so removed without being replaced if such removal would diminish the current or residual value of the Network (taking into account any related software) or the remaining useful life or utility of the Network (taking into account any related software) by more than a de minimis amount or cause the Network (taking into account any related software) to become “limited use” property within the meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 and 2001-29, 2001-19 I.R.B. 1160. The Lessee shall keep records of any maintenance, servicing, repairing or testing performed on the Network (and any related software) in the ordinary course of business in accordance with its then current practice. SECTION 8. MODIFICATIONS      Section 8.1 Required Modifications. The Lessee, at its own cost and expense, shall make or cause or permit to be made all Modifications to the Network (including any related software) as are required by Applicable Law or any Governmental Entity having jurisdiction (each, a “Required Modification”); provided, however, that the Lessee may, in good faith and by appropriate proceedings, diligently contest the validity or application of any Applicable Law in any reasonable manner which does not involve any danger of (a) foreclosure, sale, forfeiture or loss of, or imposition of a material Lien on any part of the Network, (including any related software) or any impairment of the use, operation or maintenance of the Network (including any related software) in any material respect, or (b) any criminal or material civil liability being incurred by the Owner Participant, the Owner Lessor or the Lease Indenture Trustee.      Section 8.2 Optional Modifications. The Lessee at any time may, at its own cost and expense, make or cause or permit to be made any Modification to the Network as the Lessee considers desirable in the proper conduct of its business (any such non-Required Modification being referred to as an “Optional Modification”); provided, that no Optional Modification shall be made to the Network that would (a) change the functional nature of the Network, (b) diminish by more than a de minimis amount the current or residual value of the Network (taking into account any related software) or the remaining useful life or utility of the Network (taking into account any related software), (c) cause the Network (taking into account any related software) to become “limited use” property, within the meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 and 2001-29, 2001-19 I.R.B. 1160 or (d) alter the Network such that it would not be commercially feasible for the Lessee or its designee to return the Network as a whole in accordance with Section 5.      Section 8.3 Title to Modifications. Title to all Modifications shall immediately vest in the Head Lessor. An undivided interest equal to the applicable Owner Lessor’s Percentage in all Modifications shall (at no cost to the Owner Lessor and with no adjustment to Head Lease Rent 10 --------------------------------------------------------------------------------   or Basic Lease Rent, Termination Value, either Early Purchase Price or Purchase Option Price) immediately (i) become subject to the Head Lease and this Network Lease and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lien of the Lease Indenture, and (ii) be deemed part of the Network and Undivided Interest for all purposes of the Head Lease and this Network Lease. The Lessee, at its own cost and expense, shall take such steps as either the Owner Lessor or, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee may reasonably require from time to time to confirm that such undivided interest in all Modifications are subject to the Head Lease and this Network Lease and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, that the Owner Lessor’s leasehold interest in such Modifications is subject to the Lien of the Lease Indenture.      Section 8.4 Report of Modifications. Within 120 days after the end of each fiscal year, the Lessee shall furnish to the Owner Lessor and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, a report stating the total cost of all Modifications made during such fiscal year and describing separately and in reasonable detail each such Modification that cost in excess of $20,000,000. SECTION 9. NET LEASE      This Network Lease is a “net lease” and the Lessee’s obligation to pay all Basic Lease Rent payable hereunder, as well as any Termination Value (or amount computed by reference thereto) in lieu of Basic Lease Rent following termination of this Network Lease, shall be absolute and unconditional under any and all circumstances and shall not be terminated, extinguished, diminished, lost or otherwise impaired by any circumstance of any character, including by (i) any setoff, counterclaim, recoupment, defense or other right which the Lessee may have against the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or any other Person, including any claim as a result of any breach by any of said parties of any covenant or provision in this Network Lease or any other Operative Document, (ii) any lack, or invalidity of title or other interest or any defect in the title or other interest, condition, design, operation, merchantability or fitness for use of the Network or any Component or any portion thereof, or any eviction by paramount title or otherwise, or any unavailability of the Network, any Component or any portion thereof, (iii) any loss or destruction of, or damage to, the Network or any Component or any portion thereof or interruption or cessation in the use or possession thereof or any part thereof by the Lessee for any reason whatsoever and of whatever duration, (iv) the condemnation, requisitioning, expropriation, seizure or other taking of title to or use of the Network or any Component or any portion thereof by any Governmental Entity or TVA or otherwise, (v) the invalidity or unenforceability or lack of due authorization or other infirmity of this Network Lease or any other Operative Document, (vi) the lack of right, power or authority of the Owner Lessor to enter into this Network Lease or any other Operative Document, (vii) any ineligibility of the Network or any Component or any portion thereof for any particular use, whether or not due to any failure of the Lessee to comply with any Applicable Law, (viii) any event of “force majeure” or any frustration, (ix) any legal requirement similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding, (x) any insolvency, bankruptcy, reorganization or similar proceeding by or against the Lessee or any other Person, (xi) any Lien of any Person with respect to the Network or any Component or any portion thereof, or (xii) any other cause, whether similar or dissimilar to the foregoing, any present or 11 --------------------------------------------------------------------------------   future law notwithstanding, except as expressly set forth herein or in any other Operative Document, it being the intention of the parties hereto that all Basic Lease Rent (and all amounts, including Termination Value (or amounts computed by reference thereto), in lieu of Basic Lease Rent following termination of this Network Lease in whole or in part) payable by the Lessee hereunder shall continue to be payable in all events in the manner and at times provided for herein. All Rent, including Basic Lease Rent (and all amounts, including Termination Value (or amounts computed by reference thereto), in lieu of Basic Lease Rent following termination of this Network Lease in whole or in part) shall not be subject to any abatement and the payments thereof shall not be subject to any setoff or reduction for any reason whatsoever, including any present or future claims of the Lessee or any other Person against the Owner Lessor or any other Person under this Network Lease or otherwise. To the extent permitted by Applicable Law, the Lessee hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Network Lease except in accordance with Sections 10, 13, 14, 14A, 15 or 16. If for any reason whatsoever this Network Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Lessee nonetheless agrees, to the extent permitted by Applicable Law, to pay to the Owner Lessor an amount equal to each installment of Basic Lease Rent and all Supplemental Lease Rent due and owing, at the time such payment would have become due and payable in accordance with the terms hereof had this Network Lease not been so terminated. Nothing contained herein shall be construed to waive any claim which the Lessee might have under any of the Operative Documents or otherwise or to limit the right of the Lessee separately to make any claim it might have against the Owner Lessor or any other Person or to separately pursue such claim in such manner as the Lessee shall deem appropriate. SECTION 10. EVENTS OF LOSS      Section 10.1 Occurrence of Events of Loss. The Owner Lessor and the Owner Participant will promptly notify the Lessee and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee of any event of which it is aware that upon election by the Owner Participant or Owner Lessor would result in a Regulatory Event of Loss. The Lessee will promptly notify the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee of any damage to or other event with respect to, the Network that the Lessee reasonably anticipates will cause an Event of Loss described in clause (a) or (b) of the definition of Event of Loss or that causes damage to the Network in excess of $20 million. If an Event of Loss described in clause (a) or (b) of the definition of Event of Loss shall occur, then no later than six months following such occurrence, the Lessee shall notify the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, in writing of its election to either (a) if no Significant Lease Default or Lease Event of Default (other than Lease Events of Default arising as a result of such Event of Loss) has occurred and is continuing and subject to the satisfaction of the conditions set forth in Section 10.3(a) and (b), repair or replace the Network so that the Network shall have a current and residual value, remaining useful life and utility at least equal to that of the Network prior to such Event of Loss, assuming the Network was in the condition and repair required to be maintained by this Network Lease or (b) terminate this Network Lease 12 --------------------------------------------------------------------------------   pursuant to Section 10.2 hereof. The Lessee may elect the option provided in clause (b) of the preceding sentence regardless of whether the Network is to be repaired or replaced. If the Lessee fails to make an election as provided above, an Event of Loss shall be deemed to occur with respect to the Network as of the end of the six month period referred to in the third sentence of this Section 10.1 and the Lessee will be deemed to have made the election to terminate this Network Lease pursuant to Section 10.2.      Section 10.2 Payment of Termination Value; Termination of Basic Lease Rent.           (a) If (i) an Event of Loss described in clause (a) or (b) of the definition of Event of Loss shall have occurred with respect to the Network and the Lessee shall elect not to repair or replace the Network pursuant to Section 10.1 (a) hereof, or (ii) an Event of Loss shall be deemed to occur pursuant to the last sentence of Section 10.1, or (iii) a Regulatory Event of Loss shall have occurred, then, on a Termination Date occurring no later than 90 days following the Lessee’s notice of its election referred to in the third sentence of Section 10.1 or the occurrence of a deemed Event of Loss pursuant to the last sentence of Section 10.1 or the occurrence of a Regulatory Event of Loss, as the case may be, the Lessee shall terminate the Network Lease and, subject to Section 10.2(d), pay to the Owner Lessor the sum of (A) Termination Value determined as of the Termination Date on which payment is made, (B) all amounts of Supplemental Lease Rent (including all documented, out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee, and all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 10.2) due and payable on or prior to such Termination Date, (C) any unpaid Basic Lease Rent due before such Termination Date and (D) in the case of a Regulatory Event of Loss, the Make Whole Premium on the Lessor Note, if any. Ail payments of Rent under this Section 10.2(a) shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee.           (b) Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to this Section 10.2, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee shall cease to have any liability to the Owner Lessor with respect to the Undivided Interest or the Software Rights except for Supplemental Lease Rent and other obligations (including those under Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express provisions of any Operative Document, (iii) unless the Lessee assumes the Lessor Notes pursuant to Section 10.2(d), the Owner Lessor shall pay the outstanding principal and accrued interest on the Lessor Note pursuant to Section 2.10(a) of the Lease Indenture, (iv) this Network Lease and the Head Lease shall terminate, (v) the Owner Lessor shall, at the Lessee’s cost and expense, execute and deliver to the Lessee a release or termination of this Network Lease, (vi) the Owner Lessor shall transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest to the Lessee pursuant to this Section 10.2 and Section 6.2 of the Head Lease on an “as is,” “where is” and “with all faults’” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens; and (vii) the Owner Lessor shall discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments 13 --------------------------------------------------------------------------------   necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) by and at the cost and expense of the Lessee.           (c) Any payments with respect to the Undivided Interest or the Software Rights received at any time by the Owner Lessor, the Lease Indenture Trustee or the Lessee from any Governmental Entity as a result of the occurrence of an Event of Loss described in clause (b) of the definition of Event of Loss shall be applied as follows:      (i) all such payments received at any time by the Lessee shall be promptly paid to the Owner Lessor or, if the Lien of the Lease Indenture shall not have been terminated or discharged, to the Lease Indenture Trustee, for application pursuant to the following provisions of this Section 10.2, except that so long as no Significant Lease Default or Lease Event of Default shall have occurred and be continuing (other than Lease Events of Default arising as a result of such Event of Loss), the Lessee may retain any amounts that the Owner Lessor would at the time be obligated to pay to the Lessee as reimbursement under the provisions of paragraph (ii) below;      (ii) so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to paragraph (a) of this Section 10.2 shall be applied in reduction of the Lessee’s obligation to pay such amount if not already paid by the Lessee or, if already paid by the Lessee, shall, so long as no Significant Lease Default or Lease Event of Default (other than Lease Events of Default arising as a result of such Event of Loss) shall have occurred, and be continuing, be applied to reimburse the Lessee for its payment of such amount; and      (iii) the balance, if any, of such payments remaining thereafter shall be paid to the Owner Lessor.           (d) Notwithstanding the foregoing provisions of paragraph (a) of this Section 10.2, in the case of a Regulatory Event of Loss, so long as no Lease Event of Default shall have occurred and is continuing, the Lessee may, at its option, elect to assume in full, the Lessor Note and if (i) the Lessee shall have executed and delivered an assumption agreement to assume in full the Lessor Note as permitted by and in accordance with Section 2.10(c) of the Lease Indenture, (ii) all other conditions contained in such Section 2.10(c) shall have been satisfied, and (iii) no Significant Lease Default or Lease Event of Default shall have occurred or be continuing after giving effect to such assumption, then, the obligation of the Lessee to pay Termination Value shall be reduced by the outstanding principal amount and accrued interest of the Lessor Note so assumed by the Lessee.      Section 10.3 Repair or Replace. The Lessee’s right to repair or replace the Network pursuant to Section 10.1 shall be subject to the fulfillment, at the Lessee’s sole cost and expense, in addition to the conditions contained in said clause (a), of the following conditions:           (a) the Lessee shall, on the date it gives notice pursuant to Section 10.1 of its election to repair or replace the Network (i) deliver to the Owner Participant either (x) an opinion 14 --------------------------------------------------------------------------------   of tax counsel to the Owner Participant to the effect that such proposed repair or replacement will not result in any incremental adverse tax consequences to the Owner Participant or the Owner Lessor, or (y) an indemnity against all adverse tax risks as a result of such proposed repair or replacement, such indemnity to be in form and substance satisfactory to the Owner Participant, (ii) deliver to the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee (A) a report of an Independent Engineer, in form and substance reasonably acceptable to the Owner Participant, to the effect that the repair or replacement of the Network is technologically feasible and economically viable and that it is reasonable to expect that such repair or replacement can be completed by a date at least 6 months prior to the end of the Network Lease Term, and (B) a report, in form and substance reasonably acceptable to the Owner Participant, of the QTE Consultant or other party (selected by the Owner Participant and reasonably acceptable to the Lessee) experienced in the analysis of property eligible for treatment as “qualified technological equipment” under §168(i)(2) of the Code that the Network (and its major Components), after repair or replacement, will constitute “qualified technological equipment” under §168(i)(2) of the Code or “computer software” under §167(f)(l)(B) of the Code, provided, however, such report shall be required only if Owner Lessor’s Percentage of the Network Cost has not been fully recovered for federal income tax purposes at the time that the repair or replacement is being made;           (b) the Lessee shall cause the repair or replacement of the Network to commence as soon as reasonably practicable after notifying the Owner Lessor and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee pursuant to Section 10.1, of its election to repair or replace the Network, and in all events within 12 months of the occurrence of the event that caused such Event of Loss, and will cause work on such repair or replacement to proceed diligently thereafter. As the repair or replacement of the Network progresses, title to the repaired or replacement equipment shall vest in the Lessee and an undivided interest equal to the Owner Lessor’s Percentage in the repaired or replacement equipment (and associated software) shall become subject to the Head Lease and this Network Lease and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lien of the Lease Indenture, and be deemed a part of the Network for all purposes of the Head Lease and this Network Lease, automatically without any further act by any Person; and           (c) within 30 days of the date of the completion of such repair or replacement (the “Rebuilding Closing Date”) the following documents shall be duly authorized, executed and delivered by the respective party or parties thereto and shall be in full force and effect, and an executed counterpart of each thereto shall be delivered to the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee: (i) supplements to the Head Lease and this Network Lease subjecting an undivided interest equal to the Owner Lessor’s Percentage in the repaired or replacement equipment and associated software to the Head Lease and this Network Lease (with no change in Head Lease Rent or Basic Lease Rent as a result of such repair or replacement), (ii) so long as the Lien of the Lease Indenture shall not have been terminated or discharged, supplements to the Lease Indenture subjecting an undivided interest equal to the Owner Lessor’s Percentage in the repaired or replacement equipment (and associated software) to the Lien of the Lease Indenture, (iii) such UCC filings as may be reasonably requested by the Owner Participant 15 --------------------------------------------------------------------------------   and the Lease Indenture Trustee to be filed, (iv) an opinion of counsel of the Lessee, such counsel and such opinion to be reasonably satisfactory to the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee to the effect that (A) the supplements to the Head Lease and this Network Lease required by clause (i) above constitute effective instruments for subjecting an undivided interest equal to the Owner Lessor’s Percentage in the repaired or replacement equipment (and associated software) to the Head Lease and this Network Lease, (B) the supplements to the Lease Indenture required by clause (ii) above, if any, constitute effective instruments for subjecting an undivided interest equal to the Owner Lessor’s Percentage in the rebuilt or replacement equipment (and associated software) to the Lien of the Lease Indenture, and (C) all filings and other action necessary to perfect and protect the Owner Lessor’s and, if applicable, the Lease Indenture Trustee’s interest in an undivided interest equal to the Owner Lessor’s Percentage in the repaired or replacement equipment (and associated software) have been accomplished, (v) a report, in form and substance reasonably acceptable to the Owner Participant, by an Independent Engineer certifying that the repaired or replacement equipment (and associated software) are in a state of repair and condition required by this Network Lease and that the Network, as repaired or replaced, is capable of performing the Network Functions, (vi) an appraisal, in form and substance reasonably acceptable to the Owner Participant, by an Independent Appraiser reasonably acceptable to the Owner Participant, certifying that the Undivided Interest and the Network (and associated software and software rights) have a current and residual value and the Network and any related software has a remaining useful life and utility at least equal to the current and residual value of the Undivided Interest and the remaining useful life and utility of the Network immediately prior to the Event of Loss and (vii) an Officer’s Certificate of the Lessee as to compliance with this Section 10.3 and that no Lease Event of Default shall have occurred and be continuing as a result of the repair or replacement. Whether or not the transactions contemplated by this Section 10.3 are consummated, the Lessee agrees to pay or reimburse, on an After-Tax Basis, any costs or expenses (including reasonable legal fees and expenses) incurred by the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee in connection with the transactions contemplated by this Section 10.3.      Section 10.4 Application of Payments Not Relating to an Event of Loss.      In the event that during the Network Lease Term the use of all or any portion of the Network is requisitioned or taken by or pursuant to a request of any Governmental Entity under the power of eminent domain or otherwise for a period which does not constitute an Event of Loss, the Lessee’s obligation to pay all installments of Basic Lease Rent shall continue for the duration of such requisitioning or taking. The Lessee shall be entitled to receive and retain for its own account all sums payable for any such period by such Governmental Entity as compensation for such requisition or taking of possession; provided, however, that if at the time of such payment a Lease Event of Default shall have occurred and be continuing, all such sums shall be paid to and held by the Owner Lessor or, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee as security for the obligations of the Lessee under this Network Lease, and upon the earlier of (i) so long as no Lease Event of Default shall be continuing under Section 17(a) or (b) hereof, 180 days after the Owner Lessor (or the Lease Indenture Trustee) shall have received such amount, provided the Owner Lessor (or 16 --------------------------------------------------------------------------------   the Lease Indenture Trustee) has not proceeded to exercise any remedy under Section 17 hereof and it is not stayed or prevented by law or otherwise from exercising such remedy and (ii) such time as there shall not be continuing any Lease Event of Default, such amount shall be paid to the Lessee. SECTION 11. INSURANCE      Section 11.1 Insurance by Owner Lessor. At any time, the Owner Lessor (either directly or in the name of the Owner Participant), the Owner Participant or the Lease Indenture Trustee may at its own expense and for its own account carry insurance with respect to its interest in the Network. Any insurance payments received from policies maintained by the Owner Lessor, the Owner Participant or the Lease Indenture Trustee pursuant to the previous sentence shall be retained by the Owner Lessor, the Owner Participant or the Lease Indenture Trustee, as the case may be.      Section 11.2 Insurance by the lessee. If and for so long as the unenhanced debt of the Lessee issued under the Bond Resolution is rated BBB+ or lower by S&P and Baal or lower by Moody’s, the Lessee shall maintain (or cause to be maintained) property and commercial general liability insurance with respect to the Network customarily carried by other operators of similar equipment and against such loss, damage or liability and with such deductibles as are customarily insured against and which is reasonably acceptable to the Owner Participant. The property insurance maintained pursuant to this Section 11.2 shall, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, name the Lease Indenture Trustee (and thereafter, the Owner Lessor) as loss payee with respect to any claim in excess of $50 million and such amounts shall be paid to the Lessee as and when needed to pay or reimburse the Lessee for any construction costs to repair the damage to which such claim relates, with the balance, if any paid to the Lessee upon completion of such repairs, or applied at the direction of the Lessee to pay Termination Value or any other amounts payable by the Lessee under Section 10. During the period the Lessee is required to maintain insurance under this Section 11.2, the Lessee shall no less frequently than annually provide the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, a description of the insurance it is maintaining pursuant to this Section 11.2 and evidence which may, at the Lessee’s option, be in the form of an Officer’s Certificate, that all premiums in respect of such policies are current and that such insurance is in effect. SECTION 12. INSPECTION      During the Network Lease Term, each of the Owner Participant, the Owner Lessor, and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee and their representatives may, during normal business hours, on reasonable notice to the Lessee and at their own risk and expense (except, at the expense but not risk, of the Lessee when a Significant Lease Default or a Lease Event of Default has occurred and is continuing), inspect the Network and the records with respect to the operations and maintenance thereof in the Lessee’s custody; provided, however, that so long as no Significant Lease Default or Lease Event of Default shall have occurred and be continuing, each such Person shall only be entitled to make one inspection in any twelve-month period; provided, further, that the preceding proviso shall not apply with respect to any such 17 --------------------------------------------------------------------------------   inspection made (a) in connection with the occurrence of (i) failure or malfunction or any equipment resulting in serious injury or death, (ii) a significant curtailment of operations due to a final, nonappealable order of a Governmental Entity having jurisdiction over safety, or (iii) cessation of operations of the Network for more than 30 days or (b) after the Early Purchase Date unless the Lessee has exercised its option to purchase the Owner Lessor’s Interest under Section 16. For the purpose of such inspections the Owner Participant, the Owner Lessor and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, and their representatives, may request that the Lessee demonstrate that the Network is performing the Network Functions. The Lessee may restrict the quantity and scope of data made available to the inspecting party for purposes of such demonstration, provided, that any such restriction shall not make the demonstration unrepresentative of the performance and functionality of the Network. The Owner Participant, the Owner Lessor, the Lease Indenture Trustee and the Pass Through Trustee, and their representatives, may not inspect data collected and disseminated by the Network relating to the operation and performance of the Transmission Plant and the associated billing arrangements, in the Lessee’s custody, other than data relating to a demonstration by the Lessee of any of the Network Functions. Any such inspection will not unreasonably interfere with the operation or maintenance of the Network or the conduct by the Lessee of its business and will be in accordance with the Lessee’s safety and security precautions and confidentiality undertakings, as applicable. In no event shall the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustee have any duty or obligation to make any such inspection and such Persons shall not incur any liability or obligation by reason of not making any such inspection. SECTION 13. TERMINATION OPTION FOR BURDENSOME EVENTS      Section 13.1 Election to Terminate. On or after the occurrence of either of the events specified below and so long as no Significant Lease Default or Lease Event of Default shall have occurred and be continuing, the Lessee shall have the right, at its option, upon at least 30 days’ prior written notice to the Owner Lessor, the Owner Participant, and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, to terminate this Network Lease in whole on the Termination Date specified in such notice (which shall be a date occurring not more than 90 days after the date of such notice) if:           (a) as a result of a change in Applicable Law or an interpretation of Applicable Law, it shall have become illegal for the Lessee to continue this Network Lease or the Head Lease or for the Lessee to make payments under this Network Lease or the other Operative Documents, and the transactions contemplated by the Operative Documents cannot be restructured to comply with such change in law or interpretation of law in a manner acceptable to the Lessee, the Owner Participant, the Owner Lessor, and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee; or           (b) one or more events outside the control of the Lessee or any Affiliate shall have occurred and not the result of an intentional act of the Lessee or any of its Affiliates intended to trigger the right to exercise the purchase option hereunder which will, or can reasonably be expected to, give rise to an obligation by the Lessee to pay or indemnify in respect of the Tax Indemnity Agreement or Section 9.1 or 9.2 of the Participation Agreement; provided, 18 --------------------------------------------------------------------------------   however, that (i) such indemnity obligation (and the underlying cost or Tax) can be avoided in whole or in part if this Network Lease is terminated and the Owner Lessor sells the Owner Lessor’s Interest to the Lessee and (ii) the amount of such avoided payments hereunder would exceed (on a present value basis, discounted at the Discount Rate, compounded on an annual basis to the date of the termination) three (3) percent of the Owner Lessor’s Cost, and provided, further, that no such termination option shall exist if the applicable indemnitee shall waive its right to, or the Owner Participant shall arrange for payment of (without reimbursement by the Lessee or any Affiliate thereof), amounts of indemnification payments under the Tax Indemnity Agreement or Section 9.1 or 9.2 of the Participation Agreement in excess of such amount as to cause such avoided payments, computed in accordance with the preceding proviso, not to exceed three (3) percent of the Owner Lessor’s Cost. No termination of this Network Lease pursuant to this Section 13.1 shall become effective unless the conditions set forth in Section 13.3 are satisfied. If the Lessee does not give notice of its exercise of the termination option under this Section 13.1 within twelve months of the date the Lessee receives notice or Actual Knowledge of an event or condition described above, the Lessee will lose its right to terminate this Network Lease pursuant to this Section 13.1 as a result of such event or condition.      Section 13.2 Payments Upon Termination. If the Lessee shall have exercised its option under Section 13.1, the Lessee shall purchase the Owner Lessor’s Interest on the Termination Date set forth in the termination notice for cash in an amount equal to the Termination Value for such Termination Date, on an “as is,” “where is” and “with all faults” basis without any representation, other than by the Owner Lessor that the Owner Lessor’s Interest is free of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens.      Section 13.3 Procedure for Exercise of Termination Option. If the Lessee shall have exercised its option to terminate the Network Lease under Section 13.1, on the Termination Date specified in the Lessee’s notice of such exercise, the Lessee shall also pay to the Owner Lessor (a) all amounts of Supplemental Lease Rent (excluding Termination Value but including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee, all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 13 and all indemnity amounts not obviated by the termination) due and payable on or prior to the Termination Date, (b) any unpaid Basic Lease Rent due before such Termination Date, and (c) the Make Whole Premium due on the Lessor Note being prepaid pursuant to this Section 13.3. All Rent payments under this Section 13.3 shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to Section 13.2 and this Section 13.3, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee shall cease to have any liability to the Owner Lessor hereunder or under the other Operative Documents, except for Supplemental Lease Rent and other obligations (including those under Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) unless the Lessee assumes the Lessor Note pursuant to Section 13.4 hereof and Section 2.10(c) of the Lease Indenture, the Owner Lessor shall pay the outstanding principal of and accrued interest and 19 --------------------------------------------------------------------------------   Make Whole Premium on the Lessor Note pursuant to Section 2.10(b) of the Lease Indenture, (iv) this Network Lease and the Head Lease shall terminate, (v) the Owner Lessor shall transfer, at the Lessee’s cost and expense, by an appropriate instrument of transfer (in form and substance reasonably satisfactory to the Owner Lessor and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest to the Lessee pursuant to this Section 13.3 and Section 6.2 of the Head Lease on an “as is,” “where is” and “with all faults” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens, and (vi) unless the Lessee assumes the Lessor Note pursuant to Section 13.4 hereof and Section 2.10(c) of the Lease Indenture, the Owner Lessor shall discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) by and at the cost and expense of the Lessee. It shall be a condition of the termination of this Network Lease pursuant to this Section 13 that the Lessee shall pay all amounts it is obligated to pay under Section 13.2 and this Section 13.3. If the Lessee fails to consummate the termination option under this Section 13 after giving notice of its intention to do so, (i) the Network Lease shall continue, (ii) such failure to consummate shall not constitute a default under the Network Lease, and (iii) unless such failure is a consequence of a failure of the Owner Lessor or Owner Participant to fulfill their obligations under this Section 13, the Lessee will lose its right to terminate this Network Lease pursuant to this Section 13 as a result of such event or condition during the remainder of the Network Lease Term.      Section 13.4 Assumption of the Lessor Note. In connection with any Burdensome Termination Event contemplated by this Section 13, the Lessee may, at its option, elect to assume in full the Lessor Note and if (a) the Lessee shall have executed and delivered an assumption agreement in accordance with Section 2.10(c) of the Lease Indenture, (b) all other conditions contained in such Section 2.10(c) of the Lease Indenture shall have been satisfied, and (c) no Significant Lease Default or Lease Event of Default shall have occurred and be continuing after giving effect to such assumption, then the obligation of the Lessee to pay Termination Value shall be reduced by the outstanding principal amount and accrued interest on the Lessor Note so assumed by the Lessee. SECTION 14. TERMINATION FOR OBSOLESCENCE      Section 14.1 Termination. Upon at least six months’ prior written notice to the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee (which notice shall be accompanied by a certification by the Board of Directors of the Lessee as to one or more of the matters described in clause (a) and (b) below), the Lessee shall have the option, so long as no Significant Lease Default or Lease Event of Default shall have occurred and be continuing and it simultaneously exercises the corresponding option under Section 14.1 of the Other Network Leases, to terminate this Network Lease in whole on any Termination Date occurring on or after the fifth anniversary of the Closing Date (the date of termination selected by the Lessee being the “Obsolescence Termination Date”) on the terms and conditions set forth in this Section 14 if the Lessee’s Board of Directors determines in good faith that: 20 --------------------------------------------------------------------------------             (a) the Network is economically or technologically obsolete as a result of a change in Applicable Law; or           (b) the Network is otherwise economically or technologically obsolete or the Network is surplus to the Lessee’s needs or is no longer useful in its trade or business.       Section 14.2 Solicitation of Offers. If the Lessee shall give the Owner Lessor notice pursuant to Section 14.1 and the Owner Lessor shall not have elected to retain the Owner Lessor’s Interest pursuant to Section 14.3 hereof, the Lessee shall, as non-exclusive agent for the Owner Lessor, use its commercially reasonable efforts to obtain bids and sell such Owner Lessor’s Interest on the Obsolescence Termination Date, all of the proceeds of which will be for the account of the Owner Lessor; provided that so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the proceeds of such sale pursuant to this Section 14.2 shall be paid directly to the Lease Indenture Trustee. The Owner Lessor shall also have the right to obtain bids for the sale of such Owner Lessor’s Interest either directly or through agents other than the Lessee. At least 90 days prior to the Obsolescence Termination Date the Lessee shall certify to the Owner Lessor and the Lease Indenture Trustee each bid or offer, the amount and terms thereof and the name and address of the party (which shall not be the Lessee, any Affiliate or any third party with whom it or an Affiliate has an arrangement to use or operate the Network for the benefit of the Lessee or such Affiliate after the termination of this Network Lease) submitting such bid or offer.      Section 14.3 Right of Owner Lessor to Retain the Owner Lessor’s Interest. The Owner Lessor may irrevocably elect to retain, rather than sell, the Owner Lessor’s Interest by giving notice to the Lessee and the Lease Indenture Trustee at least 85 days prior to the Obsolescence Termination Date; provided, however, that the Owner Lessor may not elect to retain the Owner Lessor’s Interest unless (i) the Other Owner Lessors shall have elected to retain the related Other Owner Lessor’s Interests pursuant to Section 14.3 of the respective Other Network Leases, and (ii) it shall have provided the Lessee with financial assurances reasonably satisfactory to the Lessee that it will satisfy all of its payment obligations under this Section 14.3. If the Owner Lessor elects to retain such Owner Lessor’s Interest pursuant to this Section 14.3, on the Obsolescence Termination Date the Lessee shall pay to the Owner Lessor (a) all Supplemental Lease Rent (including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee (excluding the fees and costs of any broker unless engaged by the Lessee on the Owner Lessor’s behalf) and all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 14.3 due and payable on such Obsolescence Termination Date, (b) any unpaid Basic Lease Rent due before such Obsolescence Termination Date, (c) any Underpayment of Basic Lease Rent determined as of such Obsolescence Termination Date, and (d) the Make Whole Premium due on the Lessor Note being prepaid pursuant to this Section 14.3, but shall not be required to pay Termination Value. All Rent payments under this Section 14.3 shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to this Section 14.3, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee’s obligations under this Network Lease shall terminate, (iii) the Lessee shall cease to have any other liability to the Owner Lessor hereunder or under the other Operative Documents, except for 21 --------------------------------------------------------------------------------   Supplemental Lease Rent (other than Termination Value) and other obligations (including those under Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iv) the Owner Lessor shall pay the outstanding principal of and accrued interest and Make Whole Premium on the Lessor Note pursuant to Section 2.10(b) of the Lease Indenture and repay to the Lessee any Overpayment of Basic Lease Rent determined as of such Obsolescence Termination Date, (v) this Network Lease shall terminate, (vi) the Owner Lessor shall, at the Lessee’s cost and expense, execute and deliver to the Lessee a release and termination of this Network Lease, (vii) the Lessee will return the Owner Lessor’s Interest to the Owner Lessor in accordance with Section 5.1, and (viii) the Owner Lessor shall cause the Lease Indenture Trustee to discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) by and at the cost and expense of the Lessee. It shall be a condition to the termination of this Network Lease pursuant to this Section 14.3 that the Lessee shall pay all amounts that it is obligated to pay under this Section 14.3. If the Owner Lessor shall not pay any amount payable by it as contemplated by clause (iv) above, then the notice of termination shall be deemed revoked and this Network Lease shall continue in full force and effect in accordance with its terms and, so long as such failure was not caused by the Lessee’s failure to pay any amount required to be made by it under this Section, without prejudice to the Lessee’s right to exercise its rights under this Section 14.      Section 14.4 Procedure for Exercise of Termination Option. If the Owner Lessor has not elected to retain the Owner Lessor’s Interest in accordance with Section 14.3 hereof, on the Obsolescence Termination Date the Owner Lessor shall sell the Owner Lessor’s Interest under this Section 14.4 and Section 5.2 of the Head Lease to the bidder or bidders (which shall not be the Lessee, any Affiliate thereof or any third party with whom it or an Affiliate has an arrangement to use or operate the Network for the benefit of the Lessee or such Affiliate after the termination of this Network Lease) that shall have submitted the highest cash bid or bids with respect to the Owner Lessor’s Interest, and the Lessee shall certify to the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, that such buyer is not the Lessee, any Affiliate thereof or any third party with whom it or an Affiliate has an arrangement to use or operate the Network for the benefit of the Lessee or such Affiliate after the termination of this Network Lease. On the Obsolescence Termination Date, the Lessee shall pay to the Owner Lessor (a) the excess, if any, of Termination Value determined as of such Obsolescence Termination Date over the net sales price of the Owner Lessor’s Interest paid to or retained by the Owner Lessor, after deducting from the total sales price the expenses, if any, incurred by the Owner Lessor and the Owner Participant in connection with such sale, plus (b) any unpaid Basic Lease Rent due on or before such Obsolescence Termination Date, plus (c) all amounts of Supplemental Lease Rent (excluding Termination Value but including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee (excluding the fees and costs of any broker unless engaged by the Lessee on the Owner Lessor’s behalf) and all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the termination option pursuant to this Section 14) due and payable on such Obsolescence Termination Date and not already deducted from the sales price pursuant to clause (a) above, plus (d) the Make Whole Premium due on the Lessor Note being prepaid pursuant to this Section 14.4. All Rent payments under this Section 14.4 shall, to the extent required by 22 --------------------------------------------------------------------------------   Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to this Section 14.4, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee’s obligations under this Network Lease shall terminate, (iii) the Lessee shall cease to have any other liability to the Owner Lessor hereunder or under the other Operative Documents, except for Supplemental Lease Rent and other obligations (including Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iv) the Owner Lessor will pay the outstanding principal of and accrued interest and Make Whole Premium on the Lessor Note pursuant to Section 2.10(b) of the Lease Indenture, (v) this Network Lease and the Head Lease shall terminate, (vi) the Owner Lessor shall, at the Lessee’s cost and expense, execute and deliver to the Lessee a release or termination of this Network Lease, (vii) the Owner Lessor will transfer (by an appropriate instrument of transfer in form and substance reasonably satisfactory to the Owner Lessor and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest to the purchaser pursuant to this Section 14.4 on an “as is,” “where is” and “with all faults” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty from the Owner Participant as to the absence of Owner Participant’s Liens, and (viii) the Owner Lessor shall discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) at the cost and expense of the Lessee. Unless the Owner Lessor shall have elected to retain the Owner Lessor’s Interest pursuant to Section 14.3 or the Owner Lessor with the consent of the Lessee shall have entered into a legally binding contract to sell the Owner Lessor’s Interest, the Lessee may, at its election, revoke its notice of termination on at least 30 days’ prior notice to the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, in which event this Network Lease shall continue without prejudice to the Lessee’s right to exercise its rights under this Section 14; provided that the Lessee may initiate the termination procedure set forth herein no more than three times. The Owner Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or to otherwise take any action in arranging any such sale of the Owner Lessor’s Interest other than, if the Owner Lessor has not elected to retain the Owner Lessor’s Interest, to transfer the Owner Lessor’s Interest in accordance with clause (vii) of this Section 14.4. It shall be a condition of the Owner Lessor’s obligation to consummate a sale of the Owner Lessor’s Interest that the Lessee shall pay all amounts it is obligated to pay under this Section 14.4 If no sale shall occur on the Obsolescence Termination Date, the notice of termination shall be deemed revoked and this Network Lease shall continue in full force and effect in accordance with its terms without prejudice to the Lessee’s right to exercise its rights under this Section 14. Section 14A. PARTIAL TERMINATION IN CONSEQUENCE OF SALES OF TRANSMISSION ASSETS.      Section 14A.1 Partial Termination. If a portion of the Transmission Plant of the Lessee in connection with which a portion of the Network (including software) is utilized shall be sold to a third party which is not the Lessee or an Affiliate of the Lessee, upon at least two months’ prior written notice to the Owner Lessor, the Owner Participant and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, the Lessee shall have the option, so long as no Significant Lease Default or 23 --------------------------------------------------------------------------------   Lease Event of Default shall have occurred and be continuing and the Lessee simultaneously exercises the corresponding option under Section 14A of the Other Network Leases, to declare such portion of the Network to be surplus to the Lessee’s operations in consequence of such sale of the portion of the Transmission Plant and terminate this Network Lease and the Head Lease in part on any Termination Date (the date of termination selected by the Lessee being the “ Partial Termination Date”) on the terms and conditions set forth in this Section 14A. The Lessee’s right to partially terminate the Network Lease pursuant to this Section 14A shall be limited to those Components of the Network (and associated software) utilized in connection with that portion of the Transmission Plant which are to be sold to a third party. In no event shall the termination option provided by this Section 14A.1 be used to terminate the Network Lease (a) with respect to the System Operations Center or the Reliability Operations Center or (b) if, following such termination, the Fair Market Sales Value of the Network (as determined by the appraisal conducted pursuant to Section 14A.2) would be less than fifty percent of the Network Cost as of the Closing Date. The Lessee shall not be permitted to effect a Partial Termination more frequently than once in each twenty-four month period unless the sale of the transmission facilities in respect of which such Partial Termination shall occur shall be required by Applicable Law.      The Lessee may revoke its notice of Partial Termination so long as such notice is given at least thirty days prior to the proposed Partial Termination Date.      Section 14A.2 Appraisal. In connection with the partial termination contemplated by this Section 14A, the Lessee shall, at its own cost and expense, cause an appraisal to be conducted by an Independent Appraiser of (a) that portion of the Network with respect to which the Network Lease is to be terminated (the “Terminated Portion”) and (b) the entire Network without regard to the proposed termination. The fraction (expressed as a percentage), the numerator of which is the Fair Market Sales Value of the Terminated Portion and the denominator of which is the Fair Market Sales Value of the entire Network, as each is determined by such appraisal, is hereinafter called the “Termination Percentage”. It shall be a condition to the Lessee’s right to effect a Partial Termination pursuant to this Section 1.4A that the Lessee shall either make Substituted Components or Substituted Non-Network Equipment subject to the Head Lease and this Network Lease in accordance with Section 14A.3 or make the Partial Termination Payment in accordance with Section 14A.4. The right of the Lessee to effect a Partial Termination shall in all cases be subject to delivery of (i) the report, in form and substance reasonably satisfactory to the Owner Participant, of an Independent Engineer described in clause (b) of the first sentence of Section 14A.3 and (ii) a conclusion by the Independent Appraiser in the appraisal conducted pursuant to this Section 14A.2 that the estimated useful life of the Network will not be diminished following such Partial Termination from what it was prior thereto.      Section 14A.3 Substituted Components; Substituted Non-Network Equipment. If the Lessee elects not to cause a sale of the Terminated Portion of the Owner Lessor’s Interest as provided in Section 14A.4, the Lessee may elect to replace the Terminated Portion with either Substituted Components or Substituted Non-Network Equipment (as each are hereafter defined) upon satisfaction of the conditions provided in this Section 14A.3. In the event that the Lessee elects to replace the Terminated Portion with Substituted Components the Lessee shall provide replacement Components that constitute accessions to the remaining portion of the Network and will be operated as an integral part of the remaining portion of the Network (“Substituted 24 --------------------------------------------------------------------------------   Components”). The Lessee’s right to provide Substituted Components shall be subject to (a) receipt by each Owner Participant of either (i) an opinion of its tax counsel satisfactory to the Owner Participant to the effect that such substitution will not result in any incremental tax risks to the Owner Participant, or (ii) an indemnity against such incremental risks in form and substance satisfactory to the Owner Participant from the Lessee, (b) receipt by the Owner Participant and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, of (1)a report of an Independent Engineer reasonably satisfactory to the Owner Participant, to the effect that following the Partial Termination and release of the Terminated Portion from the Head Lease and the addition to the Network of the Substituted Components, the Network constitutes a single integrated and technologically viable “system” capable of performing the Network Functions with respect to which it performed prior to such Partial Termination (other than with respect to the portion of the Transmission Plant sold) and (2) a report, in form and substance reasonably satisfactory to the Owner Participant, of the QTE Consultant or other Person selected by the Owner Participant and reasonably acceptable to the Lessee, experienced in the analysis of property eligible for treatment as “qualified technological equipment” under §168(i)(2) of the Code selected by the Lessee and reasonably acceptable to the Owner Participant that the Network and its Components (including any Substituted Components) will continue to constitute “qualified technological equipment” under §168(i)(2) of the Code or “computer software” under §167(f)(1)(B) of the Code provided, however, such report shall be required only if the Owner Lessor’s Percentage of the Network Cost has not been fully recovered for federal income tax purposes at the time the Terminated Portion is replaced with Substituted Components or Substituted Non-Network Equipment; and (c) an appraisal (which may be the appraisal conducted pursuant to Section 14A.2), in form and substance reasonably satisfactory to the Owner Participant, to the effect that the Network has a fair market value, estimated residual value, utility and useful life at least equal to that of the Network prior to the Partial Termination assuming the Network is in a state of repair and condition required by this Network Lease and that the Network and its Components (including any Substituted Components made subject to the Head Lease pursuant to this provision) do not constitute “limited use property” within the meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 and 2001-29, 2001-19 I.R.B. 1160.      The Lessee also may substitute for the Terminated Portion additional items of equipment (“Substituted Non-Network Equipment”) which do not constitute accessions to the Network subject to meeting the conditions of this Section 14A.3. The Lessee’s right to make Substituted Non-Network Equipment subject to the Head Lease and this Network Lease shall be subject to (a) receipt by the Owner Participant of either (i) an opinion of its tax counsel satisfactory to the Owner Participant to the effect that such substitution will not result in any incremental tax risks to the Owner Participant, or (ii) an indemnity against such incremental risks in form and substance satisfactory to Owner Participant from the Lessee, (b) receipt by the Owner Participant and, so long as the Lien of the Lease Indenture has not been terminated or discharged, the Lease Indenture Trustee and the Pass Through Trustee, of (i) a report of an Independent Engineer reasonably satisfactory to the Owner Participant, to the effect that (1) following the Partial Termination and release of the Terminated Portion from the Head Lease the Network constitutes an integrated and a technologically viable “system” capable of performing at least one of the Network Functions, (2) that the Substituted Non-Network Equipment itself constitutes a technologically viable integrated “system” capable of performing at least one of the Network Functions, and (3) the Network and Substituted Non-Network Equipment together (although not 25 --------------------------------------------------------------------------------   necessarily on a fully integrated basis) are capable of performing all of the Network Functions or providing services that are equivalent to the Network Functions, and (ii) a report, in form and substance reasonably acceptable to the Owner Participant, of the QTE Consultant or other Person experienced in the analysis of property eligible for treatment as “qualified technological equipment” under §168(i)(2) of the Code selected by the Lessee and reasonably acceptable to the Owner Participant that, following the Partial Termination, the Network and the Substituted Non-Network Equipment and Components of each, constitutes “qualified technological equipment” under §168(i)(2) of the Code or “computer software” under §167(f)(l)(B) of the Code, provided, however, such report shall be required only if the Owner Lessor’s Percentage of the Network Cost has not been fully recovered for federal income tax purposes at the time the Terminated Portion is replaced with Substituted Components or Substituted Non-Network Equipment; and (c) an appraisal in form and substance reasonably acceptable to Owner Participant (which may be the appraisal conducted pursuant to Section 14A.2) to the effect that the Network and the Substituted Non-Network Equipment have an aggregate fair market value, combined estimated residual value, and each has a utility and useful life at least equal to that of the Network prior to the Partial Termination and that neither the Network nor the Substituted Non-Network Equipment constitute “limited use property” within the meaning of Rev. Proc. 2001-28, 2001-19 I.R.B. 1156 and 2001-29, 2001-19 I.R.B. 1160.      The Lessee shall be permitted to satisfy its obligations under this Section 14A.3 with a combination of Substituted Components and Substituted Non-Network Equipment, provided that each such substitution satisfies the applicable conditions of this Section 14A.3. All provisions of this Network Lease and the other Operative Documents shall apply to any remaining portion of the Network as it existed on the Closing Date (including any Substituted Components, if applicable) and any Substituted Non-Network Equipment, each as a separate integrated system.      Section 14A.4 Partial Termination Payment. If the Lessee shall not elect to substitute Substituted Components or Substituted Non-Network Equipment for the Terminated Portion of the Network pursuant to Section 14A.3, or shall be unable to meet the requirements for substitution set forth in Section 14A.3, then on the Partial Termination Date the Lessee shall pay the Owner Lessor an amount (the “Partial Termination Payment”) equal to the higher of (x) the Fair Market Sales Value of the Terminated Portion and (y) the Termination Percentage of Termination Value; provided, however, that, if such sale of the Lessee’s transmission facilities to a third party is pursuant to any Governmental Action or the direct or indirect result of changes in law not within the control of the Lessee, such Partial Termination Payment by the Lessee to the Owner Lessor shall be in an amount equal to the Termination Percentage of the Termination Value. In addition, on the Partial Termination Date, the Lessee shall pay to the Owner Lessor (a) all amounts of Supplemental Lease Rent (including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee, all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the Partial Termination Option pursuant to this Section 14A) due and payable on or prior to such Partial Termination Date, (b) any unpaid Basic Lease Rent due before such Partial Termination Date, (c) any Underpayment of Basic Lease Rent determined as of such Partial Termination Date and (d) the Make-Whole Premium due on the portion of the Lessor Note being prepaid pursuant to this Section 14A.4. All Rent payments under this Section 14A.4 shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a 26 --------------------------------------------------------------------------------   condition to) the payment of all sums required to be paid pursuant to this Section 14A.4, the Owner Lessor shall (i) pay a portion of the outstanding principal of, and accrued interest on, the Lessor Note equal to the Termination Percentage and the applicable Make-Whole Premium pursuant to Section 2.10(b) of the Lease Indenture and (ii) pay to the Lessee any Overpayment of Basic Lease Rent determined as of such Partial Termination Date.      Section 14A.5 Conveyance of Terminated Portion. If the Lessee shall satisfy the conditions of Section 14A.3 for the substitution of Substituted Components or Substituted Non-Network Equipment or shall have made the Partial Termination Payment pursuant to Section 14A.4, on the Partial Termination Date: (a) Owner Lessor shall transfer, at the Lessee’s cost and expense, by an appropriate instrument of transfer (in form and substance reasonably satisfactory to the Lessee and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest in the Terminated Portion to the Lessee’s designee (which shall not be an Affiliate of the Lessee or any third party with whom the Lessee or any Affiliate has an arrangement to use or operate the Terminated Portion for the benefit of the Lessee or an Affiliate after the Partial Termination) pursuant to this Section 14A.5 and Section 6.2 of the Head Lease on an “as is,” “where is” and “with all faults” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens, (b) the schedules of Basic Lease Rent, Termination Values and the Early Purchase Option shall be adjusted pursuant to Section 3.4(b) and (c) the Owner Lessor shall discharge the Lien of the Lease Indenture with respect to such Terminated Portion and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) by and at the cost and expense of the Lessee. SECTION 15. EARLY PURCHASE OPTION       Section 15.1 Election of Early Purchase. So long as no Significant Lease Default described in clause (iii) of the definition thereof or Lease Event of Default under Section 17(e) or 17(f) hereof shall have occurred and be continuing, the Lessee shall have the right, at its option (the “ Early Purchase Option”), by giving written notice to the Owner Lessor, the Owner Participant, and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, at any time not earlier than 36 months prior to the Early Purchase Date and not later than 12 months prior to the Early Purchase Date, to purchase the Owner Lessor’s Interest and terminate this Network Lease on the Early Purchase Date. Such notice, once given, shall be irrevocable. The Lessee may exercise its Early Purchase Option with respect to this Network Lease only if the Lessee simultaneously exercises its corresponding “Early Purchase Option” in the Other Network Leases.       Section 15.2 Procedure for Exercise of Early Purchase Option. If the Lessee shall have exercised its option under Section 15.1, the Lessee shall (1) pay to the Owner Lessor on the Early Purchase Date (a) the initial installment of the applicable Early Purchase Price set forth on Schedule 4 hereto, (b) all amounts of Supplemental Lease Rent (including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee, all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the Early Purchase Option pursuant to this Section 15) due and 27 --------------------------------------------------------------------------------   payable on or prior to the Early Purchase Date, and (c) any unpaid Basic Lease Rent due on or before the Early Purchase Date, and (2) become obligated to pay to the Owner Lessor the additional installments of the applicable Early Purchase Price in the amounts and on the dates set forth in Schedule 4 hereto. The covenant to pay additional installments of the Early Purchase Price in accordance with the preceding sentence shall survive termination of this Network Lease. All Rent payments under this Section 15.2 shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to Section 15.2, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee shall cease to have any liability to the Owner Lessor hereunder or under the other Operative Documents, except for Supplemental Lease Rent, the additional installments of the Early Purchase Price payable as set forth above and other obligations (including those under Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) this Network Lease and the Head Lease shall terminate, (iv) the Owner Lessor shall transfer, at the Lessee’s cost and expense, by an appropriate instrument of transfer (in form and substance reasonably satisfactory to the Owner Lessor and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest to the Lessee pursuant to this Section 15.2 and Section 6.2 of the Head Lease on an “as is,” “where is” and “with all faults” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens, and (v) the Owner Lessor shall discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared and filed (as appropriate) by and at the cost and expense of the Lessee. SECTION 16. PURCHASE OPTION      Section 16.1 Election of Purchase Option. Unless this Network Lease shall have been previously terminated pursuant to Section 10, 13, 14, 15 or 18 hereof, the Lessee shall have the option, so long as no Significant Lease Default or Lease Event of Default shall have occurred and be continuing (other than any default that would be cured by such purchase), to purchase the Owner Lessor’s Interest on the Expiration Date for the Purchase Option Price in accordance with this Section 16.1 (the “Purchase Option”). The Lessee may exercise its Purchase Option with respect to this Network Lease only if the Lessee simultaneously exercises its corresponding “Purchase Option” in the Other Network Leases. In order to exercise the Purchase Option, the Lessee must notify the Owner Lessor, the Owner Participant, and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee, of its election to exercise the Purchase Option at any time not earlier than 24 months prior to the Expiration Date and not later than 12 months prior to the Expiration Date. If such election is made by the Lessee prior to the date which is 12 months prior to the Expiration Date, unless previously revoked by the Lessee, such election shall become irrevocable on the date that is 12 months prior to the Expiration Date. Upon delivery of notice by the Lessee of the notice contemplated by the preceding sentence, the Lessee and the Owner Participant will promptly commence negotiation to determine the Fair Market Sales Value of the Owner Lessor’s Interest. If such Fair Market Sales Value cannot be agreed upon by the Lessee and the Owner Participant within 90 days of the Lessee’s notice of its election to exercise the Purchase Option, such Fair Market Sales Value shall be determined by the Appraisal Procedure. Unless the Lessee shall purchase the Owner Lessor’s Interest in accordance with this Section 16, on the Expiration Date 28 --------------------------------------------------------------------------------   the Lessee shall return the Network to the Owner Lessor in accordance with the provisions of Section 5 of this Network Lease.       Section 16.2 Procedure for Exercise of Purchase Option. If the Lessee shall have irrevocably elected the Purchase Option, the Lessee shall become unconditionally obligated to pay on the expiration of the Network Lease Term (a) the Purchase Option Price, (b) all amounts of Supplemental Lease Rent (including all reasonable out-of-pocket costs and expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee, all sales, use, value added and other Taxes required to be indemnified by the Lessee pursuant to Section 9.2 of the Participation Agreement associated with the exercise of the Purchase Option pursuant to this Section 16) due and payable prior to the Purchase Option Date, and (c) any unpaid Basic Lease Rent due before the Expiration Date of the Network Lease Term. All Rent payments under this Section 16.2 shall, to the extent required by Section 3.5, be made to the Lease Indenture Trustee. Concurrently with (but not as a condition to) the payment of all sums required to be paid pursuant to this Section 16.2, (i) Basic Lease Rent shall cease to accrue, (ii) the Lessee shall cease to have any liability to the Owner Lessor hereunder or under the other Operative Documents, except for Supplemental Lease Rent and other obligations (including those under Sections 9.1 and 9.2 of the Participation Agreement) surviving pursuant to the express terms of any Operative Document, (iii) this Network Lease and the Head Lease shall terminate, (iv) the Owner Lessor shall transfer, at the Lessee’s cost and expense, by an appropriate instrument of transfer (in form and substance reasonably satisfactory to the Owner Lessor and prepared by and at the expense of the Lessee) all of its right, title and interest in and to the Owner Lessor’s Interest to the Lessee pursuant to this Section 16.2 and Section 6.2 of the Head Lease on an “as is,” “where is” and “with all faults” basis, without representations or warranties other than a warranty as to the absence of Owner Lessor’s Liens and a warranty of the Owner Participant as to the absence of Owner Participant’s Liens, and (v) the Owner Lessor shall discharge the Lien of the Lease Indenture and execute and deliver appropriate releases and other documents or instruments necessary or desirable to effect the foregoing, all to be prepared, filed and recorded (as appropriate) by and at the cost and expense of the Lessee. SECTION 17. EVENTS OF DEFAULT      The following events shall constitute a “Lease Event of Default” hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Entity):           (a) the Lessee shall fail to make any payment of Basic Lease Rent, Termination Value, Partial Termination Payment, Early Purchase Price or Purchase Option Price after the same shall have become due and such failure shall have continued for five (5) Business Days after the same shall become due; or           (b) the Lessee shall fail to make any payment of Supplemental Lease Rent (other than Excepted Payments, unless the Owner Participant shall have declared a default with respect thereto and amounts described in clause (a)), after the same shall have become due and such failure shall have continued from a period of thirty (30) days after receipt by the Lessee of 29 --------------------------------------------------------------------------------   written notice of such default from the Owner Participant, the Owner Lessor, the Lease Indenture Trustee or the Pass Through Trustee; or           (c) the Lessee shall fail to perform or observe any covenant, obligation or agreement to be performed or observed by it under this Network Lease or any other Operative Document (other than any covenant, obligation or agreement contained in the Tax Indemnity Agreement or any covenant, obligation or agreement referred to in clauses (a) or (b) of this Section 17) in any material respect, which shall continue unremedied for 30 days after receipt by the Lessee of written notice thereof from the Owner Participant, the Owner Lessor, the Lease Indenture Trustee or the Pass Through Trustee; provided, however, that if such condition cannot be remedied within such 30 day period, then the period within which to remedy such condition shall be extended up to an additional 180 days, so long as the Lessee diligently pursues such remedy and such condition is reasonably capable of being remedied within such additional 180 day period; provided, further, that, in the case of the Lessee’s obligation set forth in clause (a) of Section 7.1, if, to the extent and for so long as a test, challenge, appeal or proceeding shall be prosecuted in good faith by the Lessee, the failure by the Lessee to comply with such requirement shall not constitute a Lease Event of Default if such test, challenge, appeal or proceeding shall not involve any danger of (i) foreclosure, sale, forfeiture or loss of, or imposition of a lien on, any part of the Undivided Interest or the Software Rights, or the impairment of the use, operation or maintenance of the Network in any material respect, or (ii) any criminal liability being incurred by, or any material adverse effect on the interests of, the Owner Participant, the Owner Lessor, the Lease Indenture Trustee or the Pass Through Trustee, including subjecting the Owner Participant or the Owner Lessor to regulation as a public utility or similar entity under Applicable Law; and provided, further, that in the case of the Lessee’s obligation set forth in clause (a) of Section 7.1, if the noncompliance is not a type that can be immediately remedied, the failure to comply shall not be a Lease Event of Default if the Lessee is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger described in clause (i) or (ii) of the preceding proviso; and provided, further, such noncompliance, or such test, challenge, appeal or proceeding to review shall not extend beyond the scheduled expiration of the Network Lease Term; or           (d) any representation or warranty made by the Lessee in the Operative Documents (other than a Tax Representation) shall prove to have been incorrect in any material respect when made and continues to be material and unremedied for a period of 30 days after receipt by the Lessee of written notice thereof from the Owner Participant, the Owner Lessor, the Lease Indenture Trustee or the Pass Through Trustee; provided, however, that if such condition cannot be remedied within such 30 day period, then the period within which to remedy such condition shall be extended up to an additional 180 days, so long as the Lessee diligently pursues such remedy and such condition is reasonably capable of being remedied within such additional 180 day period; or           (e) the Lessee shall (i) commence a voluntary case or other proceeding seeking relief under the Bankruptcy Code or liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or apply for or consent to the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (ii) consent to, or 30 --------------------------------------------------------------------------------   fail to controvert in a timely manner, any such relief or the appointment of or taking possession by any such official in any voluntary case or other insolvency proceeding commenced against it, or (iii) file an answer admitting the material allegations of a petition filed against it in any such proceeding, or (iv) make a general assignment for the benefit of creditors; or           (f) an involuntary case or other proceeding shall be commenced against the Lessee seeking (i) liquidation, reorganization or other relief with respect to it or its debts under the Bankruptcy Code or any bankruptcy, insolvency or other similar law now or hereafter in effect, or (ii) the appointment of a trustee, receiver, liquidator, custodian or other similar official with respect to it or any substantial part of its property or (iii) the winding-up or liquidation of the Lessee; and such involuntary case or other insolvency proceeding shall remain undismissed and unstayed for a period of 90 days (unless, in lieu of dismissal or stay of such proceeding, the Lessee shall deliver to the Owner Lessor and the Lease Indenture Trustee an opinion of counsel reasonably satisfactory to each of them to the effect that the Lessee is not an entity which can become a “debtor” under Section 101 of the Bankruptcy Code); or           (g) the Lessee or any Person acting on behalf of the Lessee shall repudiate or disaffirm the validity or enforceability of the Head Lease or the rights of the Owner Lessor thereunder;           (h) the Lessee shall fail to return the Network in accordance with the provisions hereof as and when required to do so hereunder; or           (i) the Lessee shall fail to comply with its covenant set forth in Section 11.2 of the Participation Agreement. SECTION 18. REMEDIES      Section 18.1 Remedies for Lease Event of Default. Upon the occurrence of any Lease Event of Default and at any time thereafter so long as the same shall be continuing, the Owner Lessor may, at its option, declare this Network Lease to be in default by written notice to the Lessee; provided that upon the occurrence of a Lease Event of Default described in paragraph (e) or (f) of Section 17, this Network Lease shall automatically be deemed to be in default without the need for giving any notice; and at any time thereafter, so long as the Lessee shall not have remedied all outstanding Lease Events of Default, the Owner Lessor may do one or more of the following as the Owner Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, Applicable Law then in effect:           (a) proceed by appropriate court action or actions, either at law or in equity, to enforce performance by the Lessee, at the Lessee’s sole cost and expense, of the applicable covenants and terms of this Network Lease or to recover damages for breach thereof;           (b) by notice in writing to the Lessee, terminate this Network Lease whereupon all right of the Lessee to the possession and use under this Network Lease of the Lessee’s Interest shall absolutely cease and terminate but the Lessee shall remain liable as hereinafter provided; and thereupon, the Owner Lessor may demand that the Lessee, and the Lessee shall, upon written demand of the Owner Lessor and at the Lessee’s expense, forthwith return possession of the Undivided Interest and the Software Rights to the Owner Lessor in the 31 --------------------------------------------------------------------------------   manner and condition required by, and otherwise in accordance with all of the provisions of Section 5, except those provisions relating to periods of notice; and the Owner Lessor may thenceforth hold, possess and enjoy the same, free from any right of the Lessee, or its successor or assigns, to use the Undivided Interest and the Software Rights for any purpose whatever;           (c) sell the Owner Lessor’s Interest at public or private sale, as the Owner Lessor may determine, free and clear of any rights of the Lessee under this Network Lease and without any duty to account to the Lessee with respect to such sale or for the proceeds thereof (except to the extent required by paragraph (f) below if the Owner Lessor elects to exercise its rights under said paragraph and by Applicable Law), in which event the Lessee’s obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such sale shall terminate (except to the extent that Basic Lease Rent is to be included in computations under paragraph (e) or (f) below if the Owner Lessor elects to exercise its rights under said paragraphs);           (d) hold, keep idle or lease to others the Owner Lessor’s Interest as the Owner Lessor in its sole discretion may determine, free and clear of any rights of the Lessee under this Network Lease and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds with respect thereto, except that the Lessee’s obligation to pay Basic Lease Rent due for any periods subsequent to the date upon which the Lessee shall have been deprived of possession and use of the Lessee’s Interest pursuant to this Section 18 shall be reduced by the net proceeds, if any, received by the Owner Lessor from subleasing the Undivided Interest and transferring the Software Rights to any Person other than the Lessee;           (e) whether or not the Owner Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Lessee’s Interest, the Owner Lessor, by written notice to the Lessee specifying a Termination Date that shall be not earlier than 10 days after the date of such notice, may demand that the Lessee pay to the Owner Lessor, and the Lessee shall pay to the Owner Lessor, on the Termination Date specified in such notice, any unpaid Basic Lease Rent due on or before such Termination Date, any Supplemental Lease Rent due and payable as of the Termination Date specified in such notice, plus, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Lease Rent due after the Termination Date specified in such notice), (i) an amount equal to the excess, if any, of the Termination Value computed as of the Termination Date specified in such notice over the Fair Market Sales Value of the Owner Lessor’s Interest as of the Termination Date specified in such notice, or (ii) an amount equal to the excess, if any, of Termination Value computed as of the Termination Date specified in such notice over the Fair Market Rental Value of the Owner Lessor’s Interest until the end of the Network Lease Term, after discounting such Fair Market Rental Value semiannually to present value as of the Termination Date specified in such notice at a rate equal to the Lease Debt Rate, and upon payment of such excess amount under either clause (i) or (ii) of this paragraph (e), this Network Lease and the Lessee’s obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such payments shall terminate;           (f) if the Owner Lessor shall have sold the Owner Lessor’s Interest pursuant to paragraph (c) above, the Owner Lessor may, if it shall so elect, demand that the Lessee pay to the Owner Lessor, and the Lessee shall pay to the Owner Lessor, as liquidated damages for loss 32 --------------------------------------------------------------------------------   of a bargain and not as a penalty (in lieu of the Basic Lease Rent due for any periods subsequent to the dale of such sale), an amount equal to (i) any unpaid Basic Lease Rent due [on or] before the date of such sale and, (ii) if that date is not a Termination Date, the daily equivalent of Basic Lease Rent for the period from the preceding Termination Date to the date of such sale, plus (iii) the amount, if any, by which the Termination Value computed as of the Termination Date next preceding the date of such sale or, if such sale occurs on a Rent Payment Date or a Termination Date then computed as of such date, exceeds the net proceeds of such sale, and, upon payment of such amount, this Network Lease and the Lessee’s obligation to pay Basic Lease Rent for any periods subsequent to the date of such payment shall terminate;           (g) whether or not the Owner Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (b) above with respect to the Lessee’s Interest, the Owner Lessor, by written notice to the Lessee specifying a Termination Date that shall not be earlier than 10 days after the date of such notice, may demand that the Lessee pay to the Owner Lessor, and the Lessee shall pay to the Owner Lessor, on the Termination Date specified in such notice, any unpaid Basic Rent due before such Termination Date, plus as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent due after the Termination Date specified in such notice), an amount equal to the Termination Value computed, as of the Termination Date specified in such notice and, upon payment of such Termination Value by the Lessee pursuant to this clause (g) and all other Rent then due and payable by the Lessee, the Owner Lessor will forthwith transfer to the Lessee in accordance with this Section 18.1(g), and Section 5 of the Head Lease on an “as is,” “where is” and “with all faults” basis, without representation or warranty other than a warranty as to the absence of Owner Lessor’s Liens accompanied by a warranty of the Owner Participant as to the absence of the Owner Participant’s Liens, all of its right, title and interest in and to the Owner Lessor’s Interest and execute, acknowledge and deliver, and prepare and file (as appropriate), appropriate releases and all other documents or instructions necessary or desirable to effect the foregoing all in form and substance reasonably satisfactory to, and at the cost and expense of, the Lessee, and upon payment of such amounts under this paragraph (g), this Network Lease and the Lessee’s obligation to pay Basic Lease Rent hereunder due for any periods subsequent to the date of such payment shall terminate; or           (h) apply any amounts which are held by the Owner Lessor or the Lease Indenture Trustee under Section 10.2(c) as security for the Lessee’s obligations hereunder against any amounts owed by the Lessee hereunder or under any other Operative Document. In addition, the Lessee shall be liable, except as otherwise provided above, for (i) any and all unpaid Basic Lease Rent due hereunder before or during the exercise of any of the foregoing remedies, and (ii) on an After-Tax Basis, for legal fees and other costs and expenses incurred by reason of the occurrence of any Lease Event of Default or the exercise of the Owner Lessor’s remedies with respect thereto (whether those remedies are exercised by the Owner Lessor, the Lease Indenture Trustee or a designee of either), including the repayment in full of any costs and expenses necessary to be expended in connection with the return of the Network in accordance with Section 5 hereof, and any costs and expenses incurred by the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee in connection with retaking constructive possession of, or in repairing, the Network in order to cause it to be in compliance with all maintenance standards imposed by this Network Lease. 33 --------------------------------------------------------------------------------   For the limited purpose of permitting the Owner Lessor to exercise the remedies provided by paragraphs (b), (c) or (d) of this Section 18.1 in circumstances where the Lessee shall not have complied with its covenant set forth in paragraph (b) of this Section 18.1, (i) the Lessee grants to the Owner Lessor the right to enter upon premises owned by the Lessee or in which the Lessee has a possessory interest on which any Component of the Network is located, (ii) the Lessee appoints the Owner Lessor as its agent for purposes of exercising its right to ingress and egress over any property in which the Lessee holds a possessory interest on which any Component of the Network is located and (iii) the Lessee appoints the Owner Lessor as its attorney-in-fact for purposes of exercising a right of ingress and egress over any property in which the Lessee holds a possessory interest on which any Component of the Network is located, in the case of clauses (i), (ii) and (iii), to the fullest extent permitted by Applicable Law.      Section 18.2 Cumulative Remedies. The remedies in this Network Lease provided in favor of the Owner Lessor shall not be deemed exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity; and the exercise or beginning of exercise by the Owner Lessor of any one or more of such remedies shall not, except as specifically provided in this Section 18, preclude the simultaneous or later exercise by the Owner Lessor of any or all of such other remedies. To the extent permitted by Applicable Law, the Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Owner Lessor to sell, lease or otherwise use the Network or any Component thereof in mitigation of the Owner Lessor’s damages as set forth in this Section 18 or which may otherwise limit or modify any of the Owner Lessor’s rights and remedies in this Section 18.      Section 18.3 No Delay or Omission to be Construed as Waiver. No delay or omission to exercise any right, power or remedy accruing to the Owner Lessor upon any breach or default by the Lessee under this Network Lease shall impair any such right, power or remedy of the Owner Lessor, nor shall any such delay or omission be construed as a waiver of any breach or default, or of any similar breach or default hereafter occurring; nor shall any waiver of a single breach or default be deemed a waiver of any subsequent breach or default.      Section 18.4 Rent Trueup. If the Network Lease is terminated pursuant to this Section 18, the Owner Lessor has elected not to seek any payment from the Lessee under this Section 18 and has retained the Owner Lessor’s Interest, or the calculation of amounts due under any provision of this Section 18 have not previously included an adjustment for Basic Lease Rent that has been paid but not yet allocated or allocated but not yet paid, then the Lessee shall pay to the Owner Lessor as Basic Lease Rent through (but not including) the date of such early termination the amount, if any, set forth opposite the applicable Termination Date under the caption “Underpayment of Basic Lease Rent” or the Owner Lessor shall pay to the Lessee as a refund of Basic Lease Rent through (but not including) the date of such early termination the amount, if any, set forth opposite the applicable Termination Date under the caption “Overpayment of Basic Lease Rent; provided, however, that the Owner Lessor shall be entitled to set off its obligation to make any such refund against any amount due from the Lessee hereunder. 34 --------------------------------------------------------------------------------   SECTION 19. SECURITY INTEREST AND INVESTMENT OF SECURITY FUNDS.      Any moneys received by the Owner Lessor or the Lease Indenture Trustee pursuant to Section 10.2(c) or 11.2 shall, until paid to the Lessee in accordance with such Section, be held by the Owner Lessor or the Lease Indenture Trustee, as the case may be, as security for the Lessee’s obligations under this Network Lease and be invested in Permitted Instruments by the Owner Lessor or the Lease Indenture Trustee, as the case may be, at the sole risk of the Lessee, from time to time as directed in writing by the Lessee if such instruments are reasonably available for purchase. Any gain (including interest received) realized as the result of any such Permitted Instrument (net of any fees, commissions, taxes and other expenses, if any, incurred in connection with such Permitted Instrument) shall be applied or remitted to the Lessee in the same manner as the principal invested. SECTION 20. LESSEE’S RIGHT TO SUBLEASE; ASSIGNMENT      Section 20.1 Right to Sublease. The Lessee shall have the right to sublease the Undivided Interest or any part thereof and assign the Software Rights without the consent of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustee only under the following conditions:           (a) the sublessee is a solvent corporation, partnership, statutory or business trust, limited liability company or other person or entity not then involved in a bankruptcy proceeding and that is, or has engaged a third party that is, experienced in the operation of similar equipment;           (b) the sublease does not extend beyond the scheduled expiration of the Network Lease Term (and may be terminated upon early termination of this Network Lease) and is expressly subject and subordinated to this Network Lease and the Head Lease and the Lien of the Lease Indenture;           (c) all terms and conditions of this Network Lease and the other Operative Documents remain in effect and the Lessee remains fully and primarily liable for its obligations under this Network Lease and the other Operative Documents and the obligation to pay Basic Lease Rent under the Network Lease retains the same priority of payment with respect to “Gross Power Revenues” (as defined in the Bond Resolution) as it enjoyed prior to such sublease;           (d) no Significant Lease Default or Lease Event of Default shall have occurred and be continuing; and           (e) the sublease prohibits further assignment or subletting.      Section 20.2 Right to Assign. The Lessee shall have the right to assign its interest in this Network Lease without the consent of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustee only under the following conditions:           (a) the assignee is a solvent corporation, partnership, statutory or business trust, limited liability company or other person or entity not then involved in a bankruptcy proceedings; 35 --------------------------------------------------------------------------------             (b) the assignment does not extend beyond the scheduled expiration of the Network Lease Term (and may be terminated upon early termination of this Network Lease) and is expressly subject and subordinated to this Network Lease and the Head Lease and the Lien of the Lease Indenture;           (c) all terms and conditions of this Network Lease and the other Operative Documents remain in effect and the Lessee remains fully and primarily liable for its obligations under this Network Lease and the other Operative Documents and the obligation to pay Basic Lease Rent under the Network Lease retains the same priority of payment with respect to “Gross Power Revenues” (as defined in the Bond Resolution) as it enjoyed prior to such assignment;           (d) no Significant Lease Default or Lease Event of Default shall have occurred and be continuing;           (e) the assignment prohibits further assignment or subletting;           (f) such assignment shall be pursuant to an assignment and assumption agreement in form and substance reasonably satisfactory to the Owner Participant, the Owner Lessor and so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee; and           (g) the Owner Participant, the Owner Lessor and, so long as the Lien of the Lease Indenture shall not have been terminated or discharged, the Lease Indenture Trustee shall have received an opinion of counsel, in form and substance reasonably satisfactory to each such recipient, as to such assignment and assumption agreement.      As a condition precedent to any sublease or assignment effected in accordance with this Section 20, the Lessee shall pay, on an After-Tax Basis, all reasonable documented out-of-pocket expenses of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee and the Pass Through Trustee in connection with such sublease.      Section 20.3 Right to Assign or Sublease to Regional Transmission Organizations. The Lessee shall have the right to sublease the Network or any portion thereof or assign its interest in this Network Lease and other Operative Documents without the consent of the Owner Lessor, the Owner Participant, the Lease Indenture Trustee or the Pass Through Trustee to any regional transmission organization or other similar entity, but otherwise in compliance with Section 20.1 or 20.2, as appropriate, if required by the provisions of the arrangement, establishing or governing such regional transmission organization or similar entity.      Section 20.4 Operation. Notwithstanding any of the provisions contained in this Section 20 or anywhere else in this Network Lease, the Lessee shall not be permitted to relocate or operate any Component independent of the Network, whether pursuant to a sublease, assignment or otherwise, except in respect of ordinary maintenance and repair of the Network in accordance with Section 7, provided, however, (x) that the Network may be operated in its entirety by any such sublessee, assignee, regional transmission organization or other entity and (y) any Component may be used by any sublessee, assignee, regional transmission organization or other entity as part of a sharing arrangement with the Lessee to provide monitoring, control and/or data analysis services to Transmission Plant that is operated independent of any 36 --------------------------------------------------------------------------------   Transmission Plant currently serviced by the Network so long as (1) any such Component continues to function as an integral part of the Network; and (2) such sharing arrangement with any such Components does not diminish either the capability of the Network to perform the Network Functions or the fair market value, estimated residual value, utility or useful life of the Network in each case by more than a de minimis amount. SECTION 21. OWNER LESSOR’S RIGHT TO PERFORM      If the Lessee fails to make any payment required to be made by it hereunder or fails to perform or comply with any of its other agreements contained herein after notice to the Lessee and failure of the Lessee to so perform or comply within 10 days thereafter, the Owner Lessor or the Owner Participant may itself make such payment or perform or comply with such agreement in a reasonable manner, but shall not be obligated hereunder to do so, and the amount of such payment and of the reasonable expenses of the Owner Lessor or the Owner Participant incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Overdue Rate, to the extent permitted by Applicable Law, shall be deemed to be Supplemental Lease Rent, payable by the Lessee to the Owner Lessor on demand. SECTION 22. SECURITY FOR OWNER LESSOR’S OBLIGATIONS TO THE LEASE INDENTURE TRUSTEE      In order to secure the Lessor Note, the Owner Lessor will assign and grant a Lien to the Lease Indenture Trustee in and to all of the Owner Lessor’s right, title and interest in, to and under this Network Lease, and grant a security interest in favor of the Lease Indenture Trustee in all of the Owner Lessor’s right, title and interest in and to the Owner Lessor’s Interest (other than Excepted Payments and Excepted Rights). The Lessee hereby consents to such assignment and to the creation of such Lien and security interest and acknowledges receipt of copies of the Lease Indenture, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent of the Lessee under any other circumstances. Unless and until the Lessee shall have received written notice from the Lease Indenture Trustee that the Lien of the Lease Indenture has been fully terminated, the Lease Indenture Trustee shall have the right to exercise the rights of the Owner Lessor under this Network Lease to the extent set forth in and subject in each case to the exceptions set forth in the Lease Indenture. TO THE EXTENT, IF ANY, THAT THIS NETWORK LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS NETWORK LEASE MAY BE CREATED THROUGH TOE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE LEASE INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF. SECTION 23. WAIVER OF RIGHT TO PARTITION      So long as the Network or any part thereof as originally constructed, reconstructed or added to is used or useful for the transmission of electrical power and energy, or to the end of the 37 --------------------------------------------------------------------------------   period permitted by Applicable Law, whichever first occurs, the Owner Lessor waives its right to partition whether by partition in kind or sale and division of the proceeds thereof, and agrees that it will not resort to any action at law or in equity to partition and further waives the benefit of all laws that may now or hereafter authorize such partition of the properties comprising the Network. All instruments of conveyance which effect, evidence or vest the ownership interest of the Owner Lessor in the Network shall contain this waiver of right to partition. SECTION 24. MISCELLANEOUS      Section 24.1 Amendments and Waivers. No term, covenant, agreement or condition of this Network Lease may be terminated, amended or compliance therewith waived (either generally or in a particular instance, retroactively or prospectively) except by an instrument or instruments in writing executed by each party hereto.      Section 24.2 Notices. Unless otherwise expressly specified or permitted by the terms hereof, all communications and notices provided for herein to a party hereto shall be in writing or by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including by overnight mail or courier service, (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) and (b) above, in each case addressed to such party and copy party at its address set forth below or at such other address as such party or copy party may from time to time designate by written notice to the other party:      If to the Owner Lessor: c/o Wells Fargo Delaware Trust Company 919 Market Street, Suite 700 Wilmington, DE 19801 Attention: Ann E. Roberts, Corporate Trust Services Facsimile No.: (302)575-2006 Telephone No.: (302)575-2004      with a copy to the Owner Participant: Wachovia Mortgage Corporation c/o Wachovia Securities Postal Mailing Address: One Wachovia Center Mail Code NC0738 Charlotte, NC 28288-0738 Courier Address: 38 --------------------------------------------------------------------------------   301 South College Street, 18th Floor Charlotte, NC 28202 Facsimile No.: (704) 383-1572 Telephone No.: (704) 715-7720 Attention: Ida Blake and to the Lease Indenture Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone No.: (302) 636-6000 Facsimile No.: (302) 636-4140 Attention: Corporate Trust Administration and to the Pass Through Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone No.: (302) 636-6000 Facsimile No.: (302) 636-4140 Attention: Corporate Trust Administration If to the Lessee: Tennessee Valley Authority 400 West Summit Hill Drive Knoxville, Tennessee 37902 Telephone No.: (865) 632-3366 Facsimile No.: (865) 632-6673 Attention: Treasurer      Section 24.3 Survival. Except for the provisions of Sections 3.3, 3.5, 5, 9 and 18, which shall survive, the warranties and covenants made by each party hereto shall not survive the expiration or termination of this Network Lease in accordance with its terms.      Section 24.4 Successors and Assigns.           (a) This Network Lease shall be binding upon and shall inure to the benefit of, and shall be enforceable by, the parties hereto and their respective successors and assigns as permitted by and in accordance with the terms hereof. 39 --------------------------------------------------------------------------------             (b) Except as expressly provided herein or in the other Operative Documents, neither party hereto may assign its interests or transfer its obligations herein without the consent of the other party hereto.      Section 24.5 “True Lease “. This Network Lease shall constitute an agreement of lease and nothing herein shall be construed as conveying to the Lessee any right, title or interest in or to the Undivided Interest or the Software Rights except as lessee only.      Section 24.6 Business Day. Notwithstanding anything herein to the contrary, if the date on which any payment or performance is to be made pursuant to this Network Lease is not a Business Day, the payment otherwise payable on such date shall be payable on the next succeeding Business Day with the same force and effect as if made on such scheduled date and (provided that such payment is made on such succeeding Business Day) no interest shall accrue on the amount of such payment from and after such scheduled date to the time of such payment on such next succeeding Business Day.      Section 24.7 Governing Law. This Network Lease shall be in all respects governed by and construed in accordance with the laws of the State of New York, including all matters of construction, validity and performance (without giving effect to the conflicts of laws provisions thereof, other than New York General Obligations Law Section 5-1401), except to the extent inconsistent with Federal law.      Section 24.8 Severability. Any provision of this Network Lease that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.      Section 24.9 Counterparts. This Network Lease may be executed by the parties hereto in separate counterparts, each of which, subject to Section 22, when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.      Section 24.10 Headings and Table of Contents. The headings of the sections of this Network Lease and the Table of Contents are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.      Section 24.11 Further Assurances. Each party hereto will promptly and duly execute and deliver such further documents and assurances for and take such further action reasonably requested by the other party, all as may be reasonably necessary to carry out more effectively the intent and purpose of this Network Lease.      Section 24.12 Effectiveness. This Network Lease has been dated as of the date first above written for convenience only. This Network Lease shall be effective as of the date set forth on the signature page hereto.      Section 24.13 Owner Lessor Covenant. So long as this Network Lease shall remain in effect, the Owner Lessor (or any successor thereto) hereby agrees and covenants to comply with 40 --------------------------------------------------------------------------------   the applicable provisions of 41 C.F.R. section 60-1.4, 41 C.F.R. section 60-250.4 and C.F.R. section 60-741.5.      Section 24.14 Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Network Lease is executed and delivered by the Trust Company, not individually or personally but solely as trustee of the Owner Lessor under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it pursuant thereto, (b) each of the representations, undertakings and agreements herein made on the part of the Owner Lessor is made and intended not as personal representations, undertakings and agreements by the Trust Company, but is made and intended for the purpose for binding only the Owner Lessor, (c) nothing herein contained shall be construed as creating any liability on the Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto or by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall the Trust Company, be personally liable for the payment of any indebtedness or expenses of the Owner Lessor or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Owner Lessor under this Network Lease. 41 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, the Owner Lessor and the Lessee have caused this Network Lease to be duly executed and delivered under seal by their respective officers thereunto duly authorized on the dates below their respective signatures, but effective as of September 26, 2003.                   NVG NETWORK I STATUTORY TRUST                       By:   Wells Fargo Delaware Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement                       By:   /s/ Ann Roberts Dukart               Name: Ann Roberts Dukart             Title: Vice President           TENNESSEE VALLEY AUTHORITY                       By:   /s/ John M. Hoskins               Name: John M. Hoskins             Title: Sr. V.P. & Treasurer       --------------------------------------------------------------------------------     *   Receipt of the original counterpart of the foregoing Network Lease is hereby acknowledged on this 26th day of September, 2003                   WILMINGTON TRUST COMPANY, not in its         individual capacity, but solely         as Lease Indenture Trustee                       By:   /s/ Ann Roberts Dukart               Name: Ann Roberts Dukart             Title: Vice President       *   This acknowledgment executed in the original counterpart only. (Network Lease (A1)   --------------------------------------------------------------------------------   Schedule 1A to Network Lease (NVG Network Statutory I Trust) BASIC RENT PAYMENTS (Percentages are percentages of Owner Lessor’s Cost)                          Rent         Payment Date   Percentage   Sep 26 2003     0.00000000 % Dec 26 2003     0.00000000 % Jan 15 2004     8.93740892 % Jul 15 2004     l.60834567 % Jan 15 2005     3.67920324 % Jul 15 2005     1.55730939 % Jan 15 2006     3.73281866 % Jul 15 2006     1.50369396 % Jan 15 2007     4.13986616 % Jul 15 2007     1.43872550 % Jan 15 2008     3.85739524 % Jul 15 2008     1.37911738 % Jan 15 2009     3.92001568 % Jul 15 2009     1.31649695 % Jan 15 2010     3.98580067 % Jul 15 2010     1.25071196 % Jan 15 2011     4.04841949 % Jul 15 2011     1.18809313 % Jan 15 2012     4.09246477 % Jul 15 2012     1.14404786 % Jan 15 2013     4.14456066 % Jul 15 2013     1.09195197 % Jan 25 2014     4.22169313 % Jul 15 2014     1.01481950 % Jan 15 2015     5.31077824 % Jul 15 2015     0.90894559 % Jan 15 2016     5.60702056 % Jul 15 2016     0.79316154 % Jan 15 2017     5.72865582 % Jul 15 2017     0.67152628 % Jan 15 2018     5.85643797 % Jul 15 2018     0.54374413 % Jan 15 2019     5.99067764 % Jul 15 2019     0.40950445 % Jan 15 2020     6.08017600 % Jul 15 2020     0.32000610 % Jan 15 2021     6.17475420 % Jul 15 2021     0.22542789 % Jan 15 2022     6.17475420 % Jul 15 2022     0.22542789 % Jan 15 2023     6.17475420 % Jul 15 2023     0.22542789 % Jan 15 2024     6.17475420 % Jul 15 2024     0.22542789 % Jan 15 2025     6.28686613 % Jul 15 2025     0.11331596 % Jan 15 2026     4.71124516 % Jul 15 2026     0.00000000 % Jan 15 2027     0.00000000 % Jul 15 2027     0.00000000 % Sep 26 2027     0.00000000 %   --------------------------------------------------------------------------------   Schedule 1 B to Network Lease (NVG Network Statutory I Trust) ALLOCATED RENT (Percentages are percentages of Owner Lessor’s Cost)                   From and   To and   Basic Rent   Including   Including   Allocated   Sep 26 2003   Dec 25 2003     0.00000000 % Dec 26 2003   Jan 14 2004     0.27637150 % Jan 15 2004   Jul 14 2004     0.00000000 % Jul 15 2004   Jan 14 2005     5.45732942 % Jan 15 2005   Jul 14 2005     4.81205367 % Jul 15 2005   Jan 14 2006     0.00000000 % Jan 15 2006   Jul 14 2006     5.23651263 % Jul 15 2006   Jan 14 2007     0.00000000 % Jan 15 2007   Jul 14 2007     0.00000000 % Jul 15 2007   Jan 14 2008     5.67814622 % Jan 15 2008   Jul 14 2008     5.13695806 % Jul 15 2008   Jan 14 2009     0.00000000 % Jan 15 2009   Jul 14 2009     0.00000000 % Jul 15 2009   Jan 14 2010     5.67814622 % Jan 15 2010   Jul 14 2010     4.79487903 % Jul 15 2010   Jan 14 2011     0.00000000 % Jan 15 2011   Jul 14 2011     0.00000000 % Jul 15 2011   Jan 14 2012     5.67814622 % Jan 15 2012   Jul 14 2012     4.79487903 % Jul 15 2012   Jan 14 2013     0.00000000 % Jan 15 2013   Jul 14 2013     0.00000000 % Jul 15 2013   Jan 14 2014     5.67814622 % Jan 15 2014   Jul 14 2014     4.79487903 % Jul 15 2014   Jan 14 2015     0.00000000 % Jan 15 2015   Jul 14 2015     0.00000000 % Jul 15 2015   Jan 14 2016     5.67814622 % Jan 15 2016   Jul 14 2016     5.77809023 % Jul 15 2016   Jan 14 2017     0.00000000 % Jan 15 2017   Jul 14 2017     0.00000000 % Jul 15 2017   Jan 14 2018     6.93995649 % Jan 15 2018   Jul 14 2018     5.86040770 % Jul 15 2018   Jan 14 2019     0.00000000 % Jan 15 2019   Jul 14 2019     0.00000000 % Jul 15 2019   Jan 14 2020     6.93995649 % Jan 15 2020   Jul 14 2020     5.86040770 % Jul 15 2020   Jan 14 2021     0.00000000 % Jan 15 2021   Jul 14 2021     0.00000000 % Jul 15 2021   Jan 14 2022     6.93995649 % Jan 15 2022   Jul 14 2022     5.86040770 % Jul 15 2022   Jan 14 2023     0.00000000 % Jan 15 2023   Jul 14 2023     0.00000000 % Jul 15 2023   Jan 14 2024     6.93995649 % Jan 15 2024   Jul 14 2024     5.86040770 % Jul 15 2024   Jan 14 2025     0.00000000 % Jan 15 2025   Jul 14 2025     6.40018210 % Jul 15 2025   Jan 14 2026     0.00000000 % Jan 15 2026   Jul 14 2026     6.40018210 % Jul 15 2026   Jan 14 2027     0.00000000 % Jan 15 2027   Jul 14 2027     4.71124516 % Jul 15 2027   Sep 26 2027     0.00000000 %   --------------------------------------------------------------------------------   Schedule 1C to Network Lease (NVG Network Statutory I Trust) ATTRIBUTION OF BASIC LEASE RENT PAYMENTS TO ALLOCATIONS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                                       Allocated     Allocated   Rent Payment Date   Basic Lease Rent     From and Including     To and Including   Sep 26 2003     0.00000000 %                 Dec 26 2003     0.00000000 %                 Jan 15 2004     8.93740892 %   Dec 26 2003   Jul 14 2005 Jul 15 2004     1.60834567 %   Jan 15 2005   Jul 14 2005 Jan 15 2005     3.67920324 %   Jan 15 2006   Jul 14 2006 Jul 15 2005     1.55730939 %   Jan 15 2006   Jul 14 2006 Jan 15 2006     3.73281866 %   Jul 15 2007   Jan 14 2008 Jul 15 2006     1.50369396 %   Jul 15 2007   Jan 14 2008 Jan 15 2007     4.13986616 %   Jul 15 2007   Jul 14 2008 Jul 15 2007     1.43872550 %   Jan 15 2008   Jul 14 2008 Jan 15 2008     3.85739524 %   Jul 15 2009   Jan 14 2010 Jul 15 2008     1.37911738 %   Jul 15 2009   Jan 14 2010 Jan 15 2009     3.92001568 %   Jul 15 2009   Jul 14 2010 Jul 15 2009     1.31649695 %   Jan 15 2010   Jul 14 2010 Jan 15 2010     3.98580067 %   Jul 15 2011   Jan 14 2012 Jul 15 2010     1.25071196 %   Jul 15 2011   Jan 14 2012 Jan 15 2011     4.04841949 %   Jul 15 2011   Jul 14 2012 Jul 15 2011     1.18809313 %   Jan 15 2012   Jul 14 2012 Jan 15 2012     4.09246477 %   Jul 15 2013   Jan 14 2014 Jul 15 2012     1.14404786 %   Jul 15 2013   Jan 14 2014 Jan 15 2013     4.14456066 %   Jul 15 2013   Jul 14 2014 Jul 15 2013     1.09195197 %   Jan 15 2014   Jul 14 2014 Jan 15 2014     4.22169313 %   Jul 15 2015   Jan 14 2016 Jul 15 2014     1.01481950 %   Jul 15 2015   Jan 14 20l6 Jan 15 2015     5.31077824 %   Jul 15 2015   Jul 14 2016 Jul 15 2015     0.90894559 %   Jan 15 2016   Jul 14 2016 Jan 15 2016     5.60702056 %   Jul 15 2017   Jan 14 2018 Jul 15 2016     0.79316154 %   Jul 15 2017   Jan 14 2018 Jan 15 2017     5.72865582 %   Jul 15 2017   Jul 14 2018 Jul 15 2017     0.67152628 %   Jan 15 2018   Jul 14 2018 Jan 15 2018     5.85643797 %   Jul 15 2019   Jan 14 2020 Jul 15 2018     0.54374413 %   Jul 15 2019   Jan 14 2020 Jan 15 2019     5.99067764 %   Jul 15 2019   Jul 14 2020 Jul 15 2019     0.40950445 %   Jan 15 2020   Jul 14 2020 Jan 15 2020     6.08017600 %   Jul 15 2021   Jan 14 2022 Jul 15 2020     0.32000610 %   Jul 15 2021   Jan 14 2022 Jan 15 2021     6.17475420 %   Jul 15 2021   Jul 14 2022 Jul 15 2021     0.22542789 %   Jan 15 2022   Jul 14 2022 Jan 15 2022     6.17475420 %   Jul 15 2023   Jan 14 2024 Jul 15 2022     0.22542789 %   Jul 15 2023   Jan 14 2024 Jan 15 2023     6.17475420 %   Jul 15 2023   Jul 14 2024 Jul 15 2023     0.22542789 %   Jan 15 2024   Jul 14 2024 Jan 15 2024     6.17475420 %   Jan 15 2025   Jul 14 2025 Jul 15 2024     0.22542789 %   Jan 15 2025   Jul 14 2025 Jan 15 2025     6.28686613 %   Jan 15 2026   Jul 14 2026 Jul 15 2025     0.11331596 %   Jan 15 2026   Jul 14 2026 Jan 15 2026     4.71124516 %   Jan 15 2027   Jul 14 2027 Jul 15 2026     0.00000000 %                 Jan 15 2027     0.00000000 %                 Jul 15 2027     0.00000000 %                 Sep 26 2027     0.00000000 %                   --------------------------------------------------------------------------------   Schedule 1 D to Nework Lease (NVG Network Statutory I Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                     (b)     (c)   (a)   Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent   Dec 26 2003     0.00000000 %     0.00000000 % Jan 15 2004     0.27637150 %     0.00000000 % Feb 15 2004     0.00000000 %     8.66103742 % Mar 15 2004     0.00000000 %     8.66103742 % Apr 15 2004     0.00000000 %     8.66103742 % May 15 2004     0.00000000 %     8.66103742 % Jun 15 2004     0.00000000 %     8.66103742 % Jul 15 2004     0.00000000 %     8.66103742 % Aug 15 2004     0.00000000 %     9.35982819 % Sep 15 2004     0.00000000 %     8.45027329 % Oct 15 2004     0.00000000 %     7.54071838 % Nov 15 2004     0.00000000 %     6.63116348 % Dec 15 2004     0.00000000 %     5.72160857 % Jan 15 2005     0.00000000 %     4.81205367 % Feb 15 2005     0.00000000 %     7.68924796 % Mar 15 2005     0.00000000 %     6.88723902 % Apr 15 2005     0.00000000 %     6.08523007 % May 15 2005     0.00000000 %     5.28322113 % Jun 15 2005     0.00000000 %     4.48121218 % Jul 15 2005     0.00000000 %     3.67920324 % Aug 15 2005     0.00000000 %     5.23651263 % Sep 15 2005     0.00000000 %     5.23651263 % Oct 15 2005     0.00000000 %     5.23651263 % Nov 15 2005     0.00000000 %     5.23651263 % Dec 15 2005     0.00000000 %     5.23651263 % Jan 15 2006     0.00000000 %     5.23651263 % Feb 15 2006     0.00000000 %     8.09657918 % Mar 15 2006     0.00000000 %     7.22382708 % Apr 15 2006     0.00000000 %     6.35107497 % May 15 2006     0.00000000 %     5.47832287 % Jun 15 2006     0.00000000 %     4.60557077 % Jul 15 2006     0.00000000 %     3.73281866 % Aug 15 2006     0.00000000 %     5.23651263 % Sep l5 2006     0.00000000 %     5.23651263 % Oct 15 2006     0.00000000 %     5.23651263 % Nov 15 2006     0.00000000 %     5.23651263 % Dec 15 2006     0.00000000 %     5.23651263 % Jan 15 2007     0.00000000 %     5.23651263 % Feb 15 2007     0.00000000 %     9.37637878 % Mar 15 2007     0.00000000 %     9.37637878 % Apr 15 2007     0.00000000 %     9.37637878 % May 15 2007     0.00000000 %     9.37637878 % Jun 15 2007     0.00000000 %     9.37637878 % Jul 15 2007     0.00000000 %     9.37637878 % Aug 15 2007     0.00000000 %     9.86874658 % Sep 15 2007     0.00000000 %     8.92238887 % Oct 15 2007     0.00000000 %     7.97603117 % Nov 15 2007     0.00000000 %     7.02967347 % Dec 15 2007     0.00000000 %     6.08331576 % Jan 15 2008     0.00000000 %     5.13695806 % Feb 15 2008     0.00000000 %     8.13819362 % Mar 15 2008     0.00000000 %     7.28203395 % Apr 15 2008     0.00000000 %     6.42587427 % May 15 2008     0.00000000 %     5.56971459 % Jun 15 2008     0.00000000 %     4.71355492 % Jul 15 2008     0.00000000 %     3.85739524 % Aug 15 2008     0.00000000 %     5.23651263 % Sep 15 2008     0.00000000 %     5.23651263 % Oct 15 2008     0.00000000 %     5.23651263 % Nov 15 2008     0.00000000 %     5.23651263 % Dec 15 2008     0.00000000 %     5.23651263 % Jan 15 2009     0.00000000 %     5.23651263 % Feb 15 2009     0.00000000 %     9.15652831 % Mar 15 2009     0.00000000 %     9.15652831 %   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory I Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                       (b)     (c)   (a)   Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent   Apr 15 2009     0.00000000 %     9.15652831 % May 15 2009     0.00000000 %     9.15652831 % Jun 15 2009     0.00000000 %     9.15652831 % Jul 15 2009     0.00000000 %     9.15652831 % Aug l5 2009     0.00000000 %     9.52666755 % Sep 15 2009     0.00000000 %     8.58030984 % Oct 15 2009     0.00000000 %     7.63395214 % Nov 15 2009     0.00000000 %     6.68759444 % Dec 15 2009     0.00000000 %     5.74123673 % Jan 15 2010     0.00000000 %     4.79487903 % Feb 15 2010     0.00000000 %     7.98153320 % Mar 15 2010     0.00000000 %     7.18238669 % Apr 15 2010     0.00000000 %     6.38324019 % May 15 2010     0.00000000 %     5.58409368 % Jun 15 2010     0.00000000 %     4.78494718 % Jul 15 2010     0.00000000 %     3.98580067 % Aug 15 2010     0.00000000 %     5.23651263 % Sep 15 2010     0.00000000 %     5.23651263 % Oct 15 2010     0.00000000 %     5.23651263 % Nov 15 2010     0.00000000 %     5.23651263 % Dec 15 2010     0.00000000 %     5.23251263 % Jan 15 2011     0.00000000 %     5.23651263 % Feb 15 2011     0.00000000 %     9.28493212 % Mar 15 2011     0.00000000 %     9.28493212 % Apr 15 2011     0.00000000 %     9.28493212 % May 15 2011     0.00000000 %     9.28493212 % Jun 15 201l     0.00000000 %     9.28493212 % Jul 15 2011     0.00000000 %     9.28493212 % Aug 15 2011     0.00000000 %     9.52666755 % Sep 15 2011     0.00000000 %     8.58030984 % Oct 15 2011     0.00000000 %     7.63395214 % Nov 15 2011     0.00000000 %     6.68759444 % Dec 15 2011     0.00000000 %     5.74123673 % Jan 15 2012     0.00000000 %     4.79487903 % Feb 15 2012     0.00000000 %     8.08819729 % Mar 15 2012     0.00000000 %     7.28905079 % Apr 15 2012     0.00000000 %     6.48990428 % May 15 2012     0.00000000 %     5.69075778 % Jun 15 2012     0.00000000 %     4.89161127 % Jul 15 2012     0.00000000 %     4.09246477 % Aug 15 2012     0.00000000 %     5.23651263 % Sep 15 2012     0.00000000 %     5.23651263 % Oct 15 2012     0.00000000 %     5.23651263 % Nov 15 2012     0.00000000 %     5.23651263 % Dec 15 2012     0.00000000 %     5.23651263 % Jan 15 2013     0.00000000 %     5.23651263 % Feb 15 2013     0.00000000 %     9.38107328 % Mar 15 2013     0.00000000 %     9.38107328 % Apr 15 2013     0.00000000 %     9.38107328 % May 13 2013     0.00000000 %     9.38107328 % Jun 15 2013     0.00000000 %     9.38107328 % Jul 15 2013     0.00000000 %     9.38107328 % Aug 15 2013     0.00000000 %     9.52666755 % Sep l5 2013     0.00000000 %     8.58030984 % Oct 15 2013     0.00000000 %     7.63395214 % Nov 15 2013     0.00000000 %     6.68759444 % Dec 15 2013     0.00000000 %     5.74123673 % Jan 15 2014     0.00000000 %     4.79487903 % Feb 15 2014     0.00000000 %     8.21742565 % Mar 15 2014     0.00000000 %     7.41827915 % Apr 15 2014     0.00000000 %     6.61913264 % May 15 2014     0.00000000 %     5.81998614 % Jun l5 2014     0.00000000 %     5.02083963 % Jul 15 2014     0.00000000 %     4.22169313 %   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory I Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                       (b)     (c)   (a)   Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent   Aug 15 2014     0.00000000 %     5.23651263 % Sep 15 2014     0.00000000 %     5.23651263 % Oct 15 2014     0.00000000 %     5.23651263 % Nov 15 2014     0.00000000 %     5.23651263 % Dec 15 2014     0.00000000 %     5.23651263 % Jan 15 2015     0.00000000 %     5.23651263 % Feb 15 2015     0.00000000 %     10.54729086 % Mar 15 2015     0.00000009 %     10.54729086 % Apr 15 2015     0.00000000 %     10.54729086 % May 15 2015     0.00000000 %     10.54729086 % Jun 15 2015     0.00000000 %     10.54729086 % Jul 15 2015     0.00000000 %     10.54729086 % Aug 15 2015     0.00000000 %     10.50987875 % Sep l5 2015     0.00000000 %     9.56352105 % Oct 15 2015     0.00000000 %     8.61716334 % Nov 15 2015     0.00000000 %     7.67080564 % Dec 15 2015     0.00000000 %     6.72444794 % Jan 15 2016     0.00000000 %     5.77809023 % Feb 15 2016     0.00000000 %     10.42209576 % Mar 15 2016     0.00000000 %     9.45908072 % Apr 15 2016     0.00000000 %     8.49606568 % May 15 2016     0.00000000 %     7.53305064 % Jun 15 20l6     0.00000000 %     6.57003560 % Jul 15 2016     0.00000000 %     5.60702056 % Aug 15 2016     0.00000000 %     6.40018210 % Sep 15 2016     0.00000000 %     6.40018210 % Oct 15 2016     0.00000000 %     6.40018210 % Nov 15 2016     0.00000000 %     6.400182 10 % Dec 15 2016     0.00000000 %     6.40018210 % Jan 15 2017     0.00000000 %     6.40018210 % Feb 15 2017     0.00000000 %     12.12883792 % Mar 15 2017     0.00000000 %     12.12883792 % Apr 15 2017     0.00000000 %     12.12883792 % May 15 2017     0.00000000 %     12.12883792 % Jun 15 2017     0.00000000 %     12.12883792 % Jul 15 2017     0.00000000 %     12.12883792 % Aug 15 2017     0.00000000 %     11.64370478 % Sep 15 2017     9.00000000 %     10.48704537 % Oct 15 2017     0.00000000 %     9.33038595 % Nov 15 2017     0.00000000 %     8.17372653 % Dec 15 2017     0.00000000 %     7.01706712 % Jan 15 2018     0.00000000 %     5.86040770 % Feb 15 2018     0.00000000 %     10.74011105 % Mar 15 2018     0.00000000 %     9.76337644 % Apr 15 2018     0.00000000 %     8.78664182 % May 15 2018     0.00000000 %     7.80990720 % Jun l5 2018     0.00000000 %     6.83317258 % Jul 15 2018     0.00000000 %     5.85643797 % Aug 15 2018     0.00000000 %     6.40018210 % Sep l5 2018     0.00000000 %     6.40018210 % Oct 15 2018     0.00000000 %     6.40018210 % Nov 15 2018     0.00000000 %     6.40018210 % Dec 15 2018     0.00000000 %     6.40018210 % Jan 15 2019     0.00000000 %     6.40018210 % Feb 15 2019     0.00000000 %     12.39085974 % Mar 15 2019     0.00000000 %     12.39085974 % Apr 15 2019     0.00000000 %     12.39085974 % May 15 2019     0.00000000 %     12.39085974 % Jun 15 2019     0.00000000 %     12.39085974 % Jul 15 2019     0.00000000 %     12.39085974 % Aug 15 2019     0.00000000 %     11.64370478 % Sep 15 2019     0.00000000 %     10.48704537 % Oct 15 2019     0.00000000 %     9.33038595 % Nov 15 2019     0.00000000 %     8.17372653 %   --------------------------------------------------------------------------------   Schedule ID to Network Lease (NVG Network Statutory I Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)     (c)       Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent   Dec 15 2019     0.00000000 %     7.01706712 % Jan 15 2020     0.00000000 %     5.86040770 % Feb 15 2020     0.00000000 %     10.96384909 % Mar 15 2020     0.00000000 %     9.98711447 % Apr 15 2020     0.00000000 %     9.01037985 % May 15 2020     0.00000000 %     8.03364523 % Jun 15 2020     0.00000000 %     7.05691062 % Jul 15 2020     0.00000000 %     6.08017600 % Aug 15 2020     0.00000000 %     6.40018210 % Sep 15 2020     0.00000000 %     6.40018210 % Oct 15 2020     0.00000000 %     6.40018210 % Nov 15 2020     0.00000000 %     6.40018210 % Dec 15 2020     0.00000000 %     6.40018210 % Jan 15 2021     0.00000000 %     6.40018210 % Feb 15 2021     0.00000000 %     12.57493630 % Mar 15 2021     0.00000000 %     12.57493630 % Apr 15 2021     0.00000000 %     12.57493630 % May 15 2021     0.00000000 %     12.57493630 % Jun 15 2021     0.00000000 %     12.57493630 % Jul 15 2021     0.00000000 %     12.57493630 % Aug 15 2021     0.00000000 %     11.64370478 % Sep 15 2021     0.00000000 %     10.48704537 % Oct 15 2021     0.00000000 %     9.33038595 % Nov 15 2021     0.00000000 %     8.17372653 % Dec 15 2021     0.00000000 %     7.01706712 % Jan 15 2022     0.00000000 %     5.86040770 % Feb 15 2022     0.00000000 %     11.05842729 % Mar 15 2022     0.00000000 %     10.08169267 % Apr 15 2022     0.00000000 %     9.10495806 % May 15 2022     0.00000000 %     8.12822344 % Jun 15 2022     0.00000000 %     7.15148882 % Jul 15 2022     0.00000000 %     6.17475420 % Aug 15 2022     0.00000000 %     6.40018210 % Sep 15 2022     0.00000000 %     6.40018210 % Oct 15 2022     0.00000000 %     6.40018210 % Nov 15 2022     0.00000000 %     6.40018210 % Dec 15 2022     0.00000000 %     6.40018210 % Jan 15 2023     0.00000000 %     6.40018210 % Feb 15 2023     0.00000000 %     12.57493630 % Mar 15 2023     0.00000000 %     12.57493630 % Apr 15 2023     0.00000000 %     12.57493630 % May 15 2023     0.00000000 %     12.57493630 % Jun 15 2023     0.00000000 %     12.57493630 % Jul 15 2023     0.00000000 %     12.57493630 % Aug 15 2023     0.00000000 %     11.64370478 % Sep 15 2023     0.00000000 %     10.48704537 % Oct 15 2023     0.00000000 %     9.33038595 % Nov 15 2023     0.00000000 %     8.17372653 % Dec l5 2023     0.00000000 %     7.01706712 % Jan 15 2024     0.00000000 %     5.86040770 % Feb 15 2024     0.00000000 %     11.05842729 % Mar 15 2024     0.00000000 %     10.08169267 % Apr 15 2024     0.00000000 %     9.10495806 % May 15 2024     0.00000000 %     8.12822344 % Jun 15 2024     0.00000000 %     7.15148882 % Jul 15 2024     0.00000000 %     6.17475420 % Aug 15 2024     0.00000000 %     6.40018210 % Sep 15 2024     0.00000000 %     6.40018210 % Oct 15 2024     0.00000000 %     6.40016210 % Nov 15 2024     0.00000000 %     6.40018210 % Dec 15 2024     0.00000000 %     6.40018210 % Jan 15 2025     0.00000000 %     6.40018210 % Feb 15 2025     0.00000000 %     11.62035121 % Mar 15 2025     0.00000000 %     10.55365420 %   --------------------------------------------------------------------------------   Schedule ID to Network Lease (NVG Network Statutory I Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)     (c)       Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent   Apr 15 2025     0.00000000 %     9.48695718 % May 15 2025     0.00000000 %     8.42026017 % Jun 15 2025     0.00000000 %     7.35356315 % Jul 15 2025     0.00000000 %     6.28686613 % Aug 15 2025     0.00000000 %     6.40018210 % Sep 15 2025     0.00000000 %     6.40018210 % Oct 15 2025     0.00000000 %     6.40018210 % Nov 15 2025     0.00000000 %     6.40018210 % Dec 15 2025     0.00000000 %     6.40018210 % Jan 15 2026     0.00000000 %     6.40018210 % Feb 15 2026     0.00000000 %     10.04473024 % Mar 15 2026     0.00000000 %     8.97803322 % Apr 15 2026     0.00000000 %     7.91133620 % May 15 2026     0.00000000 %     6.84463919 % Jun 15 2026     0.00000000 %     5.77794217 % Jul 15 2026     0.00000000 %     4.71124516 % Aug 15 2026     0.00000000 %     4.711245l6 % Sep 15 2026     0.00000000 %     4.71124516 % Oct 15 2026     0.00000000 %     4.71124516 % Nov 15 2026     0.00000000 %     4.71124516 % Dec 15 2026     0.00000000 %     4.71124516 % Jan 15 2027     0.00000000 %     4.71124516 % Feb 15 2027     0.00000000 %     3.92603763 % Mar 15 2027     0.00000000 %     3.14083010 % Apr 15 2027     0.00000000 %     2.35562258 % May 15 2027     0.00000000 %     1.57041505 % Jun 15 2027     0.00000000 %     0.78520753 % Jul 15 2027     0.00000000 %     0.00000000 % Aug 15 2027     0.00000000 %     0.00000000 % Sep 15 2027     0.00000000 %     0.00000000 % Sep 26 2027     0.00000000 %     0.00000000 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory I Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Dec 26 2003     104.85152600 % Jan 15 2004     105.30445439 % Feb 15 2004     96.89597217 % Mar 15 2004     97.42644234 % Apr 15 2004     97.95846512 % May 15 2004     98.47089297 % Jun 15 2004     98.98476667 % Jul 15 2004     99.47893807 % Aug 15 2004     98.36610162 % Sep 15 2004     98.86295661 % Oct 15 2004     99.43182794 % Nov 15 2004     99.91011647 % Dec 15 2004     100.38964886 % Jan 15 2005     100.84927575 % Feb 15 2005     97.62232681 % Mar 15 2005     98.07572127 % Apr 15 2005     98.53026262 % May 15 2005     98.96490664 % Jun 15 2005     99.40058661 % Jul 15 2005     99.81625765 % Aug 15 2005     98.67554300 % Sep l5 2005     99.09306691 % Oct 15 2005     99.41603213 % Nov 15 2005     99.81425532 % Dec 15 2005     100.21329899 % Jan 15 2006     100. 59211695 % Feb 15 2006     97.22988601 % Mar 15 2006     97.60118356 % Apr 15 2006     97.97319515 % May 15 2006     98.32770838 % Jun 15 2006     98.68283634 % Jul 15 2006     99.02036604 % Aug 15 2006     97.85471603 % Sep 15 2006     98.19327726 % Oct 15 2006     98.41602088 % Nov l5 2006     98.73730148 % Dec 15 2006     99.05900019 % Jan 15 2007     99.36290285 % Feb 15 2007     95.51642657 % Mar 15 2007     95.81013358 % Apr 15 2007     96.10415962 % May 15 2007     96.38803687 % Jun 15 2007     96.67217499 % Jul 15 2007     96.94610581 % Aug 15 2007     95.78151315 % Sep 15 2007     96.05584919 % Oct 15 2007     96.42016539 % Nov 15 2007     96.68437982 % Dec 15 2007     96.94873878 % Jan 15 2008     97.20277342 % Feb 15 2008     93.58956242 % Mar 15 2008     93.83383147 % Apr 15 2008     94.07818580 % May 15 2008     94.31469424 % Jun 15 2008     94.55124206 % Jul 15 2008     94.78109496 % Aug 15 2008     93.63183047 % Sep 15 2008     93.86168337 % Oct 15 2008     94.10194085 % Nov 15 2008     94.33179375 % Dec 15 2008     94.56164665 % Jan 15 2009     94.79149955 % Feb 15 2009     91.09090002 % Mar 15 2009     91.31031618 % Apr 15 2009     91.52973234 % May 15 2009     91.74914850 % Jun 15 2009     91.96856465 % --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory I Trust) TERMINATION VALUE (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Jul 15 2009     92.18798081 % Aug 15 2009     91.09090002 % Sep 15 2009     91.31031618 % Oct 15 2009     91.46319101 % Nov 15 2009     91.68260717 % Dec 15 2009     91.90202333 % Jan 15 2010     92.12143949 % Feb 15 2010     88.34409081 % Mar 15 2010     88.55254280 % Apr 15 2010     88.76099479 % May 15 2010     88.96944679 % Jun 15 2010     89.17789878 % Jul 15 2010     89.38635077 % Aug 15 2010     88.34409081 % Sep 15 2010     88.55254280 % Oct 15 2010     88.75865077 % Nov 15 2010     88.96710276 % Dec 15 2010     89.17555476 % Jan 15 2011     89.38647959 % Feb 15 2011     85.53607562 % Mar 15 2011     85.73409114 % Apr 15 2011     85.93210666 % May 15 2011     86.13274387 % Jun 15 2011     86.33339658 % Jul 15 2011     86.53668659 % Aug 15 2011     85.55191466 % Sep 15 2011     85.75526727 % Oct 15 2011     85.94061608 % Nov 15 2011     86.14666922 % Dec 15 2011     86.35276992 % Jan 15 2012     86.56154014 % Feb 15 2012     82.65975001 % Mar 15 2012     82.85042466 % Apr 15 2012     83.04109930 % May 15 2012     83.23447995 % Jun 15 2012     83.42787660 % Jul 15 2012     83.62399536 % Aug 15 2012     82.67609847 % Sep 15 2012     82.87228185 % Oct 15 2012     83.19836259 % Nov 15 2012     83.39733335 % Dec 15 2012     83.59635320 % Jan 15 2013     83.79812843 % Feb 15 2013     79.83813998 % Mar 15 2013     80.02272745 % Apr 15 2013     80.20733029 % May 15 2013     80.39475210 % Jun 15 2013     80.58220604 % Jul 15 2013     80.77249582 % Aug 15 2013     79.87088274 % Sep 15 2013     80.06127100 % Oct 15 2013     80.08078992 % Nov 15 2013     80.27409795 % Dec 15 2013     80.46747294 % Jan 15 2014     80.66371881 % Feb 15 2014     76.62550048 % Mar 15 2014     76.80906010 % Apr 15 2014     76.99270507 % May 15 2014     77.17983285 % Jun 15 2014     77.36616441 % Jul 15 2014     77.55599735 % Aug 15 2014     76.73113325 % Sep 15 2014     76.92121181 % Oct 15 2014     77.23503347 % Nov 15 2014     77.42832500 % Dec 15 2014     77.62175944 % Jan 15 2015     77.81828462 % --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory I Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Feb 15 2015     72.68654796 % Mar 15 2015     72.86575254 % Apr 15 2015     73.04512110 % May 15 2015     73.22779888 % Jun 15 2015     73.41066118 % Jul 15 2015     73.59685336 % Aug 15 2015     72.87430528 % Sep 15 2015     73.06090931 % Oct 15 2015     73.12265366 % Nov 15 2015     73.31283731 % Dec 15 2015     73.50324989 % Jan 15 2016     73.69703704 % Feb 15 2016     68.26475653 % Mar 15 2016     68.43974832 % Apr 15 2016     68.61499333 % May 15 2016     68.79478061 % Jun 15 2016     68.97484948 % Jul 15 2016     69.15948916 % Aug 15 2016     68.55127760 % Sep l5 20l6     68.73653972 % Oct l5 20l6     69.00914955 % Nov 15 2016     69.19935442 % Dec 15 2016     69.38990253 % Jan 15 2017     69.58508344 % Feb 15 2017     64.03170866 % Mar 15 2017     64.20736459 % Apr 15 2017     64.38339761 % May 15 2017     64.56449611 % Jun 15 2017     64.74600391 % Jul 15 2017     64.93260958 % Aug 15 20l7     64.44813086 % Sep 15 2017     64.63562292 % Oct 15 2017     64.47841583 % Nov 15 2017     64.67151867 % Dec 15 2017     64.86510183 % Jan 15 2018     65.06385432 % Feb 15 2018     59.38538556 % Mar 15 2018     59.56387156 % Apr 15 2018     59.74287742 % May 15 2018     59.92733257 % Jun 15 2018     60.11234289 % Jul 15 2018     60.30283803 % Aug 15 2018     59.95017995 % Sep 15 2018     60.14186040 % Oct 15 2018     60.13482525 % Nov 15 2018     60.33266059 % Dec 15 2018     60.53113027 % Jan 15 2019     60.73516440 % Feb 15 2019     54.92681863 % Mar 15 2019     55.10982547 % Apr 15 2019     55.29351130 % May 15 2019     55.48305884 % Jun 15 2019     55.67332406 % Jul 15 2019     55.86948993 % Aug 15 2019     55.65690818 % Sep l5 2019     55.85459220 % Oct 15 2019     55.96824064 % Nov l5 2019     56.17267019 % Dec 15 2019     56.37790546 % Jan 15 2020     56.58912996 % Feb 15 2020     50.68636153 % Mar 15 2020     50.86450320 % Apr 15 2020     51.04338331 % May 15 2020     51.22835682 % Jun 15 2020     51.41410919 % Jul 15 2020     51.60599561 % Aug 15 2020     51.47869570 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory I Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Sep 15 2020     51.67222650 % Oct 15 2020     51.87193738 % Nov 15 2020     52.07251432 % Dec 15 2020     52.27396244 % Jan 15 2021     51.76732038 % Feb15 2021     46.68541951 % Mar 15 2021     46.85951472 % Apr 15 2021     47.03441770 % May 15 2021     47.21566156 % Jun 15 2021     47.39775548 % Jul 15 2021     47.58623284 % Aug l5 2021     47.55017517 % Sep 15 2021     47.74044353 % Oct 15 2021     47.93714369 % Nov 15 2021     48.13478536 % Dec 15 2021     48.33337411 % Jan 15 2022     48.69008975 % Feb 15 2022     42.66378559 % Mar 15 2022     42.81289167 % Apr 15 2022     42.96265766 % May 15 2022     43.11862273 % Jun 15 2022     43.27528830 % Jul 15 2022     43.43819378 % Aug 15 2022     43.37641293 % Sep 15 2022     43.54080592 % Oct 15 2022     43.71148454 % Nov 15 2022     43.88295071 % Dec 15 2022     44.05520909 % Jan 15 2023     44.19775231 % Feb 15 2023     38.14481225 % Mar 15 2023     38.26712483 % Apr 15 2023     38.38993879 % May 15 2023     38.51879237 % Jun 15 2023     38.64818604 % Jul 15 2023     38.78365826 % Aug 15 2023     38.69428183 % Sep 15 2023     38.83091597 % Oct 15 2023     38.97367150 % Nov 15 2013     39.11704937 % Dec 15 2023     39.26105326 % Jan 15 2024     39.64044471 % Feb 15 2024     33.55891483 % Mar 15 2024     33.65246842 % Apr 15 2024     33.74635325 % May 15 2024     33.84610653 % Jun 15 2024     33.94622772 % Jul 15 2024     34.05225427 % Aug l5 2024     33.93325795 % Sep 15 2024     34.04009694 % Oct 15 2024     34.15288104 % Nov 15 2024     34.26611015 % Dec 15 2024     34.37978690 % Jan 15 2025     34.69423236 % Feb 15 2025     28.49418382 % Mar 15 2025     28.58140334 % Apr 15 2025     28.66902716 % May 15 2025     28.76279590 % Jun 15 2025     28.85700770 % Jul 15 2025     28.95740339 % Aug 15 2025     28.94496538 % Sep 15 2025     29.04632845 % Oct 15 2025     29.15391772 % Nov 15 2025     29.26203183 % Dec 15 2025     29.37067386 % Jan 15 2026     29.45095681 % Feb 15 2026     24.83630512 % Mar 15 2026     24.93347009 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory I Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessors Cost)           Termination Date   Termination Value   Apr 15 2026     25.03120996 % May 15 2026     25.13547967 % Jun 15 2026     25.24036631 % Jul 15 2026     25.35182508 % Aug 15 2026     25.4639433l % Sep 15 2026     25.57672491 % Oct 15 2026     25.69612536 % Nov 15 2026     25.81623225 % Dec 15 2026     25.93704978 % Jan 15 2027     25.97944347 % Feb 15 2027     26.10768167 % Mar 15 2027     26.23667861 % Apr 15 2027     26.36643878 % May 15 2027     26.52576340 % Jun 15 2027     26.68603069 % Jul 15 2027     26.87604294 % Aug l5 2027     27.06717943 % Sep l5 2027     27.25944680 % Sep 26 2027     27.25944680 %   --------------------------------------------------------------------------------   Schedule 3 to Network Lease (NVG Network Statutory I Trust) PRICING ASSUMPTIONS           (1) Network Cost   $ 388,500,000.00             (2) Owner Lessor’s Cost:   $ 103,500,000.00             (3) Equity Investment:   $ 28,327,000.00             (4) Closing Date:     9/26/2003             (5) Assumed Tax Rate:     38.90 %           (6) Transaction Cost:   $ 1,518,532.81             (7) Early Purchase Date:     1/15/2021             (8) Lessor Note:         Interest Rate:     4.929 %   --------------------------------------------------------------------------------   Schedule 4 to Network Lease (NVG Network Statutory I Trust) EARLY PURCHASE PRICE AND INSTALLMENTS                                                       Underpayment     Overpayment             Early   Early     of     of     Early       Purchase Date   Purchase Amount     Basic Lease Rent*     Basic Lease Rent*     Purchase Price   (1)   Jan 15 2021     36,988,322.64       0.00       13,015,1159.07       23,973,263.57   (2)   Apr 15 2021     5,803,760.61       0.00       0.00       5,803,760.61   (3)   Jun 15 2021     5,803,760.61       0.00       0.00       5,803,760.61   (4)   Sep 15 2021     5,803,760.61       0.00       0.00       5,803,760.61   (5)   Dec 15 2021     5,803,760.61       0.00       0.00       5,803,760.61                                           60,203,365.07       0.00       13,015,059.07       47,188,306.00     *   Values are calculated without regard to any offset for amounts of Basic Lease Rent that are due and owing on such date: the total amount due and payable by Lessee on such date is the sum of (i) the Early Purchase Price and (ii) the amount of Basic Lease Rent payable on such date as set forth on Schedule 1A.   --------------------------------------------------------------------------------   CONTROL, MONITORING AND DATA ANALYSIS NETWORK NETWORK LEASE AGREEMENT (A1) The September 26, 2003, Network Lease Agreement (A1) between the Tennessee Valley Authority (“TVA”), as lessee, and NVG Network I Statutory Trust, as owner lessor, has been filed. Network Lease Agreement (A1) covers an undivided 26.640926641 percent interest in the Control, Monitoring and Data Analysis Network (“Network”). In consideration of NVG Network I Statutory Trust agreeing to lease the undivided interest in the Network to TVA, TVA agrees to pay basic rent to NVG Network I Statutory Trust for the network lease term as set out in the Schedule 1A, with explanatory schedules 1B, 1C, and 1D. Schedule 2 sets out the termination values applicable to this network lease. Schedule 3 describes the pricing assumptions applicable to this network lease. Schedule 4 sets out the early purchase price and installments applicable to this network lease.   --------------------------------------------------------------------------------   CONTROL, MONITORING AND DATA ANALYSIS NETWORK NETWORK LEASE AGREEMENT (A2) The September 26, 2003, Network Lease Agreement (A1) between the Tennessee Valley Authority (“TVA”), as lessee, and NVG Network I Statutory Trust, as owner lessor, has been filed. It is substantially similar to Network Lease Agreement (A2), except as noted below: Network Lease Agreement (A2) covers an undivided 33.462033462 percent interest in the Control, Monitoring and Data Analysis Network (“Network”). In consideration of NVG Network II Statutory Trust agreeing to lease the undivided interest in the Network to TVA, TVA agrees to pay basic rent to NVG Network II Statutory Trust for the network lease term as set out in the Schedule 1A, with explanatory schedules 1B, 1C, and 1D. Schedule 2 sets out the termination values applicable to this network lease. Schedule 3 describes the pricing assumptions applicable to this network lease. Schedule 4 sets out the early purchase price and installments applicable to this network lease. These schedules for Network Lease Agreement (A2) follow on the next pages.   --------------------------------------------------------------------------------   Schedule 1A to Network Lease (NVG Network Statutory II Trust) BASIC RENT PAYMENTS (Percentages are percentages of Owner Lessor’s Cost)           Rent       Payment Date             Percentage   Dec 26 2003     0.00038994 % Jan 15 2004     8.68538939 % Jul 15 2004     1.55202542 % Jan 15 2005     3.58159287 % Jul 15 2005     1.50200673 % Jan 15 2006     3.63413928 % Jul 15 2006     1.44946032 % Jan 15 2007     3.68934114 % Jul 15 2007     1.39425846 % Jan 15 2008     3.74733266 % Jul 15 2008     1.33626695 % Jan 15 2009     3.80825480 % Jul 15 2009     1.27534480 % Jan 15 2010     3.87225567 % Jul 15 2010     1.21134394 % Jan 15 2011     3.93949085 % Jul 15 2011     1.14410876 % Jan 15 2012     4.01012379 % Jul 15 2012     1.07347582 % Jan 15 2013     4.08432619 % Jul 15 2013     0.99927341 % Jan 15 2014     4.32314421 % Jul 15 2014     0.91735661 % Jan 15 2015     5.40656842 % Jul 15 2015     0.80671999 % Jan 15 2016     5.52279611 % Jul 15 2016     0.69049229 % Jan 15 2017     5.64489743 % Jul 15 2017     0.56839098 % Jan 15 2018     5.77316919 % Jul 15 2018     0.44011922 % Jan 15 2019     5.90792322 % Jul 15 2019     0.30536519 % Jan 15 2020     6.04948710 % Jul 15 2020     0.16380130 % Jan 15 2021     6.04948710 % Jul 15 2021     0.16380130 % Jan 15 2022     6.04948710 % Jul 15 2022     0.16380130 % Jan 15 2023     6.04948710 % Jul 15 2023     0.16380130 % Jan 15 2024     6.04948710 % Jul 15 2024     0.16380130 % Jan 15 2025     6.10328141 % Jul 15 2025     0.11000699 % Jan 15 2026     4.57367063 % Jul 15 2026     0.00000000 % Jan l5 2027     0.00000000 % Jul 15 2027     0.00000000 % Sep 26 2027     0.00000000 %   --------------------------------------------------------------------------------   Schedule 1B to Network Lease (NVG Network Statutory II Trust) ALLOCATED RENT (Percentages are percentages of Owner Lessor’s Cost)                   From and     To and   Basic Rent Including     Including   Allocated   Dec 26 2003   Jan 14 2004     0.26830109 % Jan 15 2004   Jul 14 2004     4.88590406 % Jul 15 2004   Jan 14 2005     0.00000000 % Jan 15 2005   Jul 14 2005     5.08359960 % Jul 15 2005   Jan 14 2006     0.00000000 % Jan 15 2006   Jul 14 2006     5.08359960 % Jul 15 2006   Jan 14 2007     0.00000000 % Jan 15 2007   Jul 14 2007     5.08359960 % Jul 15 2007   Jan 14 2008     0.00000000 % Jan 15 2008   Jul 14 2008     5.08359960 % Jul 15 2008   Jan 14 2009     0.00000000 % Jan 15 2009   Jul 14 2009     5.08359960 % Jul 15 2009   Jan 14 2010     0.00000000 % Jan 15 2010   Jul 14 2010     5.08359960 % Jul 15 2010   Jan 14 2011     0.00000000 % Jan 15 2011   Jul 14 2011     5.08359960 % Jul 15 2011   Jan 14 2012     0.00000000 % Jan 15 2012   Jul 14 2012     5.08359960 % Jul 15 2012   Jan 14 2013     0.00000000 % Jan 15 2013   Jul 14 2013     5.08359960 % Jul 15 2013   Jan 14 2014     0.00000000 % Jan 15 2014   Jul 14 2014     5.08359960 % Jul 15 2014   Jan 14 2015     0.00000000 % Jan 15 2015   Jul 14 2015     5.24050083 % Jul 15 2015   Jan 14 2016     0.00000000 % Jan 15 2016   Jul 14 2016     6.21328840 % Jul 15 2016   Jan 14 2017     0.00000000 % Jan 15 2017   Jul 14 2017     6.21328840 % Jul 15 2017   Jan 14 2018     0.00000000 % Jan 15 2018   Jul 14 2018     6.21328840 % Jul 15 2018   Jan 14 2019     0.00000000 % Jan 15 2019   Jul 14 2019     6.21328840 % Jul 15 2019   Jan 14 2020     0.00000000 % Jan 15 2020   Jul 14 2020     6.13679643 % Jul 15 2020   Jan 14 2021     0.08294310 % Jan 15 2021   Jul 14 2021     6.20683727 % Jul 15 2021   Jan 14 2022     0.00000000 % Jan 15 2022   Jul 14 2022     6.21328840 % Jul 15 2022   Jan 14 2023     0.00000000 % Jan 15 2023   Jul 14 2023     6.21328840 % Jul 15 2023   Jan 14 2024     0.00000000 % Jan 15 2024   Jul 14 2024     6.21328840 % Jul 15 2024   Jan 14 2025     0.00000000 % Jan 15 2025   Jul 14 2025     6.21328840 % Jul 15 2025   Jan 14 2026     0.00000000 % Jan 15 2026   Jul 14 2026     6.21328840 % Jul 15 2026   Jan 14 2027     0.00000000 % Jan 15 2027   Jul 14 2027     4.57367063 % Jul 15 2027   Sep 26 2027     0.00000000 %   --------------------------------------------------------------------------------   Schedule 1C to Network Lease (NVG Network Statutory II Trust) ATTRIBUTION OF BASIC LEASE RENT PAYMENTS TO ALLOCATIONS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                               Allocated   Allocated Rent Payment Date     Basic Lease Rent     From and Including   To and Including   Dec 26 2003     0.00038994%   Dec 26 2003   Jan 14 2004 Jan 15 2004     8.68538939%   Dec 26 2003   Jul 14 2005 Jul 15 2004     1.55202542%   Jan 15 2005   Jul 14 2005 Jan 15 2005     3.58159287%   Jan 15 2006   Jul 14 2006 Jul 15 2005     1.50200673%   Jan 15 2006   Jul 14 2006 Jan 15 2006     3.63413928%   Jan 15 2007   Jul 14 2007 Jul 15 2006     1.44946032%   Jan 15 2007   Jul 14 2007 Jan 15 2007     3.68934114%   Jan 15 2008   Jul 14 2008 Jul 15 2007     1.39425846%   Jan 15 2008   Jul 14 2008 Jan 15 2008     3.74733266%   Jan 15 2009   Jul 14 2009 Jul 15 2008     1.33626695%   Jan 15 2009   Jul 14 2009 Jan 15 2009     3.80825480%   Jan 15 2010   Jul 14 2010 Jul 15 2009     1.27534480%   Jan 15 2010   Jul 14 2010 Jan 15 2010     3.87225567%   Jan 15 2011   Jul 14 2011 Jul 15 2010     1.21134394%   Jan 15 2011   Jul 14 2011 Jan 15 2011     3.93949085%   Jan 15 2012   Jul 14 2012 Jul 15 2011     1.14410876%   Jan 15 2012   Jul 14 2012 Jan 15 2012     4.01012379%   Jan 15 2013   Jul 14 2013 Jul 15 2012     1.07347582%   Jan 15 2013   Jul 14 2013 Jan 15 2013     4.08432619%   Jan 15 2014   Jul 14 2014 Jul 15 2013     0.99927341%   Jan 15 2014   Jul 14 2014 Jan 15 2014     4.32314421%   Jan 15 2015   Jul 14 2015 Jul 15 2014     0.91735661%   Jan 15 2015   Jul 14 2015 Jan 15 2015     5.40656842%   Jan 15 2016   Jul 14 2016 Jul 15 2015     0.80671999%   Jan 15 2016   Jul 14 2016 Jan 15 2016     5.52279611%   Jan 15 2017   Jul 14 2017 Jul 15 2016     0.69049229%   Jan 15 2017   Jul 14 2017 Jan 15 2017     5.64489743%   Jan 15 2018   Jul 14 2018 Jul 15 2017     0.56839098%   Jan 15 2018   Jul 14 2018 Jan 15 2018     5.77316919%   Jan 15 2019   Jul 14 2019 Jul 15 2018     0.44011922%   Jan 15 2019   Jul 14 2019 Jan 15 2019     5.90792322%   Jan 15 2020   Jul 14 2020 Jul 15 2019     0.30536519%   Jan 15 2020   Jan 14 2021 Jan 15 2020     6.04948710%   Jul 15 2020   Jul 14 2021 Jul 15 2020     0.16380130%   Jan 15 2021   Jul 14 2021 Jan 15 2021     6.04948710%   Jan 15 2022   Jul 14 2022 Jul 15 2021     0.16380130%   Jan 15 2022   Jul 14 2022 Jan 15 2022     6.04948710%   Jan 15 2023   Jul 14 2023 Jul 15 2022     0.16380130%   Jan 15 2023   Jul 14 2023 Jan 15 2023     6.04948710%   Jan 15 2024   Jul 14 2024 Jul 15 2023     0.16380130%   Jan 15 2024   Jul 14 2024 Jan 15 2024     6.04948710%   Jan 15 2025   Jul 14 2025 Jul 15 2024     0.16380130%   Jan 15 2025   Jul 14 2025 Jan 15 2025     6.10328141%   Jan 15 2026   Jul 14 2026 Jul 15 2025     0.11000699%   Jan 15 2026   Jul 14 2026 Jan 15 2026     4.57367063%   Jan 15 2027   Jul 14 2027 Jul 15 2026     0.00000000%         Jan 15 2027     0.00000000%         Jul 15 2027     0.00000000%         Sep 26 2027     0.00000000%           --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory II Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)                    (b)       (c)         Underpayment       Overpayment   Termination Date     of Basic Lease Rent       of Basic Lease Rent     Dec 26 2003     0.00000000%     0.00000000% Jan 15 2004     0.26791115%     0.00000000% Feb 15 2004     0.00000000%     7.60316090% Mar 15 2004     0.00000000%     6.78884356% Apr 15 2004     0.00000000%     5.97452622% May 15 2004     0.00000000%     5.16020887% Jun 15 2004     0.00000000%     4.34589153% Jul 15 2004     0.00000000%     3.53157418% Aug 15 2004     0.00000000%     5.08359960% Sep 15 2004     0.00000000%     5.08359960% Oct 15 2004     0.00000000%     5.08359960% Nov 15 2004     0.00000000%     5.08359960% Dec 15 2004     0.00000000%     5.08359960% Jan 15 2005     0.00000000%     5.08359960% Feb 15 2005     0.00000000%     7.81792588% Mar 15 2005     0.00000000%     6.97065928% Apr 15 2005     0.00000000%     6.12339268% May 15 2005     0.00000000%     5.27612607% Jun 15 2005     0.00000000%     4.42885947% Jul 15 2005     0.00000000%     3.58159287% Aug 15 2005     0.00000000%     5.08359960% Sep 15 2005     0.00000000%     5.08359960% Oct 15 2005     0.00000000%     5.08359960% Nov 15 2005     0.00000000%     5.08359960% Dec 15 2005     0.00000000%     5.08359960% Jan 15 2006     0.00000000%     5.08359960% Feb 15 2006     0.00000000%     7.87047228% Mar 15 2006     0.00000000%     7.02320568% Apr 15 2006     0.00000000%     6.17593908% May 15 2006     0.00000000%     5.32867248% Jun 15 2006     0.00000000%     4.48140588% Jul 15 2006     0.00000000%     3.63413928% Aug 15 2006     0.00000000%     5.08359960% Sep 15 2006     0.00000000%     5.08359960% Oct 15 2006     0.00000000%     5.08359960% Nov 15 2006     0.00000000%     5.08359960% Dec 15 2006     0.00000000%     5.08359960% Jan 15 2007     0.00000000%     5.08359960% Feb 15 2007     0.00000000%     7.92567415% Mar 15 2007     0.00000000%     7.07840755% Apr 15 2007     0.00000000%     6.23114095% May 15 2007     0.00000000%     5.38387434% Jun 15 2007     0.00000000%     4.53660774% Jul 15 2007     0.00000000%     3.68934114% Aug 15 2007     0.00000000%     5.08359960% Sep 13 2007     0.00000000%     5.08359960% Out 15 2007     0.00000000%     5.08359960% Nov 15 2007     0.00000000%     5.08359960% Dec 15 2007     0.00000000%     5.08359960% Jan 15 2008     0.00000000%     5.08359960% Feb 15 2008     0.00000000%     7.98366566% Mar 15 2008     0.00000000%     7.13639906% Apr 15 2008     0.00000000%     6.28913246% May 15 2008     0.00000000%     5.44186586% Jun 15 2008     0.00000000%     4.59459926% Jul 15 2008     0.00000000%     3.74733266% Aug 15 2008     0.00000000%     5.08359960% Sep 15 2008     0.00000000%     5.08359960% Oct 15 2008     0.00000000%     5.08359960% Nov 15 2008     0.00000000%     5.08359960% Dec 15 2008     0.00000000%     5.08359960% Jan 15 2009     0.00000008%     5.08359960% Feb l5 2009     0.00000000%     8.04458780% Mar 15 2009     0.00000000%     7.19732120%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory II Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)                  (b)       (c)         Underpayment       Overpayment   Termination Date     of Basic Lease Rent       of Basic Lease Rent     Apr 15 2009     0.00000000%     6.35005460% May 15 2009     0.00000000%     5.50278800% Jun 15 2009     0.00000000%     4.65552140% Jul 15 2009     0.00000000%     3.80825480% Aug 15 2009     0.00000000%     5.08359960% Sep 15 2009     0.00000000%     5.08359960% Oct 15 2009     0.00000000%     5.08359960% Nov 15 2009     0.00000000%     5.08359960% Dec 15 2009     0.00000000%     5.08359960% Jan 15 2010     0.00000000%     5.08359960% Feb 15 2010     0.00000000%     8.10858867% Mar 15 2010     0.00000000%     7.26132207% Apr 15 2010     0.00000000%     6.41405547% May 15 2010     0.00000000%     5.56678887% Jun 15 2010     0.00000000%     4.71952227% Jul 15 2010     0.00000000%     3.87225567% Aug 15 2010     0.00000000%     5.08359960% Sep 15 2010     0.00000000%     5.08359960% Oct 15 2010     0.00000000%     5.08359960% Nov 15 2010     0.00000000%     5.08359960% Dec 15 2010     0.00000000%     5.08359960% Jan 15 2011     0.00000000%     5.08359960% Feb 15 2011     0.00000000%     8.17582385% Mar 15 2011     0.00000000%     7.32855725% Apr 15 2011     0.00000000%     6.48129065% May 15 2011     0.00000000%     5.63402405% Jun 15 2011     0.00000000%     4.78675745% Jul 15 2011     0.00000000%     3.93949085% Aug 15 2011     0.00000000%     5.08359960% Sep 15 2011     0.00000000%     5.08359960% Oct 15 2011     0.00000000%     5.08359960% Nov 15 2011     0.00000000%     5.08359960% Dec 15 2011     0.00000000%     5.08359960% Jan 15 2012     0.00000000%     5.08359960% Feb 15 2012     0.00000000%     8.24645679% Mar 15 2012     0.00000000%     7.39919019% Apr 15 2012     0.00000000%     6.55192359% May 15 2012     0.00000000%     5.70465699% Jun 15 2012     0.00000000%     4.85739039% Jul 15 2012     0.00000000%     4.01012379% Aug 15 2012     0.00000000%     5.08359960% Sep 15 2012     0.00000000%     5.08359960% Oct 15 2012     0.00000000%     5.08359960% Nov 15 2012     0.00000000%     5.08359960% Dec 15 2012     0.00000000%     5.08359960% Jan 15 2013     0.00000000%     5.08359960% Feb 15 2013     0.00000000%     8.32065920% Mar 15 2013     0.00000000%     7.47339260% Apr 15 2013     0.00000000%     6.62612600% May 15 2013     0.00000000%     5.77885940% Jun 15 2013     0.00000000%     4.93159280% Jul 15 2013     0.00000000%     4.08432619% Aug 15 2013     0.00000000%     5.08359960% Sep 15 2013     0.00000000%     5.08359960% Oct 15 2013     0.00000000%     5.08359960% Nov 15 2013     0.00000000%     5.08359960% Dec 15 2013     0.00000000%     5.08359960% Jan 15 2014     0.00000000%     5.08359960% Feb 15 2014     0.00000000%     8.55947722% Mar 15 2014     0.00000000%     7.71221061% Apr 15 2014     0.00000000%     6.86494401% May 15 2014     0.00000000%     6.01767741% Jun 15 2014     0.00000000%     5.17041081% Jul 15 2014     0.00000000%     4.32314421%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory II Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)           (a)   (b)   (c)     Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Aug 15 2014   0.00000000%   5.24050083% Sep 15 2014   0.00000000%   5.24050083% Oct 15 2014   0.00000000%   5.24050083% Nov 15 2014   0.00000000%   5.24050083% Dec 15 2014   0.00000000%   5.24050083% Jan 15 2015   0.00000000%   5.24050083% Feb 15 2015   0.00000000%   9.77365244% Mar 15 2015   0.00000000%   8.90023563% Apr 15 2015   0.00000000%   8.02681883% May 15 2015   0.00000000%   7.15340202% Jun 15 2015   0.00000000%   6.27998522% Jul 15 2015   0.00000000%   5.40656842% Aug 15 2015   0.00000000%   6.21328840% Sep 15 2015   0.00000000%   6.21328840% Oct 15 2015   0.00000000%   6.21328840% Nov 15 2015   0.00000000%   6.21328840% Dec 15 2015   0.00000000%   6.21328840% Jan 15 2016   0.00000000%   6.21328840% Feb 15 2016   0.00000000%   10.70053645% Mar 15 2016   0.00000000%   9.66498838% Apr 15 2016   0.00000000%   8.62944031% May 15 2016   0.00000000%   7.59389225% Jun 15 2016   0.00000000%   6.55834418% Jul 15 2016   0.00000000%   5.52279611% Aug 15 2016   0.00000000%   6.21328840% Sep 15 2016   0.00000000%   6.21328840% Oct 15 2016   0.00000000%   6.21328840% Nov 15 2016   0.00000000%   6.21328840% Dec 15 2016   0.00000000%   6.21328840% Jan 15 2017   0.00000000%   6.21328840% Feb 15 2017   0.00000000%   10.82263776% Mar 15 2017   0.00000000%   9.78708970% Apr 15 2017   0.00000000%   8.75154163% May 15 2017   0.00000000%   7.71599356% Jun 15 2017   0.00000000%   6.68044549% Jul 15 2017   0.00000000%   5.64489743% Aug 15 2017   0.00000000%   6.21328840% Sep 15 2017   0.00000000%   6.21328840% Oct 15 2017   0.00000000%   6.21328840% Nov 15 2017   0.00000000%   6.21328840% Dec 15 2017   0.00000000%   6.21328840% Jan 15 2018   0.00000000%   6.21328840% Feb 15 2018   0.00000000%   10.95090952% Mar 15 2018   0.00000000%   9.91536145% Apr 15 2018   0.00000000%   8.87981339% May 15 2018   0.00000000%   7.84426532% Jun 15 2018   0.00000000%   6.80871725% Jul 15 2018   0.00000000%   5.77316919% Aug 15 2018   0.00000000%   6.21328840% Sep 15 2018   0.00000000%   6.21328840% Oct 15 2018   0.00000000%   6.21328840% Nov 15 2018   0.00000000%   6.21328840% Dec 15 2018   0.00000000%   6.21328840% Jan 15 2019   0.00000000%   6.21328840% Feb 15 2019   0.00000000%   11.08566355% Mar 15 2019   0.00000000%   10.05011548% Apr 15 2019   0.00000000%   9.01456742% May 15 2019   0.00000000%   7.97901935% Jun 15 2019   0.00000000%   6.94347128% Jul 15 2019   0.00000000%   5.90792322% Aug 15 2019   0.00000000%   6.21328840% Sep 15 2019   0.00000000%   6.21328840% Oct 15 2019   0.00000000%   6.21328840% Nov 15 2019   0.00000000%   6.21328840% --------------------------------------------------------------------------------   Schedule ID to Network Lease (NVG Network Statutory II Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)   (c)       Underpayment       Overpayment   Termination Date     of Basic Lease Rent       of Basic Lease Rent     Dec 15 2019     0.00000000%       6.21328840%   Jan 15 2020     0.00000000%       6.21328840%   Feb 15 2020     0.00000000%       11.23997610%   Mar 15 2020     0.00000000%       10.21717669%   Apr 15 2020     0.00000000%       9.19437729%   May 15 2020     0.00000000%       8.17157788%   Jun 15 2020     0.00000000%       7.14877848%   Jul 15 2020     0.00000000%       6.12597907%   Aug 15 2020     0.00000000%       6.27595653%   Sep 15 2020     0.00000000%       6.26213267%   Oct 15 2020     0.00000000%       6.24830882%   Nov 15 2020     0.00000000%       6.23448497%   Dec 15 2020     0.00000000%       6.22066112%   Jan 15 2021     0.00000000%       6.20683727%   Feb 15 2021     0.00000000%       11.22185149%   Mar 15 2021     0.00000000%       10.18737862%   Apr 15 2021     0.00000000%       9.15290574%   May 15 2021     0.00000000%       8.11843286%   Jun 15 2021     0.00000000%       7.08395998%   Jul 15 2021     0.00000000%       6.04948710%   Aug 15 2021     0.00000000%       6.21328840%   Sep 15 2021     0.00000000%       6.21328840%   Oct 15 2021     0.00000000%       6.21328840%   Nov 15 2021     0.00000000%       6.21328840%   Dec 15 2021     0.00000000%       6.21328840%   Jan 15 2022     0.00000000%       6.21328840%   Feb 15 2022     0.00000000%       11.22722744%   Mar 15 2022     0.00000000%       10.19167937%   Apr 15 2022     0.00000000%       9.15613130%   May 15 2022     0.00000000%       8.12058323%   Jun 15 2022     0.00000000%       7.08503517%   Jul 15 2022     0.00000000%       6.04948710%   Aug 15 2022     0.00000000%       6.21328840%   Sep 15 2022     0.00000000%       6.21328840%   Oct 15 2022     0.00000000%       6.21328840%   Nov 15 2022     0.00000000%       6.21328840%   Dec 15 2022     0.00000000%       6.21328840%   Jan 15 2023     0.00000000%       6.21328840%   Feb 15 2023     0.00000000%       11.22722744%   Mar 15 2023     0.00000000%       10.19167937%   Apr 15 2023     0.00000000%       9.15613130%   May 15 2023     0.00000000%       8.12058323%   Jun 15 2023     0.00000000%       7.08503517%   Jul 15 2023     0.00000000%       6.04948710%   Aug 15 2023     0.00000000%       6.21328840%   Sep 15 2023     0.00000000%       6.21328840%   Oct 15 2023     0.00000000%       6.21328840%   Nov 15 2023     0.00000000%       6.21328840%   Dec 15 2023     0.00000000%       6.21328840%   Jan 15 2024     0.00000000%       6.21328840%   Feb 15 2024     0.00000000%       11.22722744%   Mar 15 2024     0.00000000%       10.19167937%   Apr 15 2024     0.00000000%       9.15613130%   May 15 2024     0.00000000%       8.12058323%   Jun 15 2024     0.00000000%       7.08503517%   Jul 15 2024     0.00000000%       6.04948710%   Aug 15 2024     0.00000000%       6.21328840%   Sep 15 2024     0.00000000%       6.21328840%   Oct 15 2024     0.00000000%       6.21328840%   Nov 15 2024     0.00000000%       6.21328840%   Dec 15 2024     0.00000000%       6.21328840%   Jan 15 2025     0.00000000%       6.21328840%   Feb 15 2025     0.00000000%       11.28102175%   Mar 15 2025     0.00000000%       10.24547368%     --------------------------------------------------------------------------------   Schedule ID to Network Lease (NVG Network Statutory II Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)   (c)       Underpayment       Overpayment     Termination Date     of Basic Lease Rent       of Basic Lease Rent     Apr 15 2025     0.00000000%       9.20992561%   May 15 2025     0.00000000%       8.17437755%   Jun 15 2025     0.00000000%       7.13882948%   Jul 15 2025     0.00000000%       6.10328141%   Aug 15 2025     0.00000000%       6.21328840%   Sep 15 2025     0.00000000%       6.21328840%   Oct 15 2025     0.00000000%       6.21328840%   Nov 15 2025     0.00000000%       6.21328840%   Dec 15 2025     0.00000000%       6.21328840%   Jan 15 2026     0.00000000%       6.21328840%   Feb 15 2026     0.00000000%       9.75141097%   Mar 15 2026     0.00000000%       8.71586290%   Apr 15 2026     0.00000000%       7.68031483%   May 15 2026     0.00000000%       6.64476676%   Jun 15 2026     0.00000000%       5.60921870%   Jul 15 2026     0.00000000%       4.57367063%   Aug 15 2026     0.00000000%       4.57367063%   Sep 15 2026     0.00000000%       4.57367063%   Oct 15 2026     0.00000000%       4.57367063%   Nov 15 2026     0.00000000%       4.57367063%   Dec 15 2026     0.00000000%       4.57367063%   Jan 15 2027     0.00000000%       4.57367063%   Feb 15 2027     0.00000000%       3.81139219%   Mar 15 2027     0.00000000%       3.04911375%   Apr 15 2027     0.00000000%       2.28683532%   May 15 2027     0.00000000%       1.52455688%   Jun 15 2027     0.00000000%       0.76227844%   Jul 15 2027     0.00000000%       0.00000000%   Aug 15 2027     0.00000000%       0.00000000%   Sep 15 2027     0.00000000%       0.00000000%   Sep 26 2027     0.00000000%       0.00000000%     --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory II Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date     Termination Value     Dec 26 2003     105.33650342%   Jan 15 2004     105.72183209%   Feb 15 2004     97.49798430%   Mar 15 2004     97.96035945%   Apr 15 2004     98.42357155%   May 15 2004     98.87248194%   Jun 15 2004     99.32217397%   Jul 15 2004     99.75750873%   Aug 15 2004     98.64154394%   Sep 15 2004     99.07833340%   Oct 15 2004     99.50071258%   Nov 15 2004     99.92376440%   Dec 15 2004     100.34749160%   Jan 15 2005     100.75675487%   Feb 15 2005     97.57670754%   Mar 15 2005     97.97887437%   Apr 15 2005     98.38166504%   May 15 2005     98.77001443%   Jun 15 2005     99.15893089%   Jul 15 2005     99.53334907%   Aug 15 2005     98.40627035%   Sep 15 2005     98.78171028%   Oct 15 2005     99.14259655%   Nov 15 2005     99.50393706%   Dec 15 2005     99.86573365%   Jan 15 2006     100.21292054%   Feb 15 2006     96.91760836%   Mar 15 2006     97.25683503%   Apr 15 2006     97.59646291%   May 15 2006     97.92344726%   Jun 15 2006     98.25078252%   Jul 15 2006     98.56542375%   Aug 15 2006     97.43090485%   Sep 15 2006     97.74614772%   Oct 15 2006     98.04864685%   Nov 15 2006     98.35139631%   Dec 15 2006     98.65439710%   Jan 15 2007     98.94460387%   Feb 15 2007     95.53646899%   Mar 15 2007     95.81787588%   Apr 15 2007     96.09948423%   May 15 2007     96.37376416%   Jun 15 2007     96.64821625%   Jul 15 2007     96.91531053%   Aug 15 2007     95.78828899%   Sep 15 2007     96.05566915%   Oct 15 2007     96.31566242%   Nov 15 2007     96.57576917%   Dec 15 2007     96.83598985%   Jan 15 2008     97.08879424%   Feb 15 2008     93.58468465%   Mar 15 2008     93.82799200%   Apr 15 2008     94.07138397%   May 15 2008     94.30890890%   Jun 15 2008     94.54649469%   Jul 15 2008     94.77818959%   Aug 15 2008     93.67365446%   Sep 15 2008     93.90542333%   Oct 15 2008     94.13127741%   Nov 15 2008     94.35714440%   Dec 15 2008     94.58302435%   Jan 15 2009     94.80573551%   Feb 15 2009     91.21003818%   Mar 15 2009     91.42259565%   Apr 15 2009     91.63515311%   May 15 2009     91.84771058%   Jun 15 2009     92.06026805%     --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory II Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date     Termination Value     Jul 15 2009     92.27332361%   Aug 15 2009     91.21103640%   Sep 15 2009     91.42409606%   Oct 15 2009     91.63879193%   Nov 15 2009     91.85349658%   Dec 15 2009     92.06821005%   Jan 15 2010     92.28456652%   Feb 15 2010     88.61801612%   Mar 15 2010     88.82373707%   Apr 15 2010     89.02947375%   May 15 2010     89.23694623%   Jun 15 2010     89.44444165%   Jul 15 2010     89.65368010%   Aug 15 2010     88.65160480%   Sep 15 2010     88.86090376%   Oct 15 2010     89.07195315%   Nov 15 2010     89.28304018%   Dec 15 2010     89.49416499%   Jan 15 2011     89.70704774%   Feb 15 2011     85.96927895%   Mar 15 2011     86.17104635%   Apr 15 2011     86.37285929%   May 15 2011     86.57652815%   Jun 15 2011     86.78025036%   Jul 15 2011     86.98583634%   Aug 15 2011     86.04737479%   Sep 15 2011     86.25308347%   Oct 15 2011     86.46066408%   Nov 15 2011     86.66831411%   Dec 15 2011     86.87603385%   Jan 15 2012     87.08563378%   Feb 15 2012     83.27341548%   Mar 15 2012     83.47139901%   Apr 15 2012     83.66946089%   May 15 2012     83.86950641%   Jun 15 2012     84.06963876%   Jul 15 2012     84.27176326%   Aug 15 2012     83.40050731%   Sep 15 2012     83.60282294%   Oct 15 2012     83.80713969%   Nov 15 2012     84.01156081%   Dec 15 2012     84.21608674%   Jan 15 2013     84.42262287%   Feb 15 2013     80.53257924%   Mar 15 2013     80.72697576%   Apr 15 2013     80.92148671%   May 15 2013     81.11811707%   Jun 15 2013     81.31487104%   Jul 15 2013     81.51375364%   Aug 15 2013     80.71349569%   Sep 15 2013     80.91264456%   Oct 15 2013     81.11393189%   Nov 15 2013     81.31536197%   Dec 15 2013     81.51693537%   Jan 15 2014     81.72065721%   Feb 15 2014     77.58773477%   Mar 15 2014     77.77810993%   Apr 15 2014     77.96863908%   May 15 2014     78.16143709%   Jun 15 2014     78.35439904%   Jul 15 2014     78.54963984%   Aug 15 2014     77.82769802%   Sep 15 2014     78.02328753%   Oct 15 2014     78.22116667%   Nov 15 2014     78.41923064%   Dec 15 2014     78.61748021%   Jan 15 2015     78.81803034%     --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory II Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date     Termination Value     Feb 15 2015     73.59376843%   Mar 15 2015     73.77627155%   Apr 15 2015     73.95897209%   May 15 2015     74.14423772%   Jun 15 2015     74.32971212%   Jul 15 2015     74.51776300%   Aug 15 2015     73.89931412%   Sep 15 2015     74.08780634%   Oct 15 2015     74.27888744%   Nov 15 2015     74.47020121%   Dec 15 2015     74.66174860%   Jan 15 2016     74.85589743%   Feb 15 2016     69.50812413%   Mar 15 2016     69.68339322%   Apr 15 2016     69.85890961%   May 15 2016     70.03785083%   Jun 15 2016     70.21705442%   Jul 15 2016     70.39969801%   Aug 15 2016     69.89212689%   Sep 15 2016     70.07532679%   Oct 15 2016     70.26198310%   Nov 15 2016     70.44893349%   Dec 15 2016     70.63617916%   Jan 15 2017     70.82689786%   Feb 15 2017     65.35267968%   Mar 15 2017     65.52367097%   Apr 15 2017     65.69497559%   May 15 2017     65.86993516%   Jun 15 2017     66.04522437%   Jul 15 2017     66.22418489%   Aug 15 2017     65.83510051%   Sep 15 2017     66.01475459%   Oct 15 2017     66.19809793%   Nov 15 2017     66.38180535%   Dec 15 2017     66.56587835%   Jan 15 2018     66.75365875%   Feb 15 2018     61.14727365%   Mar 15 2018     61.31444162%   Apr 15 2018     61.48199504%   May 15 2018     61.65344792%   Jun 15 2018     61.82530386%   Jul 15 2018     62.00107695%   Aug 15 2018     61.73715162%   Sep 15 2018     61.91376806%   Oct 15 2018     62.09432119%   Nov 15 2018     62.27531477%   Dec 15 2018     62.45675062%   Jan 15 2019     62.64214297%   Feb 15 2019     56.89761343%   Mar 15 2019     57.06146933%   Apr 15 2019     57.22578935%   May 15 2019     57.39426861%   Jun 15 2019     57.56323099%   Jul 15 2019     57.73637168%   Aug 15 2019     57.60464945%   Sep 15 2019     57.77879675%   Oct 15 2019     57.95714366%   Nov 15 2019     58.13601423%   Dec 15 2019     58.31541062%   Jan 15 2020     58.49902819%   Feb 15 2020     52.61011000%   Mar 15 2020     52.77122646%   Apr 15 2020     52.93289274%   May 15 2020     53.09899420%   Jun 15 2020     53.26566596%   Jul 15 2020     53.43679346%   Aug 15 2020     53.44471061%     --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory II Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date     Termination Value     Sep 15 2020     53.61702243%   Oct 15 2020     53.79381318%   Nov 15 2020     53.97121814%   Dec 15 2020     54.14923983%   Jan 15 2021     52.83176391%   Feb 15 2021     48.42543457%   Mar 15 2021     48.56906836%   Apr 15 2021     48.71318012%   May 15 2021     48.86166235%   Jun 15 2021     49.01064247%   Jul 15 2021     49.16401306%   Aug 15 2021     49.15410033%   Sep 15 2021     49.30850901%   Oct 15 2021     49.46733047%   Nov 15 2021     49.62669230%   Dec 15 2021     49.78659674%   Jan 15 2022     49.95093652%   Feb 15 2022     44.02634817%   Mar 15 2022     44.15164793%   Apr 15 2022     44.27735033%   May 15 2022     44.40734756%   Jun 15 2022     44.53776674%   Jul 15 2022     44.67250012%   Aug 15 2022     44.64387360%   Sep 15 2022     44.77949162%   Oct 15 2022     44.91944519%   Nov 15 2022     45.05986163%   Dec 15 2022     45.20074282%   Jan 15 2023     45.34598120%   Feb 15 2023     39.40221297%   Mar 15 2023     39.50825404%   Apr 15 2023     39.61461863%   May 15 2023     39.72519859%   Jun 15 2023     39.83612072%   Jul 15 2023     39.95127695%   Aug 15 2023     39.90299284%   Sep 15 2023     40.01887250%   Oct 15 2023     40.13900662%   Nov 15 2023     40.25952216%   Dec 15 2023     40.38042070%   Jan 15 2024     40.50559433%   Feb 15 2024     34.54167890%   Mar 15 2024     34.62748999%   Apr 15 2024     34.71354148%   May 15 2024     34.80372489%   Jun 15 2024     34.89416666%   Jul 15 2024     34.98875838%   Aug 15 2024     34.91982527%   Sep 15 2024     35.01497109%   Oct 15 2024     35.11428618%   Nov 15 2024     35.21389716%   Dec 15 2024     35.31380524%   Jan 15 2025     35.41790216%   Feb 15 2025     29.38453370%   Mar 15 2025     29.45465857%   Apr 15 2025     29.52499623%   May 15 2025     29.59950757%   Jun 15 2025     29.67424972%   Jul 15 2025     29.75318365%   Aug 15 2025     29.72235957%   Sep 15 2025     29.80179248%   Oct 15 2025     29.88543644%   Nov 15 2025     29.96934874%   Dec 15 2025     30.05353047%   Jan 15 2026     30.14194277%   Feb 15 2026     25.63863786%   Mar 15 2026     25.70929269%     --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory II Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Apr 15 2026     25.78023782 % May 15 2026     25.85557937 % Jun 15 2026     25.93123048 % Jul 15 2026     26.01129735 % Aug 15 2026     26.09169318 % Sep 15 2026     26.17241934 % Oct 15 2026     26.25758211 % Nov 15 2026     26.34309478 % Dec 15 2026     26.42895880 % Jan 15 2027     26.51928053 % Feb 15 2027     26.60997338 % Mar 15 2027     26.70103885 % Apr 15 2027     26.79247848 % May 15 2027     26.90473894 % Jun 15 2027     27.01746065 % Jul 15 2027     27.15109064 % Aug 15 2027     27.28526967 % Sep 15 2027     27.42000000 % Sep 26 2027     25.92000000 %   --------------------------------------------------------------------------------   Schedule 3 to Network Lease (NVG Network Statutory II Trust) PRICING ASSUMPTIONS               (1)   Network Cost:   $ 388,500,000.00                 (2)   Owner Lessor’s Cost:   $ 130,000,000.00                 (3)   Equity Investment:   $ 38,211,000.00                 (4)   Closing Date:     9/26/2003                 (5)   Assumed Tax Rate:     39.55 %               (6)   Transaction Cost:   $ 1,907,335.91                 (7)   Early Purchase Date:     1/15/2021                 (8)   Lessor Note:     4.929 %     Interest Rate:           --------------------------------------------------------------------------------   Schedule 4 to Network Lease (NVG Network Statutory II Trust) EARLY PURCHASE PRICE AND INSTALLMENTS                                                               Underpayment     Overpayment             Early   Early     of     of     Early       Purchase Date   Purchase Amount     Basic Lease Rent *     Basic Lease Rent *     Purchase Price     (1)   Jan 15 2021     46,733,106.73       0.00       15,933,221.68       30,799,885.05   (2)   Apr 15 2021     7504,268.70       0.00       0.00       7,504,268.70   (3)   Jun 15 2021     7,504,268.70       0.00       0.00       7,504,268.70   (4)   Sep 15 2021     7,504,268.70       0.00       0.00       7,504,268.70   (5)   Dec 15 2021     7,504,268.70       0.00       0.00       7,504,268.70                                                   76,750,181.53       00.00       15,933,221.68       60,816,959.85     * Values are calculated without regard to any offset for amounts of Basic Lease Rent that are due and owing on such date: the total amount due and payable by Lessee on such date is the sum of (i) the Early Purchase Price and (ii) the amount of Basic Lease Rent payable on such date as set forth on Schedule 1A.   --------------------------------------------------------------------------------   CONTROL, MONITORING AND DATA ANALYSIS NETWORK NETWORK LEASE AGREEMENT (A3) The September 26, 2003, Network Lease Agreement (A1) between the Tennessee Valley Authority (“TVA”), as lessee, and NVG Network I Statutory Trust, as owner lessor, has been filed. It is substantially similar to Network Lease Agreement (A3), except as noted below: Network Lease Agreement (A3) covers an undivided 21.879021879 percent interest in the Control, Monitoring and Data Analysis Network (“Network”). In consideration of NVG Network III Statutory Trust agreeing to lease the undivided interest in the Network to TVA, TVA agrees to pay basic rent to NVG Network III Statutory Trust for the network lease term as set out in the Schedule 1A, with explanatory schedules 1B, 1C, and 1D. Schedule 2 sets out the termination values applicable to this network lease. Schedule 3 describes the pricing assumptions applicable to this network lease. Schedule 4 sets out the early purchase price and installments applicable to this network lease. These schedules for Network Lease Agreement (A3) follow on the next pages.   --------------------------------------------------------------------------------   Schedule 1A to Network Lease (NVG Network Statutory III Trust) BASIC RENT PAYMENTS (Percentages are percentages of Owner Lessor’s Cost)       Rent     Payment Date   Percentage   Sep 26 2003   0.00000000% Dec 26 2003   0.60717044% Jan 15 2004   8.18444750% Jul 15 2004   1.61937326% Jan 15 2005   3.59901053% Jul 15 2005   1.57058510% Jan 15 2006   3.65026422% Jul 15 2006   1.51933141% Jan 15 2007   3.70410804% Jul 15 2007   1.46548759% Jan 15 2008   3.76067288% Jul 15 2008   1.40892275% Jan 15 2009   3.82009625% Jul 15 2009   1.34949938% Jan 15 2010   3.88252261% Jul 15 2010   1.28707302% Jan 15 2011   3.94810371% Jul 15 2011   1.22149192% Jan 15 2012   4.01699898% Jul 15 2012   1.15259664% Jan 15 2013   4.08937591% Jul 15 2013   1.08021972% Jan 15 2014   4.32899564% Jul 15 2014   1.00015364% Jan 15 2015   5.42733617% Jul 15 2015   0.89104572% Jan 15 2016   5.54195790% Jul 15 2016   0.77642399% Jan 15 2017   5.66237209% Jul 15 2017   0.65600980% Jan 15 2018   5.78887147% Jul 15 2018   0.52951043% Jan 15 2019   5.92176354% Jul 15 2019   0.39661835% Jan 15 2020   6.06137138% Jul 15 2020   0.25701051% Jan 15 2021   6.06137138% Jul 15 2021   0.25701051% Jan 15 2022   6.06137138% Jul 15 2022   0.25701051% Jan 15 2023   6.18588824% Jul 15 2023   0.13249365% Jan 15 2024   6.31838189% Jul 15 2024   0.00000000% Jan 15 2025   6.31838189% Jul 15 2025   0.00000000% Jan 15 2026   4.65103111% Jul 15 2026   0.00000000% Jan 15 2027   0.00000000% Jul 15 2027   0.00000000% Sep 26 2027   0.00000000%   --------------------------------------------------------------------------------   Schedule 1B to Network Lease (NVG Network Statutory III Trust) ALLOCATED RENT (Percentages are percentages of Owner Lessor’s Cost)           From and   To and   Basic Rent Including   Including   Allocated   Sep 26 2003   Dec 25 2003   0.00000000% Dec 26 2003   Jan 14 2004   0.27283977% Jan 15 2004   Jul 14 2004   4.96855580% Jul 15 2004   Jan 14 2005   0.00000000% Jan 15 2005   Jul 14 2005   5.16959563% Jul 15 2005   Jan 14 2006   0.00000000% Jan 15 2006   Jul 14 2006   0.00000000% Jul 15 2006   Jan 14 2007   5.60558562% Jan 15 2007   Jul 14 2007   4.73360564% Jul 15 2007   Jan 14 2008   0.00000000% Jan 15 2008   Jul 14 2008   5.16959563% Jul 15 2008   Jan 14 2009   0.00000000% Jan 15 2009   Jul 14 2009   5.16959563% Jul 15 2009   Jan 14 2010   0.00000000% Jan 15 2010   Jul 14 2010   0.00000000% Jul 15 2010   Jan 14 2011   5.60558562% Jan 15 2011   Jul 14 2011   4.73360564% Jul 15 2011   Jan 14 2012   0.00000000% Jan 15 2012   Jul 14 2012   0.00000000% Jul 15 2012   Jan 14 2013   5.60558562% Jan 15 2013   Jul 14 2013   0.00000000% Jul 15 2013   Jan 14 2014   5.13282539% Jan 15 2014   Jul 14 2014   4.77037588% Jul 15 2014   Jan 14 2015   0.00000000% Jan 15 2015   Jul 14 2015   0.00000000% Jul 15 2015   Jan 14 2016   5.77859560% Jan 15 2016   Jul 14 2016   5.86893557% Jul 15 2016   Jan 14 2017   0.00000000% Jan 15 2017   Jul 14 2017   0.00000000% Jul 15 2017   Jan l4 2018   6.85125747% Jan 15 2018   Jul 14 2018   5.78550631% Jul 15 2018   Jan 14 2019   0.00000000% Jan l5 2019   Jul 14 2019   0.00000000% Jul 15 2019   Jan 14 2020   6.85125747% Jan 15 2020   Jul 14 2020   0.00000000% Jul 15 2020   Jan 14 2021   6.27344058% Jan 15 2021   Jul 14 2021   5.83044762% Jul 15 2021   Jan 14 2022   0.00000000% Jan 15 2022   Jul 14 2022   6.31838189% Jul 15 2022   Jan 14 2023   0.00000000% Jan 15 2023   Jul 14 2023   0.00000000% Jul 15 2023   Jan 14 2024   6.85125747% Jan 15 2024   Jul 14 2024   5.78550631% Jul 15 2024   Jan 14 2025   0.00000000% Jan 15 2025   Jul 14 2025   0.00000000% Jul 15 2025   Jan 14 2026   6.85125747% Jan 15 2026   Jul 14 2026   0.00000000% Jul 15 2026   Jan 14 2027   6.27344058% Jan 15 2027   Jul 14 2027   4.16309685% Jul 15 2027   Sep 26 2027   0.00000000%   --------------------------------------------------------------------------------   Schedule 1C to Network Lease (NVG Network Statutory III Trust) ATTRIBUTION OF BASIC LEASE RENT PAYMENTS TO ALLOCATIONS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                       Allocated   Allocated Rent Payment Date   Basic Lease Rent   From and Including   To and Including   Sep 26 2003   0.00000000%         Dec 26 2003   0.60717044%   Dec 26 2003   Jul 14 2004 Jan 15 2004   8.18444750%   Jan 15 2004   Jul 14 2005 Jul 15 2004   1.61937326%   Jan 15 2005   Jul 14 2005 Jan 15 2005   3.59901053%   Jul 15 2006   Jan 14 2007 Jul 15 2005   1.57058510%   Jul 15 2006   Jan 14 2007 Jan 15 2006   3.65026422%   Jul 15 2006   Jul 14 2007 Jul 15 2006   1.51933141%   Jan 15 2007   Jul 14 2007 Jan 15 2007   3.70410804%   Jan 15 2008   Jul 14 2008 Jul 15 2007   1.46548759%   Jan 15 2008   Jul 14 2008 Jan 15 2008   3.76067288%   Jan 15 2009   Jul 14 2009 Jul 15 2008   1.40892275%   Jan 15 2009   Jul 14 2009 Jan 15 2009   3.82009625%   Jul 15 2010   Jan 14 2011 Jul 15 2009   1.34949938%   Jul 15 2010   Jan 14 2011 Jan 15 2010   3.88252261%   Jul 15 2010   Jul 14 2011 Jul 15 2010   1.28707302%   Jan 15 2011   Jul 14 2011 Jan 15 2011   3.94810371%   Jul 15 2012   Jan 14 2013 Jul 15 2011   1.22149192%   Jul 15 2012   Jan 14 2013 Jan 15 2012   4.01699898%   Jul 15 2012   Jan 14 2014 Jul 15 2012   1.15259664%   Jul 15 2013   Jan 14 2014 Jan 15 2013   4.08937591%   Jul 15 2013   Jul 14 2014 Jul 15 2013   1.08021972%   Jan 15 2014   Jul 14 2014 Jan 15 2014   4.32899564%   Jul 15 2015   Jan 14 2016 Jul 15 2014   1.00015364%   Jul 15 2015   Jan 14 2016 Jan 15 2015   5.42733617%   Jul 15 2015   Jul 14 2016 Jul 15 2015   0.89104572%   Jan 15 2016   Jul 14 2016 Jan 15 2016   5.54195790%   Jul 15 2017   Jan 14 2018 Jul 15 2016   0.77642399%   Jul 15 2017   Jan 14 2018 Jan 15 2017   5.66237209%   Jul 15 2017   Jul 14 2018 Jul 15 2017   0.65600980%   Jan 15 2018   Jul 14 2018 Jan 15 2018   5.78887147%   Jul 15 2019   Jan 14 2020 Jul 15 2018   0.52951043%   Jul 15 2019   Jan 14 2020 Jan 15 2019   5.92176354%   Jul 15 2019   Jan 14 2021 Jul 15 2019   0.39661835%   Jul 15 2020   Jan 14 2021 Jan 15 2020   6.06137138%   Jul 15 2020   Jul 14 2021 Jul 15 2020   0.25701051%   Jan 15 2021   Jul 14 2021 Jan 15 2021   6.06137138%   Jan 15 2022   Jul 14 2022 Jul 15 2021   0.25701051%   Jan 15 2022   Jul 14 2022 Jan 15 2022   6.06137138%   Jul 15 2023   Jan 14 2024 Jul 15 2022   0.25701051%   Jul 15 2023   Jan 14 2024 Jan 15 2023   6.18588824%   Jul 15 2023   Jul 14 2024 Jul 15 2023   0.13249365%   Jan 15 2024   Jul 14 2024 Jan 15 2024   6.31838189%   Jul 15 2025   Jan 14 2026 Jul 15 2024   0.00000000%         Jan 15 2025   6.31838189%   Jul 15 2025   Jan 14 2027 Jul 15 2025   0.00000000%         Jan 15 2026   4.65103111%   Jul 15 2026   Jul 14 2027 Jul 15 2026   0.00000000%         Jan 15 2027   0.00000000%         Jul 15 2027   0.00000000%         Sep 26 2027   0.00000000%           --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory III Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)           (a)                (b)   (c)     Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Dec 26 2003   0.00000000%   0.00000000% Jan 15 2004   0.00000000%   0.33433067% Feb 15 2004   0.00000000%   7.69068553% Mar 15 2004   0.00000000%   6.86259290% Apr 15 2004   0.00000000%   6.03450027% May 15 2004   0.00000000%   5.20640763% Jun 15 2004   0.00000000%   4.37831500% Jul 15 2004   0.00000000%   3.55022237% Aug 15 2004   0.00000000%   5.16959563% Sep 15 2004   0.00000000%   5.16959563% Oct 15 2004   0.00000000%   5.16959563% Nov 15 2004   0.00000000%   5.16959563% Dec 15 2004   0.00000000%   5.16959563% Jan 15 2005   0.00000000%   5.16959563% Feb 15 2005   0.00000000%   7.90700689% Mar 15 2005   0.00000000%   7.04540761% Apr 15 2005   0.00000000%   6.18380834% May 15 2005   0.00000000%   5.32220907% Jun 15 2005   0.00000000%   4.46060980% Jul 15 2005   0.00000000%   3.59901053% Aug 15 2005   0.00000000%   5.16959563% Sep 15 2005   0.00000000%   5.16959563% Oct 15 2005   0.00000000%   5.16959563% Nov 15 2005   0.00000000%   5.16959563% Dec 15 2005   0.00000000%   5.16959563% Jan 15 2006   0.00000000%   5.16959563% Feb 15 2006   0.00000000%   8.81985985% Mar 15 2006   0.00000000%   8.81985985% Apr 15 2006   0.00000000%   8.81985985% May 15 2006   0.00000000%   8.81985985% Jun 15 2006   0.00000000%   8.81985985% Jul 15 2006   0.00000000%   8.81985985% Aug 15 2006   0.00000000%   9.40492699% Sep 15 2006   0.00000000%   8.47066272% Oct 15 2006   0.00000000%   7.53639845% Nov 15 2006   0.00000000%   6.60213418% Dec 15 2006   0.00000000%   5.66786991% Jan 15 2007   0.00000000%   4.73360564% Feb 15 2007   0.00000000%   7.64877940% Mar 15 2007   0.00000000%   6.85984513% Apr 15 2007   0.00000000%   6.07091086% May 15 2007   0.00000000%   5.28197659% Jun 15 2007   0.00000000%   4.49304231% Jul 15 2007   0.00000000%   3.70410804% Aug 15 2007   0.00000000%   5.16959563% Sep 15 2007   0.00000000%   5.16959563% Oct 15 2007   0.00000000%   5.16959563% Nov 15 2007   0.00000000%   5.16959563% Dec 15 2007   0.00000000%   5.16959563% Jan 15 2008   0.00000000%   5.16959563% Feb 15 2008   0.00000000%   8.06866924% Mar 15 2008   0.00000000%   7.20706997% Apr 15 2008   0.00000000%   6.34547070% May 15 2008   0.00000000%   5.48387142% Jun 15 2008   0.00000000%   4.62227215% Jul 15 2008   0.00000000%   3.76067288% Aug 15 2008   0.00000000%   5.16959563% Sep 15 2008   0.00000000%   5.16959563% Oct 15 2008   0.00000000%   5.16959563% Nov 15 2008   0.00000000%   5.16959563% Dec 15 2008   0.00000000%   5.16959563% Jan 15 2009   0.00000000%   5.16959563% Feb 15 2009   0.00000000%   8.12809261% Mar 15 2009   0.00000000%   7.26649334%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory III Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)           (a)                 (b)           (c)                  Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Apr 15 2009   0.00000000%   6.40489407% May 15 2009   0.00000000%   5.54329480% Jun 15 2009   0.00000000%   4.68169552% Jul 15 2009   0.00000000%   3.82009625% Aug 15 2009   0.00000000%   5.16959563% Sep 15 2009   0.00000000%   5.16959563% Oct 15 2009   0.00000000%   5.16959563% Nov 15 2009   0.00000000%   5.16959563% Dec 15 2009   0.00000000%   5.16959563% Jan 15 2010   0.00000000%   5.16959563% Feb 15 2010   0.00000000%   9.05211824% Mar 15 2010   0.00000000%   9.05211824% Apr 15 2010   0.00000000%   9.05211824% May 15 2010   0.00000000%   9.05211824% Jun 15 2010   0.00000000%   9.05211824% Jul 15 2010   0.00000000%   9.05211824% Aug 15 2010   0.00000000%   9.40492699% Sep 15 2010   0.00000000%   8.47066272% Oct 15 2010   0.00000000%   7.53639845% Nov 15 2010   0.00000000%   6.60213418% Dec 15 2010   0.00000000%   5.66786991% Jan 15 2011   0.00000000%   4.73360564% Feb 15 2011   0.00000000%   7.89277507% Mar 15 2011   0.00000000%   7.10384080% Apr 15 2011   0.00000000%   6.31490653% May 15 2011   0.00000000%   5.52597226% Jun 15 2011   0.00000000%   4.73703798% Jul 15 2011   0.00000000%   3.94810371% Aug 15 2011   0.00000000%   5.16959563% Sep 15 2011   0.00000000%   5.16959563% Oct 15 2011   0.00000000%   5.16959563% Nov 15 2011   0.00000000%   5.16959563% Dec l5 2011   0.00000000%   5.16959561% Jan 15 2012   0.00000000%   5.16959563% Feb 15 2012   0.00000000%   9.18659461% Mar 15 2012   0.00000000%   9.18659461% Apr 15 2012   0.00000000%   9.18659461% May 15 2012   0.00000000%   9.18659461% Jun 15 2012   0.00000000%   9.18659461% Jul 15 2012   0.00000000%   9.18659461% Aug 15 2012   0.00000000%   9.40492699% Sep 15 2012   0.00000000%   8.47066272% Oct 15 2012   0.00000000%   7.53639845% Nov 15 2012   0.00000000%   6.60213418% Dec 15 2012   0.00000000%   5.66786991% Jan 15 2013   0.00000000%   4.73360564% Feb l5 2013   0.00000000%   8.82298154% Mar 15 2013   0.00000000%   8.82298154% Apr 15 2013   0.00000000%   8.82298154% May 15 2013   0.00000000%   8.82298154% Jun 15 2013   0.00000000%   8.82298154% Jul 15 2013   0.00000000%   8.82298154% Aug 15 2013   0.00000000%   9.04773037% Sep 15 2013   0.00000000%   8.19225947% Oct 15 2013   0.00000000%   7.33678857% Nov 15 2013   0.00000000%   6.48131767% Dec 15 2013   0.00000000%   5.62584677% Jan 15 2014   0.00000000%   4.77037588% Feb 15 2014   0.00000000%   8.30430887% Mar 15 2014   0.00000000%   7.50924622% Apr 15 2014   0.00000000%   6.71418358% May l5 2014   0.00000000%   5.91912093% Jun 15 2014   0.00000000%   5.12405829% Jul 15 2014   0.00000000%   4.32899564%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory III Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)   (c)   Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Aug 15 2014     0.00000000%     5.32914928% Sep 15 2014     0.00000000%     5.32914928% Oct 15 2014     0.00000000%     5.32914928% Nov 15 2014     0.00000000%     5.32914928% Dec 15 2014     0.00000000%     5.32914928% Jan 15 2015     0.00000000%     5.32914928% Feb 15 2015     0.00000000%     10.75648544% Mar 15 2015     0.00000000%     10.75648544% Apr 15 2015     0.00000000%     10.75648544% May 15 2015     0.00000000%     10.75648544% Jun 15 2015     0.00000000%     10.75648544% Jul 15 2015     0.00000000%     10.75648544% Aug 15 2015     0.00000000%     10.68443190% Sep 15 2015     0.00000000%     9.72133263% Oct 15 2015     0.00000000%     8.75823337% Nov 15 2015     0.00000000%     7.79513410% Dec 15 2015     0.00000000%     6.83203483% Jan 15 2016     0.00000000%     5.86893557% Feb 15 2016     0.00000000%     10.43273754% Mar 15 2016     0.00000000%     9.45458161% Apr 15 2016     0.00000000%     8.47642568% May 15 2016     0.00000000%     7.49826976% Jun 15 2016     0.00000000%     6.52011383% Jul 15 2016     0.00000000%     5.54195790% Aug 15 2016     0.00000000%     6.31838189% Sep 15 2016     0.00000000%     6.31838189% Oct 15 2016     0.00000000%     6.31838189% Nov 15 2016     0.00000000%     6.31838189% Dec 15 2016     0.00000000%     6.31838189% Jan 15 2017     0.00000000%     6.31838189% Feb l5 2017     0.00000000%     11.98075398% Mar 15 2017     0.00000000%     11.98075398% Apr 15 2017     0.00000000%     11.98075398% May 15 2017     0.00000000%     11.98075398% Jun l5 2017     0.00000000%     11.98075398% Jul 15 2017     0.00000000%     11.98075398% Aug l5 2017     0.00000000%     11.49488754% Sep 15 2017     0.00000000%     10.35301129% Oct 15 2017     0.00000000%     9.21113505% Nov 15 2017     0.00000000%     8.06925880% Dec 15 2017     0.00000000%     6.92738256% Jan 15 2018     0.00000000%     5.78550631% Feb 15 2018     0.00000000%     10.61012673% Mar 15 2018     0.00000000%     9.64587567% Apr 15 2018     0.00000000%     8.68162462% May 15 2018     0.00000000%     7.71737357% Jun 15 2018     0.00000000%     6.75312252% Jul 15 2018     0.00000000%     5.78887147% Aug 15 2018     0.00000000%     6.31838189% Sep 15 2018     0.00000000%     6.31838189% Oct 15 2018     0.00000000%     6.31838189% Nov 15 2018     0.00000000%     6.31838189% Dec 15 2018     0.00000000%     6.31838189% Jan 15 2019     0.00000000%     6.31838189% Feb 15 2019     0.00000000%     12.24014544% Mar 15 2019     0.00000000%     12.24014544% Apr 15 2019     0.00000000%     12.24014544% May 15 2019     0.00000000%     12.24014544% Jun 15 2019     0.00000000%     12.24014544% Jul 15 2019     0.00000000%     12.24014544% Aug 15 2019     0.00000000%     11.49488754% Sep 15 2019     0.00000000%     10.35301129% Oct 15 2019     0.00000000%     9.21113505% Nov 15 2019     0.00000000%     8.06925880%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory III Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)   (c)   Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Dec 15 2019     0.00000000%     6.92738256% Jan 15 2020     0.00000000%     5.78550631% Feb 15 2020     0.00000000%     11.84687769% Mar 15 2020     0.00000000%     11.84687769% Apr 15 2020     0.00000000%     11.84687769% May 15 2020     0.00000000%     11.84687769% Jun 15 2020     0.00000000%     11.84687769% Jul 15 2020     0.00000000%     11.84687769% Aug 15 2020     0.00000000%     11.05831477% Sep l5 2020     0.00000000%     10.01274134% Oct 15 2020     0.00000000%     8.96716791% Nov 15 2020     0.00000000%     7.92159448% Dec 15 2020     0.00000000%     6.87602105% Jan 15 2021     0.00000000%     5.83044762% Feb 15 2021     0.00000000%     10.92007774% Mar 15 2021     0.00000000%     9.94833647% Apr 15 2021     0.00000000%     8.97659520% May 15 2021     0.00000000%     8.00485392% Jun 15 2021     0.00000000%     7.03311265% Jul 15 2021     0.00000000%     6.06137138% Aug 15 2021     0.00000000%     6.31838189% Sep 15 2021     0.00000000%     6.31838189% Oct l5 2021     0.00000000%     6.31838189% Nov 15 2021     0.00000000%     6.31838189% Dec 15 2021     0.00000000%     6.31838189% Jan 15 2022     0.00000000%     6.31838189% Feb 15 2022     0.00000000%     11.32668963% Mar 15 2022     0.00000000%     10.27362598% Apr 15 2022     0.00000000%     9.22056233% May 15 2022     0.00000000%     8.16749868% Jun 15 2022     0.00000000%     7.11443503% Jul 15 2022     0.00000000%     6.06137138% Aug 15 2022     0.00000000%     6.31838189% Sep 15 2022     0.00000000%     6.31838189% Oct 15 2022     0.00000000%     6.31838189% Nov 15 2022     0.00000000%     6.31838189% Dec 15 2022     0.00000000%     6.31838189% Jan 15 2023     0.00000000%     6.31838189% Feb 15 2023     0.00000000%     12.50427013% Mar 15 2023     0.00000000%     12.50427013% Apr 15 2023     0.00000000%     12.50427013% May 15 2023     0.00000000%     12.50427013% Jun 15 2023     0.00000000%     12.50427013% Jul 15 2023     0.00000000%     12.50427013% Aug l5 2023     0.00000000%     11.49488754% Sep 15 2023     0.00000000%     10.35301129% Oct 15 2023     0.00000000%     9.21113505% Nov 15 2023     0.00000000%     8.06925880% Dec 15 2023     0.00000000%     6.92738256% Jan 15 2024     0.00000000%     5.78550631% Feb 15 2024     0.00000000%     11.13963715% Mar 15 2024     0.00000000%     10.17538610% Apr 15 2024     0.00000000%     9.21113505% May 15 2024     0.00000000%     8.24688400% Jun l5 2024     0.00000000%     7.28263294% Jul 15 2024     0.00000000%     6.31838189% Aug l5 2024     0.00000000%     6.31838189% Sep 15 2024     0.00000000%     6.31838189% Oct 15 2024     0.00000000%     6.31838189% Nov 15 2024     0.00000000%     6.31838189% Dec 15 2024     0.00000000%     6.31838189% Jan 15 2025     0.00000000%     6.31838189% Feb 15 2025     0.00000000%     12.63676378% Mar 15 2025     0.00000000%     12.63676378%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory III Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)   (b)   (c)   Underpayment   Overpayment Termination Date   of Basic Lease Rent   of Basic Lease Rent   Apr 15 2025     0.00000000%     12.63676378% May 15 2025     0.00000000%     12.63676378% Jun 15 2025     0.00000000%     12.63676378% Jul 15 2025     0.00000000%     12.63676378% Aug l5 2025     0.00000000%     11.49488754% Sep 15 2025     0.00000000%     10.35301129% Oct l5 2025     0.00000000%     9.21113505% Nov l5 2025     0.00000000%     8.06925880% Dec 15 2025     0.00000000%     6.92738256% Jan 15 2026     0.00000000%     5.78550631% Feb 15 2026     0.00000000%     10.43653743% Mar 15 2026     0.00000000%     10.43653743% Apr 15 2026     0.00000000%     10.43653743% May 15 2026     0.00000000%     10.43653743% Jun 15 2026     0.00000000%     10.43653743% Jul 15 2026     0.00000000%     10.43653743% Aug 15 2026     0.00000000%     9.39096400% Sep 15 2026     0.00000000%     8.34539057% Oct 15 2026     0.00000000%     7.29981714% Nov 15 2026     0.00000000%     6.25424371% Dec 15 2026     0.00000000%     5.20867028% Jan 15 2027     0.00000000%     4.16309685% Feb 15 2027     0.00000000%     3.46924737% Mar 15 2027     0.00000000%     2.77539790% Apr 15 2027     0.00000000%     2.08154842% May 15 2027     0.00000000%     1.38769895% Jun 15 2027     0.00000000%     0.69384947% Jul 15 2027     0.00000000%     0.00000000% Aug 15 2027     0.00000000%     0.00000000% Sep 15 2027     0.00000000%     0.00000000% Sep 26 2027     0.00000000%     0.00000000%   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory III Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Dec 26 2003     105.07165687 % Jan 15 2004     104.82735162 % Feb l5 2004     97.08698921 % Mar 15 2004     97.53180008 % Apr 15 2004     97.97733977 % May 15 2004     98.41094897 % Jun 15 2004     98.84524031 % Jul 15 2004     99.26755430 % Aug 15 2004     98.07113010 % Sep 15 2004     98.49471688 % Oct 15 2004     98.99810107 % Nov 15 2004     99.41025619 % Dec 15 2004     99.82300405 % Jan 15 2005     100.22368480 % Feb 15 2005     97.01776859 % Mar 15 2005     97.41141012 % Apr 15 2005     97.80560114 % May 15 2005     98.18774184 % Jun 15 2005     98.57038410 % Jul 15 2005     98.94092792 % Aug 15 2005     97.74133989 % Sep l5 2005     98.11279209 % Oct 15 2005     98.39765690 % Nov l5 2005     98.75737046 % Dec 15 2005     99.11749214 % Jan 15 2006     99.46542155 % Feb 15 2006     96.15490347 % Mar 15 2006     96.49501013 % Apr 15 2006     96.83547881 % May 15 2006     97.16539446 % Jun 15 2006     97.49562967 % Jul 15 2006     97.81526922 % Aug 15 2006     96.61585410 % Sep 15 2006     96.93604827 % Oct 15 2006     97.14748360 % Nov 15 2006     97.45727500 % Dec 15 2006     97.76730211 % Jan 15 2007     98.06664935 % Feb 15 2007     94.65310677 % Mar 15 2007     94.94386522 % Apr 15 2007     95.23481746 % May 15 2007     95.51964975 % Jun 15 2007     95.80465115 % Jul 15 2007     96.08350779 % Aug 15 2007     94.89702105 % Sep 15 2007     95.17616669 % Oct 15 2007     95.54938863 % Nov 15 2007     95.82248483 % Dec 15 2007     96.09570124 % Jan 15 2008     96.36272379 % Feb 15 2008     92.85974088 % Mar 15 2008     93.11752614 % Apr 15 2008     93.37540709 % May 15 2008     93.62838557 % Jun 15 2008     93.88143971 % Jul 15 2008     94.12957128 % Aug 15 2008     92.96883557 % Sep 15 2008     93.21707829 % Oct 15 2008     93.47078298 % Nov 15 2008     93.71411842 % Dec 15 2008     93.95748933 % Jan 15 2009     94.19589732 % Feb 15 2009     90.60432011 % Mar 15 2009     90.83285417 % Apr 15 2009     91.06140329 % May 15 2009     91.29129890 % Jun 15 2009     91.52121525 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory III Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Jul 15 2009     91.75248377 % Aug 15 2009     90.63427939 % Sep 15 2009     90.86560096 % Oct 15 2009     91.03173923 % Nov 15 2009     91.26445118 % Dec 15 2009     91.49719560 % Jan 15 2010     91.73130398 % Feb 15 2010     88.07252366 % Mar 15 2010     88.29630441 % Apr 15 2010     88.52012378 % May 15 2010     88.74538316 % Jun 15 2010     88.97068733 % Jul 15 2010     89.19743771 % Aug 15 2010     88.13716606 % Sep 15 2010     88.36401863 % Oct 15 2010     88.58997984 % Nov 15 2010     88.81834254 % Dec 15 2010     89.04676295 % Jan 15 2011     89.27664255 % Feb 15 2011     85.54755229 % Mar 15 2011     85.76663004 % Apr 15 2011     85.98577236 % May 15 2011     86.20645418 % Jun 15 2011     86.42720725 % Jul 15 2011     86.64950654 % Aug l5 2011     85.65039190 % Sep 15 2011     85.87284749 % Oct 15 2011     86.07619935 % Nov 15 2011     86.30029336 % Dec 15 2011     86.52447284 % Jan 15 2012     86.75021282 % Feb 15 2012     82.94756359 % Mar 15 2012     83.16200605 % Apr 15 2012     83.37654161 % May 15 2012     83.59272247 % Jun 15 2012     83.80900367 % Jul 15 2012     84.02693744 % Aug 15 2012     83.09238220 % Sep 15 2012     83.31053170 % Oct l5 2012     83.65750033 % Nov 15 2012     83.87742565 % Dec 15 2012     84.09746691 % Jan 15 2013     84.31917640 % Feb 15 2013     80.43957054 % Mar 15 2013     80.64946448 % Apr 15 2013     80.85948283 % May 15 2013     81.07125895 % Jun 15 2013     81.28316732 % Jul 15 2013     81.49684134 % Aug 15 2013     80.63043580 % Sep 15 2013     80.84439072 % Oct l5 2013     80.88639725 % Nov l5 2013     81.10227507 % Dec 15 2013     81.31830222 % Jan 15 2014     81.53611219 % Feb l5 2014     77.41173956 % Mar 15 2014     77.61652062 % Apr 15 2014     77.82146038 % May 15 2014     78.02828184 % Jun 15 2014     78.23527050 % Jul 15 2014     78.44414940 % Aug 15 2014     77.65305044 % Sep 15 2014     77.86228163 % Oct 15 2014     78.19408461 % Nov 15 2014     78.40540054 % Dec 15 2014     78.61690240 % Jan 15 2015     78.83031331 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory III Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Feb 15 2015     73.59839805 % Mar 15 2015     73.79401444 % Apr 15 2015     73.98982711 % May 15 2015     74.18776985 % Jun 15 2015     74.38591856 % Jul 15 2015     74.58620707 % Aug 15 2015     73.89566561 % Sep 15 2015     74.09638653 % Oct 15 2015     74.17104625 % Nov 15 2015     74.37414419 % Dec 15 2015     74.57746960 % Jan 15 2016     74.78295637 % Feb 15 2016     69.42761904 % Mar 15 2016     69.61447800 % Apr 15 2016     69.80157637 % May 15 2016     69.99153128 % Jun 15 2016     70.18173849 % Jul 15 2016     70.37481520 % Aug 15 2016     69.79173323 % Sep 15 2016     69.98534165 % Oct 15 2016     70.26457993 % Nov 15 2016     70.46135156 % Dec 15 2016     70.65840390 % Jan 15 2017     70.85835426 % Feb l5 2017     65.37615744 % Mar 15 2017     65.55662788 % Apr 15 2017     65.73739472 % May 15 2017     65.92121018 % Jun 15 2017     66.10533597 % Jul 15 2017     66.29252437 % Aug 15 2017     65.82402737 % Sep 15 2017     66.01186590 % Oct 15 2017     65.85295010 % Nov 15 2017     66.04420664 % Dec 15 2017     66.23580452 % Jan 15 2018     66.43049615 % Feb 15 2018     60.81558874 % Mar 15 2018     60.98990993 % Apr 15 2018     61.16458974 % May 15 2018     61.34252230 % Jun 15 2018     61.52082852 % Jul 15 2018     61.70240260 % Aug l5 2018     61.35485509 % Sep 15 2018     61.53720848 % Oct 15 2018     61.51860669 % Nov 15 2018     61.70465057 % Dec 15 2018     61.89110191 % Jan 15 2019     62.08085505 % Feb 15 2019     56.32711888 % Mar 15 2019     56.49557095 % Apr 15 2019     56.66444946 % May 15 2019     56.83679764 % Jun 15 2019     57.00958850 % Jul 15 2019     57.18586532 % Aug 15 2019     56.96598285 % Sep 15 2019     57.14317970 % Oct 15 2019     57.23390074 % Nov 15 2019     57.41507940 % Dec 15 2019     57.59673754 % Jan 15 2020     57.78191858 % Feb 15 2020     51.88295642 % Mar 15 2020     52.04586387 % Apr 15 2020     52.20927163 % May 15 2020     52.37637951 % Jun 15 2020     52.54400520 % Jul 15 2020     52.71534859 % Aug 15 2020     52.63021692 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory III Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)                 Termination Date   Termination Value   Sep 15 2020     52.80263345 % Oct 15 2020     52.97878764 % Nov 15 2020     53.15549733 % Dec 15 2020     53.33276483 % Jan 15 2021     52.79947311 % Feb 15 2021     47.80205658 % Mar 15 2021     47.94687347 % Apr 15 2021     48.09211529 % May 15 2021     48.24098763 % Jun 15 2021     48.39030179 % Jul 15 2021     48.54326345 % Aug 15 2021     48.43967347 % Sep 15 2021     48.59355476 % Oct 15 2021     48.75110258 % Nov l5 2021     48.90912837 % Dec 15 2021     49.06763413 % Jan 15 2022     49.38147153 % Feb 15 2022     43.44558157 % Mar 15 2022     43.57140736 % Apr 15 2022     43.69757893 % May 15 2022     43.82730158 % Jun 15 2022     43.95738626 % Jul 15 2022     44.09103831 % Aug 15 2022     43.96805826 % Sep 15 2022     44.10246870 % Oct 15 2022     44.24046454 % Nov 15 2022     44.37885688 % Dec 15 2022     44.51764737 % Jan 15 2023     44.62399419 % Feb 15 2023     38.55454378 % Mar 15 2023     38.67137477 % Apr 15 2023     38.78860054 % May 15 2023     38.90956082 % Jun 15 2023     39.03093310 % Jul 15 2023     39.15605717 % Aug 15 2023     39.14911693 % Sep 15 2023     39.27510147 % Oct 15 2023     39.40485702 % Nov 15 2023     39.53506121 % Dec 15 2023     39.66571591 % Jan 15 2024     40.02938363 % Feb 15 2024     33.81864177 % Mar 15 2024     33.92673031 % Apr 15 2024     34.03526921 % May 15 2024     34.14774672 % Jun 15 2024     34.26069289 % Jul 15 2024     34.37759604 % Aug l5 2024     34.49498628 % Sep 15 2024     34.61286565 % Oct 15 2024     34.73472255 % Nov 15 2024     34.85708719 % Dec 15 2024     34.97996168 % Jan 15 2025     35.30161767 % Feb 15 2025     29.07013480 % Mar 15 2025     29.15739590 % Apr 15 2025     29.24502059 % May 15 2025     29.33650253 % Jun 15 2025     29.42836565 % Jul 15 2025     29.52410367 % Aug 15 2025     29.62024061 % Sep 15 2025     29.71677811 % Oct l5 2025     29.81721000 % Nov 15 2025     29.91806036 % Dec 15 2025     30.01933092 % Jan 15 2026     30.08988724 % Feb 15 2026     25.51466477 % Mar 15 2026     25.59078928 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory III Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Apr 15 2026     25.66723098 % May 15 2026     25.74748333 % Jun 15 2026     25.82807006 % Jul 15 2026     25.91248472 % Aug 15 2026     25.99725111 % Sep 15 2026     26.08237069 % Oct 15 2026     26.17133709 % Nov 15 2026     26.26067417 % Dec 15 2026     26.35038350 % Jan 15 2027     26.35886853 % Feb l5 2027     26.45283369 % Mar 15 2027     26.54719037 % Apr 15 2027     26.64194020 % May 15 2027     26.75419389 % Jun 15 2027     26.86691531 % Jul 15 2027     26.99721547 % Aug l5 2027     27.12805854 % Sep 15 2027     27.25944680 % Sep 26 2027     27.25944680 %   --------------------------------------------------------------------------------   Schedule 3 to Network Lease (NVG Network Statutory III Trust) PRICING ASSUMPTIONS                     (1 )   Network Cost:   $ 388,500,000.00                       (2 )   Owner Lessor’s Cost:   $ 85,000,000.00                       (3 )   Equity Investment:   $ 23,115,000.00                       (4 )   Closing Date:     9/26/2003                       (5 )   Assumed Tax Rate:     35.00 %                     (6 )   Transaction Cost:   $ l,247,104.25                       (7 )   Early Purchase Date:     1/15/2021                       (8 )   Lessor Note:                 Interest Rate:     4.929 %   --------------------------------------------------------------------------------   Schedule 4 to Network Lease (NVG Network Statutory III Trust) EARLY PURCHASE PRICE AND INSTALLMENTS                                                       Underpayment     Overpayment             Early   Early     of     of     Early       Purchase Date   Purchase Amount     Basic Lease Rent *     Basic Lease Rent *     Purchase Price     (l)   Jan 15 2021     32,438,951.68       0.00       10,108,046.16       22,330,905.53   (2)   Apr 15 2021     4,349,120.23       0.00       0 00       4,349,120 23   (3)   Jun 15 2021     4,349,120.23       0 00       0.00       4,349,120.23   (4)   Sep 15 2021     4,349,120.23       0.00       0.00       4,349,120.23   (5)   Dec 15 2021     4,349,120.23       0.00       0.00       4,349,120.23                                           49,835,432.62       0.00       10,108,046.16       39,727,386.46     *   Values are calculated without regard to any offset for amounts of Basic Lease Rent that are due and owing on such date: the total amount due and payable by Lessee on such date is the sum (i) the Early Purchase Price and (ii) the amount of Basic Lease Rent payable on such date as set forth on Schedule 1A.   --------------------------------------------------------------------------------   CONTROL, MONITORING AND DATA ANALYSIS NETWORK NETWORK LEASE AGREEMENT (A4) The September 26, 2003, Network Lease Agreement (Al) between the Tennessee Valley Authority (“TVA”), as lessee, and NVG Network I Statutory Trust, as owner lessor, has been filed. It is substantially similar to Network Lease Agreement (A4), except as noted below: Network Lease Agreement (A4) covers an undivided 18.018018018 percent interest in the Control, Monitoring and Data Analysis Network (“Network”). In consideration of NVG Network IV Statutory Trust agreeing to lease the undivided interest in the Network to TVA, TVA agrees to pay basic rent to NVG Network IV Statutory Trust for the network lease term, as set out in the Schedule 1A, with explanatory schedules 1B, 1C, and 1D. Schedule 2 sets out the termination values applicable to this network lease. Schedule 3 describes the pricing assumptions applicable to this network lease. Schedule 4 sets out the early purchase price and installments applicable to this network lease. These schedules for Network Lease Agreement (A4) follow on the next pages.   --------------------------------------------------------------------------------   Schedule 1A to Network Lease (NVG Network Statutory IV Trust) BASIC RENT PAYMENTS (Percentages are percentages of Owner Lessor’s Cost)           Rent       Payment Date   Percentage   Sep 26 2003     0.00000000 % Dec 26 2003     0.00000000 % Jan 15 2004     9.00427841 % Jul 15 2004     1.65460183 % Jan 15 2005     3.68820160 % Jul 15 2005     1.60448376 % Jan 15 2006     3.74085240 % Jul 15 2006     1.55183296 % Jan 15 2007     3.99663800 % Jul 15 2007     1.49158074 % Jan 15 2008     3.85946103 % Jul 15 2008     1.43322433 % Jan 15 2009     3.92076651 % Jul 15 2009     1.37191885 % Jan 15 2010     3.98517009 % Jul 15 2010     1.30751527 % Jan 15 2011     4.04181870 % Jul 15 2011     1.25086666 % Jan 15 2012     4.11201227 % Jul 15 2012     1.18067309 % Jan 15 2013     4.18608054 % Jul 15 2013     1.10660482 % Jan 15 2014     5.46976287 % Jul 15 2014     0.99907479 % Jan 15 2015     5.58272698 % Jul 15 2015     0.88611068 % Jan 15 2016     5.70139978 % Jul 15 2016     0.76743788 % Jan 15 2017     5.81473271 % Jul 15 2017     0.65410495 % Jan 15 2018     5.94513002 % Jul 15 2018     0.52370764 % Jan 15 2019     4.95289352 % Jul 15 2019     0.41455035 % Jan 15 2020     6.11855372 % Jul 15 2020     0.35028394 % Jan 15 2021     6.26430476 % Jul 15 2021     0.20453290 % Jan 15 2022     6.26430476 % Jul 15 2022     0.20453290 % Jan 15 2023     6.26430476 % Jul 15 2023     0.20453290 % Jan 15 2024     6.26430476 % Jul 15 2024     0.20453290 % Jan 15 2025     6.35687823 % Jul 15 2025     0.11195944 % Jan 15 2026     4.65484587 % Jul 15 2026     0.00000000 % Jan 15 2027     0.00000000 % Jul 15 2027     0.00000000 % Sep 26 2027     0.00000000 %   --------------------------------------------------------------------------------   Schedule 1B to Network Lease (NVG Network Statutory IV Trust) ALLOCATED RENT (Percentages are percentages of Owner Lessor’s Cost)                   From and   To and   Basic Rent   Including   Including   Allocated     Sep 26 2003   Dec 25 2003     0.00000000% Dec 26 2003   Jan 14 2004     0.27933617% Jan 15 2004   Jul 14 2004     0.00000000% Jul 15 2004   Jan 14 2005     5.51587089% Jan 15 2005   Jul 14 2005     4.86367318% Jul 15 2005   Jan 14 2006     0.00000000% Jan 15 2006   Jul 14 2006     5.29268536% Jul 15 2006   Jan 14 2007     0.00000000% Jan 15 2007   Jul 14 2007     0.00000000% Jul 15 2007   Jan 14 2008     5.73905641% Jan 15 2008   Jul 14 2008     5.04184768% Jul 15 2008   Jan 14 2009     0.00000000% Jan 15 2009   Jul 14 2009     0.00000000% Jul 15 2009   Jan 14 2010     5.73905641% Jan 15 2010   Jul 14 2010     4.84631431% Jul 15 2010   Jan 14 2011     0.00000000% Jan 15 2011   Jul 14 2011     0.00000000% Jul 15 2011   Jan 14 2012     5.73905641% Jan 15 2012   Jul 14 2012     4.84631431% Jul 15 2012   Jan 14 2013     0.00000000% Jan 15 2013   Jul 14 2013     0.00000000% Jul 15 2013   Jan 14 2014     5.73905641% Jan 15 2014   Jul 14 2014     4.84631431% Jul 15 2014   Jan 14 2015     0.00000000% Jan 15 2015   Jul 14 2015     6.46883766% Jul 15 2015   Jan 14 2016     0.00000000% Jan 15 2016   Jul 14 2016     6.46883766% Jul 15 2016   Jan 14 2017     0.00000000% Jan 15 2017   Jul 14 2017     0.00000000% Jul 15 2017   Jan 14 2018     7.01440228% Jan 15 2018   Jul 14 2018     5.92327304% Jul 15 2018   Jan 14 2019     0.00000000% Jan 15 2019   Jul 14 2019     6.46883766% Jul 15 2019   Jan 14 2020     0.00000000% Jan 15 2020   Jul 14 2020     5.36744388% Jul 15 2020   Jan 14 2021     0.00000000% Jan 15 2021   Jul 14 2021     6.46883766% Jul 15 2021   Jan 14 2022     0.00000000% Jan 15 2022   Jul 14 2022     6.46883766% Jul 15 2022   Jan 14 2023     0.00000000% Jan 15 2023   Jul 14 2023     0.00000000% Jul 15 2023   Jan 14 2024     7.01440228% Jan 15 2024   Jul 14 2024     5.92327304% Jul 15 2024   Jan 14 2025     0.00000000% Jan 15 2025   Jul 14 2025     0.00000000% Jul 15 2025   Jan 14 2026     7.01440228% Jan 15 2026   Jul 14 2026     5.92327304% Jul 15 2026   Jan 14 2027     0.00000000% Jan 15 2027   Jul 14 2027     4.65484587% Jul 15 2027   Sep 26 2027     0.00000000% --------------------------------------------------------------------------------   Schedule 1C to Network Lease (NVG Network Statutory IV Trust) ATTRIBUTION OF BASIC LEASE RENT PAYMENTS TO ALLOCATIONS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                               Allocated   Allocated Rent Payment Date     Basic Lease Rent   From and Including   To and Including   Sep 26 2003     0.00000000 %         Dec 26 2003     0.00000000 %         Jan 15 2004     9.00427841 %   Dec 26 2003   Jul 14 2005 Jul 15 2004     1.65460183 %   Jan 15 2005   Jul 14 2005 Jan 15 2005     3.68820160 %   Jan 15 2006   Jul 14 2006 Jul 15 2005     1.60448376 %   Jan 15 2006   Jul 14 2006 Jan 15 2006     3.74085240 %   Jul 15 2007   Jan 14 2008 Jul 15 2006     1.55183296 %   Jul 15 2007   Jan 14 2008 Jan 15 2007     3.99663800 %   Jul 15 2007   Jul 15 2008 Jul 15 2007     1.49158074 %   Jan 15 2008   Jul 14 2008 Jan 15 2008     3.85946103 %   Jul 15 2009   Jan 14 2010 Jul 15 2008     1.43322433 %   Jul 15 2009   Jan 14 2010 Jan 15 2009     3.92076651 %   Jul 15 2009   Jul 14 2010 Jul 15 2009     1.37191885 %   Jan 15 2010   Jul 14 2010 Jan 15 2010     3.98517009 %   Jul 15 2011   Jan 14 2012 Jul 15 2010     1.30751527 %   Jul 15 2011   Jan 14 2012 Jan 15 2011     4.04181870 %   Jul 15 2011   Jul 14 2012 Jul 15 2011     1.25086666 %   Jan 15 2012   Jul 14 2012 Jan 15 2012     4.11201227 %   Jul 15 2013   Jan 14 2014 Jul 15 2012     1.18067309 %   Jul 15 2013   Jan 14 2014 Jan 15 2013     4.18608054 %   Jul 15 2013   Jul 14 2014 Jul 15 2013     1.10660482 %   Jan 15 2014   Jul 14 2014 Jan 15 2014     5.46976287 %   Jan 15 2015   Jul 14 2015 Jul 15 2014     0.99907479 %   Jan 15 2015   Jul 14 2015 Jan 15 2015     5.58272698 %   Jan 15 2016   Jul 14 2016 Jul 15 2015     0.88611068 %   Jan 15 2016   Jul 14 2016 Jan 15 2016     5.70139978 %   Jul 15 2017   Jan 14 2018 Jul 15 2016     0.76743788 %   Jul 15 2017   Jan 14 2018 Jan 15 2017     5.81473271 %   Jul 15 2017   Jul 14 2018 Jul 15 2017     0.65410495 %   Jan 15 2018   Jul 14 2018 Jan 15 2018     5.94513002 %   Jan l5 2019   Jul 14 2019 Jul 15 2018     0.52370764 %   Jan 15 2019   Jul 14 2019 Jan 15 2019     4.95289352 %   Jan 15 2020   Jul 14 2020 Jul 15 2019     0.41455035 %   Jan 15 2020   Jul 14 2020 Jan 15 2020     6.11855372 %   Jan 15 2021   Jul 14 2021 Jul 15 2020     0.35028394 %   Jan 15 2021   Jul 14 2021 Jan 15 2021     6.26430476 %   Jan 15 2022   Jul 14 2022 Jul 15 2021     0.20453290 %   Jan 15 2022   Jul 14 2022 Jan 15 2022     6.26430476 %   Jul 15 2023   Jan 14 2024 Jul 15 2022     0.20453290 %   Jul 15 2023   Jan 14 2024 Jan 15 2023     6.26430476 %   Jul 15 2023   Jul 14 2024 Jul 15 2023     0.20453290 %   Jan 15 2024   Jul 14 2024 Jan 15 2024     6.26430476 %   Jul 15 2025   Jan 14 2026 Jul 15 2024     0.20453290 %   Jul 15 2025   Jan 14 2026 Jan 15 2025     6.35687823 %   Jul 15 2025   Jul 14 2026 Jul 15 2025     0.11195944 %   Jan 15 2026   Jul 14 2026 Jan 15 2026     4.65484587 %   Jan 15 2027   Jul 14 2027 Jul 15 2026     0.00000000 %         Jan 15 2027     0.00000000 %         Jul 15 2027     0.00000000 %         Sep 26 2027     0.00000000 %           --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory IV Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)              (b)     (c)     Underpayment   Overpayment Date Termination   of Basic Lease Rent   of Basic Lease Rent   Dec 26 2003     0.00000000 %     0.00000000 % Jan 15 2004     0.27933617 %     0.00000000 % Feb 15 2004     0.00000000 %     8.72494224 % Mar 15 2004     0.00000000 %     8.72494224 % Apr 15 2004     0.00000000 %     8.72494224 % May 15 2004     0.00000000 %     8.72494224 % Jun 15 2004     0.00000000 %     8.72494224 % Jul 15 2004     0.00000000 %     8.72494224 % Aug 15 2004     0.00000000 %     9.46023225 % Sep 15 2004     0.00000000 %     8.54092044 % Oct 15 2004     0.00000000 %     7.62160862 % Nov 15 2004     0.00000000 %     6.70229681 % Dec 15 2004     0.00000000 %     5.78298499 % Jan 15 2005     0.00000000 %     4.86367318 % Feb 15 2005     0.00000000 %     7.74126258 % Mar 15 2005     0.00000000 %     6.93065038 % Apr 15 2005     0.00000000 %     6.12003819 % May 15 2005     0.00000000 %     5.30942599 % Jun 15 2005     0.00000000 %     4.49881379 % Jul 15 2005     0.00000000 %     3.68820160 % Aug 15 2005     0.00000000 %     5.29268536 % Sep 15 2005     0.00000000 %     5.29268536 % Oct 15 2005     0.00000000 %     5.29268536 % Nov 15 2005     0.00000000 %     5.29268536 % Dec 15 2005     0.00000000 %     5.29268536 % Jan 15 2006     0.00000000 %     5.29268536 % Feb 15 2006     0.00000000 %     8.15142353 % Mar 15 2006     0.00000000 %     7.26930931 % Apr 15 2006     0.00000000 %     6.38719508 % May 15 2006     0.00000000 %     5.50508085 % Jun l5 2006     0.00000000 %     4.62296663 % Jul 15 2006     0.00000000 %     3.74085240 % Aug l5 2006     0.00000000 %     5.29268536 % Sep 15 2006     0.00000000 %     5.29268536 % Oct 15 2006     0.00000000 %     5.29268536 % Nov 15 2006     0.00000000 %     5.29268536 % Dec 15 2006     0.00000000 %     5.29268536 % Jan 15 2007     0.00000000 %     5.29268536 % Feb 15 2007     0.00000000 %     9.28932336 % Mar 15 2007     0.00000000 %     9.28932336 % Apr 15 2007     0.00000000 %     9.28932336 % May 15 2007     0.00000000 %     9.28932336 % Jun 15 2007     0.00000000 %     9.28932336 % Jul 15 2007     0.00000000 %     9.28932336 % Aug 15 2007     0.00000000 %     9.82439469 % Sep 15 2007     0.00000000 %     8.86788529 % Oct 15 2007     0.00000000 %     7.91137589 % Nov 15 2007     0.00000000 %     6.95486648 % Dec 15 2007     0.00000000 %     5.99835708 % Jan 15 2008     0.00000000 %     5.04184768 % Feb 15 2008     0.00000000 %     8.06100076 % Mar 15 2008     0.00000000 %     7.22069282 % Apr 15 2008     0.00000000 %     6.38038487 % May 15 2008     0.00000000 %     5.54007692 % Jun 15 2008     0.00000000 %     4.69976898 % Jul 15 2008     0.00000000 %     3.85946103 % Aug 15 2008     0.00000000 %     5.29268536 % Sep 15 2008     0.00000000 %     5.29268536 % Oct 15 2008     0.00000000 %     5.29268536 % Nov 15 2008     0.00000000 %     5.29268536 % Dec 15 2008     0.00000000 %     5.29268536 % Jan 15 2009     0.00000000 %     5.29268536 % Feb 15 2009     0.00000000 %     9.21345187 % Mar 15 2009     0.00000000 %     9.21345187 %   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory IV Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)              (b)               (c)                  Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent     Apr 15 2009     0.00000000%       9.21345187%   May 15 2009     0.00000000%       9.21345187%   Jun 15 2009     0.00000000%       9.21345187%   Jul 15 1009     0.00000000%       9.21345187%   Aug 15 2009     0.00000000%       9.62886132%   Sep 15 2009     0.00000000%       8.67235192%   Oct 15 2009     0.00000000%       7.71584251%   Nov 15 2009     0.00000000%       6.75933311%   Dec 15 2009     0.00000000%       5.80282371%   Jan 15 2010     0.00000000%       4.84631431%   Feb l5 2010     0.00000000%       8.02376534%   Mar 15 2010     0.00000000%       7.21604629%   Apr 15 2010     0.00000000%       6.40832724%   May 15 2010     0.00000000%       5.60060819%   Jun 15 2010     0.00000000%       4.79288914%   Jul 15 2010     0.00000000%       3.98517009%   Aug 15 2010     0.00000000%       5.29268536%   Sep l5 2010     0.00000000%       5.29268536%   Oct 15 2010     0.00000000%       5.29268536%   Nov l5 2010     0.00000000%       5.29268536%   Dec 15 2010     0.00000000%       5.29268536%   Jan l5 201l     0.00000000%       5.29268536%   Feb 15 20l1     0.00000000%       9.33450406%   Mar 15 2011     0.00000000%       9.33450406%   Apr 15 2011     0.00000000%       9.33450406%   May 15 2011     0.00000000%       9.33450406%   Jun 15 2011     0.00000000%       9.33450406%   Jul 15 2011     0.00000000%       9.33450406%   Aug 15 2011     0.00000000%       9.62886132%   Sep 15 2011     0.00000000%       8.67235192%   Oct 15 2011     0.00000000%       7.71584251%   Nov 15 2011     0.00000000%       6.7593331l%   Dec 15 2011     0.00000000%       5.80282371%   Jan 15 2012     0.00000000%       4.84631431%   Feb 15 2012     0.00000000%       8.15060753%   Mar 15 2012     0.00000000%       7.34288848%   Apr 15 2012     0.00000000%       6.53516943%   May 15 2012     0.00000000%       5.72745038%   Jun 15 2012     0.00000000%       4.91973133%   Jul 15 2012     0.00000000%       4.11201227%   Aug 15 2012     0.00000000%       5.29268536%   Sep 15 2012     0.00000000%       5.29268536%   Oct 15 2012     0.00000000%       5.29268536%   Nov 15 2012     0.00000000%       5.29268536%   Dec 15 2012     0.00000000%       5.29268536%   Jan 15 2013     0.00000000%       5.29268536%   Feb 15 2013     0.00000000%       9.47876590%   Mar 15 2013     0.00000000%       9.47876590%   Apr l5 2013     0.00000000%       9.47876590%   May 15 2013     0.00000000%       9.47876590%   Jun 15 2013     0.00000000%       9.47876590%   Jul 15 2013     0.00000000%       9.47876590%   Aug 15 2013     0.00000000%       9.62886132%   Sep 15 2013     0.00000000%       8.67235192%   Oct 15 2013     0.00000000%       7.71584251%   Nov l5 2013     0.00000000%       6.75933311%   Dec 15 2013     0.00000000%       5.80282371%   Jan 15 2014     0.00000000%       4.84631431%   Feb 15 2014     0.00000000%     9.50835813% Mar 15 2014     0.00000000%       8.70063908%   Apr 15 2014     0.00000000%       7.89292003%   May 15 2014     0.00000000%       7.08520098%   Jun 15 2014     0.00000000%       6.27748192%   Jul 15 2014     0.00000000%       5.46976287%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory IV Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)             (b)              (c)                Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent     Aug 15 2014     0.00000000%       6.46883766%   Sep 15 2014     0.00000000%       6.46883766%   Oct 15 2014     0.00000000%       6.46883766%   Nov 15 2014     0.00000000%       6.46883766%   Dec 15 2014     0.00000000%       6.46883766%   Jan 15 2015     0.00000000%       6.46883766%   Feb 15 2015     0.00000000%       10.97342503%   Mar 15 2015     0.00000000%       9.89528542%   Apr 15 2015     0.00000000%       8.81714581%   May 15 2015     0.00000000%       7.73900620%   Jun 15 2015     0.00000000%       6.66086659%   Jul 15 2015     0.00000000%       5.58272698%   Aug 15 2015     0.00000000%       6.46883766%   Sep l5 2015     0.00000000%       6.46883766%   Oct l5 2015     0.00000000%       6.46883766%   Nov 15 2015     0.00000000%       6.46883766%   Dec 15 2015     0.00000000%       6.46883766%   Jan 15 2016     0.00000000%       6.46883766%   Feb 15 20l6     0.00000000%       11.09209783%   Mar 15 2016     0.00000000%       10.01395822%   Apr 15 2016     0.00000000%       8.93581861%   May 15 2016     0.00000000%       7.85767900%   Jun 15 2016     0.00000000%       6.77953939%   Jul 15 2016     0.00000000%       5.70139978%   Aug 15 2016     0.00000000%       6.46883766%   Sep 15 20l6     0.00000000%       6.46883766%   Oct 15 2016     0.00000000%       6.46883766%   Nov 15 2016     0.00000000%       6.46883766%   Dec 15 2016     0.00000000%       6.46883766%   Jan 15 2017     0.00000000%       6.46883766%   Feb 15 2017     0.00000000%       12.28357037%   Mar 15 2017     0.00000000%       12.28357037%   Apr 15 2017     0.00000000%       12.28357037%   May 15 2017     0.00000000%       12.28357037%   Jun 15 2017     0.00000000%       12.28357037%   Jul 15 2017     0.00000000%       12.28357037%   Aug 15 2017     0.00000000%       11.76860828%   Sep 15 2017     0.00000000%       10.59954123%   Oct 15 2017     0.00000000%       9.43047418%   Nov 15 2017     0.00000000%       8.26140713%   Dec 15 2017     0.00000000%       7.09234009%   Jan 15 2018     0.00000000%       5.92327304%   Feb 15 2018     0.00000000%       10.88119089%   Mar 15 2018     0.00000000%       9.89397872%   Apr 15 2018     0.00000000%       8.90676654%   May 15 2018     0.00000000%       7.91955437%   Jun 15 2018     0.00000000%       6.93234220%   Jul 15 2018     0.00000000%       5.94513002%   Aug 15 2018     0.00000000%       6.46883766%   Sep l5 2018     0.00000000%       6.46883766%   Oct l5 2018     0.00000000%       6.46883766%   Nov 15 2018     0.00000000%       6.46883766%   Dec 15 2018     0.00000000%       6.46883766%   Jan 15 2019     0.00000000%       6.46883766%   Feb l5 2019     0.00000000%       10.34359158%   Mar 15 2019     0.00000000%       9.26545197%   Apr !5 1019     0.00000000%       8.18731236%   May 15 2019     0.00000000%       7.10917275%   Jun 15 2019     0.00000000%       6.03103313%   Jul 15 2019     0.00000000%       4.95289352%   Aug 15 2019     0.00000000%       5.36744388%   Sep 15 2019     0.00000000%       5.36744388%   Oct 15 2019     0.00000000%       5.36744388%   Nov 15 2019     0.00000000%       5.36744388%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory IV Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)            (b)              (c)                Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Basic Lease Rent     Dec 15 2019     0.00000000%       5.36744388%   Jan 15 2020     0.00000000%       5.36744388%   Feb 15 2020     0.00000000%       10.59142362%   Mar 15 2020     0.00000000%       9.69684964%   Apr 15 2020     0.00000000%       8.80227566%   May 15 2020     0.00000000%       7.90770168%   Jun 15 2020     0.00000000%       7.01312770%   Jul 15 2020     0.00000000%       6.11855372%   Aug 15 2020     0.00000000%       6.46883766%   Sep 15 2020     0.00000000%       6.46883766%   Oct 15 2020     0.00000000%       6.46883766%   Nov 15 2020     0.00000000%       6.46883766%   Dec 15 2020     0.00000000%       6.46883766%   Jan 15 2021     0.00000000%       6.46883766%   Feb 15 2021     0.00000000%       11.65500281%   Mar 15 2021     0.00000000%       10.57686320%   Apr 15 2021     0.00000000%       9.49872359%   May 15 2021     0.00000000%       8.42058398%   Jun 15 2021     0.00000000%       7.34244437%   Jul 15 2021     0.00000000%       6.26430476%   Aug 15 2021     0.00000000%       6.46883766%   Sep 15 2021     0.00000000%       6.46883766%   Oct 15 2021     0.00000000%       6.46883766%   Nov 15 2021     0.00000000%       6.46883766%   Dec 15 2021     0.00000000%       6.46883766%   Jan 15 2022     0.00000000%       6.46883766%   Feb 15 2022     0.00000000%       11.65500281%   Mar 15 2022     0.00000000%       10.57686320%   Apr 15 2022     0.00000000%       9.49872359%   May 15 2022     0.00000000%       8.42058398%   Jun 15 2022     0.00000000%       7.34244437%   Jul 15 2022     0.00000000%       6.26430476%   Aug 15 2022     0.00000000%       6.46883766%   Sep 15 2022     0.00000000%       6.46883766%   Oct 15 2022     0.00000000%       6.46883766%   Nov 15 2022     0.00000000%       6.46883766%   Dec 15 2022     0.00000000%       6.46883766%   Jan 15 2023     0.00000000%       6.46883766%   Feb 15 2023     0.00000000%       12.73314243%   Mar 15 2023     0.00000000%       12.73314243%   Apr 15 2023     0.00000000%       12.73314243%   May 15 2023     0.00000000%       12.73314243%   Jun 15 2023     0.00000000%       12.73314243%   Jul 15 2023     0.00000000%       12.73314243%   Aug 15 2023     0.00000000%       11.76860828%   Sep 15 2023     0.00000000%       10.59954123%   Oct 15 2023     0.00000000%       9.43047418%   Nov 15 2023     0.00000000%       8.26140713%   Dec 15 2023     0.00000000%       7.09234009%   Jan 15 2024     0.00000000%       5.92327304%   Feb 15 2024     0.00000000%       11.20036563%   Mar 15 2024     0.00000000%       10.21315346%   Apr 15 2024     0.00000000%       9.22594128%   May 15 2024     0.00000000%       8.23872911%   Jun 15 2024     0.00000000%       7.25151694%   Jul 15 2024     0.00000000%       6.26430476%   Aug 15 2024     0.00000000%       6.46883766%   Sep 15 2024     0.00000000%       6.46883766%   Oct 15 2024     0.00000000%       6.46883766%   Nov 15 2024     0.00000000%       6.46883766%   Dec 15 2024     0.00000000%       6.46883766%   Jan 15 2025     0.00000000%       6.46883766%   Feb 15 2025     0.00000000%       12.82571589%   Mar 15 2025     0.00000000%       12.82571589%   --------------------------------------------------------------------------------   Schedule 1D to Network Lease (NVG Network Statutory IV Trust) OVERPAYMENTS AND UNDERPAYMENTS OF BASIC LEASE RENT (Percentages are percentages of Owner Lessor’s Cost)                   (a)            (b)              (c)                Underpayment     Overpayment   Termination Date   of Basic Lease Rent     of Bask Lease Rent     Apr 15 2025     0.00000000%       12.82571589%   May 15 2025     0.00000000%       12.82571589%   Jun 15 2025     0.00000000%       12.82571589%   Jul 15 2025     0.00000000%       12.82571589%   Aug 15 2025     0.00000000%       11.76860828%   Sep 15 2025     0.00000000%       10.59954123%   Oct 15 2025     0.00000000%       9.43047418%   Nov 15 2025     0.00000000%       8.26140713%   Dec 15 2025     0.00000000%       7.09234009%   Jan 15 2026     0.00000000%       5.92327304%   Feb 15 2026     0.00000000%       9.59090674%   Mar 15 2026     0.00000000%       8.60369457%   Apr 15 2026     0.00000000%       7.61648239%   May 15 2026     0.00000000%       6.62927022%   Jun l5 2026     0.00000000%       5.64205805%   Jul 15 2026     0.00000000%       4.65484587%   Aug l5 2026     0.00000000%       4.65484587%   Sep 15 2026     0.00000000%       4.65484587%   Oct 15 2026     0.00000000%       4.65484587%   Nov 15 2026     0.00000000%       4.65484587%   Dec 15 2026     0.00000000%       4.65484587%   Jan 15 2027     0.00000000%       4.65484587%   Feb 15 2027     0.00000000%       3.87903823%   Mar 15 2027     0.00000000%       3.10323058%   Apr 15 2027     0.00000000%       2.32742294%   May 15 2027     0.00000000%       1.55161529%   Jun 15 2027     0.00000000%       0.77580765%   Jul 15 2027     0.00000000%       0.00000000%   Aug 15 2027     0.00000000%       0.00000000%   Sep 15 2027     0.00000000%       0.00000000%   Sep 26 2027     0.00000000%       0.00000000%   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory IV Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value     Dec 26 2003     104.66682483%   Jan 15 2004     105.61642190%   Feb 15 2004     97.13211100%   Mar 15 2004     97.65345190%   Apr 15 2004     98.16694870%   May 15 2004     98.66979100%   Jun 15 2004     99.17391030%   Jul 15 2004     99.66731010%   Aug 15 2004     98.49957840%   Sep 15 2004     98.98763330%   Oct 15 2004     99.50304460%   Nov 15 2004     99.97363080%   Dec 15 2004     100.44530790%   Jan 15 2005     100.89833730%   Feb 15 2005     97.65580170%   Mar 15 2005     98.10246300%   Apr 15 2005     98.54238430%   May 15 2005     98.97133410%   Jun 15 2005     99.40118300%   Jul 15 2005     99.81999150%   Aug 15 2005     98.62648380%   Sep 15 2005     99.03825630%   Oct 15 2005     99.39300210%   Nov 15 2005     99.78565700%   Dec 15 2005     100.17900390%   Jan 15 2006     100.55244000%   Feb 15 2006     97.17683080%   Mar 15 2006     97.54265970%   Apr 15 2006     97.90041550%   May 15 2006     98.24838650%   Jun 15 2006     98.59891480%   Jul 15 2006     98.93545780%   Aug 15 2006     97.71476700%   Sep 15 2006     98.04936690%   Oct 15 2006     98.31081730%   Nov 15 2006     98.62474690%   Dec 15 2006     98.93897160%   Jan 15 2007     99.23522930%   Feb 15 2007     95.52500150%   Mar 15 2007     95.81160750%   Apr 15 2007     96.09048590%   May 15 2007     96.36357370%   Jun 15 2007     96.63678600%   Jul 15 2007     96.90416950%   Aug 15 2007     95.67673480%   Sep 15 2007     95.94095290%   Oct 15 2007     96.24608860%   Nov 15 2007     96.50111990%   Dec 15 2007     96.75616980%   Jan 15 2008     97.00754340%   Feb 15 2008     93.38973000%   Mar 15 2008     93.63137760%   Apr 15 2008     93.87302520%   May 15 2008     94.11467280%   Jun 15 2008     94.35632040%   Jul 15 2008     94.59796800%   Aug 15 2008     93.40639130%   Sep 15 2008     93.64803890%   Oct 15 2008     93.89488880%   5 --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory IV Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Nov 15 2008     94.13653640 % Dec 15 2008     94.37818400 % Jan 15 2009     94.61983160 % Feb 15 2009     90.93049510 % Mar 15 2009     91.16192510 % Apr 15 2009     91.39335510 % May 15 2009     91.62478510 % Jun 15 2009     91.85621520 % Jul 15 2009     92.08764520 % Aug 15 2009     90.94715640 % Sep 15 2009     91.17858640 % Oct 15 2009     91.37674570 % Nov 15 2009     91.60817580 % Dec 15 2009     91.83960580 % Jan 15 2010     92.07103580 % Feb 15 2010     88.30656180 % Mar 15 2010     88.52725790 % Apr 15 2010     88.74795400 % May 15 2010     88.96865010 % Jun 15 2010     89.18934620 % Jul 15 2010     89.41004230 % Aug 15 2010     88.32322310 % Sep 15 2010     88.54391920 % Oct 15 2010     88.76344320 % Nov 15 2010     88.98413930 % Dec 15 2010     89.20483540 % Jan 15 2011     89.42553150 % Feb 15 2011     85.59496750 % Mar 15 2011     85.80622210 % Apr 15 2011     86.01747680 % May 15 2011     86.22873140 % Jun 15 2011     86.43998610 % Jul 15 2011     86.65124070 % Aug 15 2011     85.61162870 % Sep 15 2011     85.82288340 % Oct 15 2011     86.02380950 % Nov 15 2011     86.23506420 % Dec 15 2011     86.44631880 % Jan 15 2012     86.65757350 % Feb 15 2012     82.74511690 % Mar 15 2012     82.94467270 % Apr 15 2012     83.14422840 % May 15 2012     83.34378410 % Jun 15 2012     83.54333980 % Jul 15 2012     83.74289560 % Aug 15 2012     82.76177820 % Sep 15 2012     82.96133390 % Oct 15 2012     83.22446900 % Nov 15 2012     83.42402480 % Dec 15 2012     83.62358050 % Jan 15 2013     83.82313620 % Feb 15 2013     79.82426670 % Mar 15 2013     80.01147770 % Apr 15 2013     80.19868870 % May 15 2013     80.38589970 % Jun 15 2013     80.57311080 % Jul 15 2013     80.76062990 % Aug 15 2013     79.84267290 % Sep 15 2013     80.03132780 % --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory IV Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Oct 15 2013     80.13677300 % Nov 15 2013     80.32910620 % Dec 15 2013     80.52146640 % Jan 15 2014     80.71749810 % Feb 15 2014     75.42589220 % Mar 15 2014     75.60409640 % Apr 15 2014     75.78438470 % May 15 2014     75.96645080 % Jun 15 2014     76.14858530 % Jul 15 2014     76.33250980 % Aug 15 2014     75.51870330 % Sep 15 2014     75.70405840 % Oct 15 2014     75.95282090 % Nov 15 2014     76.14135220 % Dec 15 2014     76.32998880 % Jan 15 2015     76.52171560 % Feb 15 2015     71.11201180 % Mar 15 2015     71.28515930 % Apr 15 2015     71.45969490 % May 15 2015     71.63683110 % Jun 15 2015     71.81411600 % Jul 15 2015     71.99401960 % Aug 15 2015     71.28968540 % Sep 15 2015     71.47163730 % Oct 15 2015     71.59383490 % Nov 15 2015     71.78033990 % Dec 15 2015     71.96704750 % Jan 15 2016     72.15813410 % Feb 15 2016     66.62827120 % Mar 15 2016     66.80003850 % Apr 15 2016     66.97374350 % May 15 2016     67.15028470 % Jun 15 2016     67.32708530 % Jul 15 2016     67.50674260 % Aug 15 2016     66.91999930 % Sep 15 2016     67.10097880 % Oct 15 2016     67.32697110 % Nov 15 2016     67.51189930 % Dec 15 2016     67.69713820 % Jan 15 2017     67.88604300 % Feb 15 2017     62.23753620 % Mar 15 2017     62.40407550 % Apr 15 2017     62.57168760 % May 15 2017     62.74233720 % Jun 15 2017     62.91332740 % Jul 15 2017     63.08737720 % Aug 15 2017     62.61072670 % Sep 15 2017     62.78855960 % Oct 15 2017     62.79761540 % Nov 15 2017     62.98200210 % Dec 15 2017     63.16680580 % Jan 15 2018     63.35778750 % Feb 15 2018     57.58235980 % Mar 15 2018     57.75251850 % Apr 15 2018     57.92617770 % May 15 2018     58.10316730 % Jun 15 2018     58.28065390 % Jul 15 2018     58.46149570 % Aug 15 2018     58.12101200 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory IV Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Sep 15 2018     58.30476930 % Oct 15 2018     58.39165850 % Nov 15 2018     58.58123460 % Dec 15 2018     58.77138110 % Jan 15 2019     58.96681670 % Feb 15 2019     54.19177040 % Mar 15 2019     54.37022570 % Apr 15 2019     54.55115270 % May 15 2019     54.73567600 % Jun 15 2019     54.92084630 % Jul 15 2019     55.10964050 % Aug 15 2019     54.88643790 % Sep 15 2019     55.07847280 % Oct 15 2019     55.23106040 % Nov 15 2019     55.42936160 % Dec 15 2019     55.62839050 % Jan 15 2020     55.83300330 % Feb 15 2020     49.88064660 % Mar 15 2020     50.04744890 % Apr 15 2020     50.21623870 % May 15 2020     50.38910460 % Jun 15 2020     50.56211130 % Jul 15 2020     50.73821800 % Aug 15 2020     50.58114530 % Sep 15 2020     50.78048790 % Oct 15 2020     50.98568650 % Nov 15 2020     51.19186980 % Dec 15 2020     51.39904420 % Jan 15 2021     51.64911250 % Feb 15 2021     46.28408030 % Mar 15 2021     46.46257920 % Apr 15 2021     46.64396330 % May 15 2021     46.82938130 % Jun 15 2021     47.01566410 % Jul 15 2021     47.20601240 % Aug 15 2021     47.19534160 % Sep 15 2021     47.39011860 % Oct 15 2021     47.59142430 % Nov 15 2021     47.79368890 % Dec 15 2021     47.99691820 % Jan 15 2022     48.28254930 % Feb 15 2022     42.17128490 % Mar 15 2022     42.32499950 % Apr 15 2022     42.48180580 % May 15 2022     42.64250760 % Jun 15 2022     42.80392920 % Jul 15 2022     42.96927640 % Aug 15 2022     42.93231550 % Sep 15 2022     43.10064910 % Oct 15 2022     43.27422110 % Nov 15 2022     43.44859160 % Dec 15 2022     43.62376530 % Jan 15 2023     43.78619560 % Feb 15 2023     37.64540810 % Mar 15 2023     37.76943000 % Apr 15 2023     37.89523030 % May 15 2023     38.02474890 % Jun 15 2023     38.15480890 % Jul 15 2023     38.28861520 %   --------------------------------------------------------------------------------   Schedule 2 to Network Lease (NVG Network Statutory IV Trust) TERMINATION VALUES (Percentages are percentages of Owner Lessor’s Cost)           Termination Date   Termination Value   Aug 15 2023     38.22234940 % Sep 15 2023     38.36120820 % Oct 15 2023     38.50755100 % Nov 15 2023     33.65453200 % Dec 15 2023     38.80215510 % Jan 15 2024     39.07192400 % Feb 15 2024     32.90568860 % Mar 15 2024     33.00411010 % Apr 15 2024     33.10657310 % May 15 2024     33.21261160 % Jun 15 2024     33.31904810 % Jul 15 2024     33.42908620 % Aug 15 2024     33.33637480 % Sep 15 2024     33.44862960 % Oct 15 2024     33.56567690 % Nov 15 2024     33.68318980 % Dec 15 2024     33.80117100 % Jan 15 2025     34.02137170 % Feb 15 2025     27.74965260 % Mar 15 2025     27.83538150 % Apr 15 2025     27.92223780 % May 15 2025     28.01297030 % Jun 15 2025     28.10410730 % Jul 15 2025     28.19894730 % Aug 15 2025     28.18624780 % Sep 15 2025     28.28596100 % Oct 15 2025     28.39321100 % Nov 15 2025     28.50096010 % Dec 15 2025     28.60921120 % Jan 15 2026     28.70773420 % Feb 15 2026     24.15081810 % Mar 15 2026     24.24930070 % Apr 15 2026     24.35212400 % May 15 2026     24.45894010 % Jun 15 2026     24.56636030 % Jul 15 2026     24.67780340 % Aug 15 2026     24.79221680 % Sep 15 2026     24.90727970 % Oct 15 2026     25.02854310 % Nov 15 2026     25.15049690 % Dec 15 2026     25.27314530 % Jan 15 2027     25.35949460 % Feb 15 2027     25.48932930 % Mar 15 2027     25.61990560 % Apr 15 2027     25.75336010 % May 15 2027     25.90386910 % Jun 15 2027     26.05525290 % Jul 15 2027     26.22381040 % Aug 15 2027     26.40547340 % Sep 15 2027     26.58819560 % Sep 26 2027     25.92000000 %   --------------------------------------------------------------------------------   Schedule 3 to Network Lease (NVG Network Statutory IV Trust) PRICING ASSUMPTIONS               (1)   Network Cost:   $ 388,500,000.00     (2)   Owner Lessor’s Cost:   $ 70,000,000.00     (3)   Equity Investment:   $ 17,794,000.00     (4)   Closing Date:     9/26/2003     (5)   Assumed Tax Rate:     38.90 %   (6)   Transaction Cost:   $ 1,027,027.03     (7)   Early Purchase Date:     1/15/2021     (8)   Lessor Note             Interest Rate:     4.929 %   --------------------------------------------------------------------------------   Schedule 4 to Network Lease (NVG Network Statutory IV Trust) EARLY PURCHASE PRICE AND INSTALLMENTS                                                               Underpayment     Overpayment             Early     Early     of     of     Early       Purchase Date     Purchase Amount     Basic Lease Rent *     Basic Lease Rent *     Purchase Price   (1)   Jan 15 2021     26,551,232.16       0.00       8,913,199.70       17,638,032.46   (2)   Apr 15 2021     3,532,833.25       0.00       0.00       3,532,833.25   (3)   Jun 15 2021     3,532,833.25       0.00       0.00       3,532,833.25   (4)   Sep 15 2021     3,532,833.25       0.00       0.00       3,532,833.25   (5)   Dec 15 2021     3,532,833.25       0.00       0.00       3,532,833.25                                                 40,682,565.15       0.00       8,913,199.70       31,769,365.45     *   Values are calculated without regard to any offset for amounts of Basic Lease Rent that are due and owing on such date; the total amount due and payable by Lessee on such date is the sum of (i) the Early Purchase Price and (ii) the amount of Basic Lease Rent payable on such date as set forth on Schedule 1A.  

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Exhibit 10.37A AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT (the “Amendment”) among SBA PROPERTIES INC., a Florida corporation (“SBA”), SBA COMMUNICATIONS CORPORATION, a Florida corporation (the “Company”), and THOMAS P. HUNT (the “Executive”) is made and entered into as of this 10th day of November, 2005. W I T N E S S E T H: WHEREAS, SBA and the Executive entered into an Employment Agreement, dated as of February 28, 2003 (the “Agreement”); WHEREAS, the Executive, SBA and the Company mutually desire to amend the Agreement. NOW, THEREFORE, effective as of the 10th day of November, 2005, the Agreement shall be amended as follows: 1. The Preamble to the Agreement shall be amended to replace the words “SBA PROPERTIES INC., a Florida corporation” with the words “SBA COMMUNICATIONS CORPORATION, a Florida corporation.” 2. Section 10 of the Agreement shall be amended to replace the words “SBA Properties Inc.” with the words “SBA COMMUNICATIONS CORPORATION, a Florida corporation.” 3. The Agreement is hereby amended to add the following new Section 10 after Section 9(h) and to renumber the sections that follow new Section 10 accordingly: “10. RIGHTS AND OBLIGATIONS. The Executive hereby consents to the assignment by SBA Properties, Inc. to the Company, and the assumption by the Company, of all of SBA Properties, Inc.’s rights and obligations under the Agreement. The Executive acknowledges and agrees, for himself and each of his respective heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the “Assigns”), that the Executive and the Assigns shall have no right of action or remedy against SBA Properties, Inc. for any claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including without limitation, any Claims under federal, state, local or foreign law, that the Executive and the Assigns may have, or in the future may possess, arising out of (i) the Executive’s employment relationship with and service as an employee of the Parent Group or (ii) the Agreement.” 4. The Agreement shall remain unchanged in all other respects. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed effective as of the day and year first above written.   SBA PROPERTIES, INC. By:   /s/ Jeffrey A. Stoops   Name: Jeffrey A. Stoops   Title: President and Chief Executive Officer SBA COMMUNICATIONS CORPORATION By:   /s/ Jeffrey A. Stoops   Name: Jeffrey A. Stoops   Title: President and Chief Executive Officer EXECUTIVE /s/ Thomas P. Hunt THOMAS P. HUNT   2

EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT dated as of March 10, 2006 (“Agreement”), is by and between Transaction Network Services, Inc., a Delaware corporation (the “Company”), and its parent, TNS, Inc., a Delaware corporation (“Parent”), on the one hand (collectively, “TNS”), and John J. McDonnell, Jr. (“Executive”), on the other hand. (The Company, Parent and Executive will be referred to collectively as the “Parties” and may each be referred to individually as a “Party”). WHEREAS, Executive has been employed as Chairman and Chief Executive Officer of TNS; and WHEREAS, the Board of Directors of TNS (the “Board” or “Board of Directors”) has determined that it is in the best interest of TNS and its shareholders to continue to employ Executive in such capacity and Executive desires to continue his employment in such capacity; NOW THEREFORE, in consideration of the mutual covenants and promises contained herein, the receipt and adequacy of which are acknowledged, the parties agree as follows: 1.    Acceptance of Employment. Subject to the terms and conditions set forth below, the Company agrees to employ Executive and Executive accepts such employment. 2.    Term. The period of employment and term of this Agreement will be from January 1, 2006 through December 31, 2009, unless further extended or sooner terminated as hereinafter set forth (the “Term”). The Term shall automatically be extended for successive one (1) year periods unless one Party hereto has provided the other with at least three (3) months’ prior written notice of its intention to allow this Agreement to expire at the end of such initial or extended Term, in which event the employment period will terminate on the last day of such Term. If the Company provides Executive such notice of its intention to allow this Agreement to expire without thereafter providing Executive with a timely written notice of termination for Cause (as defined in Section 6(e) of this Agreement) and otherwise complying with the 1 -------------------------------------------------------------------------------- procedures set forth in Section 6(e), the expiration of the Agreement will be considered a termination “for other than Cause” as provided in Section 6(f). The Company hereby acknowledges that Executive has been employed by the Company since April 1, 1990. 3.    Position and Duties. Executive shall serve as Chairman and Chief Executive Officer of TNS and will perform such duties as are set forth in the job description for such position, as it may be amended by TNS from time-to-time, and such other reasonably related duties consistent with such position that are assigned to Executive by the Board. Subject to reasonable business travel requirements, Executive shall generally perform his duties from the TNS’ general and administrative offices in Reston, Virginia and shall not be required by TNS to be personally based or transferred anywhere other than the metropolitan area in which his office in TNS’ general and administrative offices is now located, without Executive’s prior written consent. Executive will perform his duties in a professional and competent manner. Executive shall devote all of his working time and attention and his reasonable best efforts and skills to the business and affairs of TNS, except (i) with respect to incidental business activities, including the management of his personal investments, outside directorships, and civic and charitable activities, which shall be fully disclosed to the Board of Directors prior to engaging in such activities and which, in the determination of the Board of Directors, do not cause a conflict of interest or interfere with Executive’s performance of his duties under this Agreement; and (ii) as otherwise approved by the Board of Directors. During the Term, TNS shall nominate and take such action as may be necessary or appropriate to seek stockholder election of Executive to the Board of Directors. Executive agrees to resign from the Board of Directors in connection with, and effective upon, termination of his employment with the Company, unless specifically requested by the Board of Directors in writing to complete his term. 4.    Base Salary and Incentives. (a)            Base Salary. During the Term, the Company will pay Executive a base salary at the rate of $650,000 per annum, less customary withholdings and deductions (the “Base 2 -------------------------------------------------------------------------------- Salary”) payable in accordance with the payroll procedures for the Company’s salaried employees in effect during the Term. Beginning in January 2007 and annually thereafter, the Base Salary shall be subject to annual review and possible increase by the Board of Directors, but it shall not be decreased during the Term of this Agreement. (b)           Annual Incentive Award Opportunity. Executive shall be eligible to participate in the Company’s Annual Incentive Plan (the “AIP”), in accordance with the terms of the AIP as they may be amended by the Board from time-to time. Executive’s target annual award opportunity under the AIP shall be 100% of the Base Salary (the “AIP Annual Target”) and shall be subject, in accordance with the terms of the AIP, to an annual cap equal to 2 times the AIP Annual Target. Actual awards will be based on the achievement of specified performance objectives, as determined by the Board. (c)            Long-Term Incentive Plan Opportunity. Executive shall be eligible to participate in the Parent’s Long-Term Incentive Plan (the “LTIP”), in accordance with the terms of the LTIP, as they may be amended by the Board from time-to time. Executive’s target annual award opportunity under the LTIP shall be 250% of the Base Salary (the “LTIP Annual Target”) and shall be subject, in accordance with the terms of the LTIP, to an annual cap equal to 2 times the LTIP Annual Target. Awards will be comprised of a combination of long-term incentive vehicles, as determined by the Board. Awards under the AIP and LTIP will be referred to collectively as “Incentive Awards.” 5.    Benefits. During the Term, Executive will be eligible for the following benefits in connection with his employment (collectively, the “Benefits”): (a)            Retirement Benefits. Executive will be eligible to participate in the Company’s 401(k) Plan in accordance with the terms of that plan, as they may be amended from time-to-time by the Company. (b)           Other Fringe Benefits. In addition to any other benefits specifically set forth herein, Executive (i) shall be entitled to the benefits set forth in the Summary of Executive 3 -------------------------------------------------------------------------------- Benefits attached to this Agreement as Appendix 1 (and incorporated herein) and (ii) shall also be eligible to participate in all other employee benefit plans and programs offered by the Company to its senior executives generally, in accordance with the terms of those plans and programs ((i) and (ii) collectively being the “Fringe Benefits”), as the Fringe Benefits may be amended or terminated from time-to-time by the Company. (c)            Business and Travel Expenses. Executive shall be entitled to reimbursement of all reasonable and necessary business-related expenses he incurs in performing his duties, in accordance with and to the extent permitted by the Company’s policies in effect from time to time. (d)           Indemnification. Executive shall be entitled to such indemnification rights as are set forth in the Indemnification Agreement between Executive and the Parent, a copy of which is attached hereto and incorporated by reference as Appendix 2. 6.    Termination of Employment and Effect of Termination. (a)            By Company for Death. Executive’s employment hereunder shall terminate upon his death, in which event TNS shall have no further obligation to Executive or his estate other than the payment of accrued and/or vested but unpaid Base Salary, pro-rated Incentive Awards (calculated and paid when such awards are paid to other employees generally), vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents. (b)           By Company for Disability. If Executive incurs a Disability and such Disability continues for a period of twelve (12) consecutive months, then the Company may, to the extent permitted by applicable law, terminate Executive’s employment upon written notice to Executive, in which event TNS shall have no further obligation to Executive other than the payment of accrued and/or vested but unpaid Base Salary, pro-rated Incentive Awards (calculated and paid when such awards are paid to other employees generally), vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents. 4 -------------------------------------------------------------------------------- For the purposes of this Agreement, a “Disability” means a physical or mental impairment that substantially limits a major life activity and that precludes Executive from performing all of the essential functions of his position, with or without reasonable accommodation, as such applicable terms are defined by the federal Americans with Disabilities Act, as it may be amended from time-to-time. (c)            By Executive for Good Reason. Executive may terminate his employment hereunder for Good Reason after giving at least 30 days’ notice to the Company. The date of such termination must be no more than 90 days from the date of the occurrence giving rise to the Good Reason. For purposes of this Agreement, Good Reason means that, without Executive’s prior written consent: (i) the Company relocates its general and administrative offices or Executive’s place of employment to an area other than the Washington, D.C. Standard Metropolitan Statistical Area; (ii) Executive is assigned duties substantially inconsistent with his responsibilities as described in Section 3 of this Agreement or a substantial adverse alteration is made to the nature or status of such responsibilities; (iii) Executive’s title is diminished; (iv) the Company reduces Executive’s Base Salary as in effect on the date hereof or as the same may be increased from time to time; or (v) any material reduction in Benefits provided to Executive pursuant to Sections 4 and 5 of this Agreement, other than in connection with a reduction in benefits generally applicable to senior executives of the Company. In the event that Executive elects to terminate this Agreement for Good Reason, Executive shall be entitled to:  (aa) payment of accrued and/or vested but unpaid Base Salary, pro-rated Incentive Awards (calculated and paid when such awards are paid to other employees generally), vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents; (bb) payment of two years of Base Salary at the rate in effect as of the date of termination in installments in accordance with the Company’s payroll practices in effect at the time; and (cc) continuation of Fringe Benefits for two years after the date of termination. In the event the Company’s Fringe Benefit plans do not permit continued participation by Executive after his termination, then Executive will instead be entitled to a lump sum payment from the Company of the expected cost to Executive to purchase and continue all such Fringe Benefit programs, as an individual or family policyholder, grossed up for all local, state and Federal taxes at the maximum tax rates. Executive’s entitlement to the Base Salary described in (bb) and 5 -------------------------------------------------------------------------------- the Fringe Benefits described in (cc) is conditional on his execution of a Severance Agreement and General Release in substantially the same form attached hereto as Appendix 3. TNS agrees to provide to Executive within ten (10) days of termination the Severance Agreement and General Release for execution. (d)           By Executive without Good Reason. Executive may terminate this Agreement without Good Reason upon ninety (90) days’ prior written notice to the Company. In the event Executive’s employment is terminated pursuant to this Section 6(d), the Company may in its discretion relieve Executive of his duties and provide him with Base Salary and Benefits through the date of termination. In the event Executive terminates his employment without Good Reason, Executive shall be entitled to payment of accrued and/or vested but unpaid Base Salary, pro-rated Incentive Awards (calculated and paid when such awards are paid to other employees generally), vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents. (e)            By Company for Cause. The Board of Directors of the Company may terminate this Agreement for Cause upon written notice to Executive. “Cause” shall be defined as: (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to the Company or any of its affiliates or any of their customers or suppliers; (ii) substantial failure on the part of Executive in his performance of the duties of the office held by him as reasonably directed by the Board (other than any such failure resulting from Executive’s incapacity due to physical or mental illness), after notice to Executive and a reasonable opportunity to cure; (iii) gross negligence or willful misconduct by Executive with respect to the Company or any of its affiliates (including, without limitation, disparagement that adversely affects the reputation of the Company or any of its affiliates); or (iv) any material breach by Executive of Sections 3, 7 or 8 of this Agreement. For purposes of this Agreement, an act, or failure to act, on the Executive’s part shall be considered “gross negligence” or “willful misconduct” only if done, or omitted, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company and its affiliates. The Executive’s employment shall not be deemed to have been terminated for “Cause” unless the Company shall have given or delivered to the Executive (A) 6 -------------------------------------------------------------------------------- reasonable notice setting forth the reasons for the Company’s intention to terminate the Executive’s employment for “Cause”; (B) a reasonable opportunity, at any time during the 30 day period after the Executive’s receipt of such notice, for the Executive, together with his counsel, to be heard before the Board; and (C) a notice of termination stating that, in the good faith opinion of not less than a majority of the entire membership of the Board, the Executive was guilty of the conduct set forth in clauses (i), (ii), (iii) or (iv) of the first sentence of this Section 6(e). In the event Executive is terminated for Cause, TNS’ only obligation to Executive will be the payment of accrued and/or vested but unpaid Base Salary, vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents. (f)            By the Company for Other than Cause. The Board of Directors may terminate this Agreement for reasons other than Cause after giving at least ninety (90) days’ prior written notice of such termination to Executive. In the event the Company terminates Executive pursuant to this Section 6(f), Executive shall be entitled to:  (aa) payment of accrued and/or vested but unpaid Base Salary, pro-rated Incentive Awards (calculated and paid when such awards are paid to other employees generally), vacation pay and other Benefits as of the termination date, unless otherwise required by law or plan documents; (bb) payment of two years of Base Salary at the rate in effect as of the date of termination in installments in accordance with the Company’s payroll practices in effect at the time; and (cc) continuation of Fringe Benefits for two years after the date of termination. In the event the Company’s Fringe Benefit plans do not permit continued participation by Executive after his termination, then Executive will instead be entitled to a lump sum payment from the Company of the expected cost to Executive to purchase and continue all such Fringe Benefit programs, as an individual or family policyholder, grossed up for all local, state and Federal taxes at the maximum tax rates. Executive’s entitlement to the Base Salary described in (bb) and the Fringe Benefits described in (cc) is conditional on his execution of a Severance Agreement and General Release in substantially the same form attached hereto as Appendix. TNS agrees to provide to Executive within ten (10) days of termination the Severance Agreement and General Release for execution. 7 -------------------------------------------------------------------------------- (g)           Termination Following a Change in Control. If the Executive’s employment is terminated by the Company during the Protection Period other than for Cause, Disability or as a result of the Executive’s death, or if the Executive terminates his employment during the Protection Period for Good Reason, the Company shall, subject to Section 7 of this Agreement, provide Executive with the following within then (10) days of the effective date of the Severance Agreement and General Release described below (the “Effective Date”) unless otherwise indicated below: (i)   The Executive’s Base Salary and vacation pay (for vacation not taken) accrued but unpaid through the date of termination of employment; (ii)   a lump sum severance payment in an amount equal to the product of 2.99 times the Executive’s “Average Annual Compensation.”  For the purposes of this Agreement, “Average Annual Compensation” shall be an amount equal to the annual average of the sums of (x) the Executive’s annual Base Salary from the Company plus (y) the amount of Incentive Awards accrued by TNS for the Executive, in each case for the three calendar years that ended immediately before (or, if applicable, coincident with) the Change in Control Date; (iii)   within 30 days of the Effective Date, upon surrender by the Executive of the outstanding options to purchase shares of common stock (“Shares”) of Parent granted to the Executive by the Parent (the “Outstanding Options”) and any stock appreciation rights granted to the Executive by the Parent (“SARs”), an amount with respect to each Outstanding Option and SAR (whether vested or not) equal to the difference between the exercise price of such Outstanding Options and SARs and the higher of (x) the fair market value of the Shares on the date of such termination (but not less than the closing price for the Shares on the New York Stock Exchange, or such other national stock exchange on which such shares may be listed, on the last trading day such shares traded prior to the date of termination); and (y) the highest price paid for Shares or, in the cases of securities convertible into Shares or carrying a right to acquire Shares, the highest effective price (based on the prices paid for such securities) at which such securities are convertible into Shares or at which Shares may be acquired, by any person or group whose acquisition of voting securities has resulted in a Change in Control of the Parent; provided, however, that this Section 6(g)(iii) shall not apply to the surrender of any 8 -------------------------------------------------------------------------------- Outstanding Option that is an incentive stock option (within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)); (iv)   the Company shall provide continuation of Fringe Benefits for three years after the date of termination. In the event the Company’s Fringe Benefit plans do not permit continued participation by Executive after his termination, then Executive will instead be entitled to a lump sum payment from the Company of the expected cost to Executive to purchase and continue all such Fringe Benefit programs, as an individual or family policyholder, grossed up for all local, state and Federal taxes at the maximum tax rate; (v)   all of the Executive’s Benefits accrued under any supplemental retirement plans, excess retirement plans, and deferred compensation plans maintained by the Company or any of its affiliates shall become immediately vested in full; (vi)   all of the Executive’s Outstanding Options shall become immediately vested and exercisable in full; and (vii)   all of the Executive’s outstanding shares of restricted stock shall become immediately vested in full. Executive’s entitlement to the foregoing benefits described in (g) is conditional on his execution of a Severance Agreement and General Release in substantially the same form as is attached hereto as Appendix 3. TNS agrees to provide to Executive within ten (10) days of termination the Severance Agreement and General Release for execution. For the purposes of this Section 6(g) and Section 6(h) of this Agreement, the following terms are defined below: “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Parent is then subject to such reporting requirements; provided that, without limitation, a Change in Control shall be deemed to have occurred if (i) any person (as such term is used in section 13(d) and 14(d) of the Exchange Act) is or becomes beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent representing 25 percent or more of the combined voting power of the Parent’s then outstanding securities; or (ii) 9 -------------------------------------------------------------------------------- during any period of two consecutive years, the following persons (the “Continuing Directors”) cease for any reason to constitute a majority of the Board: individuals who at the beginning of such period constitute the Board and new directors each of whose election to the Board or nomination for election to the Board by the Parent’s security holders was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; or (iii) the securityholders of the Parent approve a merger or consolidation of the Parent with any other corporation, other than a merger or consolidation that would result in the voting securities of the Parent outstanding immediately before the merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of such surviving entity) a majority of the voting securities of the Parent or of such surviving entity outstanding immediately after such merger or consolidation; or (iv) the security holders of the Parent approve a plan of complete liquidation of Parent or the Company or an agreement for the sale or disposition by the Parent or the Company of all or substantially all of its assets. The “Change in Control Date” shall be any date during the term of this Agreement on which a Change in Control occurs. Notwithstanding any contrary provision in this Agreement, if the Executive’s employment or status as an elected or appointed officer with the Company is terminated by the Company within six months before the date on which a Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated or intended to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for the purposes of this Agreement the “Change in Control Date” shall mean the date immediately before the date of such termination. “Good Reason” means: (i)   the assignment to the Executive within the Protection Period of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements, authority, duties, or responsibilities) or any other action that results in a diminution in such position, authority, duties, or responsibilities excluding for 10 -------------------------------------------------------------------------------- this purpose an isolated, insubstantial, and inadvertent action that is not taken in bad faith and is remedied by TNS promptly after receipt of notice given by the Executive; (ii)   a reduction by the Company in the Executive’s Base Salary in effect immediately before the beginning of the Protection Period or as increased from time to time after the beginning of the Protection Period; (iii)   a failure by TNS to maintain plans providing Benefits at least as beneficial as those provided by any benefit or compensation plan (including, without limitation, any incentive compensation plan, bonus plan, or program, retirement, pension or savings plan, life insurance plan, health and dental plan, or disability plan) in which the Executive is participating immediately before the beginning of the Protection Period or any action taken by TNS that would adversely affect the Executive’s participation in, or reduce the Executive’s opportunity to benefit under, any of such plans or deprive the Executive of any material fringe benefit enjoyed by him immediately before the beginning of the Protection Period; provided, however, that a reduction in benefits under TNS’ tax qualified retirement, pension, or savings plans or its life insurance plan, health and dental plan, disability plans, or other insurance plans, which reduction applies generally to participants in the plans and has a de minimis effect on the Executive shall not constitute “Good Reason” for termination by the Executive; (iv)   the Company requiring the Executive, without the Executive’s written consent, to be based at any office or location in excess of 25 miles from his office location immediately before the beginning of the Protection Period, except for travel reasonably required in the performance of the Executive’s responsibilities; (v)   any purported termination by the Company of the Executive’s employment for Cause otherwise than as provided in Section 6(e) of this Agreement; or (vi)   any failure by TNS to obtain the assumption of the obligations contained in this Agreement by any successor as contemplated in Section 9(c) of this Agreement. “Protection Period” means the period beginning on the Change in Control Date and ending on the last day of the 24th calendar month following the Change in Control Date.   11 -------------------------------------------------------------------------------- h)           Adjustment in Benefits. In the event that Executive becomes entitled to the payments and benefits described in this Section 6 (together with any other benefits to which Executive is entitled hereunder following a termination entitling Executive to the payments and benefits of this Section 6, the “Severance Benefits”), if (x) the Severance Benefits equal or exceed 110% of three times Executive’s “base amount” determined for purposes of Section 280G of the Code, the Company shall pay to Executive an additional amount (the “Gross-Up Payment”) equal to the sum of any excise tax imposed under Section 280G of the Code (“Excise Tax”) on Executive by reason of receiving the Severance Benefits plus the amount necessary to place Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income and other taxes on the Gross-Up Payment) as if no Excise Tax had been imposed on the Severance Befits and no Gross-Up Payment had been made to Executive, and if (y) the Severance Benefits are less than 110% of three times Executive’s “base amount” determined for purposes of Section 280G of the Code, the Severance Benefits shall be limited to no more than 2.99 times Executive’s “base amount” determined for purposes of Section 280G of the Code. For purposes of determining whether any of the Severance Benefits will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments or benefits received or to be received by Executive in connection with a Change in Control or Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with TNS, any person whose actions result in a change in control or any person affiliated with the Company or such person) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by TNS’ independent auditors and reasonably acceptable to Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, including without limitation by reason of Section 280G(b)(4)(A) of the Code, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code in excess of the Base Amount as defined in Section 280G(b)(3) of the Code allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, (ii) the amount of the Severance Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Severance Benefits or (b) the amount of excess parachute payments within 12 --------------------------------------------------------------------------------   the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above), and (iii) the value of all non-cash benefits or any deferred payment or benefit shall be determined by TNS’ independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of his residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder in the computation of the Gross-Up Payment, Executive shall repay to the Company (without interest), at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable the Excise tax and federal, state and local income and employment tax imposed on the portion of the Gross-Up Payment being repaid by Executive to the extent that such repayment results in a reduction in the Excise Tax and/or in a federal, state or local income or employment tax deduction). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the computation of the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined. Executive and TNS shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Severance Benefits. (i)           Notice of Termination. Termination of this Agreement by TNS or termination of this Agreement by Executive shall be communicated by written notice to the other Party hereto, specifically indicating the termination provision relied upon. 13 --------------------------------------------------------------------------------   (j)           Property. Upon the termination of Executive’s employment under this Agreement, for any reason, or at any time upon request from the Company, Executive shall return all property of TNS, and all copies, excerpts or summaries of such property in whatever form, that are in his possession, custody or control. 7.    Noncompetition and Nonsolicitation. Executive acknowledges that in the course of his employment with the Company he has and will become familiar with the Company’s and its affiliates’ trade secrets and with other confidential information concerning The Company and its affiliates and that his services will be of special, unique and extraordinary value to the Company and its affiliates. Therefore, Executive agrees that: (a)          Noncompetition. During the Term and (i) in the case of termination by the Company without Cause or resignation by Executive for Good Reason, for a period of two years thereafter, or (ii) in the case of termination or resignation for any other reason, for a period of one year thereafter (as applicable, the “Noncompete Period”), Executive shall not, directly or indirectly, either alone or in association with others, own, manage, operate, sell, control or participate in the ownership, management, operation, sales or control of, be involved with the development efforts of, serve as a technical advisor to, license intellectual property to, provide services to or in any manner engage in any business that competes with any business in which the Company or any of its affiliates is engaged as of the date of Executive’s termination or resignation; provided, however, that Executive may own as a passive investor up to 5.0% of any class of an issuer’s publicly traded securities. (b)         Nonsolicitation. During the Noncompete Period, Executive shall not, directly or indirectly, alone or in association with others, (i) induce or attempt to induce any employee of the Company or any of its affiliates to leave the employ of the Company or such affiliate, or in any way interfere with the relationship between the Company and any of its affiliates and any employee thereof; (ii) hire any person who was an employee of the Company or any of its affiliates within one year prior to the time such employee was hired by Executive; (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any of its affiliates to cease doing business with the Company or such affiliate or in 14 --------------------------------------------------------------------------------   any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any of its affiliates; or (iv) acquire or attempt to acquire an interest in any business which relates to any business of the Company or any of its affiliates and with which the Company and any of its affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company or any of its affiliates in the two-year period immediately preceding the termination of employment. (c)          Business Scope and Geographical Limitation. Executive acknowledges (i) that the business of the Company and its affiliates is, and is expected to remain, international in scope and without geographical limitation; (ii) notwithstanding the state of incorporation or principal office of the Company or any of its affiliates, or any of their respective executives or employees (including Executive), it is expected that the Company and its affiliates will have business activities and have valuable business relationships within its industry throughout the world; and (iii) as part of his responsibilities, Executive will travel around the world in furtherance of the Company’s and its affiliates’ businesses and their relationships. Accordingly, the restrictions set forth in this Section 7 shall be effective in all cities, counties and states of the United States and all countries in which the Company or any of its affiliates has an office or is engaged in business as of the date of Executive’s termination or resignation. (d)         Enforcement. If, at the time of enforcement of this Section 7, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. (e)          Additional Acknowledgments. Executive acknowledges that the provisions of this Section 7 are in consideration of employment with the Company and the additional good and valuable consideration as set forth in this Agreement. Executive acknowledges that he has carefully read this Agreement and has given careful consideration to 15 -------------------------------------------------------------------------------- the restraints imposed upon Executive by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company and its affiliates now existing or to be developed in the future. Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement was discussed in good faith between the parties hereto and is reasonable with respect to subject matter, time period and geographical area. During the Term and the Noncompete Period, Executive agrees to provide the Company (upon the Company’s reasonable request) with such information as may be necessary to demonstrate Executive’s compliance with the terms and provisions of this Agreement. 8.    Confidential Information. (a)          Obligation to Maintain Confidentiality. Executive acknowledges that the information, observations and data obtained by him during the course of his performance under this Agreement concerning the business and affairs of the Company and its affiliates are the property of the Company or such affiliates, including information concerning acquisition opportunities in or reasonably related to the Company’s or any of its affiliates’ business or industry of which Executive becomes aware during the Term. Therefore, Executive agrees that he will not disclose to any unauthorized person or use for his own account any of such information, observations or data without the prior written consent of the Board, unless, and then only to the extent that, the aforementioned matters become generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act. Executive agrees to deliver to the Company upon termination of employment, or at any other time the Company may request in writing, any and all property belonging to the Company and its affiliates in his possession or under his control including, but not limited to, any memoranda, notes, plans, records, reports, documents, discs and other data storage media (and any copies thereof). (b)         Ownership of Property. Executive expressly understands and agrees that any and all right, title or interest he has or obtains in any documentation, trade secrets, technical specifications, data, know-how, inventions, concepts, ideas, techniques, innovations, discoveries, improvements, developments, methods, processes, programs, designs, analyses, drawings, 16 --------------------------------------------------------------------------------   reports, memoranda, marketing plans, and all similar or related information  (whether or not patentable) conceived, devised, developed, contributed to, made, reduced to practice or otherwise had or obtained by Executive (either solely or jointly with others) during the Term that relate to the Company’s or any of its affiliates’ actual or anticipated business, research and development, or existing or future products or services, or that arise out of Executive’s employment with the Company or any of its affiliates (including any of the foregoing that constitutes any proprietary information or records) (“Work Product”) belong to the Company or the respective affiliate, and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company or such affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns, and agrees to assign, to the Company or the respective affiliate all of his right, title and interest in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company’s or the respective affiliate’s ownership therein (including executing and delivering any assignments, consents, powers of attorney and other instruments). (c)          Third Party Information. Executive understands that the Company and its affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s and such affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Term and thereafter, and without in any way limiting the provisions of Section 8(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company or its affiliates who need to know such information in connection with their work for the Company or such affiliates) or use, except in connection with his work for the Company or such affiliates, Third Party Information without the prior written consent of the Board. 17 --------------------------------------------------------------------------------   (d)         Use of Information of Prior Employers. During the Term, Executive will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Executive has an obligation of confidentiality, and will not bring onto the premises of the Company or any of its affiliates any unpublished documents or any property belonging to any former employer or any other person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or person. Executive will use in the performance of his duties only information which is (i)(x) common knowledge in the industry or (y) is otherwise legally in the public domain; (ii) is otherwise provided or developed by the Company or its affiliates; or (iii) in the case of materials, property or information belonging to any former employer or other person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or person. 9.    Arbitration. All disputes concerning the application, interpretation or enforcement of this Agreement or otherwise arising out of the relationship between Executive, on the one hand, and the Company or Parent, on the other hand, except for those arising under Section 7 or 8 of this Agreement, shall be resolved exclusively by final and binding arbitration before a single arbitrator in accordance with the Employment Rules of the American Arbitration Association then in effect. The arbitration shall be held in Washington, D.C., and the arbitrator shall have the authority to permit the parties to engage in reasonable pre-hearing discovery. In any litigation or arbitration to enforce this Agreement, the prevailing party will be awarded reasonable attorneys’ fees and costs. Each Party knowingly and voluntarily waives its right to a trial by jury with respect to disputes that are covered by this Section 9. 10.  Notices. Any notice provided for or required by this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the addresses indicated below or to such other address as a Party may designate in writing to the other Party: 18 --------------------------------------------------------------------------------   If to the Company or Parent: Transaction Network Services, Inc. 11480 Commerce Park Drive Suite 600 Reston, VA  20191 Attention:  General Counsel With a copy to: Arent Fox PLLC 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 Attention:  Jeffrey E. Jordan, Esquire If to Executive: To his last known home address on file with the Company 11.  No Waiver. The failure of either Party at any time to enforce any provision of this Agreement or to exercise any remedy, option, right, power or privilege provided for herein, or to require the performance by the other party of any of the provisions hereof, shall in no way be deemed a waiver of such provision at the same or at any prior or subsequent time. 12.  Governing Law. This Agreement is governed by and shall be construed in accordance with the laws of the Commonwealth of Virginia, without reference to the principles of conflict of laws therein. Executive agrees to submit to personal jurisdiction and venue in the Commonwealth of Virginia. 13.  Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not be deemed to affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. The court or arbitrator will modify any invalid or unenforceable provision to make it valid and enforceable to the maximum extent permitted by law. 14.  Successors. This Agreement shall be binding upon TNS, its successors and assigns, including any corporation or other business entity which may acquire all or substantially 19 --------------------------------------------------------------------------------   all of TNS’ assets or business, or within which TNS may be consolidated or merged, or any surviving corporation in a merger involving TNS. 15.  Waiver or Modification of Agreement. No waiver or modification of this Agreement shall be valid unless in writing and duly executed by both Parties. 16.  Counterparts. This Agreement may be executed in one or more counterparts, each of which and together will constitute one and the same instrument. 17.  Entire Agreement.   This Agreement represents the entire agreement, and supersedes all other agreements, discussions or understandings concerning the subject matter. The Amended and Restated Senior Management Agreement among Executive, the Company and Parent, dated March 19, 2004, is hereby terminated (except for any provisions relating to the continued vesting of Carried Shares after the date hereof). [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] 20 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date and year first above written. TRANSACTION NETWORK SERVICES, INC.:   EXECUTIVE:                 By: /s/ Henry H. Graham, Jr.      /s/ John J. McDonnell, Jr.   Henry H. Graham, Jr.      John J. McDonnell, Jr.                 TNS, INC.:                     By: /s/ Henry H. Graham, Jr.       Henry H. Graham, Jr.         21 --------------------------------------------------------------------------------

SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT   THIS SECOND AMENDMENT AND RESTATED JOINT VENTURE AGREEMENT  (the “Agreement”) is made as of August 31, 2006 (the “Effective Date”), by and between Solidus Networks, Inc., a Delaware corporation (“PBT”), and WinWin Gaming, Inc., a Delaware corporation (“WinWin”). PBT and WinWin are each referred to in this Agreement as a “Party” and collectively as the “Parties.”   RECITALS   A. On September 30, 2005, the Parties entered into a Joint Venture Agreement (the “Original Agreement”) in order to establish a framework for cooperation through joint marketing and other efforts in order to gain mutual benefit by taking advantage of the relationships and synergies between their respective businesses.   B. On April 14, 2006, the Parties amended and restated the Original Agreement and entered into an Amended and Restated Joint Venture Agreement (the “Restated Agreement”).   C. The Parties now desire to amend and restate the Restated Agreement in order to expand the scope of the joint venture established by the Parties under the Original Agreement and the Restated Agreement.   D. Contemporaneously with the execution and delivery hereof, PBT entered into voting agreements with certain holders of WinWin common stock relating to the approval of the Restated Charter (as defined below) and certain other items as set forth therein.    E. By agreements dated April 21, 2006 and June 13, 2006, the maturity date of the Note (as defined below) has been extended to September 30, 2006.   NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:   AGREEMENT   1. Purchase and Sale; Authority.   (a) Authorization. WinWin’s Board of Directors has approved the terms of this Agreement and all exhibits attached hereto, including authorizing the issuance and sale, pursuant to the terms and conditions of this Agreement, of shares of the Series A-1 Preferred Stock of WinWin, par value $0.01 per share (the “WinWin Series A-1 Shares”), and Series A Preferred Stock of WinWin, par value $0.01 per share (the “WinWin Series A Shares and, together with the WinWin Series A-1 Shares, the “WinWin Shares”).   (b) Agreement to Purchase and Sell. Subject to the terms and conditions of this Agreement, PBT agrees to purchase, and WinWin agrees to sell and issue to PBT at each Closing (as defined in Section 2), that number and series of WinWin Shares to be issued and sold to PBT at each Closing, as set forth in Section 2. The purchase price of each WinWin Share at each Closing (the “Purchase Price”) shall be $79.10 for the WinWin Series A-1 Shares and $7.91 for the WinWin Series A Shares.   --------------------------------------------------------------------------------   2. Closings.   (a) Initial Closing. An initial Closing (the “Initial Closing”) of the purchase and sale of WinWin Shares shall take place at the offices of Cooley Godward llp, 101 California Street, 5th Floor, San Francisco, California, at 10:00 a.m. Pacific time, on the date that is three business days following the date on which the parties have satisfied all of the conditions to the Initial Closing (the “Initial Closing Date”); provided, that the Initial Closing shall only occur, if at all, on such date that is chosen by PBT; and provided further, that the Initial Closing shall occur, if at all, on or prior to September 30, 2006. At the Initial Closing, PBT shall purchase, and WinWin shall issue and sell, against delivery of payment therefor, a number of WinWin Shares (the “Initial Closing WinWin Shares”) such that, following the issuance of the Initial Closing WinWin Shares, PBT will hold 19% of the outstanding capital stock of WinWin on an as-converted-to-common basis, and WinWin shall authorize its transfer agent to issue to PBT a certificate registered in the name of PBT, representing the Initial Closing WinWin Shares and bearing the legend set forth in Section 4(x)(vi). The purchase price for the Initial Closing WinWin Shares will be paid by PBT’s delivery to WinWin at the Initial Closing of (i) that certain original promissory note issued by WinWin to PBT and dated as of September 30, 2005 and with a principal amount of $2.5 million (the “Note”), all principal and accrued interest on which shall be canceled in exchange for a number of Initial Closing WinWin Shares equal to the quotient obtained by dividing the principal and accrued interest under the Note by the Purchase Price and, (ii) a number of fully paid and nonassessable newly issued shares of PBT Series C Preferred Stock (the “Initial Closing PBT Shares”), each with a deemed value of $5.00, which shares will have the rights, preferences and privileges as set forth in PBT’s Amended and Restated Certificate of Incorporation as in effect as of the date of this Agreement (the “PBT Charter”). In advance of the Initial Closing the PBT Board of Directors shall have authorized the issuance and sale to WinWin of the Initial Closing PBT Shares, and shall have reserved a sufficient number of shares of the common stock of PBT (the “PBT Common Stock”) for issuance upon the conversion of the Initial Closing PBT Shares.   (b) Second Closing. A second Closing (the “Second Closing”) of the purchase and sale of WinWin Shares shall take place at the offices of Cooley Godward llp, 101 California Street, 5th Floor, San Francisco, California, at 10:00 a.m. Pacific time, at PBT’s sole option, at any time after the Initial Closing Date and on or before the one-year anniversary of the date of this Agreement (the “Second Closing Date”). At the Second Closing, PBT shall purchase, and WinWin shall issue and sell, against delivery of payment therefor, a number of WinWin Shares (the “Second Closing WinWin Shares”) such that, following the issuance of the Second Closing WinWin Shares, PBT will hold, at PBT’s option, up to 35% of the capital stock of WinWin on a fully diluted, as-converted-to-common basis, and WinWin shall authorize its transfer agent to issue to PBT a certificate registered in the name of PBT, representing the Second Closing WinWin Shares and bearing the legend set forth in Section 4(x)(vi). The purchase price for the Second Closing WinWin Shares will be paid by PBT’s delivery to WinWin at the Second Closing, at PBT’s option, of (i) cash, (ii) fully paid and nonassessable newly issued shares of PBT’s Series C Preferred Stock (the “Second Closing PBT Shares”), each with a deemed value of $5.00, which shares will have the rights, preferences and privileges accorded to such shares in the PBT Charter, or (iii) a combination of cash and Second Closing PBT Shares. In advance of the Second Closing the PBT Board of Directors shall have authorized the issuance and sale to WinWin of the Second Closing PBT Shares, and shall have reserved a sufficient number of shares of PBT Common Stock for issuance upon the conversion of the Second Closing PBT Shares. In no event shall the Second Closing occur following the date on which this Agreement has terminated in accordance with Section 13 hereof. The Initial Closing PBT Shares and the Second Closing PBT Shares are referred to collectively as the “PBT Shares.” The Initial Closing and the Second Closing are referred to collectively as the “Closings” and individually as a “Closing.”   -2- --------------------------------------------------------------------------------   (c) Series of WinWin Shares to be Issued. The WinWin Shares issued at any Closing shall be WinWin Series A-1 Shares if such Closing occurs before the Restated Charter (as defined below) becomes effective and WinWin Series A Shares if such Closing occurs after such Restated Charter becomes effective.   3. Representations and Warranties of WinWin. WinWin hereby represents and warrants to PBT that, except as set forth in the SEC Documents (as defined below) or in the Disclosure Schedule delivered by WinWin to PBT as of the date of this Agreement (the “WinWin Disclosure Schedule”) (for purposes of this Section 3 (other than Sections 3(b), 3(d), 3(e), 3(k) and 3(w)), all references to “WinWin” shall include each other entity in which WinWin holds, beneficially or of record, a controlling interest, either directly or indirectly):   (a) Organization Good Standing and Qualification. WinWin is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all corporate power and authority required to (i) carry on its business as presently conducted and (ii) enter into this Agreement and the other agreements, instruments and documents contemplated hereby, and to consummate the transactions contemplated hereby and thereby. WinWin is qualified to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means a material adverse effect on, or a material adverse change in, or a group of such effects on or changes in, the business, operations, financial condition, results of operations, assets or liabilities of the relevant Party and its subsidiaries, taken as a whole.   (b) Capitalization. The capitalization of WinWin, assuming the issuance of no WinWin Shares at any Closing, is as follows:   (i) the authorized capital stock of WinWin consists of 300,000,000 shares of Common Stock, $0.01 par value per share (“WinWin Common Stock”) and 10,000,000 shares of preferred stock, $0.01 par value per share (“WinWin Preferred Stock”), of which 6,000,000 shares of WinWin Preferred Stock will be designated as Series A-1 Preferred Stock upon the filing of WinWin’s Certificate of Designation of Preferences of Series A-1 Preferred Stock, in the form attached hereto as Exhibit G (the “Designation”); upon the filing and acceptance of the Designation, shares of WinWin Series A-1 Preferred Stock shall have the rights, preferences, privileges and restrictions set forth in the Designation.   (ii) the issued and outstanding capital stock of WinWin consists of 63,692,171 shares of WinWin Common Stock. The shares of issued and outstanding capital stock of WinWin have been duly authorized and validly issued, are fully paid and nonassessable and have not been issued in violation of, or are not otherwise subject to, any preemptive or other similar rights.   -3- --------------------------------------------------------------------------------   (iii) there are no issued and outstanding shares of WinWin Preferred Stock.   (iv) WinWin has (A) 14,099,026 shares of WinWin Common Stock reserved for issuance upon exercise of outstanding options granted under WinWin’s 2003 Stock Plan (the “Option Plan”) and (B) 17,582,161 shares of WinWin Common Stock reserved for issuance upon exercise of outstanding warrants.   (v) WinWin has 5,900,974 shares of WinWin Common Stock available for future grant under the Option Plan.   With the exception of the foregoing in this Section 3(b), there are no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other rights granted to or by WinWin to purchase shares of WinWin Common Stock or other securities of WinWin and there are no commitments, plans or arrangements to issue any shares of WinWin Common Stock or any security convertible into or exchangeable for WinWin Common Stock.   (c) Subsidiaries. WinWin does not have any subsidiaries, and does not own any capital stock of, assets comprising the business of, obligations of, or any other interest (including any equity or partnership interest) in, any person or entity.   (d) Due Authorization. All corporate actions on the part of WinWin necessary for the authorization, execution, delivery of, and the performance of all obligations of WinWin under this Agreement and the authorization, issuance, reservation for issuance and delivery of all of the WinWin Shares being sold under this Agreement have been taken, no further consent or authorization of WinWin’s Board of Directors or its stockholders is required, and this Agreement constitutes the legal, valid and binding obligation of WinWin, enforceable against WinWin in accordance with its terms, except (i) as may be limited by (A) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (B) the effect of rules of law governing the availability of equitable remedies and (ii) as rights to indemnity or contribution may be limited under federal or state securities laws or by principles of public policy thereunder.   (e) Valid Issuance of WinWin Shares.   (i) Purchased Shares. The WinWin Shares will be, upon payment therefor by PBT in accordance with this Agreement, duly authorized, validly issued, fully paid and non-assessable, free from all taxes, liens, claims and encumbrances with respect to the issuance of such WinWin Shares (other than any liens, claims or encumbrances created by or imposed upon PBT) and will not be subject to any pre-emptive rights or similar rights.   -4- --------------------------------------------------------------------------------   (ii) Underlying Shares of Common Stock. The issuance of the shares of WinWin Common Stock issued or issuable from time to time upon the conversion of the WinWin Shares (the “Underlying WinWin Shares”) will be, and at all times prior to such conversion, will have been, duly authorized, duly reserved for issuance upon such conversion, and will be, upon such conversion, validly issued, fully-paid and non-assessable free from all taxes, liens, claim, encumbrances with respect to the issuance of such shares and will not be subject to any pre-emptive rights or similar rights.   (iii) Compliance with Securities Laws. Subject to the accuracy of the representations made by PBT in Section 4(x), the WinWin Shares (assuming no change in applicable law and no unlawful distribution of the WinWin Shares by PBT or other parties) will be issued to PBT in compliance with applicable exemptions from (A) the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”) and (B) the registration and qualification requirements of all applicable securities laws of the states of the United States.   (f) Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, or notice to, any federal, state or local governmental authority or self regulatory agency on the part of WinWin is required in connection with the issuance of the WinWin Shares to PBT, or the consummation of the other transactions contemplated by this Agreement, except (i) such filings as have been made prior to the date hereof and (ii) such additional post-Closing filings as may be required to comply with applicable state and federal securities laws.   (g) Non-Contravention. The execution, delivery and performance of this Agreement by WinWin, and the consummation by WinWin of the transactions contemplated hereby (including issuance of the WinWin Shares), do not: (i) contravene or conflict with the Certificate of Incorporation of WinWin, as amended and in effect as of the date of this Agreement (the “WinWin Certificate of Incorporation”), the Designation or the Bylaws of WinWin (the “WinWin Bylaws”); (ii) constitute a violation of any provision of any federal, state, local or foreign law, rule, regulation, order or decree applicable to WinWin; or (iii) constitute a default or require any consent under, give rise to any right of termination, cancellation or acceleration of, or to a loss of any material benefit to which WinWin is entitled under, or result in the creation or imposition of any lien, claim or encumbrance on any assets of WinWin under, any material mortgage, indenture, contract, agreement, permit, license or instrument to which WinWin or any of its subsidiaries is a party or by which WinWin or any of its subsidiaries is bound or subject.   (h) Litigation. There is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending or, to WinWin’s knowledge, threatened in writing: (i) against WinWin, its activities, properties or assets, or any officer, director or, to WinWin’s knowledge, employee of WinWin in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, WinWin, that is reasonably likely to have a Material Adverse Effect on WinWin; or (ii) that seeks to prevent, enjoin, alter, challenge or delay the transactions contemplated by this Agreement (including the issuance of the WinWin Shares). WinWin is not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. No Action is currently pending nor does WinWin intend to initiate any Action that is reasonably likely to have a Material Adverse Effect on WinWin.   -5- --------------------------------------------------------------------------------   (i) Compliance with Law and Charter Documents. WinWin is not in violation or default of any provisions of the WinWin Certificate of Incorporation or the WinWin Bylaws. WinWin has complied and is currently in compliance with all applicable statutes, laws, rules, regulations and orders of the United States of America and all states thereof, foreign countries and other governmental bodies and agencies having jurisdiction over WinWin’s business or properties, except for any instance of non-compliance that has not had, and would not reasonably be expected to have, a Material Adverse Effect on WinWin. WinWin has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it and as presently proposed to be conducted, the lack of which could materially and adversely affect the business, properties or financial condition of WinWin.   (j) Full Disclosure.  WinWin has provided PBT with all information requested by PBT in connection with its decision to purchase the WinWin Shares. To WinWin’s knowledge, neither this Agreement, the exhibits hereto, nor any other document delivered by WinWin to PBT or its attorneys or agents in connection herewith or therewith at the Initial Closing or with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor, to WinWin’s knowledge, omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. Without limiting the foregoing, (i) WinWin has disclosed to PBT or the Representatives of PBT all significant or pending transactions with customers, vendors, stockholders, affiliates and other current and potential contracting parties and (ii) the April 4, 2006 letter regarding WinWin China Business Clarifications from Mark Galvin of WinWin to Gus Spanos of PBT is true, correct and complete in all material respects.   (k) SEC Documents.   (i) Reports. WinWin has filed in a timely manner all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. WinWin has made available to PBT prior to the date hereof copies of its Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “Form 10-KSB”), its Quarterly Reports on Forms 10-QSB for the first and second quarters of the fiscal year ending December 31, 2006 (the "Forms 10-QSB") any information statement or proxy statement filed by WinWin since December 31, 2005, and any Current Report on Form 8-K for events occurring since December 31, 2005 (“Forms 8-K”) filed by WinWin with the SEC (the Form 10-KSB, the Forms 10-QSB, the information statements and proxy statements referenced above and the Forms 8-K are collectively referred to herein as the “SEC Documents”). Each of the SEC Documents, as of the respective dates thereof, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Each SEC Document, as it may have been subsequently amended by filings made by WinWin with the SEC prior to the date hereof, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Document.   -6- --------------------------------------------------------------------------------   (ii) Sarbanes-Oxley. The Chief Executive Officer and the Chief Financial Officer of WinWin have signed, and WinWin has furnished to the SEC, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (“SOX”). Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither WinWin nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications. WinWin is otherwise in compliance in all material respects with all applicable effective provisions of SOX and the rules and regulations issued thereunder by the SEC.   (iii) Financial Statements. The financial statements of WinWin in the SEC Documents present fairly, in accordance with United States generally accepted accounting principles (“GAAP”), consistently applied, the financial position of WinWin as of the dates indicated, and the results of its operations and cash flows for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments. There are no material financial transactions or arrangements that are not reflected on the financial statements included in the SEC Documents.   (iv) Sufficiency of Disclosure. To WinWin’s knowledge, no circumstance exists that could reasonably be expected to lead to a restatement of any filing made by WinWin with the SEC.   (l) Absence of Certain Changes Since the Balance Sheet Date. Except as set forth in the WinWin Disclosure Schedule, since December 31, 2005, the business and operations of WinWin have been conducted in the ordinary course consistent with past practice, and there has not been:   (i) any declaration, setting aside or payment of any dividend or other distribution of the assets of WinWin with respect to any shares of capital stock of the WinWin or any repurchase, redemption or other acquisition by WinWin or any subsidiary of WinWin of any outstanding shares of the WinWin’s capital stock;   (ii) any damage, destruction or loss, whether or not covered by insurance, except for such occurrences, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect on WinWin;   (iii) any waiver by WinWin of a valuable right or of a material debt owed to it, except for such waivers, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect on WinWin;   (iv) any material change or amendment to, or any waiver of any material right under a material contract or arrangement by which WinWin or any of its assets or properties is bound or subject;   (v) any change by WinWin in its accounting principles, methods or practices or in the manner in which it keeps its accounting books and records, except any such change required by a change in GAAP or by the SEC; or   -7- --------------------------------------------------------------------------------   (vi) any other event or condition of any character, except for such events and conditions that have not resulted, and are not expected to result, either individually or collectively, in a Material Adverse Effect on WinWin.   (m) Intellectual Property.   (i) WinWin owns or possesses sufficient rights to use all patents, patent rights, inventions, trade secrets, know-how, trademarks, service marks, trade names, copyrights, information and other proprietary rights and processes (collectively, “Intellectual Property”) that are necessary to conduct its businesses as currently conducted or as proposed to be conducted, free and clear of all liens, encumbrances and other adverse claims, except where the failure to own or possess such Intellectual Property free and clear of all liens, encumbrances and other adverse claims would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect on WinWin.   (ii) WinWin has not received any written notice of, and has no knowledge of, any infringement of or conflict with rights of others with respect to any Intellectual Property used by WinWin to conduct its business as conducted or as proposed to be conducted and WinWin has no knowledge of any infringement, misappropriation or other violation of any Intellectual Property by any third party, which, in either case, either individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect on WinWin.   (iii) WinWin neither owns nor licenses any patent rights.   (iv) Each employee, consultant and contractor of WinWin who has had access to the Intellectual Property has executed a valid and enforceable agreement to maintain the confidentiality of such Intellectual Property and assigning all rights to WinWin to any inventions, improvements, discoveries or information relating to the business of WinWin. WinWin is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to WinWin or that would conflict with WinWin’s business.   (v) WinWin is not subject to any “open source” or “copyleft” obligations or otherwise required to make any public disclosure or general availability of source code either used or developed by WinWin.   (n) Registration Rights. Except for the WinWin Registration Rights Agreement, in substantially the form attached hereto as Exhibit A (the “WinWin Registration Rights Agreement”), WinWin is not currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of WinWin registered with the SEC or registered or qualified with any other governmental authority.   (o) Title to Property and Assets.  The properties and assets of WinWin are owned or leased by WinWin free and clear of all mortgages, deeds of trust, liens, charges, encumbrances and security interests except for (i) statutory liens for the payment of current taxes that are not yet delinquent and (ii) liens, encumbrances and security interests that arise in the ordinary course of business and do not in any material respect affect the properties and assets of WinWin. With respect to the property and assets it leases, WinWin is in compliance with such leases in all material respects.   -8- --------------------------------------------------------------------------------   (p) Taxes. WinWin has filed or has valid extensions of the time to file all necessary federal, state, local and foreign income and franchise tax returns due prior to the date hereof and has paid or accrued all taxes shown as due thereon, and WinWin has no knowledge of any material tax deficiency which has been or might be asserted or threatened against it.   (q) Insurance. WinWin maintains insurance of the types and in the amounts that are reasonable for companies conducting the business conducted and proposed to be conducted by WinWin, all of which insurance is in full force and effect.   (r) Labor Relations. No material labor dispute exists or, to the knowledge of WinWin, is imminent with respect to any of the employees of WinWin.   (s) Internal Accounting Controls. WinWin and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.   (t) Transactions With Officers and Directors. None of the officers or directors of WinWin has entered into any transaction with WinWin or any subsidiary that would be required to be disclosed pursuant to Item 404(a), (b) or (c) of Regulation S-K of the SEC.   (u) Investment Company. WinWin is not now, and after the sale of the WinWin Shares under this Agreement and the application of the net proceeds from the sale of the WinWin Shares will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.   (v) Executive Officers.  To the knowledge of WinWin, no executive officer or person nominated to become an executive officer of WinWin (i) has been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding minor traffic violations) or (ii) is or has been subject to any judgment or order of, the subject of any pending civil or administrative action by the SEC or any self-regulatory organization.   (w) Investment Representations and Warranties.   (i) Purchase for Own Account. WinWin represents that it is acquiring the PBT Shares solely for its own account and beneficial interest for investment and not for sale or with a view to distribution of the PBT Shares or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.   -9- --------------------------------------------------------------------------------   (ii) Information and Sophistication. Without lessening or obviating the representations and warranties of PBT set forth in Section 4, WinWin hereby acknowledges that it has had an opportunity to ask questions and receive answers from PBT regarding the terms and conditions of the offering of the PBT Shares and further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.   (iii) Ability to Bear Economic Risk. WinWin acknowledges that investment in the PBT Shares involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the PBT Shares for an indefinite period of time and to suffer a complete loss of its investment.   (iv) Accredited Investor Status. WinWin is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.   (v) Restricted Securities. WinWin understands that the PBT Shares have not been registered under the Securities Act and will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the PBT Shares unless (A) pursuant to an effective registration statement under the Securities Act, (B) such holder provides PBT with an opinion of counsel, in form and substance reasonably acceptable to PBT, to the effect that a sale, assignment or transfer of the PBT Shares may be made without registration under the Securities Act and the transferee agrees to be bound by the terms and conditions of this Agreement, (C) such holder provides PBT with reasonable assurances (in the form of seller and broker representation letters) that the PBT Shares or the PBT Conversion Shares, as the case may be, can be sold pursuant to Rule 144 promulgated under the Securities Act (“Rule 144”) or (D) pursuant to Rule 144(k) promulgated under the Securities Act following the applicable holding period.   (vi) Legends. WinWin agrees that the certificates for the PBT Shares shall bear the following legend:   THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.   -10- --------------------------------------------------------------------------------   WinWin agrees that PBT may place stop transfer orders with its transfer agent with respect to such certificates in order to implement the restrictions on transfer set forth in this Agreement. The appropriate portion of the legend and the stop transfer orders will be removed promptly upon delivery to PBT of such satisfactory evidence as reasonably may be required by PBT that such legend or stop orders are not required to ensure compliance with the Securities Act.   4. Representations and Warranties of PBT. PBT hereby represents and warrants to WinWin that, except as set forth in the Disclosure Schedule delivered by PBT to WinWin as of the date of this Agreement (the “PBT Disclosure Schedule”):   (a) Organization, Good Standing and Qualification. PBT is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. PBT has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, to issue and sell the PBT Shares and the shares of PBT common stock into which the PBT Shares convert (the “PBT Conversion Shares”), to carry out the provisions of this Agreement and to carry on its business as presently conducted. PBT is duly qualified to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on PBT or its business.   (b) Subsidiaries. PBT does not own or control any equity security or other interest of any other corporation, limited partnership or other business entity. PBT is not a participant in any joint venture, partnership or similar arrangement. Since its inception, PBT has not consolidated or merged with, acquired all or substantially all of the assets of, or acquired the stock of or any interest in any corporation, partnership, association, or other business entity.   (c) Capitalization; Voting Rights.   (i) The authorized capital stock of PBT as of the date hereof consists of (A) 800,000,000 shares of Common Stock, par value $0.0001 per share, and (B) 2,300,000,000 shares of Preferred Stock, par value $0.00001 per share (“PBT Preferred Stock”), 1,900,000,000 of which have been designated Class 1 Preferred Stock, 150,000,000 of which have been designated Series B Preferred Stock, 30,000,000 of which have been designated Series B-1 Preferred Stock, 40,000 of which have been designated Series C-1 Preferred Stock, 200,000 of which have been designated Series C-2 Preferred Stock, 200,000 of which have been designated Series C-3 Preferred Stock and 75,000,000 of which have been designated Series C Preferred Stock.   (ii) Section 4(c) of the PBT Disclosure Schedule sets forth, as of immediately prior to the Initial Closing, the number of outstanding shares of each class and series of PBT's equity securities.   -11- --------------------------------------------------------------------------------   (iii) Section 4(c) of the PBT Disclosure Schedule sets forth, as of immediately prior to the Initial Closing, under PBT’s 2003 Equity Incentive Plan (the “PBT Plan”), (A) the number of shares of PBT Common Stock that have been issued and are currently outstanding pursuant to restricted stock purchase agreements and/or the exercise of options, (B) the number of shares of Class 1 Preferred that have been issued and are currently outstanding pursuant to restricted stock purchase agreements and/or the exercise of options, (C) the number of options to purchase shares of PBT Common Stock and Class 1 Preferred that have been granted and are currently outstanding and (D) the number of shares of PBT Common Stock and Class 1 Preferred that remain available for future issuance to officers, directors, employees and consultants of PBT. PBT has not made any representations regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth in PBT’s board minutes.   (iv) Other than the shares reserved for issuance under the PBT Plan, and except as may be granted pursuant to this Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from PBT of any of its securities.   (v) All issued and outstanding shares of PBT Common Stock and PBT Preferred Stock (A) have been duly authorized and validly issued and are fully paid and nonassessable and (B) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.   (vi) The rights, preferences, privileges and restrictions of the PBT Shares are as stated in the PBT Charter. Each outstanding series of PBT Preferred Stock is convertible into PBT Common Stock on a one-for-one basis as of the date hereof and the consummation of the transactions contemplated hereunder will not result in any anti-dilution adjustment or other similar adjustment to the outstanding shares of PBT Preferred Stock. The PBT Conversion Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the PBT Charter, the PBT Shares and the PBT Conversion Shares will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances other than (A) liens and encumbrances created by or imposed upon WinWin and (B) any right of first refusal set forth in PBT’s Bylaws; provided, however, that the PBT Shares and the PBT Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.   (d) Authorization; Binding Obligations. All corporate action on the part of PBT, its officers, directors and stockholders necessary for the authorization of this Agreement and the transactions contemplated by this Agreement, the performance of all obligations of PBT hereunder at the Initial Closing and the authorization, sale, issuance and delivery of the PBT Shares pursuant hereto and the PBT Conversion Shares pursuant to the PBT Charter has been taken. This Agreement, when executed and delivered, will be the valid and binding obligation of PBT enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, (ii) general principles of equity that restrict the availability of equitable remedies and (iii) to the extent that the enforceability of indemnification provisions may be limited by applicable laws. The sale of the PBT Shares and the subsequent conversion of the PBT Shares into PBT Conversion Shares are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.   -12- --------------------------------------------------------------------------------   (e) Financial Statements. PBT has delivered to WinWin (i) its unaudited statement of income for the year ended December 31, 2005 (the “Statement Date”), and (ii) its unaudited balance sheet as of December 31, 2005 (collectively, the “PBT Financial Statements”). The PBT Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except as disclosed therein, and present fairly the financial position of PBT as of the Statement Date in all material respects; provided, however, that the unaudited financial statements are subject to year-end audit adjustments (which are not expected to be material either individually or in the aggregate), and do not contain footnotes.   (f) Liabilities. PBT has no material liabilities and, to the best of its knowledge, knows of no material contingent liabilities not disclosed in the PBT Financial Statements, except current liabilities incurred in the ordinary course of business subsequent to the Statement Date which have not been, either in any individual case or in the aggregate, materially adverse.   (g) Agreements; Action.   (i) Except for agreements explicitly contemplated hereby and agreements between PBT and its employees with respect to the sale of PBT Common Stock and PBT Preferred Stock, there are no agreements, understandings or proposed transactions between PBT and any of its officers, directors, employees, affiliates or any affiliate thereof.   (ii) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which PBT is a party or to its knowledge by which it is bound that may involve (A) future obligations (contingent or otherwise) of, or payments to, PBT in excess of $100,000 (other than obligations of, or payments to, PBT arising from purchase or sale agreements entered into in the ordinary course of business), (B) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from PBT (other than licenses by PBT of “off the shelf” or other standard products) or (C) indemnification by PBT with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase, sale or license agreements entered into in the ordinary course of business).   (iii) PBT has not (A) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (B) incurred or guaranteed any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and other obligations incurred in the ordinary course of business or as disclosed in the PBT Financial Statements) individually in excess of $100,000 or, in the case of indebtedness and/or liabilities individually less than $100,000, in excess of $250,000 in the aggregate, (C) made any loans or advances to any person, other than ordinary advances for travel expenses, or (D) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business.   (iv) For the purposes of subsections (ii) and (iii) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities PBT has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.   -13- --------------------------------------------------------------------------------   (h) Obligations to Related Parties. There are no obligations of PBT to officers, directors, stockholders, or employees of PBT other than (i) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of PBT and (iii) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the PBT Board of Directors). No officer, director or stockholder, or any member of their immediate families, is, directly or indirectly, interested in any material contract with PBT (other than such contracts as relate to any such person’s ownership of capital stock or other securities of PBT).   (i) Changes. Since the Statement Date, there has not been to PBT’s knowledge:   (i) Any change in the assets, liabilities, financial condition or operations of PBT from that reflected in the PBT Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had a material adverse effect on such assets, liabilities, financial condition or operations of PBT;   (ii) Any resignation or termination of any officer, key employee or group of employees of PBT;   (iii) Any material change, except in the ordinary course of business, in the contingent obligations of PBT by way of guaranty, endorsement, indemnity, warranty or otherwise;   (iv) Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of PBT;   (v) Any waiver by PBT of a valuable right or of a material debt owed to it;   (vi) Any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;   (vii) Any labor organization activity related to PBT;   (viii) Any sale, assignment, or exclusive license or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;   (ix) Any change in any material agreement to which PBT is a party or by which it is bound that materially and adversely affects the business, assets, liabilities, financial condition or operations of PBT;   -14- --------------------------------------------------------------------------------   (x) Any other event or condition of any character that, either individually or cumulatively, has materially and adversely affected the business, assets, liabilities, financial condition or operations of PBT; or   (xi) Any arrangement or commitment by PBT to do any of the acts described in subsection (i) through (x) above.   (j) Title to Properties and Assets; Liens, Etc. PBT has good and marketable title to its properties and assets and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) those resulting from taxes which have not yet become delinquent, (ii) minor liens and encumbrances that do not materially detract from the value of the property subject thereto or materially impair the operations of PBT, and (iii) those that have otherwise arisen in the ordinary course of business. PBT is in compliance with all material terms of each lease to which it is a party or is otherwise bound.   (k) Intellectual Property.   (i) PBT owns or possesses sufficient legal rights to (A) all trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes and (B) to PBT’s knowledge, all patents, in each instance as necessary for its business as now conducted and as presently proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing proprietary rights, nor is PBT bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.   (ii) PBT has not received any communications alleging that PBT has violated or, by conducting its business as presently proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity.   (iii) PBT is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to PBT or that would conflict with PBT’s business as proposed to be conducted. Each employee, officer and consultant of PBT has executed a proprietary information and inventions agreement in the form(s) as delivered to WinWin. No employee, officer or consultant of PBT has excluded works or inventions made prior to his or her employment with PBT from his or her assignment of inventions pursuant to such employee, officer or consultant’s proprietary information and inventions agreement. PBT does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by PBT, except for inventions, trade secrets or proprietary information that have been assigned to PBT.   -15- --------------------------------------------------------------------------------   (l) Compliance with Other Instruments. PBT is not in violation or default of any term of its charter documents, each as amended, or of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order or writ other than any such violation that would not have a material adverse effect on PBT. The execution, delivery, and performance of and compliance with this Agreement and the issuance and sale of the PBT Shares pursuant hereto and of the PBT Conversion Shares pursuant to the PBT Charter, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a material default under any such document, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of PBT or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to PBT, its business or operations or any of its assets or properties. To its knowledge, PBT has avoided every condition, and has not performed any act, the occurrence of which would result in PBT’s loss of any right granted under any license, distribution agreement or other agreement required to be disclosed on the PBT Disclosure Schedule.   (m) Litigation. There is no action, suit, proceeding or investigation pending or, to PBT’s knowledge, currently overtly threatened against PBT that questions the validity of this Agreement, or the right of PBT to enter into any of such agreements, or to consummate the transactions contemplated hereby or thereby, or that would reasonably be expected to result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of PBT, financially or otherwise, or any change in the current equity ownership of PBT, nor is PBT aware that there is any basis for any of the foregoing. The foregoing includes, without limitation, actions pending or, to PBT’s knowledge, threatened in writing involving the prior employment of any of PBT’s employees, their use in connection with PBT’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. PBT is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by PBT currently pending or that PBT intends to initiate.   (n) Tax Returns and Payments. PBT is and always has been a subchapter C corporation. PBT has filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to PBT’s knowledge all other taxes due and payable by PBT on or before the Initial Closing, have been paid or will be paid prior to the time they become delinquent. PBT has not been advised (i) that any of its returns, federal, state or other, have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. PBT has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for.   -16- --------------------------------------------------------------------------------   (o) Employees. PBT has no collective bargaining agreements with any of its employees. There is no labor union organizing activity pending or, to PBT’s knowledge, threatened with respect to PBT. To PBT’s knowledge, no employee of PBT, nor any consultant with whom PBT has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, PBT; and to PBT’s knowledge the continued employment by PBT of its present employees, and the performance of PBT’s contracts with its independent contractors, will not result in any such violation. PBT has not received any notice alleging that any such violation has occurred. No employee of PBT has been granted the right to continued employment by PBT or to any material compensation following termination of employment with PBT. PBT is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with PBT, nor does PBT have a present intention to terminate the employment of any officer, key employee or group of employees. There are no actions pending, or to PBT’s knowledge, threatened, by any former or current employee concerning such person’s employment by PBT.   (p) Obligations of Management. Each officer and key employee of the PBT currently devoting substantially all of his or her business time to the conduct of the business of PBT. PBT is not aware that any officer or key employee of PBT is planning to work less than full time at PBT in the future. No officer or key employee is currently working or, to PBT’s knowledge, plans to work for a competitive enterprise, whether or not such officer or key employee is or will be compensated by such enterprise.   (q) Registration Rights and Voting Rights. Except as required pursuant to the PBT Registration Rights Agreement and that certain Investor Rights Agreement, dated as of November 14, 2003, by and among PBT and the other parties thereto, PBT is presently not under any obligation, and has not granted any rights, to register any of PBT’s presently outstanding securities or any of its securities that may hereafter be issued. To PBT’s knowledge, no stockholder of PBT has entered into any agreement with respect to the voting of equity securities of PBT.   (r) Compliance with Laws; Permits. To its knowledge, PBT is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of PBT. No United States domestic governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement or the issuance of the PBT Shares or the PBT Conversion Shares, except such as have been duly and validly obtained or filed, or with respect to any filings that must be made after the Initial Closing, as will be filed in a timely manner. PBT has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which could materially and adversely affect the business, properties or financial condition of PBT and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted.   -17- --------------------------------------------------------------------------------   (s) Environmental and Safety Laws. To its knowledge, PBT is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. No Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by PBT or, to PBT’s knowledge, by any other person or entity on any property owned, leased or used by PBT. For the purposes of the preceding sentence, “Hazardous Materials” shall mean (i) materials that are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials, or (ii) any petroleum products or nuclear materials.   (t) Offering Valid. Assuming the accuracy of the representations and warranties of WinWin contained in Section 3(w), the offer, sale and issuance of the PBT Shares and the PBT Conversion Shares will be exempt from the registration requirements of the Securities Act, and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws. Neither PBT nor any agent on its behalf has solicited or will solicit any offers to sell or has offered to sell or will offer to sell all or any part of the PBT Shares to any person or persons so as to bring the sale of such PBT Shares by PBT within the registration provisions of the Securities Act or any state securities laws.   (u) Full Disclosure. PBT has provided WinWin with all information requested by WinWin in connection with its decision to purchase the PBT Shares. To PBT’s knowledge, neither this Agreement, the exhibits hereto, nor any other document delivered by PBT to WinWin or its attorneys or agents in connection herewith or therewith at the Initial Closing or with the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor, to PBT’s knowledge, omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading.   (v) Real Property Holding Corporation. PBT is not a real property holding corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.   (w) Insurance. PBT has or will obtain promptly following the Initial Closing general commercial, product liability, fire and casualty insurance policies with coverage customary for companies similarly situated to PBT.   (x) Investment Representations and Warranties.   (i) Purchase for Own Account. PBT represents that it is acquiring the WinWin Shares solely for its own account and beneficial interest for investment and not for sale or with a view to distribution of the WinWin Shares or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.   (ii) Information and Sophistication. Without lessening or obviating the representations and warranties of WinWin set forth in Section 3, PBT hereby acknowledges that it has had an opportunity to ask questions and receive answers from WinWin regarding the terms and conditions of the offering of the WinWin Shares and further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risk of this investment.   -18- --------------------------------------------------------------------------------   (iii) Ability to Bear Economic Risk. PBT acknowledges that investment in the WinWin Shares involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the WinWin Shares for an indefinite period of time and to suffer a complete loss of its investment.   (iv) Accredited Investor Status. PBT is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.   (v) Restricted Securities. PBT understands that the WinWin Shares have not been registered under the Securities Act and will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the WinWin Shares unless (A) pursuant to an effective registration statement under the Securities Act, (B) such holder provides WinWin with an opinion of counsel, in form and substance reasonably acceptable to WinWin, to the effect that a sale, assignment or transfer of the WinWin Shares may be made without registration under the Securities Act and the transferee agrees to be bound by the terms and conditions of this Agreement, (C) such holder provides WinWin with reasonable assurances (in the form of seller and broker representation letters) that the WinWin Shares or the Underlying WinWin Shares, as the case may be, can be sold pursuant to Rule 144 or (D) pursuant to Rule 144(k) promulgated under the Securities Act following the applicable holding period.   (vi) Legends. PBT agrees that the certificates for the WinWin Shares and Underlying WinWin Shares shall bear the following legend:   THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.   PBT agrees that WinWin may place stop transfer orders with its transfer agent with respect to such certificates in order to implement the restrictions on transfer set forth in this Agreement. The appropriate portion of the legend and the stop transfer orders will be removed promptly upon delivery to WinWin of such satisfactory evidence as reasonably may be required by WinWin that such legend or stop orders are not required to ensure compliance with the Securities Act.   -19- --------------------------------------------------------------------------------   5. No Finders or Brokers. Each of the Parties represents that, on the basis of any actions and agreements by it, there are no brokers or finders entitled to compensation in connection with the transactions contemplated hereby. WinWin hereby indemnifies PBT for any broker or finder fees or costs incurred by WinWin, and PBT hereby indemnifies WinWin for any broker or finder fees or costs incurred by PBT.   6. Conditions to PBT’s Obligations at Each Closing. The obligations of PBT under Section 1(b) of this Agreement at each Closing are subject to the fulfillment or waiver, on or before such Closing, of each of the following conditions:   (a) Securities Exemptions. The offer and sale of the WinWin Shares to PBT at such Closing pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws.   (b) No Suspension of Trading or Listing of Common Stock. The WinWin Common Stock (i) shall be designated for quotation or listed on the Over-The-Counter market and on the Pink Sheets or on any other U.S. exchange or national quotation system and (ii) shall not have been suspended from trading or quotation on either the Over-The-Counter Market or the Pink Sheets.   (c) Good Standing Certificates. WinWin shall have delivered to PBT a certificate of the Secretary of State of the State of Delaware, dated as of a date within five days prior to the date of such Closing, with respect to the good standing of WinWin.   (d) Secretary’s Certificate. WinWin shall have delivered to PBT a certificate of WinWin executed by WinWin’s Secretary and dated as of such Closing attaching and certifying to the accuracy and correctness of (i) the WinWin Certificate of Incorporation, (ii) the WinWin Bylaws and (iii) the resolutions adopted by WinWin’s Board of Directors in connection with the transactions contemplated by this Agreement.   (e) Opinion of WinWin Counsel. PBT shall have received an opinion, dated as of such Closing, from Thelen Reid & Priest LLP, counsel to WinWin, in the form attached as Exhibit B.   (f) No Statute or Rule Challenging Transaction. No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby which questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.   (g) Update of Disclosure Schedule. WinWin shall have delivered to PBT an updated WinWin Disclosure Schedule, dated as of the date of such Closing.   -20- --------------------------------------------------------------------------------   (h) Other Actions. WinWin shall have executed such certificates, agreements, instruments and other documents, and taken such other actions as shall be customary or reasonably requested by PBT in connection with the transactions contemplated hereby.   7. Additional Conditions to PBT’s Obligations at the Initial Closing. The obligations of PBT under Sections 1(b) and 2(a) of this Agreement at the Initial Closing are subject to the fulfillment or waiver, on or before the Initial Closing, in addition to the conditions set forth in Section 6, of each of the following conditions:   (a) Accuracy of Representations and Warranties. Each of the representations and warranties of WinWin contained in Section 3 shall have been true and correct in all material respects on and as of the date of this Agreement and on and as of the date of the Initial Closing with the same effect as though such representations and warranties had been made as of the Initial Closing; provided, however that, for purposes of determining the accuracy of such representations and warranties, (i) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (ii) any update of or modification to the WinWin Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   (b) Performance. WinWin shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Initial Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.   (c) Compliance Certificate. WinWin shall have delivered to PBT a certificate signed on its behalf by its Chief Executive Officer or Chief Financial Officer certifying that the conditions specified in Sections 7(a) and 7(b) hereof have been fulfilled.   (d) Delivery of Stock Certificates. A stock certificate registered in the name of PBT representing the Initial Closing WinWin Shares shall have been delivered to PBT.   (e) Option Agreement. WinWin shall have executed and delivered to PBT the Investment Option Agreement in substantially the form attached hereto as Exhibit C.   (f) Board of Directors. The authorized number of members of WinWin’s Board of Directors shall be seven (7), with at least two (2) vacancies.   (g) Registration Rights Agreement. WinWin shall have executed and delivered to PBT the WinWin Registration Rights Agreement.   (h) Opinion of WinWin Delaware Counsel. PBT shall have received an opinion, dated as of such Closing, from Proctor Heyman LLP, counsel to WinWin, in substantially the form attached as Exhibit F.   -21- --------------------------------------------------------------------------------   (i) Filing of Designation. WinWin shall have caused the Designation to be filed with the Secretary of State of the State of Delaware, and shall have provided evidence to PBT to that effect. The Designation shall be in full effect as of the Initial Closing.   8. Additional Conditions to PBT’s Obligations at the Second Closing. The obligations of PBT under Sections 1(b) and 2(c) of this Agreement at the Second Closing are subject to the fulfillment or waiver, on or before the Second Closing, in addition to the conditions set forth in Section 6, of the following conditions:   (a) Accuracy of Representations and Warranties.   (i) Each of the representations and warranties of WinWin contained in Section 3 shall have been true and correct in all material respects on and as of the date of this Agreement; provided, however that, for purposes of determining the accuracy of such representations and warranties, (A) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (B) any update of or modification to the WinWin Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   (ii) The representations and warranties of WinWin contained in Section 3 shall be accurate in all respects as of the Second Closing as if made on and as of the Second Closing, except that any inaccuracies in such representations and warranties will be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and could not reasonably be expected to have, a Material Adverse Effect on WinWin; provided, however that, for purposes of determining the accuracy of such representations and warranties, (A) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (B) any update of or modification to the WinWin Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   (b) Performance. WinWin shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Second Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.   (c) Compliance Certificate. WinWin shall have delivered to PBT a certificate signed on its behalf by its Chief Executive Officer or Chief Financial Officer, dated as of the Second Closing, certifying that the conditions specified in Sections 8(a) and 8(b) hereof have been fulfilled.   (d) Delivery of Stock Certificates. Stock certificate(s) registered in the name of PBT representing the Second Closing WinWin Shares shall have been delivered to PBT.   -22- --------------------------------------------------------------------------------   9. Conditions to WinWin’s Obligations at Each Closing. The obligations of WinWin to PBT under this Agreement are subject to the fulfillment or waiver, on or before each Closing, of each of the following conditions:   (a) Securities Exemptions. The offer and sale of the WinWin Shares to PBT pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws.   (b) Good Standing Certificates. PBT shall have delivered to WinWin a certificate of the Secretary of State of the State of Delaware, dated as of a date within five days prior to the date of such Closing, with respect to the good standing of PBT.   (c) Secretary’s Certificate. PBT shall have delivered to WinWin a certificate of PBT executed by PBT’s Secretary attaching and certifying to the accuracy and correctness of (i) the PBT Certificate of Incorporation, (ii) the PBT Bylaws and (iii) the resolutions adopted by PBT’s Board of Directors in connection with the transactions contemplated by this Agreement.   (d) No Statute or Rule Challenging Transaction. No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby which questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.   (e) Update of Disclosure Schedule. At each Closing at which PBT Shares are issued to WinWin, PBT shall have delivered to WinWin an updated PBT Disclosure Schedule, dated as of the date of such Closing.   (f) Other Actions. PBT shall have executed such certificates, agreements, instruments and other documents, and taken such other actions as shall be customary or reasonably requested by WinWin in connection with the transactions contemplated hereby.   10. Additional Conditions to WinWin’s Obligations at the Initial Closing. The obligations of WinWin to PBT at the Initial Closing under this Agreement are subject to the fulfillment or waiver, on or before the Initial Closing, in addition to the conditions set forth in Section 9, of each of the following conditions:   (a) Accuracy of Representations and Warranties. Each of the representations and warranties of PBT contained in Section 4 shall have been true and correct in all material respects on and as of the date of this Agreement and on and as of the date of the Initial Closing with the same effect as though such representations and warranties had been made as of the Initial Closing; provided, however that, for purposes of determining the accuracy of such representations and warranties, (i) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (ii) any update of or modification to the PBT Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   -23- --------------------------------------------------------------------------------   (b) Performance. PBT shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Initial Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.    (c) Compliance Certificate. PBT shall have delivered to WinWin a certificate dated as of the Initial Closing signed on its behalf by an authorized officer of PBT certifying that the conditions specified in Sections 10(a) and 10(b) hereof have been fulfilled.    (d) Receipt of Consideration. PBT shall have delivered to WinWin the original Note, marked cancelled and initialed by an officer of PBT, and a stock certificate registered in the name of WinWin representing the Initial Closing PBT Shares.   (e) Registration Rights Agreement. PBT shall have executed and delivered to WinWin the WinWin Registration Rights Agreement.   (f) Addition to PBT Registration Rights Agreement. PBT shall have provided a counterpart signature page to the PBT Amended and Restated Registration Rights, Agreement dated as of January 6, 2006, as in effect as of immediately prior to the Initial Closing, which, upon execution by WinWin, shall be sufficient to afford to WinWin all rights associated with being an “Investor” thereunder.   (g) Sales Representative Agreement. The Parties shall have entered into a sales representative agreement substantially in accordance with the terms described on Exhibit D; provided that if all other conditions to WinWin's obligations at the Initial Closing (including the conditions set forth in Section 9) have been or will be met as of the proposed date of the Initial Closing, then WinWin may not refuse to comply with its obligations at the Initial Closing unless WinWin is able to demonstrate that it has taken commercially reasonable efforts to pursue the negotiation and execution of the sales representative agreement in the period between the date of this Agreement and the intended date of the Initial Closing.   (h) Filing of Designation. WinWin shall have caused the Designation to be filed with the Secretary of State of the State of Delaware. The Designation shall be in full effect as of the Initial Closing.   11. Additional Conditions to WinWin’s Obligations at The Second Closing. The obligations of WinWin to PBT under this Agreement at the Second Closing are subject to the fulfillment or waiver, on or before the Second Closing, in addition to the conditions set forth in Section 9, of the following conditions:   -24- --------------------------------------------------------------------------------   (a) Accuracy of Representations and Warranties.   (i) If PBT is issuing PBT Shares at the Second Closing, each of the representations and warranties of PBT contained in Section 4 shall have been true and correct in all material respects on and as of the date of this Agreement; provided, however that, for purposes of determining the accuracy of such representations and warranties, (A) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (B) any update of or modification to the PBT Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   (ii) If PBT is issuing PBT Shares at the Second Closing, the representations and warranties of PBT contained in Section 4 shall be accurate in all respects as of the Second Closing as if made on and as of the Second Closing, except that any inaccuracies in such representations and warranties will be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and could not reasonably be expected to have, a Material Adverse Effect on PBT; provided, however that, for purposes of determining the accuracy of such representations and warranties, (A) all “Material Adverse Effect” qualifications and other materiality qualifications, and any similar qualifications, contained in such representations and warranties shall be disregarded and (B) any update of or modification to the PBT Disclosure Schedule made or purported to have been made after the date of this Agreement shall be disregarded.   (b) Performance. PBT shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Second Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.    (c) Compliance Certificate. PBT shall have delivered to WinWin a certificate, dated as of the Second Closing, signed on its behalf by its Chief Executive Officer or Chief Financial Officer certifying that the conditions specified in Sections 11(a) and 11(b) hereof have been fulfilled.    (d) Receipt of Consideration. PBT shall have delivered to WinWin a stock certificate registered in the name of WinWin representing the Second Closing PBT Shares, if any.   (e) Sales Representative Agreement. The Parties shall have entered into a sales representative agreement substantially in accordance with the terms described on Exhibit D (the “Sales Representative Agreement”).   12. Covenants.   (a) Securities Law Filings. The Parties shall file in a timely manner all securities filings required to be filed in connection with the issuances of securities as contemplated by this Agreement, including the filing by each Party of Forms D relating to the sale of the WinWin Shares and the PBT Shares under this Agreement, pursuant to Regulation D promulgated under the Securities Act.   -25- --------------------------------------------------------------------------------   (b) WinWin Stockholders Consent.   (i) As promptly as practicable after the date of the Initial Closing, WinWin shall prepare and cause to be filed with the SEC a preliminary information statement relating to the WinWin Stockholders’ Consent (as defined below) and shall use all commercially reasonable efforts to cause the information statement to comply with the rules and regulations promulgated by the SEC, to respond promptly to any comments of the SEC or its staff, to file a definitive information statement (the “Information Statement”) and to cause the Information Statement to be mailed to WinWin’s stockholders as promptly as practicable.   (ii) WinWin shall take all action necessary to obtain and give notice (pursuant to the Information Statement) of the written consent of the WinWin stockholders (the “WinWin Stockholders’ Consent”) to approve and adopt an amended and restated certificate of incorporation in the form attached hereto as Exhibit E (the “Restated Charter”) and approve the filing of the Restated Charter with the Secretary of State of the State of Delaware. The WinWin Stockholders’ Consent shall be obtained and the Information Statement shall be filed with the SEC and provided to the WinWin stockholder as promptly as practicable following the Initial Closing, in compliance with all applicable legal requirements.   (iii) the Information Statement shall include a statement to the effect that the WinWin Board of Directors voted to recommend that the WinWin stockholders vote to adopt the Restated Charter, including the unanimous recommendation of the disinterested members of the WinWin Board of Directors. Such recommendation shall not be withdrawn or modified, and no resolution of the WinWin Board of Directors or any committee thereof to withdraw or modify such recommendation shall be adopted or proposed.   (c) Board of Directors.  Promptly upon the written request of PBT, WinWin shall use its best efforts to cause WinWin’s Board of Directors to nominate the directors designated for election, if any, by the holders of the Series A Preferred Stock (the “PBT Representatives”) for election or re-election at each meeting of WinWin’s stockholders at which the composition of WinWin’s Board of Directors is subject to a proposal. During any such time that the holders of Series A Preferred Stock have the right to elect any PBT Representative(s) to the WinWin Board of Directors, but have not elected such PBT Representative(s) to the WinWin Board of Directors, WinWin will maintain sufficient authorized but vacant seats on its Board of Directors to permit the election of such PBT Representative(s).   (d) Access; Provision of Information.   (i) Each Party shall permit representatives of the other Party to have reasonable access at reasonable times and upon reasonable advance written notice, to senior management of the Party, its accountants, records (including tax and financial records), contracts and other documents of or pertaining to the Party.   (ii) From and after the Initial Closing, PBT shall promptly provide WinWin with information of the type that, in PBT’s reasonable judgment upon consultation with counsel, would be required to be disclosed by WinWin under Form 8-K as a result of WinWin’s ownership interest in the PBT Shares.   -26- --------------------------------------------------------------------------------   (iii) WinWin will provide PBT, on a monthly basis, with all financial information that PBT requires in order to meet its financial reporting obligations (to investors, regulatory authorities and otherwise) on a timely basis (the “WinWin Financial Reporting Covenant”). If WinWin breaches the WinWin Financial Reporting Covenant, PBT can obtain reimbursement from WinWin for direct and indirect costs and other damages incurred in connection with or relating to the untimely delivery of PBT financials resulting from such breach, including reimbursement of legal fees incurred by or reimbursable by PBT, and PBT may exercise any and all other remedies available under applicable law.   (e) Additional WinWin Financial Covenants. WinWin will comply with SOX and all applicable rules and standards promulgated under SOX. To the extent that, at any time, WinWin or its accountants determines that WinWin has material weaknesses in its internal controls over financial reporting (as such terms are defined in SOX, together with the rules and standards promulgated by the SEC relating to SOX), WinWin will promptly provide notice of such determination to PBT and, upon the written request of PBT, will remediate such material weakness within three months of such determination, provided that either (i) WinWin has Available Funds (as defined below) or (ii) PBT agrees to reimburse the reasonable, documented costs of such remediation over and above the sum of (A) the Available Funds and (B) any amounts allocated for any applicable tasks in the budget most recently approved by WinWin’s board of directors. PBT will be entitled to approve in advance any expenses requested to be reimbursed by PBT hereunder. For purposes of this Section 12(f) "Available Funds" means, as of the date of PBT’s written request, the cash and cash equivalents held by WinWin that is in excess of the greater of (1) an amount equal to the cash used in WinWin’s operations during the most recent quarter for which WinWin has filed financial results with the SEC multiplied by 3 and (2) $2,000,000.   (f) Cooperative Activities.   (i) Selling Support. During the period from the date of this Agreement through at least December 31, 2006 (the “Cooperation Term”), WinWin shall provide PBT with a reasonable amount of selling support to assist in driving PBT’s biometric authentication and payment solutions into the Chinese Video Lottery Terminal (“VLT”) solution that is being prepared for rollout across China. This support shall include, among other things (and in compliance with all applicable legal requirements), both the direct promotion of PBT’s solutions to key government officials and other decision makers/influencers and the arrangement of key meetings between these individuals/groups and PBT employees.   (ii) Access. During the Cooperation Term, in compliance with all applicable legal requirements, WinWin shall provide PBT with access to all senior Chinese government officials with current WinWin relationships for the purpose of promoting PBT solutions into other applications beyond VLTs.   (iii) Attorney Support. During the Cooperation Term, in compliance with all applicable legal requirements, WinWin shall provide PBT with the support of WinWin’s Chinese/American VP/attorney for the purpose of making introductions and helping provide tactical and strategic guidance to PBT in connection with its entry into China.   -27- --------------------------------------------------------------------------------   (iv) Physical and Logistical Support. During the Cooperation Term, in compliance with all applicable legal requirements, WinWin shall provide PBT with physical and logistical support for PBT’s entry into China, including providing access to WinWin’s distribution channels and making available without charge a limited amount of office space in Shanghai.   (v) Identification of Mutual Opportunities. During the Cooperation Term, each of WinWin and PBT shall use commercially reasonable efforts to identify and exploit opportunities for the benefit of both parties. The senior executive officers of each Party shall meet, whether telephonically or in person, on at least a monthly basis to discuss any such identified opportunities and the best means of exploiting such opportunities.   (vi) PBT Support. During the Cooperation Term and upon the written request of WinWin, PBT shall provide WinWin with reasonable support and assistance in promotional consideration and exposure of WinWin products, services and technologies. In addition, PBT shall provide WinWin with reasonable support and assistance in identifying sources of equity and debt financing and strategic partners and in assisting WinWin to obtain financing from such sources.   (vii) Sales Representative Agreement. Promptly following the Initial Closing, the Parties shall commence good faith negotiation to enter into the Sales Representative Agreement.   (g) Confidentiality. Neither Party shall issue, or permit any of its Subsidiaries or any Representative of itself or any subsidiary to issue, any press releases or any other public statements with respect to the transactions contemplated by this Agreement; provided, however, that either Party shall be entitled, without the prior written approval of the other Party, to make any public disclosure with respect to such transactions to the extent that (i) such Party shall have provided the other Party with at least one business day to review any such proposed press release or public statement and consulted with the other before issuing such press release or public statement, and (ii) such Party shall have been advised in writing by its outside legal counsel that such disclosure, including any specific disclosure to which the other Party has objected, is required by applicable law or regulations. The Parties acknowledge that the provisions of the letter agreement between the Parties, dated as of January 24, 2005, regarding the non-disclosure and non-use of confidential information shall remain in force.   (h) Negative Pledge.   (i) WinWin covenants and agrees that, beginning on the date of this Agreement and until the date following an initial public offering of PBT common stock on which any lockup or market standoff restrictions applicable to the PBT Shares expire:   (1) WinWin shall not directly or indirectly sell, assign, transfer or pledge, or otherwise take any action that could lead directly or indirectly to the creation of any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, equity, trust, equitable interest, adverse claim, proxy, option, right of first refusal, preemptive right, community property interest, legend or restriction of any nature (including any restriction on the voting or transfer of any security and any restriction on the receipt of any dividend or other payment receivable by the owner of any security, but excluding any restriction imposed under applicable securities laws) on any of WinWin’s rights in or to any of the PBT Shares or any unpaid dividends or other distributions or payments with respect to any of the PBT Shares;   -28- --------------------------------------------------------------------------------   (2) WinWin shall maintain, preserve and defend the title to the PBT Shares against the claim of any other person or entity;   (3) Each stock certificate and other instrument representing or evidencing the PBT Shares shall bear a legend in substantially the following form:   THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN THAT CERTAIN SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT DATED AS OF AUGUST 31, 2006, BY AND BETWEEN SOLIDUS NETWORKS, INC. AND WINWIN GAMING, INC. AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED IN ANY MANNER.   (ii) Immediately following the date following an initial public offering of PBT common stock on which any lockup or market standoff restrictions applicable to the PBT Shares expire, PBT shall, at WinWin’s request and following receipt of the stock certificates and other instruments representing or evidencing the PBT Shares, issue a replacement stock certificate without the legend referred to in Section 12(h)(i)(3).   13. Termination. This Agreement shall terminate upon the mutual agreement of the Parties. In any event, either Party may terminate this Agreement on or after September 30, 2006 if the Initial Closing has not occurred prior to such date and such failure to close was not due to the failure of the Party electing to terminate the Agreement to perform an obligation or satisfy a condition to the Initial Closing.   14. Indemnification, Etc.    (a) Definitions. For purposes of this Section 14, the following capitalized terms shall have the following meanings:   (i) A “Claim Notice” relating to a particular representation or warranty shall be deemed to have been given if any Indemnitee, acting in good faith, delivers to the Party making the representation or warranty a written notice stating that such Indemnitee believes that there is or has been an inaccuracy in such representation or warranty and containing (A) a brief description of the specific facts supporting such Indemnitee’s good faith belief that there is or has been such an inaccuracy and (B) a non-binding, preliminary estimate of the aggregate dollar amount of the Damages that have arisen and may arise as a direct or indirect result of such inaccuracy.   (ii) “Damages” shall include any loss, damage, injury, decline in value, lost opportunity, liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including any legal fee, expert fee, accounting fee or advisory fee), charge, cost (including any cost of investigation) or expense of any nature.   -29- --------------------------------------------------------------------------------   (iii) “Governmental Body” shall mean any: (A) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (B) federal, state, local, municipal, foreign or other government; (C) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (D) multi-national organization or body; or (E) individual, entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.   (iv) “Indemnitees” shall mean,   (A) with respect to WinWin, the following Persons: (I) PBT; (II) PBT’s affiliates; (III) the respective Representatives of the Persons referred to in clauses “(I)” and “(II)” above; and (IV) the respective successors and assigns of the Persons referred to in clauses “(I),” “(II)” and “(III)” above (collectively, the “WinWin Indemnitees”); and   (B) with respect to PBT, the following Persons: (I) WinWin; (II) WinWin’s affiliates; (III) the respective Representatives of the Persons referred to in clauses “(I)” and “(II)” above; and (IV) the respective successors and assigns of the Persons referred to in clauses “(I),” “(II)” and “(III)” above (collectively, the “PBT Indemnitees”).   (v) “Legal Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation that is, has been or may in the future be commenced, brought, conducted or heard by or before, or that otherwise has involved or may involve, any Governmental Body or self regulatory agency or any arbitrator or arbitration panel.   (vi) “Liability” shall mean any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.   (vii) “Person” shall mean any (A) individual, (B) Governmental Body or (C) corporation, general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company, firm or other enterprise, association, organization or entity.   (viii) “Representatives” shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives.   -30- --------------------------------------------------------------------------------   (b) Survival of Representations and Warranties.  The representations and warranties set forth in Sections 3 and 4 shall expire one year following the Closing at which such representations and warranties are made; provided, however, that if a Claim Notice relating to any representation or warranty set forth in Section 3 or Section 4 is given on or prior to the date one year after the Closing Date to the Party making the representation or warranty, then, notwithstanding anything to the contrary contained in this Section 14(b), such representation or warranty shall not expire, but rather shall remain in full force and effect until such time as each and every claim that is based directly or indirectly upon, or that relates directly or indirectly to, any inaccuracy or alleged inaccuracy in such representation or warranty has been fully and finally resolved. The representations and warranties set forth in Sections 3 and 4 and the rights and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected by or as a result of any information furnished or made available to, or any investigation made by or any knowledge of, any of the Indemnitees or any of their Representatives.   (c) Indemnification by WinWin. WinWin shall hold harmless and indemnify each of the WinWin Indemnitees from and against, and shall compensate and reimburse each of the WinWin Indemnitees for, any Damages that are directly or indirectly suffered or incurred by any of the WinWin Indemnitees or to which any of the WinWin Indemnitees may otherwise become subject at any time (regardless of whether or not such Damages relate to any third-party claim) and that arise directly or indirectly from or as a direct or indirect result of, or are directly or indirectly connected with:   (i) any inaccuracy in any representation or warranty made by WinWin in this Agreement as of the date of this Agreement (without giving effect to any qualification as to materiality or any similar qualification contained in such representation or warranty, and without giving effect to any update to the WinWin Disclosure Schedule);   (ii) any inaccuracy in any representation or warranty made by WinWin in this Agreement as if such representation and warranty had been made on and as of each Closing (without giving effect to any qualification as to materiality or any similar qualification contained in such representation or warranty, and without giving effect to any update to the WinWin Disclosure Schedule); and   (iii) any Legal Proceeding relating directly or indirectly to any actual or alleged inaccuracy, breach, Liability or matter of the type referred to in clause “(i)” or “(ii)” above (including any Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of its rights under this Section 14).   (d) Indemnification by PBT. PBT shall hold harmless and indemnify each of the PBT Indemnitees from and against, and shall compensate and reimburse each of the PBT Indemnitees for, any Damages that are directly or indirectly suffered or incurred by any of the PBT Indemnitees or to which any of the PBT Indemnitees may otherwise become subject at any time (regardless of whether or not such Damages relate to any third-party claim) and that arise directly or indirectly from or as a direct or indirect result of, or are directly or indirectly connected with:   (i) any inaccuracy in any representation or warranty made by PBT in this Agreement as of the date of this Agreement (without giving effect to any qualification as to materiality or any similar qualification contained in such representation or warranty, and without giving effect to any update to the PBT Disclosure Schedule);   -31- --------------------------------------------------------------------------------   (ii) any inaccuracy in any representation or warranty made by PBT in this Agreement as if such representation and warranty had been made on and as of each Closing (without giving effect to any qualification as to materiality or any similar qualification contained in such representation or warranty, and without giving effect to any update to the PBT Disclosure Schedule); and   (iii) any Legal Proceeding relating directly or indirectly to any actual or alleged inaccuracy, breach, Liability or matter of the type referred to in clause “(i)” or “(ii)” above (including any Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of its rights under this Section 14).   (e) Satisfaction of Indemnification Claims.    (i) PBT shall have the right to claw back, and WinWin shall forever forfeit, that number of PBT Shares issued to WinWin, at a deemed value per share of $5.00 (as adjusted for stock splits, stock dividends, stock combinations and similar events, the “PBT Share Deemed Value”)) that are sufficient to reimburse PBT and its affiliates and Representatives for all Damages incurred, set forth in a Claim Notice and not disputed within ten business days of delivering to WinWin the notice that details such Damages, in satisfaction of WinWin’s indemnification obligations under Section 14(c). The claw back and forfeiture of such PBT Shares shall operate for all purposes as a complete discharge of PBT’s obligation to make any payment, provide any benefit or afford any right to WinWin to the extent such payment, benefit or right would be owing as a result of WinWin’s ownership of the PBT Shares that were clawed back and forfeited.   (ii) WinWin shall have the right to claw back, and PBT shall forever forfeit, that number of WinWin Shares issued to PBT, at a deemed value per share of $79.10 for the WinWin Series A-1 Shares and $7.91 for the WinWin Series A Shares (or, in each case, $0.791 per Underlying WinWin Share) (as adjusted for stock splits, stock dividends, stock combinations and similar events, the “WinWin Share Deemed Value”) that are sufficient to reimburse WinWin and its affiliates and Representatives for all Damages incurred, set forth in a Claim Notice and not disputed within ten business days of delivering the notice that details such Damages to PBT, in satisfaction of PBT’s indemnification obligations under Section 14(d). The claw back and forfeiture of such WinWin Shares shall operate for all purposes as a complete discharge of WinWin’s obligation to make any payment, provide any benefit or afford any right to PBT to the extent such payment, benefit or right would be owing as a result of PBT’s ownership of the WinWin Shares that were clawed back and forfeited.   (f) Threshold; Ceiling.   (i) PBT shall not have the right to claw back any PBT Shares pursuant to Section 14(e) for any inaccuracy in any of WinWin’s representations and warranties set forth in Section 3 until such time as the total amount of all Damages (including the Damages arising from such inaccuracy and all other Damages arising from any other inaccuracies in any WinWin representations or warranties) that have been directly or indirectly suffered or incurred by any one or more of the WinWin Indemnitees, or to which any one or more of the WinWin Indemnitees has or have otherwise become subject, exceeds $50,000 in the aggregate. (If the total amount of such Damages exceeds $50,000, then the WinWin Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all such Damages.)   -32- --------------------------------------------------------------------------------   (ii) WinWin shall not have the right to claw back any WinWin Shares pursuant to Section 14(e) for any inaccuracy in any of PBT’s representations and warranties set forth in Section 4 until such time as the total amount of all Damages (including the Damages arising from such inaccuracy and all other Damages arising from any other inaccuracies in any PBT representations or warranties) that have been directly or indirectly suffered or incurred by any one or more of the PBT Indemnitees, or to which any one or more of the PBT Indemnitees has or have otherwise become subject, exceeds $50,000 in the aggregate. (If the total amount of such Damages exceeds $50,000, then the PBT Indemnitees shall be entitled to be indemnified against and compensated and reimbursed for all such Damages.)   (iii) The maximum liability of WinWin under Section 14 for inaccuracies of WinWin’s representations and warranties set forth in Section 3 shall be equal to the aggregate WinWin Share Deemed Value of the WinWin Shares issued to PBT under this Agreement. The maximum liability of PBT under Section 14 for inaccuracies of PBT’s representations and warranties set forth in Section 4 shall be equal to the aggregate PBT Share Deemed Value of the PBT Shares issued to WinWin pursuant to this Agreement.   (iv) The limitations set forth in this Section 14(f) shall not apply to losses caused by fraud.   (g) Exclusivity of Indemnification Remedies. The right to indemnification provided in this Section 14 is the exclusive remedy for inaccuracies in the representations and warranties set forth in Sections 3 and 4.   (h) Defense of Third Party Claims.   (i) In the event of the assertion or commencement by any Person of any claim or Legal Proceeding (whether against PBT, against any other Indemnitee or against any other Person) with respect to which WinWin may become obligated to indemnify, hold harmless, compensate or reimburse any WinWin Indemnitee pursuant to this Section 14: (A) PBT shall have the right to control the defense of such claim or Legal Proceeding; (B) all expenses relating to the defense of such claim or Legal Proceeding (whether or not incurred by PBT) shall be borne and paid exclusively by WinWin; (C) WinWin shall make available to PBT any documents and materials in the possession or control of WinWin or its Representatives that may be necessary to the defense of such claim or Legal Proceeding; and (D) PBT shall have the right to settle, adjust or compromise such claim or Legal Proceeding with the consent of WinWin, which shall not be unreasonably withheld, delayed or conditioned.   (ii) In the event of the assertion or commencement by any Person of any claim or Legal Proceeding (whether against PBT, against any other Indemnitee or against any other Person) with respect to which PBT may become obligated to indemnify, hold harmless, compensate or reimburse any PBT Indemnitee pursuant to this Section 14: (A) PBT shall have the right to control the defense of such claim or Legal Proceeding; (B) all expenses incurred by PBT relating to the defense of such claim or Legal Proceeding shall be borne and paid exclusively by PBT; (C) WinWin shall make available to PBT any documents and materials in the possession or control of WinWin or its Representatives that may be necessary to the defense of such claim or Legal Proceeding; and (D) PBT shall have the right to settle, adjust or compromise such claim or Legal Proceeding without the consent of WinWin.   -33- --------------------------------------------------------------------------------   (i) Exercise of Remedies by Indemnitees other than the Parties. No Indemnitee (other than the Parties or any successors thereto or assigns thereof) shall be permitted to assert any indemnification claim unless the Party to which Indemnitee is related (or any successor thereto or assign thereof) shall have consented to the assertion of such indemnification claim.   15. Miscellaneous.   (a) Successors and Assigns. The terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. Neither Party shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party.   (b) Governing Law. This Agreement will be governed by and construed and enforced under the internal laws of the State of California, without reference to principles of conflict of laws or choice of laws.   (c) Dispute Resolution. Any unresolved controversy or claim arising out of or relating to this Agreement, except as (i) otherwise provided in this Agreement, or (ii) any such controversies or claims arising out of either party’s intellectual property rights for which a provisional remedy or equitable relief is sought, shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within 30 days after names of potential arbitrators have been proposed by the American Arbitration Association (the “AAA”), then by one arbitrator having reasonable experience in corporate finance transactions of the type provided for in this Agreement and who is chosen by the AAA. The arbitration shall take place in San Francisco, California, in accordance with the AAA rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. There shall be limited discovery prior to the arbitration hearing as follows: (A) exchange of witness lists and copies of documentary evidence and documents relating to or arising out of the issues to be arbitrated, (B) depositions of all party witnesses and (C) such other depositions as may be allowed by the arbitrators upon a showing of good cause. Depositions shall be conducted in accordance with the California Code of Civil Procedure, the arbitrator shall be required to provide in writing to the parties the basis for the award or order of such arbitrator, and a court reporter shall record all hearings, with such record constituting the official transcript of such proceedings. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the Northern District of California or any court of the State of California having subject matter jurisdiction.   -34- --------------------------------------------------------------------------------   (d) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.   (e) Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules will, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by reference.   (f) Notices. Any notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered (i) personally by hand or by courier, (ii) mailed by United States first-class mail, postage prepaid or (iii) sent by facsimile, to a Party’s address or facsimile number as follows:   if to WinWin: WinWin Gaming, Inc.   8687 West Sahara, Suite 201 Las Vegas, NV 89117 Tel: (702) 212-4530 Fax: (702) 212-4553 Attention: Patrick Rogers   with a copy to: Thelen Reid & Priest LLP 701 Eighth Street, N.W. Washington, D.C.  20001 Tel: 202.508.4281 Fax: 202.654.1804 Attention: Louis A. Bevilacqua   if to PBT:    Solidus Networks, Inc.   101 Second Street, Suite 1100 San Francisco, California 94105 Tel: (415) 281-2200 Fax: (415) 281-2202 Attention: Gus Spanos   with a copy to: Cooley Godward llp 101 California Street, 5th Floor San Francisco, CA 94111 Tel: (415) 693-2000 Fax: (415) 693-2222 Attention: Kenneth L. Guernsey -35- -------------------------------------------------------------------------------- , or at such other address or facsimile number as a Party may designate by giving at least ten days’ advance written notice to the other Party. All such notices and other communications shall be deemed given upon (I) receipt or refusal of receipt, if delivered personally, (II) three days after being placed in the mail, if mailed, or (III) confirmation of facsimile transfer, if faxed.   (g) Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of the Parties.   (h) Severability. If any provision of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.   (i) Entire Agreement. This Agreement, together with all exhibits and schedules hereto and the Confidentiality Letter, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.   (j) Further Assurances. From and after the date of this Agreement, upon the request of a Party, the other Party will execute and deliver such instruments, documents or other writings, and take such other actions, as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.   (k) Meanings. Whenever in this Agreement the word “include” or “including” is used, it shall be deemed to mean “include, without limitation” or “including, without limitation,” as the case may be, and the language following “include” or “including” shall not be deemed to set forth an exhaustive list. All references to “dollars” or “$” shall be deemed to mean United States dollars.   (l) Fees, Costs and Expenses. Except as otherwise provided for in this Agreement, all fees, costs and expenses (including attorneys’ fees and expenses) incurred by any party hereto in connection with the preparation, negotiation and execution of this Agreement and the exhibits and schedules hereto and the consummation of the transactions contemplated hereby and thereby (including the costs associated with any filings with, or compliance with any of the requirements of any governmental authorities), shall be the sole and exclusive responsibility of such party.   (m) Stock Splits, Dividends and other Similar Events. The provisions of this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend, reorganization or other similar event that may occur with respect to either Party after the date hereof.   -36- -------------------------------------------------------------------------------- (n) Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each Party will be entitled to specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.   [Signature page follows]       -37- -------------------------------------------------------------------------------- The parties hereto have executed this Agreement as of the date and year first above written.     WinWin Gaming, Inc.       /s/ Patrick Rogers   Name: Patrick Rogers   Title: President / CEO           Solidus Networks, Inc.         Name:   Title: -------------------------------------------------------------------------------- The parties hereto have executed this Agreement as of the date and year first above written.     WinWin Gaming, Inc.         Name: Patrick Rogers   Title: President / CEO         Solidus Networks, Inc.       /s/ Steve Zelinger   Name: Steve Zelinger   Title: EVP & GC -------------------------------------------------------------------------------- Exhibits   Exhibit A  Form of WinWin Registration Rights Agreement         Exhibit B  Form of Opinion of WinWin Counsel         Exhibit C  Form of Investment Option Agreement         Exhibit D  China Sales Representative Term Sheet         Exhibit E  Form of Restated Charter         Exhibit F  Form of Opinion of WinWin Delaware Counsel         Exhibit G  Form of Certificate of Designation of Preferences of Series A-1 Preferred Stock -------------------------------------------------------------------------------- EXHIBIT A (Form of Registration Rights Agreement)     REGISTRATION RIGHTS AGREEMENT   THIS REGISTRATION RIGHTS AGREEMENT is made as of August 31, 2006, by and between WINWIN GAMING, INC., a Delaware corporation (together with any successor thereto, the “Company”), and SOLIDUS NETWORKS, INC., dba PayByTouch Solutions, a Delaware corporation (“PBT”).   BACKGROUND   The Company and PBT have entered into a Second Amended and Restated Joint Venture Agreement, dated as of August 31, 2006 (as amended, restated, supplement or otherwise modified from time to time, the “JV Agreement”), pursuant to which, among other things, PBT has agreed to purchase shares of the Company’s Series A-1 Preferred Stock, US$0.01 par value per share (the “Series A-1 Preferred Stock”), and shares of the Company’s Series A Preferred Stock, US$0.01 par value per share (the “Series A Preferred Stock”).   The Company and PBT desire to provide for certain arrangements with respect to the registration of shares of capital stock of the Company under the Securities Act (as defined herein).   The execution and delivery of this Agreement is a condition precedent to the transaction contemplated by the JV Agreement.   AGREEMENT   NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:   1. Certain Definitions. Capitalized terms used in this Agreement and not otherwise defined shall have the following respective meanings:   “Agreement” shall mean this Registration Rights Agreement, as amended, restated, supplemented or otherwise modified from time to time.   “Commission” shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act and the Exchange Act.   “Common Stock” shall mean the Company’s Common Stock, US$0.01 par value per share, and any other common equity securities now or hereafter issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or in replacement of or upon conversion of such shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).   --------------------------------------------------------------------------------   “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.   “New Securities” shall mean equity securities of the Company, whether now authorized or not, or rights, options, or warrants to purchase said equity securities, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for said equity securities.   “Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof).   “Preferred Stock” shall mean the Series A-1 Preferred Stock and the Series A Preferred Stock.   “Registrable Securities” shall mean (a) the shares of Common Stock issued or issuable upon conversion of any Preferred Stock, (b) any other shares of Common Stock issued or issuable pursuant to the JV Agreement or any option granted pursuant thereto, and (c) any additional shares of Common Stock issued or distributed by way of a dividend, stock split or other distribution in respect of any share of Preferred Stock or any share of Common Stock into which any share of Preferred Stock was converted, or acquired by way of any rights offering or similar offering made in respect thereof; provided, however, that notwithstanding anything to the contrary contained herein, “Registrable Securities” shall not at any time include any securities (i) registered and sold pursuant to the Securities Act, or (ii) sold pursuant to Rule 144 promulgated under the Securities Act.   “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.   2. Registrations.   (a) Demand Registration.   (i) If the Company shall be requested in writing by holders (the “Holders”) of a majority of the Registrable Securities to file a registration statement for Registrable Securities having an aggregate offering price to the public of not less than US$15,000,000 under the Securities Act (a “Demand Notice”) in accordance with this Section 2(a), then the Company shall use best efforts to effect such a registration statement. Upon receipt of a Demand Notice, the Company shall, within 10 days, give written notice of such proposed registration to all Holders and shall offer to include in such proposed registration any Registrable Securities requested to be included in such proposed registration by such Holders who respond in writing to the Company’s notice within 30 days after delivery of such notice (which response shall specify the number of Registrable Securities proposed to be included in such registration). The Company shall promptly use best efforts to effect such registration as soon as practicable on an appropriate form, including Form S-2 or S-3, if available, under the Securities Act of the Registrable Securities which the Company has been so requested to register; provided, however, that the Company shall not be obligated to effect any registration under the Securities Act in the following circumstances:   -2- --------------------------------------------------------------------------------   (A) after the Company has already filed two registration statements initiated by the Holders of Registrable Securities pursuant to this Section 2(a); or   (B) during any period in which any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Registrable Securities are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 90 days.   (ii) If the Holders requesting to be included in a registration pursuant to this Section 2(a) so elect, the offering of such Registrable Securities pursuant to such registration shall be in the form of an underwritten offering. The Holders of a majority of the Registrable Securities requested to be included in such registration shall select one or more nationally recognized firms of investment bankers reasonably acceptable to the Company to act as the lead managing underwriter or underwriters in connection with such offering and shall select any additional investment bankers and managers to be used in connection with the offering, which shall also be reasonably acceptable to the Company.   (iii) With respect to any registration pursuant to this Section 2(a), the Company may include in such registration any Common Stock; provided, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Securities and Common Stock requested to be included by the Company in such registration would interfere with the successful marketing (including pricing) of all such securities, then the number of Registrable Securities and Common Stock proposed to be included in such registration shall be included in the following order:   (A) first, the Registrable Securities shall be included, pro rata among the participating Holders based upon the number of Registrable Securities held by such Holders at the time of such registration; and   (B) second, Common Stock requested to be included by the Company.   -3- --------------------------------------------------------------------------------   (iv) At any time before the registration statement covering Registrable Securities becomes effective, Holders of a majority of the Registrable Securities requested to be included in such registration may request the Company to withdraw or not to file the registration statement. In that event, if such request of withdrawal shall have been caused by, or made in response to, a material adverse effect or change in the Company’s financial condition, operations, business or prospects, such Holders of Registrable Securities shall not be deemed to have used one of their demand registration rights under this Section 2(a).   (b) Registrations on Form S-3. Notwithstanding anything contained in Section 2 to the contrary, at such time as the Company shall have qualified for the use of Form S-3 promulgated under the Securities Act or any successor form thereto, Holders of Registrable Securities shall have the right to request in writing up to two registrations on Form S-3 or any such successor forms of Registrable Securities, which request or requests shall (i) specify the number of Registrable Securities intended to be sold or disposed of and the Holders thereof, (ii) state the intended method of disposition of such Registrable Securities, and (iii) relate to Registrable Securities having an anticipated aggregate offering price of at least US$5,000,000. A requested registration on Form S-3 or any such successor forms in compliance with this Section 2(b) shall not count as a demand registration pursuant to Section 2(a), but shall otherwise be treated as a registration initiated pursuant to and shall, except as otherwise expressly provided in this Section 2(b), be subject to Section 2(a).   (c) Piggyback Registration. If, at any time or times the Company shall seek to register any shares of its Common Stock under the Securities Act for sale to the public for its own account or on the account of others (except with respect to registration statements on Form S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public), the Company will promptly give written notice thereof to all Holders. If within ten (10) business days after their receipt of such notice one or more Holders request in writing the inclusion of some or all of the Registrable Securities owned by them in such registration, the Company will use best efforts to effect the registration under the Securities Act of such Registrable Securities. In the case of the registration of shares of capital stock by the Company in connection with any underwritten public offering, if the principal underwriter determines that the number of Registrable Securities to be offered must be limited, the Company shall not be required to register Registrable Securities of the Holders in excess of the amount, if any, of shares of the capital stock which the principal underwriter of such underwritten offering shall reasonably and in good faith agree to include in such offering in addition to any amount to be registered for the account of the Company; provided, however, that in no event shall the Registrable Securities to be included by PBT or its designee be reduced to below 25% of the total amount of securities included in the registration.   (d) Obligations Subject to Existing Obligations. Notwithstanding anything contained in Section 2 to the contrary, the Company’s obligations under this Section 2 shall be subject to its obligations pursuant to Section 4(k) of the Securities Purchase Agreement by and between the Company and Van Wagoner Private Opportunities Fund, dated as of February 25, 2005 (the “Existing Obligations”). The Company will not increase, extend or otherwise amend any of the Existing Obligations without the prior written consent of the Holders of a majority of the then outstanding Registrable Securities, and will promptly notify the Holders of the expiration of the Existing Obligations.   3. Further Obligations of the Company. Whenever the Company is required hereunder to register any Registrable Securities, it agrees that it shall also do the following:   -4- --------------------------------------------------------------------------------   (a) Pay all expenses of such registrations and offerings in connection with any registrations pursuant to Section 2 hereof; provided, however, that the Company shall have no obligation to pay or otherwise bear any portion of the underwriters’ commissions or discounts attributable to the Registrable Securities being offered and sold by the Holders or the fees and expenses of any counsel for the selling Holders in connection with the registration of the Registrable Securities;   (b) Use its best efforts to diligently prepare and file with the Commission a registration statement and such amendments and supplements to said registration statement and the prospectus used in connection therewith as may be necessary to keep said registration statement effective until the Holder or Holders have completed the distribution described in the registration statement relating thereto (but for no more than one hundred eighty (180) days or such lesser period until all such Registrable Securities are sold) and to comply with the provisions of the Securities Act with respect to the sale of securities covered by said registration statement for such period; provided, however, that (i) such 180-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable Commission rules, such 180-day period shall be extended for up to an additional 120 days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;   (c) Furnish to each selling Holder such copies of each preliminary and final prospectus as such Holder may reasonably request to facilitate the public offering of its Registrable Securities;   (d) Enter into and perform its obligations under any reasonable underwriting agreement required by the proposed underwriter, if any, in such form and containing such terms as are customary;   (e) Use its best efforts to register or qualify the securities covered by said registration statement under the securities or “blue sky” laws of such jurisdictions as any selling Holder may reasonably request provided the Company shall not be required to qualify to do business or file a general consent to service of process in connection therewith;   (f) Immediately notify each selling Holder, at any time when a prospectus relating to his, her or its Registrable Securities is required to be delivered under the Securities Act, of the happening of any event (other than an event relating to a Holder or a plan of distribution delivered by a Holder) as a result of which such prospectus contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading, and, to the extent required by the Securities Act, at the request of any such selling Holder, prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading;   -5- --------------------------------------------------------------------------------   (g) Cause upon or immediately after the effectiveness of a registration all such Registrable Securities to be listed on each securities exchange or quotation system on which the Common Stock of the Company are then listed or quoted;   (h) Make available to each selling Holder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling Holder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, subject to appropriate confidentiality undertakings;   (i) use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 2, on the date on which such Registrable Securities are sold to the underwriter, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a “comfort” letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any;   (j) Otherwise use its best efforts to comply with the securities laws of the United States and other applicable jurisdictions and all applicable rules and regulations of the Commission and comparable governmental agencies in other applicable jurisdictions and make generally available to its Holders, in each case as soon as practicable, but not later than forty-five (45) days after the close of the period covered thereby or ninety (90) days after the closing of the fiscal year, as the case may be, an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act;   (k) Provide an institutional transfer agent and registrar and a CUSIP number for all Registrable Securities on or before the effective date of the registration statement; and   (l) Make available for inspection by any Holder, any underwriter participating in any disposition pursuant to the registration statement, and any attorney, accountant, or other agent of any Holder or underwriter, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors and employees to supply all information requested by any Holder, underwriter, attorney, accountant, or agent in connection with the registration statement; provided that an appropriate confidentiality agreement is executed by any such Holder, underwriter, attorney, accountant or other agent.   4. Cooperation by Prospective Sellers.   (a) Each prospective seller of Registrable Securities shall furnish to the Company in writing such information as the Company may reasonably request from such seller in connection with any registration statement with respect to such Registrable Securities.   -6- --------------------------------------------------------------------------------   (b) The failure of any prospective seller of Registrable Securities to furnish any information or documents in accordance with any provision contained in this Agreement shall not affect the obligations of the Company under this Agreement to any remaining sellers who furnish such information and documents unless, in the reasonable opinion of counsel to the Company and/or the underwriters, such failure impairs or adversely affects the offering or the legality of the registration statement or causes the request not to meet the requirements of Section 2 of this Agreement.   (c) Upon receipt of a notice (telephonic or written) from the Company or the underwriter of the happening of an event which makes any statement made in a registration statement or related prospectus covering Registrable Securities untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, the Holders of Registrable Securities included in such registration statement shall discontinue disposition of such Registrable Securities pursuant to such registration statement until such Holders’ receipt of copies of the supplemented or amended prospectus contemplated in Section 3(f) hereof or until advised by the Company or the underwriters that dispositions may be resumed. If the Company gives any such notice, the time period mentioned in Section 3(b) shall be extended by the number of days elapsing between the date of notice and the date that each seller receives copies of the supplemented or amended prospectus contemplated by Section 3(f).   (d) Each Holder of Registrable Securities included in any registration statement will effect sales of such securities in accordance with the plan of distribution given to the Company.   (e) At the end of any period during which the Company is obligated to keep any registration statement current and effective as provided in this Agreement, the Holders of Registrable Securities included in such registration statement shall discontinue sales of shares pursuant to such registration statement, unless it receives notice from the Company of its intention to continue effectiveness of such registration statement with respect to such shares which remain unsold and such Holders shall notify the Company of the number of shares registered which remain unsold promptly upon expiration of the period during which the Company is obligated to maintain the effectiveness of the registration statement.   (f) No Person may participate in any underwritten registration pursuant to this Agreement unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements made with respect to such registration and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required by the terms of such underwriting arrangements.   -7- --------------------------------------------------------------------------------   5. Indemnification; Contribution.   (a) Incident to any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will, to the extent permitted by law, indemnify and hold harmless each Holder who offers or sells any such Registrable Securities in connection with such registration statement (including its partners (including partners of partners and stockholders of any such partners), and directors, officers, stockholders, affiliates, employees, representatives and agents of any of them, and each person who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, reasonable expenses and liabilities, joint or several (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, as the same are incurred), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement (including any related preliminary or definitive prospectus, or any amendment or supplement to such registration statement or prospectus), (ii) any omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading; provided, however, that the Company will not be liable to the extent that (1) such loss, claim, damage, expense or liability arises from and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Company by or on behalf of such Holder in accordance with Section 4(a) of this Agreement for use in such registration statement, or (2) in the case of a sale directly by such Holder (including a sale of Registrable Securities through any underwriter retained by such Holder to engage in a distribution solely on behalf of such Holder), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and such Holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the Person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act or any state securities laws, or (iii) any violation or alleged violation by any other party hereto, of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law. With respect to such untrue statement or omission or alleged untrue statement or omission in the information furnished in writing to the Company by or on behalf of such Holder in accordance with Section 4(a) of this Agreement for use in such registration statement, such Holder will severally and not jointly indemnify and hold harmless the Company (including its directors, officers, employees, representatives and agents), each other Holder (including its partners (including partners of partners and stockholders of such partners) and directors, officers, employees, representatives and agents of any of them, and each person who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, reasonable expenses and liabilities, joint or several (including any reasonable investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, as the same are incurred), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, provided, however, that the indemnification obligations of the Holder contained in this Section 5(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further, that, in no event shall any indemnity under this Section 5(a) exceed the net proceeds from the offering received by such Holder, except in the case of fraud or willful misconduct by such Holder.   -8- --------------------------------------------------------------------------------   (b) If the indemnification provided for in Section 5(a) above for any reason is held by a court of competent jurisdiction to be unavailable to an indemnified party in respect of any losses, claims, damages, expenses or liabilities referred to therein, then each indemnifying party under this Section 5, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the other Holders from the offering of the Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the other Holders in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Holders shall be deemed to be in the same respective proportions that the net proceeds from the offering received by the Company and the Holders, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by or on behalf of the Company or the Holders and the parties’ relative intent, knowledge and access to information.   The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5(b) were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.   -9- --------------------------------------------------------------------------------   (c) The amount paid by an indemnifying party or payable to an indemnified party as a result of the losses, claims, damages and liabilities referred to in this Section 5 shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim, payable as the same are incurred. The indemnification and contribution provided for in this Section 5 will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified parties or any officer, director, employee, agent or controlling person of the indemnified parties. No indemnifying party, in the defense of any such claim or litigation, shall enter into a consent of entry of any judgment or enter into a settlement without the consent of the indemnified party, which consent will not be unreasonably withheld. Any indemnified party that proposes to assert the right to be indemnified under this Section 5 will, promptly after receipt of notice of commencement or threat of any claim or action against such party in respect of which a claim is to be made against an indemnifying party under this Section 5 notify the indemnifying party in writing (such written notice, an “Indemnification Notice”) of the commencement or threat of such action, enclosing a copy of all papers served or notices received (if applicable), but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability that the indemnifying party may have to any indemnified party under the foregoing provisions of this Section 5 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. The indemnified party will have the right to retain its own counsel in any such action if (i) the employment of counsel by the indemnified party has been authorized by the indemnifying party, (ii) the indemnified party’s counsel, shall have reasonably concluded that there is a reasonable likelihood of a conflict of interest between the indemnifying party and the indemnified party in the conduct of the defense of such action or (iii) the indemnifying party shall not in fact have employed counsel to assume the defense of such action within a reasonable period of time following its receipt of the Indemnification Notice, in each of which cases the fees and expenses of the indemnified party’s separate counsel shall be at the expense of the indemnifying party; provided, however, that the indemnified party shall agree to repay any expenses so advanced hereunder if it is ultimately determined by a court of competent jurisdiction that the indemnified party to whom such expenses are advanced is not entitled to be indemnified; and provided, further, that so long as the indemnified party has reasonably concluded that no conflict of interest exists, the indemnifying party may assume the defense of any action hereunder with counsel reasonably satisfactory to the indemnified party.   (d) In the event of an underwritten offering of Registrable Securities under this Agreement, the Company shall enter into standard indemnification and underwriting agreements with the underwriter thereof.   6. Right to Delay. For one period not to exceed 90 days in any twelve (12) month period, the Company shall not be obligated to prepare and file, or prevented from delaying or abandoning, a Registration Statement pursuant to this Agreement at any time when the Company, in its good faith judgment, reasonably believes:   (a) that the filing thereof at the time requested, or the offering of Registrable Securities pursuant thereto, would materially and adversely affect (i) a pending or scheduled public offering of the Company’s securities, (ii) any significant acquisition, merger, recapitalization. consolidation, reorganization or other similar transaction by or of the Company, (iii) pre-existing and continuing negotiations, discussions or pending proposals with respect to any of the foregoing transactions, or (iv) the financial condition of the Company in view of the disclosure of any pending or threatened litigation, claim, assessment or governmental investigation which may be required thereby; and   (b) that the failure to disclose any material information with respect to the foregoing would cause a violation of the Securities Act or Exchange Act.   The Company shall not register any securities for the account of itself or any other stockholder during such 90-day period other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered).   -10- --------------------------------------------------------------------------------   7. Transferability of Registration Rights. The registration rights set forth in this Agreement are transferable to any transferee of Registrable Securities. Each subsequent Holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.   8. Rights Which May Be Granted to Subsequent Investors. Other than transferees of Registrable Securities under Section 7 hereof, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to include such securities in any registration unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included.   9. Right of First Offer. Subject to the terms and conditions specified in this Section 9, and applicable securities laws, in the event the Company proposes to offer or sell any New Securities, the Company shall first make an offering of such New Securities to PBT or its designee in accordance with the following provisions of this Section 9. PBT or its designee shall be entitled to apportion the right of first offer hereby granted it among itself and its partners, members and affiliates in such proportions as it deems appropriate.   (a) The Company shall deliver a notice, in accordance with the provisions of Section 10(a) hereof, (the “Offer Notice”) to PBT stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.   (b) By written notification received by the Company, within twenty (20) calendar days after mailing of the Offer Notice, PBT or its designee may elect to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock (and any other securities convertible into, or otherwise exercisable or exchangeable for, shares of Common Stock) then held, by PBT bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all convertible or exercisable securities).   (c) If all New Securities referred to in the Offer Notice are not elected to be purchased or obtained as provided in Section 9(b) hereof, the Company may, during the sixty (60) day period following the expiration of the period provided in Section 9(b) hereof, offer the remaining unsubscribed portion of such New Securities (collectively, the “Refused Securities”) to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within sixty (60) days following the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to PBT or its designee in accordance with this Section 9.   -11- --------------------------------------------------------------------------------   (d) The right of first offer in this Section 9 shall not be applicable to New Securities issued:     i. upon conversion of shares of Preferred Stock;     ii. to officers, directors, employees and consultants of the Company pursuant to stock incentive plans, or other stock arrangements that have been approved by the Board of Directors of the Company including the directors elected by the holders of a majority of the Preferred Stock (the “Series A Directors”);     iii. as a dividend or distribution on the Corporation’s Common Stock or Preferred Stock;     iv. upon the written consent of PBT that expressly states that the right of first offer in this Section 9 shall not apply to such New Securities;     v. upon the exercise or conversion of any options or other convertible securities outstanding as of the date hereof;     vi. pursuant to a loan arrangement or debt financing from a bank, equipment lessor or similar financial institution approved by the Board of Directors, including the Series A Directors; or     vii. in connection with strategic transactions (but excluding any merger, consolidation, acquisition or similar business combination) that have been approved by the Board of Directors of the Corporation including the Series A Directors.   (e) The right of first offer set forth in this Section 9 may not be assigned or transferred except that such right is assignable by PBT to any affiliate of PBT.   10. Miscellaneous.   (a) Notices. Except as otherwise expressly provided herein, all notices, requests, demands, claims, and other communications hereunder will be in writing. Any such notice, request, demand, claim, or other communication hereunder shall be deemed duly given (i) upon confirmation of facsimile, (ii) one (1) business day following the date sent when sent by overnight delivery and (iii) five (5) business days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following addresses (or such other address for a party as shall be specified by such party by like notice): All communications shall be sent to PBT at 101 Second Street, Suite 1100, San Francisco, California 94105, and to the Company at 8687 West Sahara, Suite 201, Las Vegas, NV 89117, or at such other address(es) as PBT or the Company may designate by ten (10) days advance written notice to the other parties hereto.   -12- --------------------------------------------------------------------------------   (b) Entire Agreement. This Agreement, together with the instruments and other documents hereby contemplated to be executed and delivered in connection herewith, contains the entire agreement and understanding of the parties hereto, and supersedes any prior agreements or understandings between or among them, with respect to the subject matter hereof.   (c) Successors and Assigns.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.   (d) Successor Indemnification. In the event that the Company or any of its successors or assigns (i) consolidates with or merges into any other entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately prior to such transaction, whether in the Company’s bylaws, Certificate of Incorporation, or elsewhere, as the case may be.   (e) Amendments and Waivers. Except as otherwise expressly set forth in this Agreement, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holders of a majority of the Preferred Stock. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.    (f) Counterparts; Facsimile Execution. This Agreement may be executed in multiple counterparts, each of which shall constitute an original but all of which shall constitute but one and the same instrument. One or more counterparts of this Agreement may be delivered via telecopier, with the intention that they shall have the same effect as an original counterpart hereof. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.   (g) Captions. The captions of the sections, subsections and paragraphs of this Agreement have been added for convenience only and shall not be deemed to be a part of this Agreement.    (h) Severability. Each provision of this Agreement shall be interpreted in such manner as to validate and give effect thereto to the fullest lawful extent, but if any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable under applicable law, such provision shall be ineffective only to the extent so determined and such invalidity or unenforceability shall not affect the remainder of such provision or the remaining provisions of this Agreement; provided, however, that the Company and the Holders of a majority of the Registrable Securities shall negotiate in good faith to attempt to implement an equitable adjustment in the provisions of this Agreement with a view toward effecting the purposes of this Agreement by replacing the provision that is invalid or unenforceable with a valid and enforceable provision the economic effect of which comes as close as possible to that of the provision that has been found to be invalid and unenforceable.    -13- --------------------------------------------------------------------------------   (i) Governing Law. The execution, interpretation, and performance of this Agreement shall be governed by the laws of the State of California without giving effect to any choice in conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the law of any other jurisdiction other than the State of California.   (j) Dispute Resolution. Any unresolved controversy or claim arising out of or relating to this Agreement, except as (i) otherwise provided in this Agreement, or (ii) any such controversies or claims arising out of either party’s intellectual property rights for which a provisional remedy or equitable relief is sought, shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within 30 days after names of potential arbitrators have been proposed by the American Arbitration Association (the “AAA”), then by one arbitrator having reasonable experience in corporate finance transactions of the type provided for in this Agreement and who is chosen by the AAA. The arbitration shall take place in San Francisco, California, in accordance with the AAA rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. There shall be limited discovery prior to the arbitration hearing as follows: (a) exchange of witness lists and copies of documentary evidence and documents relating to or arising out of the issues to be arbitrated, (b) depositions of all party witnesses and (c) such other depositions as may be allowed by the arbitrators upon a showing of good cause. Depositions shall be conducted in accordance with the California Code of Civil Procedure, the arbitrator shall be required to provide in writing to the parties the basis for the award or order of such arbitrator, and a court reporter shall record all hearings, with such record constituting the official transcript of such proceedings. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.   (k) Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any provision of this Agreement was not performed in accordance with the terms hereof and that the parties hereto shall be entitled to seek specific performance of the terms hereof (without necessity of posting a bond in connection therewith), in addition to any other remedy at law or equity otherwise permitted hereunder.   [Signature page follows]     -14- -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth above.     Solidus Networks, Inc.       By: _________________________________  Name: Title:       WinWin Gaming, Inc.       By:_________________________________  Name: Title:             --------------------------------------------------------------------------------   EXHIBIT B (Form of Opinion of WinWin Counsel) ON LETTERHEAD OF THELEN REID & PRIEST LLP August ____ , 2006 Solidus Networks, Inc., dba PayByTouch Solutions 101 Second Street Suite 1100 San Francisco CA 94105 Re: WinWin Gaming, Inc. Ladies and Gentlemen:   We have acted as counsel to WinWin Gaming, Inc., a Delaware corporation (the “Company”), in connection with that certain Second Amended and Restated Joint Venture Agreement, dated as of August ___, 2006 (the “Agreement”), between the Company and Solidus Networks, Inc., dba PayByTouch Solutions, a Delaware corporation (“PBT”). This opinion is furnished to PBT pursuant to Section 6(e) of the Agreement. All capitalized terms not otherwise defined herein shall have the meanings given to them in the Agreement. Items (a) through (d), below are hereinafter referred to collectively as the “Opinion Documents” and items (a) through (c) below are hereinafter referred to collectively as the “Enforceability Documents.”   For purposes of the opinions expressed herein, we have examined, among other documents, the following documents:     (a) the Agreement;     (b) that certain Amended and Restated Voting Agreement, Irrevocable Proxy and Form of Stockholders’ Written Consent, dated ____, 2006;     (c) that certain Registration Rights Agreement, of even date herewith, by and between the Company and PBT;     (d) the Certificate of Designation of Powers Designations, Preferences and Relative Participating, Optional or Other Special Rights and Qualifications, Limitations and Restrictions of the Series A-1 Preferred Stock of the Company (the “Certificate of Designation”);     (e) the Bylaws of the Company, as certified on the date hereof by an officer of the Company (the “Bylaws”);     (f) the Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on December 30, 1992 (the “Certificate of Incorporation” and, together with the Bylaws, the “Governing Documents”);   --------------------------------------------------------------------------------   (g) a Good Standing Certificate issued by the Secretary of State of the State of Delaware on August ____, 2006, certifying as to the good standing of the Company in Delaware;     (h) a Good Standing Certificate issued by the Secretary of State of the State of Nevada on August ____, 2006, certifying as to the good standing of the Company in Nevada; and     (i) a Certificate from the Chief Executive Officer or Chief Financial Officer of the Company, certifying as to certain factual matters, corporate documents and actions (the “Officer’s Certificate”).   In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents and other instruments, and of certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives as we have deemed relevant and necessary as the basis for the opinions hereinafter set forth. We have not searched any computer databases or the dockets of any court, governmental or administrative body, agency or other filing office in any jurisdiction or conducted any other independent investigation. In addition, the opinion expressed in paragraph 1 below as to the existence and good standing of the Company in Delaware is based solely upon the certificates and other documents referred to in paragraph (g) above; the opinion expressed in paragraph 3 below as to the qualification and good standing of the Company in Nevada is based solely upon the certificates and other documents referred to in paragraph (h) above; and the opinion expressed in paragraph 6 below as to the capitalization of the Company is based solely upon our review of the Certificate of Incorporation, the stock records of the Company and the Officer’s Certificate referred to in paragraph (i) above. As to all questions of fact material to the opinions set forth herein, we have relied solely upon certificates or other comparable documents of officers and other representatives of the Company and upon the representations and warranties of the Company contained in the Opinion Documents. While we have not conducted any independent investigation to determine facts upon which our opinions are based or to obtain information about which this letter advises you, we confirm that we do not have any knowledge which has caused us to conclude that our reliance and assumptions cited in this paragraph are unwarranted. The term “knowledge” whenever it is used in this letter with respect to our firm means the current, actual knowledge of the Thelen Reid & Priest LLP attorneys who played a material role in handling the transaction contemplated by the Agreement.   In such examination, we have without independent investigation relied upon and assumed the truth and accuracy of all factual matters contained in the Officer’s Certificate, a copy of which is attached hereto as Exhibit A, and the truth and accuracy of each of the representations and warranties as to factual matters contained in or made pursuant to the Opinion Documents and certificates delivered thereunder. We have also assumed, with your permission and without independent investigation, (i) the genuineness of all signatures; (ii) the legal capacity of each individual signatory to such documents; (iii) the authenticity of all documents submitted to us as originals; (iv) the conformity to originals of all documents submitted to us as certified, facsimile or photostatic copies; (v) the authenticity of the originals of such copies; (vi) the due incorporation and organization, valid existence and good standing of PBT under the laws of the State of Delaware; (vii) the due execution and delivery of the Opinion Documents by PBT; (viii) the corporate power and authority of PBT to conduct its business and own its properties and to enter into the Opinion Documents and perform its obligations thereunder; (ix) that each of the Opinion Documents has been duly authorized by all necessary corporate action of PBT and is the legal, valid and binding obligation of PBT, enforceable against PBT in accordance with its terms; (x) that, except as to the opinion in paragraph 9, each of the Company and PBT has obtained all necessary governmental permits and approvals for conducting its operations; and (xi) the identity and capacity of all individuals acting or purporting to act as public officials.   -------------------------------------------------------------------------------- Based solely upon the examination described above, and subject to the comments, assumptions, qualifications, limitations and exceptions stated herein and in the Disclosure Schedule to the Agreement, we are of the opinion that:   1. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Delaware.   2. The Company has the requisite corporate power to own its property and assets and to conduct its business as it is currently being conducted.   3. The Company is duly qualified to do business as a foreign corporation and is in good standing in the state of Nevada.   4. The Company has the requisite corporate power to execute, deliver and perform its obligations under the Opinion Documents.   5. Each of the Enforceability Documents has been duly and validly authorized, executed and delivered by the Company and each such agreement constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its respective terms.   6. As of immediately prior to the Initial Closing, the Company’s authorized capital stock consists of (a) 300,000,000 shares of Common Stock, par value $0.01 per share, of which 63,692,171 shares are issued and outstanding, and (b) 10,000,000 shares of Preferred Stock, par value $0.01 per share, of which 6,000,000 have been designated Series A-1 Preferred Stock, par value $0.01, none of which are issued and outstanding. The outstanding shares of Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable, and the shares of Series A-1 Preferred Stock have been duly authorized, and upon issuance in accordance with the terms of the Agreement, will be validly issued, fully paid and nonassessable. The Initial Closing WinWin Shares have been duly authorized, and upon issuance and delivery against payment therefor in accordance with the terms of the Agreement, will be validly issued, outstanding, fully paid and nonassessable. The shares of Common Stock issuable upon conversion of the Initial Closing WinWin Shares have been duly authorized, and when issued upon conversion in accordance with the terms of the Certificate of Designation, will be validly issued, outstanding, fully paid and nonassessable. To our knowledge, there are no options, warrants, conversion privileges, preemptive rights or other rights presently outstanding to purchase any of the authorized but unissued capital stock of the Company, other than the conversion privileges of the Series A-1 Preferred Stock, rights created in connection with the transactions contemplated by the Opinion Documents, warrants to purchase 17,582,161 shares of Common Stock, options to purchase 14,099,026 shares of Common Stock reserved for issuance upon exercise of outstanding options granted under the Company’s 2003 Stock Plan (the “Plan”) and 5,900,974 shares of Common Stock reserved for future issuance under the Plan.   -------------------------------------------------------------------------------- 7. The execution and delivery of the Opinion Documents by the Company and the issuance of the Initial Closing WinWin Shares pursuant thereto do not violate any provision of the Certificate of Incorporation or Bylaws, do not constitute a default under or a material breach of any material agreement that is listed on Annex A1  of this opinion letter and do not violate (a) any governmental statute, rule or regulation which in our experience is typically applicable to transactions of the nature contemplated by the Opinion Documents or (b) to our knowledge, any order, writ, judgment, injunction, decree, determination or award which has been entered against the Company, in each case to the extent the violation of which would materially and adversely affect the Company and its subsidiaries, taken as a whole.   8. To our knowledge, there is no action, proceeding or investigation pending or overtly threatened against the Company before any court or administrative agency that questions the validity of the Agreement.   9. All consents, approvals, authorizations, or orders of, and filings, registrations, and qualifications with any U.S. Federal or California regulatory authority or governmental body required for the issuance of the Initial Closing WinWin Shares, have been made or obtained, except (a) for the filing of a Form D pursuant to Securities and Exchange Commission Regulation D and (b) any required filings under applicable state securities law.   10. The offer and sale of the Initial Closing WinWin Shares are exempt from the registration requirements of the Securities Act of 1933, as amended, subject to the timely filing of a Form D pursuant to Securities and Exchange Commission Regulation D.   Our opinion as to enforceability set forth in paragraph 5 above is subject to:   (a) limitations imposed by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditor’s rights generally, including, without limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable subordination;   (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);   (c) the qualification that certain rights, remedies, waivers and procedures contained in the Opinion Documents may be limited or rendered unenforceable by applicable laws or judicial decisions governing such provisions, but such laws and judicial decisions do not, in our opinion, render the Opinion Documents, as a whole, unenforceable or make the remedies and procedures that are available to the parties legally inadequate for the practical realization of the principal benefits purported to be provided to them by the Opinion Documents;   -------------------------------------------------------------------------------- 1 Annex A will include a list of all of the material agreements set forth in the exhibit index of the Company’s annual report on form 10-KSB for the fiscal year ended December 31, 2005. -------------------------------------------------------------------------------- (d) the qualification that certain provisions contained in the Opinion Documents may be unenforceable in whole or in part if such provisions impose restrictions or burdens upon the debtor and it cannot be demonstrated that enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor or if the creditor’s enforcement of such provisions would violate the creditor’s implied covenant of good faith and fair dealing;   (e) the possible requirement that actions taken, or not taken, by any party pursuant to the Opinion Documents be taken, or not taken, in good faith;   (f) the qualification that certain provisions contained in the Opinion Documents regarding the rights or remedies available to any party for violations or breaches of any provisions which are immaterial or for violations or breaches of any provisions if such enforcement would be unreasonable under the circumstances, may be unenforceable in whole or in part;   (g) the unenforceability under certain circumstances of (i) waivers or provisions imposing penalties or liquidated damages and (ii) provisions purporting to release or exculpate any party from liability for its acts or omissions, or purporting to impose a duty upon any party to indemnify any other party when any claimed damages result from the negligence, gross negligence or willful misconduct of the party seeking such indemnity;   (h) the qualification that certain provisions of any such document to the effect that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to any other right or remedy, that the election of some particular remedy does not preclude recourse to one or more others or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy, may be unenforceable in whole or in part;   (i) the qualification that provisions in any such document that contain a waiver of (A) the benefits of statutory, regulatory, or constitutional rights, unless and to the extent the statute, regulation or constitution explicitly allows such waivers, (B) unknown future defenses, and (C) rights to damages, may be unenforceable in whole or in part;   (j) limitations imposed by California Civil Code Section 1670.5 on the enforceability of provisions which a court finds as a matter of law to have been unconscionable at the time when made;   (k) the qualification that certain provisions which require written amendments or waivers of documents may be unenforceable in whole or in part insofar as certain oral or other modifications, amendments or waivers may be effectively agreed upon by the parties or the doctrine of promissory estoppel may apply in certain circumstances;   -------------------------------------------------------------------------------- (l) the unenforceability under certain circumstances of any provision insofar as it provides for the payment or reimbursement of costs and expenses of indemnification for claims, losses or liabilities in excess of a reasonable amount or any provision purporting to require the payment of attorneys’ fees, expenses or costs, where such provisions do not satisfy the requirements of California Civil Code Section 1717; and   (m) the unenforceability, in certain circumstances, of consent to jurisdiction clauses and forum selection clauses.   We are not opining as to the authorization, execution, delivery or enforceability of the Investment Option or the Certificate of Designation. We understand that the Company’s special Delaware counsel is rendering an opinion of even date herewith that addresses the enforceability of the Investment Option and the Certificate of Designation.   We are members of the bar of the State of California and we express no opinion on the laws of any jurisdiction other than the federal laws of the United States and the laws of the State of California. We also express no opinion as to (i) any governmental rule or other legal requirement relating to labor, employee rights and benefits, including without limitation the Employee Retirement Income Security Act of 1974, as amended, and taxation, (ii) any choice-of-law or conflict of laws matters, (iii) any patent, trademark or copyright statute, rules or regulations, (iv) any provision appointing one party as an attorney-in-fact of an adverse party, (v) the effect of any state or federal antitrust laws, including, without limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as currently in effect, (vi) any securities laws, rules or regulations (except for the opinions set forth in paragraphs 6, 9 and 10 hereof), or (vii) the Company’s rights in or title to any property or assets.   The opinions expressed herein are solely for your benefit in connection with the above transactions and may not be relied upon in any manner or for any purpose by any other person. This opinion speaks only as of the date hereof, and we assume no obligation to advise you of any changes to this opinion that may come to our attention after the date hereof. This opinion is limited to the matters expressly stated herein and no opinion or other statement may be inferred or implied beyond the matters expressly stated herein.     Very truly yours,               THELEN REID & PRIEST LLP   -------------------------------------------------------------------------------- Annex A to Opinion of Thelen Reid & Priest LLP 1. Stock Exchange Agreement dated December 31, 2002, regarding the acquisition of Win Win, Inc.     2. Amended and Restated Stock Exchange Agreement dated March 31, 2003.     3. Agreement, dated October 8, 2003, between Win Win, Inc. and Sande Stewart Television, Inc.     4. Cooperation Agreement, dated December 15, 2003, between Win Win Consulting (Shanghai) Co. Ltd. and Shanghai Welfare Lottery Issuing Center. 5. TV Cooperation Agreement, dated December 15, 2003, between Win Win Consulting (Shanghai) Co. Ltd. and Shanghai Welfare Lottery Issuing Center.     6. WinWin Gaming Inc. 2003 Stock Plan.     7. Project Cooperation Agreement, dated April 30, 2004, between Win Win Consulting (Shanghai) Co. Ltd. and Shanghai VSAT Network Systems Co. Ltd..     8. Securities Purchase Agreement, dated February 25, 2005, among the Company and the investors who are parties thereto.     9. Registration Rights Agreement, dated February 25, 2005, among the Company and the investors who are parties thereto.     10. Revolving Credit Note and Agreement, dated March 16, 2005, between the Company and Art Petrie.     11. Revolving Credit Note and Agreement, dated March 16, 2005, between the Company and John Gronvall.     12. Co-Publishing Agreement, dated September 23, 2005 among Pixiem, Inc. and ESPN.     13. Joint Venture Agreement, dated as of September 30, 2005, by and between Solidus Networks, Inc., d/b/a PayByTouch Solutions and WinWin Gaming, Inc.     14. Security Agreement, dated as of September 30, 2005, by WinWin Gaming, Inc., in favor of Solidus Networks, Inc., d/b/a PayByTouch Solutions.     15. Secured Promissory Note, dated September 30, 2005, by WinWin Gaming, Inc. to Solidus Networks, Inc., d/b/a PayByTouch Solutions.   i --------------------------------------------------------------------------------       16. Acquisition Agreement, dated September 27, 2005, by and among WinWin Gaming, Inc., E-Bear Digital Software Co., Ltd. (“E-Bear”) and the Shareholders of E-Bear.     17. Employment Agreement, dated December 20, 2005, between WinWin Gaming, Inc. and Peter Pang.     18. Employment Agreement, dated December 20, 2005, between WinWin Gaming, Inc. and Patrick Rogers.     19. Licensing Agreement, dated December 15, 2005, among Pixiem, Inc. and Yamaha Motor Company.     20. Licensing Agreement, dated September 23, 2005 among Pixiem, Inc. and C- Valley (Beijing) Information Technology Co., Ltd.     21. Distributorship Agreement, dated June 20, 2005 among Pixiem, Inc. and Advanced Mobile Solutions, Ltd.     22. Agreement, dated August 3, 2005 among Pixiem, Inc. and Tira Wireless, Inc.     23. Distributor and Revenue Share Agreement, dated November 9, 2005 among Pixiem, Inc. and Tele-Mobile Company dba Telus Mobility.     24. License Agreement, dated November 21, 2005 among Pixiem, Inc. and Paradox Studios, Ltd.     25. License Agreement, dated November 7, 2005, among Pixiem, Inc. and iScreen Corporation.     26. Wireless Pass Through Distribution Agreement, dated May 27, 2005 among Pixiem, Inc and Wireless Developer, Inc. dba Wireless Developer Agency.     27. Service Agreement, dated July 8, 2005 among Pixiem, Inc. and Cellmania, Inc.     28. Partnership Agreement, dated September 1, 2005 among Pixiem, Inc. and 2ThumbZ Entertainment.     29. License Agreement, dated April 1, 2005, between Pixiem, Inc. and The All England Lawn Tennis Club (Wimbledon) Limited. ii --------------------------------------------------------------------------------   EXHIBIT C (Form of Investment Option Agreement)   THE SECURITIES REPRESENTED BY THIS AGREEMENT AND ISSUABLE UPON THE EXERCISE OF THE OPTION EVIDENCED HEREBY (COLLECTIVELY, THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS WITH AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY REGARDING COMPLIANCE WITH AND THE AVAILABILITY OF ANY SUCH STATE SECURITIES LAWS.   INVESTMENT OPTION AGREEMENT   This INVESTMENT OPTION AGREEMENT, dated as of August 31, 2006, by and between SOLIDUS NETWORKS, INC., a Delaware corporation (the “Optionee”) and WINWIN GAMING, INC., a Delaware corporation (the “Company”). Capitalized terms used, but not otherwise defined, herein have the meanings ascribed to those terms in the JV Agreement (as defined below).   BACKGROUND   The Optionee and the Company are parties to a Second Amended and Restated Joint Venture Agreement, dated August 31, 2006 (the “JV Agreement”). It is a condition precedent of the Initial Closing that the Company grant to the Optionee this option to acquire an additional number of shares of the Company’s Series A-1 Preferred Stock, prior to the Filing Date (as defined below), or Series A Preferred Stock, from and after the Filing Date, such that upon exercise of this option, the Optionee will be the beneficial owner of a percentage of the Company’s outstanding common stock on a Fully Diluted Basis (as defined below) indicated by the Optionee on the Option Notice (as defined below) after giving effect to the exercise of this Option (the “Election Percentage”), which Election Percentage may not be greater than eighty percent (80%).   The Company is issuing shares of its Series A-1 Preferred Stock to the Optionee at the Initial Closing and is seeking stockholder approval of the adoption and filing of the Restated Charter under which, among other things, its Series A Preferred Stock will be authorized, each outstanding share of Series A-1 Preferred Stock will be automatically converted into one tenth of a share of Series A Preferred Stock and additional shares of common stock will be authorized such that there will be sufficient authorized common stock for issuance upon the conversion of the Series A Preferred Stock. The date of the filing of the Restated Charter is referred to herein as the “Filing Date”. --------------------------------------------------------------------------------   NOW, THEREFORE, in consideration of the premises, mutual covenants herein set forth and other good and valuable consideration, subject to the terms and conditions herein, the Company and the Optionee hereby agree as follows:   1. Grant of Option; Term; Exercise Price.   (a) Subject to the terms and conditions herein, the Company hereby grants to the Optionee an option (the “Option”), prior to the Filing Date, to acquire a number of shares of the Company’s Series A-1 Preferred Stock, and from and after the Filing Date, to purchase a number of shares of the Company’s Series A Preferred Stock (such shares of Series A-1 Preferred Stock or Series A Preferred Stock, as applicable, being referred to herein as the “Option Shares”) that, together with other securities of the Company held by the Optionee at the time of exercise, constitute a percentage of the common stock of the Company on a Fully Diluted Basis after giving effect to the exercise of the Option equal to the Election Percentage. For purposes of this Agreement, “Fully Diluted Basis” means the number of shares of the Company’s Common Stock outstanding assuming, for such purpose, the exercise, exchange, or conversion into Common Stock of the Company of all options, warrants and other securities of the Company that are exercisable or exchangeable for, or convertible into, Common Stock at the time of the exercise of the Option.   (b) The Option is exercisable by Optionee’s delivery to the Company of an Exercise Notice at any time from the date of this Investment Option Agreement until Midnight Pacific Time on the date that is third anniversary of the date of this Investment Option Agreement (the “Exercise Period”); provided, however, that the Option shall automatically terminate upon the closing of the sale of all or substantially all of the assets of the Optionee, or upon the closing of a merger, consolidation or similar transaction in which the stockholders of the Optionee as of immediately prior to the transaction do not own a majority of the voting power of the surviving company as of immediately following such transaction.   (c) The exercise price per Option Share (the “Exercise Price”) shall be equal to the fair market value of a share of the Company’s Series A-1 Preferred Stock or Series A Preferred Stock, as applicable, as of the date of exercise as determined by an Appraisal (as defined below). Whenever this Option calls for an “Appraisal,” the fair market value of the Option Shares will be determined on the basis of the value of the percentage of the entire Company represented by the Option Shares at the time of determination in accordance with the following mechanism. A representative of the Optionee and a representative of the Company shall attempt to negotiate a mutually agreeable fair market value within thirty (30) days of the date that the Company receives an Exercise Notice from the Optionee. If the representatives are unable to reach an agreement within such time period, each of the Optionee and the Company will at its own cost appoint a nationally recognized investment banking firm as an appraiser of the value of the Option Shares. Each of the investment banking firms shall separately determine, within forty-five (45) days of the end of such thirty (30) day period, the fair market value of the shares taking into account the fact that the exercise of the Option may involve the acquisition of a controlling interest in the Company by the Optionee to the extent that the Optionee does not already own a controlling interest in the Company. Each of the investment banking firms shall express its valuation as a single number in US dollars. The mid-point of the valuations (the “Mid-Point”) will then be calculated by dividing the sum of the separate valuations by two (2). To the extent that each valuation is within the range which is 10% above or 10% below the Mid-Point (the “Range”), the Mid-Point shall be used. If either or both of the valuations falls outside of the Range, then the parties shall jointly choose (or if the parties are unable to so jointly choose within three (3) business days, the two appraisers shall choose) a disinterested nationally recognized investment banking firm as a third appraiser, at a cost to be shared on an equal basis between the parties, to complete an appraisal within an additional forty-five (45) days, which appraisal shall be equal to or somewhere between the two prior appraisals and such third appraisal shall be the final and binding determination of the fair market value.   2 -------------------------------------------------------------------------------- (d) The Exercise Price shall be payable in cash; provided, however, that if at the time the Option is exercised there is a public trading market for the Optionee’s common stock, then, at the option of the Optionee, the Optionee may pay the Exercise Price in cash or registered (“free-trading”) shares of the Optionee’s common stock, or a combination thereof. If the Optionee elects to pay the Exercise Price, in whole or in part, by delivery of registered shares of the Optionee’s common stock, then such shares shall be valued at the average closing price of the Optionee’s common stock over a period of twenty (20) trading days prior to the exercise of the Option.   (e) this Investment Option Agreement shall terminate and cease to be effective on the date on which the JV Agreement is validly terminated in accordance with Section 13 thereof.   2. Exercise Procedure.   (a) Procedure.   (i) The Optionee may exercise the Option, in whole, but not in part, at any time during the Exercise Period, by delivering to the Company a written notice duly signed by the Optionee indicating that the Optionee is exercising the Option and the Election Percentage (the “Exercise Notice’). The Option shall not be deemed exercised, however, until full payment in an amount equal to the full purchase price for the Option Shares has been made. Optionee may withdraw the Exercise Notice and elect not to exercise the Option at any time before making full payment.   (ii) Following receipt by the Company of such Exercise Notice and full payment of the Exercise Price, the Company shall issue, as soon as practicable, a stock certificate for the Option Shares in the name as designated by the Optionee and deliver the certificate to the Optionee.   (b) Other Terms. Other than the terms regarding pricing and consideration set forth in Section 1 of this Investment Option Agreement, the issuance and sale of the Option Shares shall be subject to the same conditions of and on the same terms as the issuance and sale of the Second Closing WinWin Shares in the Second Closing.   (c) Legend. If the Option Shares are not then covered by a registration statement, each certificate for the Option Shares shall bear a legend that is substantially similar to the following:   3 -------------------------------------------------------------------------------- “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED WITH OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.”   3. Rights of Optionee. The Optionee shall not have any rights to dividends or any other rights of a stockholder with respect to any Option Shares until such Option Shares shall have been issued to Optionee (as evidenced by the appropriate entry on the transfer books of the Company).   4. Notices. Any notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered (i) personally by hand or by courier, (ii) mailed by United States first-class mail, postage prepaid or (iii) sent by facsimile, to a Party's address or facsimile number as follows:   if to WinWin: WinWin Gaming, Inc.   8687 West Sahara, Suite 201 Las Vegas, NV 89117 Tel: (702) 212-4530 Fax: (702) 212-4553 Attention: Patrick Rogers with a copy to: Thelen Reid & Priest LLP 701 Eighth Street, N.W. Washington, D.C.  20001 Tel: 202.508.4281 Fax: 202.654.1804 Attention: Louis A. Bevilacqua if to PBT: Solidus Networks, Inc.   101 Second Street, Suite 1100 San Francisco, California 94105 Tel: (415) 281-2200 Fax: (415) 281-2202 Attention: Gus Spanos with a copy to: Cooley Godward llp 101 California Street, 5th Floor San Francisco, CA 94111-5800 Tel: (415) 693-2000 Fax: (415) 693-2222 Attention: Kenneth L. Guernsey 4 -------------------------------------------------------------------------------- or at such other address or facsimile number as a Party may designate by giving at least ten days' advance written notice to the other Party. All such notices and other communications shall be deemed given upon (I) receipt or refusal of receipt, if delivered personally, (II) three days after being placed in the mail, if mailed, or (III) confirmation of facsimile transfer, if faxed.   5. Binding; Assignment. Optionee shall not assign this Agreement, or any rights hereunder, without the Company's prior written consent. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their successors and permitted assigns, if any.   6. Dispute Resolution. Any unresolved controversy or claim arising out of or relating to this Agreement, except as (i) otherwise provided in this Agreement, or (ii) any such controversies or claims arising out of either party’s intellectual property rights for which a provisional remedy or equitable relief is sought, shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within 30 days after names of potential arbitrators have been proposed by the American Arbitration Association (the “AAA”), then by one arbitrator having reasonable experience in corporate finance transactions of the type provided for in this Agreement and who is chosen by the AAA. The arbitration shall take place in San Francisco, California, in accordance with the AAA rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. There shall be limited discovery prior to the arbitration hearing as follows: (a) exchange of witness lists and copies of documentary evidence and documents relating to or arising out of the issues to be arbitrated, (b) depositions of all party witnesses and (c) such other depositions as may be allowed by the arbitrators upon a showing of good cause. Depositions shall be conducted in accordance with the California Code of Civil Procedure, the arbitrator shall be required to provide in writing to the parties the basis for the award or order of such arbitrator, and a court reporter shall record all hearings, with such record constituting the official transcript of such proceedings. The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled.   7. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters herein, and cannot be amended, modified or terminated except by an agreement in writing executed by the parties hereto.   8. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to the conflicts of law principles thereof.   [Signature page follows]   5 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Investment Option Agreement as of the date first set forth above.     SOLIDUS NETWORKS, INC.       By: _________________________________________        Name:        Title:       WINWIN GAMING, INC.       By: _________________________________________        Name:        Title:     -------------------------------------------------------------------------------- EXHIBIT D (China Sales Representative Term Sheet) Non-Binding Term Sheet   This non-binding Term Sheet, dated as of ________ __, 2006 (this “Term Sheet”), is by and among Solidus Networks, Inc. (“Pay By Touch”), a corporation organized under the laws of Delaware, and WinWin Gaming, Inc. (“WinWin”), a company organized under the laws of the state of Delaware.   Background:   · Pay By Touch and WinWin have entered into that certain Amended and Restated Joint Venture Agreement, dated as of April 14, 2006 (the "JV Agreement"), and are entering into this Term Sheet in connection with the transactions contemplated by the JV Agreement. · Pay By Touch desires to engage WinWin to market Pay By Touch’s commercial offerings (“Pay By Touch Offerings”) within the [People’s Republic of China, including its special administrative regions of Hong Kong and Macao, and in Taiwan]. · The parties are entering into this Term Sheet as evidence of their intention to advance such a relationship.   This Term Sheet sets forth the principal terms and conditions upon which the parties propose to move forward with the relationship.  Under this Term Sheet the purpose set forth above shall be deemed the “Proposed Transaction.”   The parties intend that the specific terms of the Proposed Transaction will be contained in a complete, integrated, mutually agreeable document to be entered into by the parties on or before the Initial Closing (as defined in the JV Agreement) (a “Transaction Agreement”).   The parties contemplate that they would each be responsible for the following areas related to the Proposed Transaction as described below:   Term & Termination Either party may terminate this Term Sheet by giving written notice to the other party at least thirty (30) days prior to such termination. If neither party elects to terminate the Term Sheet pursuant to the prior sentence, this Term Sheet shall terminate on the earliest to occur of (i) [insert date] or (ii) the termination of the JV Agreement.   The term of the Transaction Agreement shall be [three (3) years] or as otherwise agreed by the parties.  The Transaction Agreement will be subject to standard termination provisions.   Marketing Appointment Under the terms of the Transaction Agreement Pay By Touch shall appoint WinWin as a non-exclusive marketing partner in [China]. WinWin shall, at its own expense, use best efforts to market Pay By Touch Offerings to prospective customers including, without limitation, by means of establishing relationships with such prospects, by correspondence with them, by participation in trade shows or professional meetings, or by publication online or in the print or broadcast media. Without limiting the foregoing, WinWin shall be permitted to distribute to any such prospects any marketing materials or information provided Pay By Touch, provided that WinWin may not alter or modify any such materials or information without Pay By Touch’s prior written consent. In no event will WinWin purport to make representations or warranties on Pay By Touch’s behalf, or purport to act as an agent of Pay By Touch for any purpose, and all marketing and promotional information provided or distributed by WinWin to any third party or through any media shall strictly conform to such information as Pay By Touch may have provided to WinWin pursuant to the Transaction Agreement. --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     In the event that a prospect desires to obtain the Pay By Touch Offerings, WinWin shall provide to such prospect Pay By Touch’s then-current standard form of customer agreement and shall exercise best efforts to cause such prospect to execute such customer agreement. In the event that such prospect desires to negotiate such agreement, WinWin shall be responsible for negotiating the terms of such agreement with such prospect in consultation with, and at Pay By Touch’s direction. WinWin shall have no authority to execute any such customer agreement on Pay By Touch’s behalf; such decision shall rest solely with Pay By Touch. WinWin shall forward to Pay By Touch any such executed customer agreement promptly upon execution thereof. Pay By Touch shall retain the right, in its sole and absolute discretion, to refuse to offer the Pay By Touch Offerings to any third party.   Fees and Payment In consideration for the performance of WinWin’s obligations under the Transaction Agreement, Pay By Touch shall pay to WinWin an amount to be agreed upon by the parties. WinWin shall bear all expenses incurred in the performance of its obligations under the Transaction Agreement in marketing and promoting the Pay By Touch Offerings to any prospective customer.   Governing Law; Jurisdiction and Resolution of Disputes   The Transaction Agreement will contain governing law and jurisdiction provisions for the resolution of disputes substantially similar to those set forth in the JV Agreement. Confidentiality, Non-Disclosure The terms of this Term Sheet and the Transaction Agreement, as well as any and all information exchanged between and among the parties in connection with the transactions provided for and described herein, shall be held strictly confidential by each of the parties and their respective agents, employees, consultants and advisors.  Such obligation of confidentiality and non-disclosure shall cover, without limitation, any and all technical information, market data and research, and other proprietary information of each of the parties hereto. The Transaction Agreement will contain standard confidentiality provisions. All information disclosed hereunder will be used solely to evaluate and effectuate the transactions described herein and for absolutely no other purpose. To preserve each parties’ respective rights and obligations hereunder, the terms of this section will survive the expiration or earlier termination hereof or of any of the Transaction Agreement.   --------------------------------------------------------------------------------   Miscellaneous Provisions Neither party is subject to any agreement or undertaking that is in conflict with or would be violated by, this Term Sheet or any of the Transaction Agreement.   This Term Sheet may be executed in any number of counterparts, including facsimile counterparts, each of which will be deemed an original and all of which taken together will constitute one and the same agreement.  Any amendments hereto or waivers hereunder must be in writing and signed by both parties.   It is understood that this Term Sheet is a statement of the intention of the parties to proceed as outlined herein and does not create any binding obligations, other than any provisions with respect to confidentiality, which the parties acknowledge have been given for good and valuable consideration and which will be legally binding.     ii --------------------------------------------------------------------------------     THIS INSTRUMENT REPRESENTS ONLY THE EXPRESSION OF OUR CURRENT MUTUAL INTENTIONS AND IS SUBJECT TO THE PROVISIONS OF THE TRANSACTION AGREEMENT TO BE ENTERED INTO BY AND AMONG THE PARTIES HERETO UPON COMPLETION OF LEGAL AND BUSINESS DUE DILIGENCE AND THE SATISFACTION OF THE CONDITIONS CONTAINED THEREIN. THE PARTIES HAVE FURTHER AGREED THAT EACH PARTY WILL BE BEAR ALL OF ITS OWN FEES AND EXPENSES INCURRED IN CONNECTION HEREWITH AND WITH THE PREPARATION AND NEGOTIATION OF THE TRANSACTION AGREEMENT, WHETHER OR NOT THE TRANSACTION CONTEMPLATED HEREBY OR THEREBY IS CONSUMMATED AND ENTERED INTO. *****     SOLIDUS NETWORKS, INC.     By: _________________________       Name:       Title:        WINWIN GAMING, INC.     By: _________________________       Name:              Title:           iii -------------------------------------------------------------------------------- EXHIBIT E (Form of Restated Charter) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF WINWIN GAMING, INC. WinWin Gaming, Inc. (hereinafter referred to as the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:    1. The current name of the Corporation is WinWin Gaming, Inc.   2. The name under which the Corporation was originally incorporated is Lone Star Casino Corporation, and the date of filing of the original Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware is December 30, 1992.   3. The provisions of the Certificate of Incorporation of the Corporation as heretofore amended and/or supplemented, and as herein amended, are hereby restated and integrated into the single instrument which is hereinafter set forth, and which is entitled the Amended and Restated Certificate of Incorporation of WinWin Gaming, Inc.   4. The resolution setting forth the amendment and restatement has been duly approved by the stockholders of the Corporation in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware and is as follows:   RESOLVED, that the Certificate of Incorporation of the Corporation be, and hereby is, amended and restated in its entirety as follows:   FIRST: The name of the corporation (hereinafter referred to as the “Corporation”) is WinWin Gaming, Inc.   SECOND: The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, 19801; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company.   THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (hereinafter, the “DGCL”).   FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) Seven Hundred Fifty Million (750,000,000) shares of common stock, $0.01 par value per share (“Common Stock”) and (ii) Sixty Million (60,000,000) shares of preferred stock, $0.01 par value per share (“Preferred Stock”).   -------------------------------------------------------------------------------- The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.   A. Common Stock.   1. General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights of the holders of Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of Preferred Stock of any series.   2. Increase of Authorized Shares. Except as otherwise provided in this Article, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.   3. Voting. The holders of Common Stock are entitled to one vote for each share held at all meetings of stockholders (and written consents in lieu of meetings). There shall be no cumulative voting.   4. Dividends. Dividends may be declared and paid on Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.   5. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.   6. No Redemption by Corporation. The Common Stock is not subject to redemption by the Corporation.   B. Preferred Stock.   Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided.   Authority is hereby expressly granted to the Board of Directors from time to time to issue Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, special voting rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to Preferred Stock of any other series to the extent permitted by law. Except as otherwise specifically provided in this Amended and Restated Certificate of Incorporation, the By-laws of the Corporation or any agreement in existence from time-to-time among the stockholders of the Corporation and the Corporation, no vote of the holders of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of Preferred Stock authorized by and complying with the conditions of this Amended and Restated Certificate of Incorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation. 2 -------------------------------------------------------------------------------- C. Series A Preferred Stock.   A series of Preferred Stock consisting of Sixty Million (60,000,000) shares and having the following voting powers, designations, preferences and relative, participating, optional or other rights and the following qualifications, limitations and restrictions is hereby created from the authorized but unissued shares of the Preferred Stock.   1. Designation.   The distinctive designation of such series is “Series A Preferred Stock” (hereinafter referred to as the “Series A Preferred Stock”).   2. Rank.   The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (a) prior to any other series of Preferred Stock hereafter established by the Board of Directors, and (b) prior to the Common Stock.   3. Dividends.   The holders of the Series A Preferred Stock shall be entitled to receive, out of any funds legally available therefor, noncumulative dividends, payable at a rate per annum equal to 8% of the Series A Original Issue Price (as defined below), when and if declared by the Corporation’s Board of Directors. No dividends on the Common Stock shall be paid unless, in addition to the amount set forth in the previous sentence, the amount of such dividend on the Common Stock is also paid on the Series A Preferred Stock on an as-converted to Common Stock basis.   3 -------------------------------------------------------------------------------- 4. Liquidation Preference.   Upon a Liquidation Event (as defined below), the holders of shares of Series A Preferred Stock are entitled to receive out of assets of the Corporation available for distribution to stockholders, before any distribution of assets is made to holders of Common Stock, liquidating distributions in the amount of $7.91 per share (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares) (the “Series A Original Issue Price”), plus (a) an additional amount equal to eight percent (8%) of the Series A Original Issue Price per year, calculated based on the number of days elapsed prior to the Liquidation Event and (b) any declared but unpaid dividends (the amount payable to a holder of Series A Preferred Stock upon a Liquidation Event as aforesaid being referred to herein as the “Liquidation Preference”).   If upon a Liquidation Event, the Liquidation Preference and any amounts payable upon a Liquidation Event to other shares of stock of the Corporation ranking as to any such distribution on a parity with the Series A Preferred Stock are not paid in full, the holders of the Series A Preferred Stock and of such other shares will share ratably in any such distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled.   For purposes of this Article FOURTH, a “Liquidation Event” is any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, and unless otherwise determined by the election of the holders of a majority of the then outstanding Series A Preferred Stock, shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, or other transaction in which control of the Corporation is transferred, but, excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) unless the Corporation’s capital stock of record as constituted immediately prior to such acquisition will, immediately after such acquisition, represent at least 50% of the voting power of the surviving or acquiring entity or (b) a sale, lease, transfer or other disposition, in a single transaction or series of related transactions, of all or substantially all of the assets and/or the intellectual property of the Corporation and its subsidiaries, taken as a whole.   5. Voting Rights.   5.1 General. Except as may be otherwise provided herein or by law, the Series A Preferred Stock shall vote together with all other classes and series of stock of the Corporation as a single class on all actions to be taken by the stockholders of the Corporation. Each share of Series A Preferred Stock shall entitle the holder thereof to such number of votes per share on each such action as shall equal the number of shares of Common Stock (including fractions of a share) into which each share of Series A Preferred Stock is then convertible.   5.2 Board of Directors. The holders of the Series A Preferred Stock, voting as a separate series, shall be entitled to elect two directors of the Corporation (the “Series A Directors”). A vacancy in any directorship elected by the holders of the Series A Preferred Stock shall be filled only by vote or written consent of the holders of the Series A Preferred Stock. Any Series A Director may be removed without cause by, and only by, the affirmative vote of the holders of a majority of the Series A Preferred Stock, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a Series A Director, the presence in person or by proxy of the holders of a majority of the outstanding shares of Series A Preferred Stock shall constitute a quorum for the purpose of electing such Series A Director.   4 -------------------------------------------------------------------------------- 5.3 Protective Provisions. So long as at least 85% of the shares of Series A Preferred Stock first issued to the original holders thereof remain outstanding (as adjusted for stock splits, distributions, combinations and similar events), except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or the Certificate of Incorporation of the Corporation, and in addition to any other vote required by law or the Certificate of Incorporation of the Corporation, without the approval of the holders of a majority of the then outstanding Series A Preferred Stock, given in writing or by vote at a meeting, the Corporation will not, either directly or by amendment, merger, consolidation or otherwise:   (a) Alter or change the rights, preferences or privileges of the Series A Preferred Stock;   (b) Create (by reclassification or otherwise) any new class or series of shares having rights, preferences or privileges senior to or on a parity with the Series A Preferred Stock with respect to redemption, voting, dividends or distribution of assets upon a Liquidation Event;   (c) Create (by reclassification or otherwise) any new class or series of shares unless such shares are subject to purchase by Solidus Networks, Inc. and repurchase by the Corporation pursuant to purchase and redemption options satisfactory to the holders of a majority of the outstanding shares of Series A Preferred Stock;   (d) Repurchase or redeem any shares of Common Stock (other than the repurchase of unvested shares at cost upon the termination of employment or the provision of services pursuant to equity incentive agreements with employees or service providers giving the Corporation the right to repurchase such shares);   (e) Effect, or consent to, a merger, other corporate reorganization, sale of controlling interest by the Corporation or any of its material subsidiaries, or any transaction in which all or substantially all of the assets of the Corporation or any of its material subsidiaries are sold;   (f) Effect, or consent to, a voluntary dissolution or liquidation of the Corporation or any of its material subsidiaries;   (g) Amend or waive any provision of the Corporation's Amended and Restated Certificate of Incorporation or Bylaws (i) relative to the Series A Preferred Stock or (ii) to increase the authorized number of shares of Common Stock;   5 -------------------------------------------------------------------------------- (h) Pay or declare any dividend or make any other distribution on any shares of Common Stock or Preferred Stock; or   (i) Authorize or issue any additional shares of Series A Preferred Stock or any equity securities convertible, directly or indirectly, into additional shares of Series A Preferred Stock.   6. Conversion Rights.   The holders of the Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):   6.1 Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial conversion price per share for shares of Series A Preferred Stock (“Series A Conversion Price” ) shall be $0.791; provided, however, that the Series A Conversion Price shall be subject to adjustment as set forth in this Section 6.   6.2 Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock at the Series A Conversion Price at the time in effect for such stock immediately upon the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, voting as a separate class.   6.3 Mechanics of Conversion. Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such Series A Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.   6.4 Fractional Shares. In lieu of any fractional shares to which the holder of Series A Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Series A Conversion Price as then in effect. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.   6 -------------------------------------------------------------------------------- 6.5 Adjustment of Conversion Price. The Series A Conversion Price shall be subject to adjustment from time to time as follows:   (a) Special Definitions. For purposes of this Section 6, the following definitions shall apply:   (1) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities.   (ii) “Original Issue Date” shall mean the date on which the first share of Series A Preferred Stock was first issued.   (iii) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities convertible into or exercisable or exchangeable, directly or indirectly, for Common Stock.   (iv) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 6.6, deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable:   (A) upon conversion of shares of Preferred Stock;   (B) to officers, directors, employees and consultants of the Corporation pursuant to stock incentive plans, or other stock arrangements that have been approved by the Board of Directors of the Corporation including the Series A Directors;   (C) pursuant to any event for which adjustment has already been made pursuant to Section 6.7;   (D) as a dividend or distribution on the Corporation’s Common Stock or Preferred Stock, where an adjustment is made pursuant to Sections 6.9, 6.10 or 6.11;   (E) upon the written consent of the holders of a majority of the Series A Preferred Stock that expressly states that such shares shall not constitute Additional Shares of Common Stock;   7 -------------------------------------------------------------------------------- (F) upon the exercise of Options or conversion of any Convertible Securities outstanding as of the date hereof;   (G) pursuant to a loan arrangement or debt financing from a bank, equipment lessor or similar financial institution approved by the Board of Directors, including the Series A Directors;   (H) in connection with strategic transactions (but excluding any merger, consolidation, acquisition or similar business combination) that have been approved by the Board of Directors of the Corporation including the Series A Directors; or   (I) pursuant to the provisions of Section 6.12 hereof.   6.6 Deemed Issue of Additional Shares of Common Stock. Except as provided in Section 6.5(a)(iv) above, in the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:   (a) no further adjustment in the Series A Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;   (b) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; and   8 -------------------------------------------------------------------------------- (c) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A Conversion Price computed upon the Original Issue Date, and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:   (i) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged; and   (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised.   6.7 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6.6) without consideration or for a consideration per share less than the Series A Conversion Price applicable on and immediately prior to such issue, then and in such event, the Series A Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the Series A Conversion Price in effect on the date of and immediately prior to such issue by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue, including any Common Stock issuable pursuant to any then outstanding options, rights or warrants for Common Stock or any class or series of stock convertible into Common Stock (including but not limited to Preferred Stock), plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Series A Conversion Price in effect on the date of and immediately prior to such issue; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue, including any Common Stock issuable pursuant to any then outstanding options, rights or warrants for Common Stock or any class or series of stock convertible into Common Stock (including but not limited to Preferred Stock) outstanding immediately prior to such issue, plus the number of such Additional Shares of Common Stock so issued.   9 -------------------------------------------------------------------------------- 6.8 Determination of Consideration. For purposes of this Section 6, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:   (a) Cash and Property. Such consideration shall:   (i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends;   (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and   (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors.   (b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6.6, relating to Options and Convertible Securities, shall be determined by dividing   (i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such options for Convertible Securities and the conversion or exchange of such Convertible Securities by   (ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.   6.9 Adjustments for Stock Dividends, Subdivisions, or Split-ups of Common Stock. If the number of shares of Common Stock outstanding at any time after the filing of this Amended and Restated Certificate of Incorporation is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock without a corresponding increase in the number of shares of Series A Preferred Stock outstanding, then, effective at the close of business upon the record date fixed for the determination of holders of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Series A Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock shall be increased in proportion to such increase in outstanding shares of Common Stock.   10 -------------------------------------------------------------------------------- 6.10 Adjustments for Combinations of Common Stock. If the number of shares of Common Stock outstanding at any time after the filing of this Amended and Restated Certificate of Incorporation is decreased by a combination of the outstanding shares of Common Stock without a corresponding decrease in the number of shares of Series A Preferred Stock outstanding, then, effective at the close of business upon the record date of such combination, the Series A Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock shall be decreased in proportion to such decrease in outstanding shares of Common Stock.   6.11 Adjustments for Reorganizations, Reclassifications, etc. If the Common Stock issuable upon conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock or other securities or property, whether by reclassification, a merger or consolidation of this Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of this Corporation (but only if such change is not in connection with an event that is deemed to be a Liquidation Event), or otherwise (other than a subdivision or combination of shares provided for in Section 6.9 or 6.10 above), the Series A Conversion Price then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted such that the Series A Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock or securities or other property equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A Preferred Stock immediately before such event; and, in any such case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as may be reasonable, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.   6.12 Special Adjustment for Issuance of Excluded Warrant Shares. Notwithstanding the provisions of Section 6.5(a)(iv)(F) hereof, if the Corporation issues shares of its Common Stock (“Excluded Warrant Shares”) upon the exercise of Excluded Warrants (as defined below), then for each Excluded Warrant Share issued, the Corporation shall issue to the holder of a share of Series A Preferred Stock upon conversion of such share, in addition to any other shares of Common Stock issuable hereunder as a result of such conversion, a number of shares of Common Stock equal to the number obtained by application of the following formula: (M x WS)/ OP, where,   M = the multiple, which is 66%,   11 -------------------------------------------------------------------------------- WS = the total number of Excluded Warrant Shares issued, and   OP = the total number of shares of Series A Preferred Stock outstanding.   For purposes of this Section 6.12, “Excluded Warrants” means (i) those warrants outstanding as of the filing date of this Amended and Restated Certificate to purchase an aggregate of [8,691,181] 2  shares of Common Stock (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares), as they may be amended or exchanged from time to time, the majority of which have an exercise price of at least $0.25 per share (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares), (ii) that certain warrant issued by the Corporation pursuant to that certain Securities Purchase Agreement, dated as of February 25, 2005, by and between the Corporation and the Van Wagoner Private Opportunities Fund L.P., as it may be amended or exchanged from time to time, and (iii) those certain warrants issued by the Corporation pursuant to that certain Secured Convertible Note and Warrant Purchase Agreement, dated as of April 21, 2006, by and among the Corporation and each of the purchasers signatory thereto, as they may be amended or exchanged from time to time.   6.13 Minimal Adjustments. No adjustment in the Series A Conversion Price need be made if such adjustment would result in a change in the Series A Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Series A Conversion Price, or upon conversion, whichever first occurs.   6.14 No Impairment. The Corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Corporation pursuant to this Section 6, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Series A Preferred Stock against impairment. This provision shall not restrict the Corporation’s right to amend this Amended and Restated Certificate of Incorporation with the requisite stockholder consent or approval.   6.15 Notices of Record Date. In the event that the Corporation shall propose at any time:   (a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;   (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights;   -------------------------------------------------------------------------------- 2 [To be updated at time of filing]   12 -------------------------------------------------------------------------------- (c) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or   (d) to merge or consolidate with or into any other corporation, or sell all or substantially all its property or business, or to liquidate, dissolve or wind up;   then, in connection with each such event, the Corporation shall send to the holders of the Series A Preferred Stock:   (i) at least 20 days’ prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto and the amount and character of such dividend, distribution or right) or for determining rights to vote in respect of the matters referred to in clause (c) or (d) above; and   (ii) in the case of the matters referred to in clauses (c) or (d) above, at least 20 days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event or the record date for the determination of such holders if such record date is earlier).   Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to each holder of Series A Preferred Stock at the address for each such holder as shown on the books of the Corporation.   6.16 Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series A Preferred Stock such number of shares of its Common Stock as shall from time to time be sufficient to effect the conversion of all authorized shares of Series A Preferred Stock, whether or not such shares are then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the authorized shares of Series A Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, whether or not such shares are then outstanding, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.   6.17 Status of Converted or Contributed Shares. In case any shares of Series A Preferred Stock are converted into Common Stock pursuant to Section 6 hereof or contributed back to the Corporation (through repurchase or otherwise) after the date such shares of Series A Preferred Stock were first issued, all such shares so converted or contributed shall, upon such conversion or contribution, be cancelled and shall not be issuable by the Corporation. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number of authorized shares of the Company’s Series A Preferred Stock.   13 -------------------------------------------------------------------------------- 6.18 No Redemption by Corporation. The Series A Preferred Stock is not subject to redemption by the Corporation.   7. Excluded Opportunities.   The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (a) any Series A Director who is not an employee of the Corporation or any of its subsidiaries, or (b) any holder of Series A Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation. FIFTH: All powers of the Corporation, insofar as the same may be lawfully vested by this Amended and Restated Certificate of Incorporation in the Board of Directors, are hereby conferred upon the Board of Directors of the Corporation. In furtherance and not in limitation of that power, the Board of Directors shall have the power to make, adopt, alter, amend and repeal from time to time By-Laws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to adopt, alter, amend and repeal By-Laws made by the Board of Directors.   SIXTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.   SEVENTH: In connection with the exercise of its judgment in determining what is in the best interest of the Corporation and of the stockholders, when evaluating a Business Combination or a proposal by another person or persons to make a Business Combination or a tender or exchange offer, the Board of Directors of the Corporation hereby is expressly authorized to consider, in addition to the adequacy of the consideration to be paid in connection with such transaction, the following factors and any other factors which it deems relevant, including, without limitation: (i) the long term interests of the Corporation’s stockholders, including among other factors, the consideration being offered in relation to (a) the then current market price of the Corporation’s equity securities and the historical range of such prices, (b) the then current value of the Corporation in a freely negotiated transaction, and (c) the Board of Directors’ then estimate of the future value of the Corporation as an independent entity; (ii) the economic, social and legal effects on the Corporation and its subsidiaries, including among other factors, such effects on the Corporation’s employees, customers, creditors, suppliers and the communities in which they operate or are located; (iii) the business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the acquisition, and other likely financial obligations of the acquiring person or persons, and the possible effect of such conditions upon the Corporation, its subsidiaries, and the other elements of the communities in which the Corporation and its subsidiaries operate or are located; and (iv) the competence, experience and integrity of the acquiring person or persons, and its or their management. For the purposes of this Article, “Business Combination” is defined as (a) a tender or exchange offer for any equity securities of the Corporation, (b) a proposal to merge or consolidate the Corporation with or into another company, (c) a proposal to purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, or (d) a proposal to engage in any other form of business combination with the Corporation.     [Signature Page Follows]   14 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its [_______________], this ____ day of _________________, 2006.     WINWIN GAMING, INC.           By: /s/                                                                             [Name]   [Title] 15 -------------------------------------------------------------------------------- EXHIBIT F (Form of Opinion of WinWin Delaware Counsel)   Direct Dial: (302) 472-7301 Email: [email protected] August ________, 2006                             Solidus Networks, Inc. 101 Second Street, Suite 1100 San Francisco CA 94105 Re: WinWin Gaming, Inc. Ladies and Gentlemen:   We have been retained as special Delaware counsel to WinWin Gaming, Inc., a Delaware corporation (the “Company”), to furnish this opinion to you in connection with certain specific matters arising under the General Corporation Law of the State of Delaware (“DGCL”) and relating to that certain Second Amended and Restated Joint Venture Agreement, dated as of August ______, 2006 (the “Agreement”), between the Company and Solidus Networks, Inc.,  a Delaware corporation (“PBT”). This opinion is furnished to PBT pursuant to Section 7(i) of the Agreement. All capitalized terms not otherwise defined herein shall have the meanings given to them in the Agreement. Items (a) and (b) below are hereinafter referred to collectively as the “Transaction Documents.”   For purposes of the opinions expressed herein, we have examined only the following documents:     (a) the Agreement;     (b) that certain Investment Option Agreement, of even date herewith (the “Investment Option Agreement”), by and between the Company and PBT;     (c) the Bylaws of the Company, as certified on the date hereof by an officer of the Company (the “Bylaws”);     (d) the Certificate of Incorporation of the Company, as amended to date, as certified on the date hereof by an officer of the Company (the “Original Certificate”);     (e) the Certificate of Designation of Powers Designations, Preferences and Relative Participating, Optional or Other Special Rights and Qualifications, Limitations and Restrictions of the Series A-1 Preferred Stock of the Company (the “Certificate of Designation”);     (f) a draft, dated August 28, 2006, of the proposed Amended and Restated Certificate of Incorporation of the Company (the “Proposed Restated Certificate” and, together with the Original Certificate, the Bylaws and the Certificate of Designation, the “Governing Documents”);   --------------------------------------------------------------------------------   (g) a Good Standing Certificate issued by the Secretary of State of the State of Delaware on [_____], 2006 certifying as to the good standing of the Company in Delaware; and     (h) the Secretary’s Certificate of the Company, of even date herewith, as executed by the Secretary of the Company, certifying as to certain factual matters, corporate documents and actions (the “Secretary’s Certificate”).   In addition, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents and other instruments, and of certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such inquiries of such officers and representatives as we have deemed relevant and necessary as the basis for the opinions hereinafter set forth. We have not searched any computer databases or the dockets of any court, governmental or administrative body, agency or other filing office in any jurisdiction or conducted any other independent investigation. As to all questions of fact material to the opinions set forth herein, we have relied solely upon the Secretary’s Certificate and upon the representations and warranties of the Company contained in the Transaction Documents. While we have not conducted any independent investigation to determine facts upon which our opinions are based or to obtain information about which this letter advises you, we confirm that we do not have any knowledge which has caused us to conclude that our reliance and assumptions cited in this paragraph are unwarranted. The term “knowledge,” whenever it is used in this letter with respect to our firm, means the current, actual knowledge of the Proctor Heyman LLP attorneys who have represented the Company in connection with the transactions contemplated by the Transaction Documents.   In such examination, we have assumed, with your permission and without independent investigation, (i) the genuineness of all signatures; (ii) the legal capacity of each individual signatory to the Transaction Documents and the Governing Documents; (iii) the authenticity of all documents submitted to us as originals; (iv) the conformity to originals of all documents submitted to us as certified, facsimile or photostatic copies; (v) the authenticity of the originals of such copies; (vi) the due incorporation and organization, valid existence and good standing of PBT and the Company under the laws of the State of Delaware; (vii) the due execution and delivery of the Transaction Documents by PBT and the Company; (viii) the corporate power and authority of PBT to conduct its business and own its properties and to enter into the Transaction Documents and perform its obligations thereunder; (ix) that each of the Transaction Documents has been duly authorized by all necessary corporate action of PBT and is the legal, valid and binding obligation of PBT, enforceable against PBT in accordance with its terms; (x) that each of the Company and PBT has obtained all necessary governmental permits and approvals for conducting its operations; and (xi) the identity and capacity of all individuals acting or purporting to act as public officials.   Based solely upon the examination described above, and subject to the comments, assumptions, qualifications, limitations and exceptions stated herein and in the Disclosure Schedule to the Agreement, and in reliance thereon, we are of the opinion that:   The Investment Option Agreement has been duly and validly authorized by the Company and, assuming the respective prior filing and effectiveness of the Certificate of Designation and the Proposed Restated Certificate in the form presented to us for review, will constitute a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting creditors’ rights generally, and subject to general equity principles and to limitations on availability of equitable relief, including specific performance.   2 -------------------------------------------------------------------------------- With respect to the opinions set forth above, we assume that the Option identified in the Investment Option Agreement will be exercised in a commercially reasonable manner. We have assumed further that, for purposes of any exercise of that Option, the Company will reserve a sufficient number of authorized but unissued shares of Common Stock of the Company, and that in no event will the Exercise Price (as defined in the Investment Option Agreement) be lower than the par value of the Company’s Common Stock.   We are members of the bar of the State of Delaware, and we express no opinion on the laws of any other jurisdiction or on any Delaware law other than the DGCL. We also express no opinion as to (i) any governmental rule or other legal requirement relating to labor, employee rights and benefits, including without limitation the Employee Retirement Income Security Act of 1974, as amended, and taxation, (ii) any choice-of-law or conflict of laws matters, (iii) any patent, trademark or copyright statute, rules or regulations, (iv) any provision appointing one party as an attorney-in-fact of an adverse party, (v) the effect of any state or federal antitrust laws, including, without limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as currently in effect, (vi) any state or federal securities laws, rules or regulations, or (vii) the Company’s rights in or title to any property or assets.   The opinions expressed herein are solely for your benefit in connection with the above transactions and may not be relied upon in any manner or for any purpose by any other person. This opinion speaks only as of the date hereof, and we assume no obligation to advise you of any changes to this opinion that may come to our attention after the date hereof. This opinion is limited to the matters expressly stated herein and no opinion or other statement may be inferred or implied beyond the matters expressly stated herein.     Very truly yours 3 -------------------------------------------------------------------------------- EXHIBIT G (Form of Certificate of Designation)   WINWIN GAMING, INC.   CERTIFICATE OF DESIGNATION OF POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF THE SERIES A-1 PREFERRED STOCK _____________________________   Pursuant to Section 151 of the General Corporation Law of the State of Delaware _____________________________   WINWIN GAMING, INC., a Delaware corporation (the “Corporation”), certifies as follows:   FIRST: Under the authority contained in Article FOURTH, Section (b) of the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the Board of Directors of the Corporation has classified 6,000,000 of the 10,000,000 authorized but unissued shares of Preferred Stock of the Corporation, par value $0.01 per share (“Preferred Stock”), as shares of “Series A-1 Preferred Stock.”   SECOND: The following resolution was duly adopted by the Board of Directors of the Corporation on August 31, 2006, and such resolution has not been modified and is in full force and effect on the date hereof:   RESOLVED, that the Board of Directors hereby creates, from the authorized but unissued shares of Preferred Stock of the Corporation, a series of Preferred Stock consisting of SIX MILLION (6,000,000) shares and having the voting powers, designations, preferences and relative, participating, optional or other rights of the Preferred Stock and the qualifications, limitations and restrictions thereof that are set forth in Article FOURTH of the Certificate of Incorporation and this resolution as follows:   1. Designation.   The distinctive designation of such series is “Series A-1 Preferred Stock” (hereinafter referred to as the “Series A-1 Preferred Stock”).   2. Rank.   The Series A-1 Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (a) prior to any other series of Preferred Stock hereafter established by the Board of Directors, and (b) prior to the Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”).   -------------------------------------------------------------------------------- 3. Dividends.   The holders of the Series A-1 Preferred Stock shall be entitled to receive, out of any funds legally available therefor, noncumulative dividends, payable at a rate per annum equal to 8% of the Series A-1 Original Issue Price (as defined below), when and if declared by the Corporation’s Board of Directors. No dividends on the Common Stock shall be paid unless, in addition to the amount set forth in the previous sentence, the amount of such dividend on the Common Stock is also paid on the Series A-1 Preferred Stock on an as-converted to Common Stock basis.   4. Liquidation Preference.   Upon a Liquidation Event (as defined below), the holders of shares of Series A-1 Preferred Stock are entitled to receive out of assets of the Corporation available for distribution to stockholders, before any distribution of assets is made to holders of Common Stock, liquidating distributions in the amount of $79.10 per share (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares) (the “Series A-1 Original Issue Price”), plus (a) an additional amount equal to eight percent (8%) of the Series A-1 Original Issue Price per year, calculated based on the number of days elapsed prior to the Liquidation Event and (b) any declared, but unpaid dividends (the amount payable to a holder of Series A-1 Preferred Stock upon a Liquidation Event as aforesaid being referred to herein as the “Liquidation Preference”).   If upon a Liquidation Event, the Liquidation Preference and any amounts payable upon a Liquidation Event to other shares of stock of the Corporation ranking as to any such distribution on a parity with the Series A-1 Preferred Stock are not paid in full, the holders of the Series A-1 Preferred Stock and of such other shares will share ratably in any such distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled.   For purposes of these resolutions, a “Liquidation Event” is any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, and unless otherwise determined by the election of the holders of a majority of the then outstanding Series A-1 Preferred Stock, shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, or other transaction in which control of the Corporation is transferred, but, excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation) unless the Corporation’s capital stock of record as constituted immediately prior to such acquisition will, immediately after such acquisition represent at least 50% of the voting power of the surviving or acquiring entity or (b) a sale, lease, transfer or other disposition, in a single transaction or series of related transactions of all or substantially all of the assets and/or the intellectual property of the Corporation and its subsidiaries, taken as a whole. 2 -------------------------------------------------------------------------------- 5. Voting Rights.     5.1. General. Except as may be otherwise provided herein or by law, the Series A-1 Preferred Stock shall vote together with all other classes and series of stock of the Corporation as a single class on all actions to be taken by the stockholders of the Corporation. Each share of Series A-1 Preferred Stock shall entitle the holder thereof to such number of votes per share on each such action as shall equal the number of shares of Common Stock (including fractions of a share) into which each share of Series A-1 Preferred Stock is then convertible.     5.2. Board of Directors. The holders of the Series A-1 Preferred Stock, voting as a separate series, shall be entitled to elect two directors of the Corporation (the “Series A-1 Directors”). A vacancy in any directorship elected by the holders of the Series A-1 Preferred Stock shall be filled only by vote or written consent of the holders of the Series A-1 Preferred Stock. Any Series A-1 Director may be removed without cause by, and only by, the affirmative vote of the holders of a majority of the Series A-1 Preferred Stock, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a Series A-1 Director, the presence in person or by proxy of the holders of a majority of the outstanding shares of Series A-1 Preferred Stock shall constitute a quorum for the purpose of electing such Series A-1 Director.     5.3. Protective Provisions. So long as at least 85% of the shares of Series A-1 Preferred Stock first issued to the original holders thereof remain outstanding (as adjusted for stock splits, distributions, combinations and similar events), except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or the Certificate of Incorporation of the Corporation, and in addition to any other vote required by law or the Certificate of Incorporation of the Corporation, without the approval of the holders of a majority of the then outstanding Series A-1 Preferred Stock, given in writing or by vote at a meeting, the Corporation will not, either directly or by amendment, merger, consolidation or otherwise, except pursuant to the Certificate of Incorporation:     (a) Alter or change the rights, preferences or privileges of the Series A-1 Preferred Stock;     (b) Create (by reclassification or otherwise) any new class or series of shares having rights, preferences or privileges senior to or on a parity with the Series A-1 Preferred Stock with respect to redemption, voting, dividends or distribution of assets upon a Liquidation Event;     (c) Create (by reclassification or otherwise) any new class or series of shares unless such shares are subject to purchase by Solidus Networks, Inc. and repurchase by the Corporation pursuant to purchase and redemption options satisfactory to the holders of a majority of the outstanding shares of Series A-1 Preferred Stock;   3 --------------------------------------------------------------------------------   (d) Repurchase or redeem any shares of Common Stock (other than the repurchase of unvested shares at cost upon the termination of employment or the provision of services pursuant to equity incentive agreements with employees or service providers giving the Corporation the right to repurchase such shares);     (e) Effect, or consent to, a merger, other corporate reorganization, sale of controlling interest by the Corporation or any of its material subsidiaries, or any transaction in which all or substantially all of the assets of the Corporation or any of its material subsidiaries are sold;     (f) Effect, or consent to, a voluntary dissolution or liquidation of the Corporation or any of its material subsidiaries;     (g) Amend or waive any provision of the Corporation’s Certificate of Incorporation or Bylaws (i) relative to the Series A-1 Preferred Stock or (ii) to increase the authorized number of shares of Common Stock;     (h) Pay or declare any dividend or make any other distribution on any shares of Common Stock or Preferred Stock; or     (i) Authorize or issue any additional shares of Series A-1 Preferred Stock or any equity securities convertible, directly or indirectly, into additional shares of Series A-1 Preferred Stock.   6. Conversion Rights.   Subject to the provisions of Section 8 below, the holders of the Series A-1 Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):     6.1. Right to Convert. Each share of Series A-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series A-1 Original Issue Price by the Series A-1 Conversion Price applicable to such share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial conversion price per share for shares of Series A-1 Preferred Stock (“Series A-1 Conversion Price” ) shall be $0.791; provided, however, that the Series A-1 Conversion Price shall be subject to adjustment as set forth in this Section 6.     6.2. Automatic Conversion. Each share of Series A-1 Preferred Stock shall automatically be converted into shares of Common Stock at the Series A-1 Conversion Price at the time in effect for such stock immediately upon the date specified by written consent or agreement of the holders of a majority of the then outstanding shares of the Series A-1 Preferred Stock, voting as a separate class.   4 --------------------------------------------------------------------------------   6.3. Mechanics of Conversion. Before any holder of Series A-1 Preferred Stock shall be entitled to convert the same into shares of Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for such Series A-1 Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A-1 Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A-1 Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.     6.4. Fractional Shares. In lieu of any fractional shares to which the holder of Series A-1 Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Series A-1 Conversion Price as then in effect. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A-1 Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.     6.5. Adjustment of Conversion Price. The Series A-1 Conversion Price shall be subject to adjustment from time to time as follows:     (a) Special Definitions. For purposes of this Section 6, the following definitions shall apply:     (i) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities.     (ii) “Original Issue Date” shall mean the date on which the first share of Series A-1 Preferred Stock was first issued.     (iii) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities convertible into or exercisable or exchangeable, directly or indirectly, for Common Stock.     (iv) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 6.6, deemed to be issued) by the Corporation after the Original Issue Date, other than shares of Common Stock issued or issuable:   5 -------------------------------------------------------------------------------- (A) upon conversion of shares of Preferred Stock;     (B) to officers, directors, employees and consultants of the Corporation pursuant to stock incentive plans, or other stock arrangements that have been approved by the Board of Directors of the Corporation including the Series A-1 Directors;     (C) pursuant to any event for which adjustment has already been made pursuant to Section 6.7;     (D) as a dividend or distribution on the Corporation’s Common Stock or Preferred Stock, where an adjustment is made pursuant to Sections 6.9, 6.10 or 6.11;     (E) upon the written consent of the holders of a majority of the Series A-1 Preferred Stock that expressly states that such shares shall not constitute Additional Shares of Common Stock;     (F) upon the exercise of Options or conversion of any Convertible Securities outstanding as of the date hereof;     (G) pursuant to a loan arrangement or debt financing from a bank, equipment lessor or similar financial institution approved by the Board of Directors, including the Series A-1 Directors;     (H) in connection with strategic transactions (but excluding any merger, consolidation, acquisition or similar business combination) that have been approved by the Board of Directors of the Corporation including the Series A-1 Directors; or     (I) pursuant to the provisions of Section 6.12 hereof.     6.6. Deemed Issue of Additional Shares of Common Stock. Except as provided in Section 6.5(a)(iv) above, in the event the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which Additional Shares of Common Stock are deemed to be issued:   6 --------------------------------------------------------------------------------   (a) no further adjustment in the Series A-1 Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities;     (b) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Series A-1 Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; and     (c) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Series A-1 Conversion Price computed upon the Original Issue Date, and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if:     (i) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged; and     (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised.   7 --------------------------------------------------------------------------------   6.7. Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6.6) without consideration or for a consideration per share less than the Series A-1 Conversion Price applicable on and immediately prior to such issue, then and in such event, the Series A-1 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying the Series A-1 Conversion Price in effect on the date of and immediately prior to such issue by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue, including any Common Stock issuable pursuant to any then outstanding options, rights or warrants for Common Stock or any class or series of stock convertible into Common Stock (including but not limited to Preferred Stock), plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the Series A-1 Conversion Price in effect on the date of and immediately prior to such issue; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue, including any Common Stock issuable pursuant to any then outstanding options, rights or warrants for Common Stock or any class or series of stock convertible into Common Stock (including but not limited to Preferred Stock) outstanding immediately prior to such issue, plus the number of such Additional Shares of Common Stock so issued.     6.8. Determination of Consideration. For purposes of this Section 6, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:     (a) Cash and Property. Such consideration shall:   (i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation excluding amounts paid or payable for accrued interest or accrued dividends;     (ii) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors; and     (iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors.     (b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6.6, relating to Options and Convertible Securities, shall be determined by dividing   8 --------------------------------------------------------------------------------   (i) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such options for Convertible Securities and the conversion or exchange of such Convertible Securities by     (ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.     6.9. Adjustments for Stock Dividends, Subdivisions, or Split-ups of Common Stock. If the number of shares of Common Stock outstanding at any time after the filing of this Certificate of Designation is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock without a corresponding increase in the number of shares of Series A-1 Preferred Stock outstanding, then, effective at the close of business upon the record date fixed for the determination of holders of Common Stock entitled to receive such stock dividend, subdivision or split-up, the Series A-1 Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A-1 Preferred Stock shall be increased in proportion to such increase in outstanding shares of Common Stock.     6.10. Adjustments for Combinations of Common Stock. If the number of shares of Common Stock outstanding at any time after the filing of this Certificate of Designation is decreased by a combination of the outstanding shares of Common Stock without a corresponding decrease in the number of shares of Series A-1 Preferred Stock outstanding, then, effective at the close of business upon the record date of such combination, the Series A-1 Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A-1 Preferred Stock shall be decreased in proportion to such decrease in outstanding shares of Common Stock.     6.11. Adjustments for Reorganizations, Reclassifications, etc. If the Common Stock issuable upon conversion of the Series A-1 Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock or other securities or property, whether by reclassification, a merger or consolidation of this Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of this Corporation (but only if such change is not in connection with an event that is deemed to be a Liquidation Event), or otherwise (other than a subdivision or combination of shares provided for in Section 6.9 or 6.10 above), the Series A-1 Conversion Price then in effect shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted such that the Series A-1 Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock or securities or other property equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A-1 Preferred Stock immediately before such event; and, in any such case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Series A-1 Preferred Stock, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the Series A-1 Conversion Price) shall thereafter be applicable, as nearly as may be reasonable, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series A-1 Preferred Stock.   9 --------------------------------------------------------------------------------   6.12. Special Adjustment for Issuance of Excluded Warrant Shares. Notwithstanding the provisions of Section 6.5(a)(iv)(F) hereof, if the Corporation issues, directly or indirectly, shares of its Common Stock (“Excluded Warrant Shares”) upon the exercise of Excluded Warrants (as defined below), then for each Excluded Warrant Share issued, the Corporation shall issue to the holder of a share of Series A-1 Preferred Stock upon conversion of such share, in addition to any other shares of Common Stock issuable hereunder as a result of such conversion, a number of shares of Common Stock equal to the number obtained by application of the following formula: (M x WS)/ OP, where,   M = the multiple, which is 66%,   WS = the total number of Excluded Warrant Shares issued, and   OP = the total number of shares of Series A-1 Preferred Stock outstanding.   For purposes of this Section 6.12, “Excluded Warrants” means (i) those warrants outstanding as of the filing date of this Certificate of Designation to purchase an aggregate of 8,691,181 shares of Common Stock (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares), as they may be amended or exchanged from time to time, the majority of which have an exercise price of at least $0.25 per share (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares), (ii) that certain warrant issued by the Corporation pursuant to that certain Securities Purchase Agreement, dated as of February 25, 2005, by and between the Corporation and the Van Wagoner Private Opportunities Fund L.P., as it may be amended or exchanged from time to time, and (iii) those certain warrants issued by the Corporation pursuant to that certain Secured Convertible Note and Warrant Purchase Agreement, dated as of April 21, 2006, by and among the Corporation and each of the purchasers signatory thereto, as they may be amended or exchanged from time to time.   10 --------------------------------------------------------------------------------   6.13. Minimal Adjustments. No adjustment in the Series A-1 Conversion Price need be made if such adjustment would result in a change in the Series A-1 Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Series A-1 Conversion Price, or upon conversion, whichever first occurs.     6.14. No Impairment. The Corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Corporation pursuant to this Section 6, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Series A-1 Preferred Stock against impairment. This provision shall not restrict the Corporation’s right to amend this Certificate of Designation with the requisite stockholder consent or approval.     6.15. Notices of Record Date. In the event that the Corporation shall propose at any time:     (a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;     (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights;     (c) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or     (d) to merge or consolidate with or into any other corporation, or sell all or substantially all its property or business, or to liquidate, dissolve or wind up;   then, in connection with each such event, the Corporation shall send to the holders of the Series A-1 Preferred Stock:     (i) at least 20 days’ prior written notice of the date on which a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto and the amount and character of such dividend, distribution or right) or for determining rights to vote in respect of the matters referred to in clause (c) or (d) above; and     (ii) in the case of the matters referred to in clauses (c) or (d) above, at least 20 days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event or the record date for the determination of such holders if such record date is earlier).   11 -------------------------------------------------------------------------------- Each such written notice shall be delivered personally or given by first class mail, postage prepaid, addressed to each holder of Series A-1 Preferred Stock at the address for each such holder as shown on the books of the Corporation.     6.16. Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series A-1 Preferred Stock such number of shares of its Common Stock as shall from time to time be sufficient to effect the conversion of all authorized shares of Series A-1 Preferred Stock, whether or not such shares are then outstanding; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the authorized shares of Series A-1 Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, whether or not such shares are then outstanding, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. Notwithstanding the foregoing, from the date of the initial issuance of shares of Series A-1 Preferred Stock until the date of a subsequent issuance of shares of Series A-1 Preferred Stock, if any, the Corporation shall only be required to reserve twenty million (20,000,000) shares of its authorized but unissued Common Stock for the purpose of effecting the conversion of shares of Series A-1 Preferred Stock.     6.17. Status of Converted or Contributed Shares. In case any shares of Series A-1 Preferred Stock are converted into Common Stock pursuant to Section 6 hereof or contributed back to the Corporation (through repurchase or otherwise) after the date such shares of Series A-1 Preferred Stock were first issued, all such shares so converted or contributed shall, upon such conversion or contribution, be cancelled and shall not be issuable by the Corporation. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number of authorized shares of the Company’s Series A-1 Preferred Stock.     6.18. No Redemption by Corporation. The Series A-1 Preferred Stock is not subject to redemption by the Corporation.   6.19. Limitation on Ability to Convert. No shares of Series A-1 Preferred Stock may be converted hereunder into Common Stock unless and until the Corporation has available sufficient authorized but unissued shares of Common Stock for the purpose of effecting such a conversion.     12 -------------------------------------------------------------------------------- 7. Excluded Opportunities.   The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (a) any Series A-1 Director who is not an employee of the Corporation or any of its subsidiaries, or (b) any holder of Series A-1 Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.   8. Automatic Conversion upon Filing of Restated Charter.     8.1. Rate of Conversion to Series A Preferred Stock. Notwithstanding the provisions of Section 6 above, on the Restated Charter Effective Date (as hereinafter defined), each outstanding share of Series A-1 Preferred Stock shall be automatically converted into a number of shares of Series A Preferred Stock (as hereinafter defined) equal to one-tenth of the number of shares of Common Stock into which such share of Series A-1 Preferred Stock could then be converted pursuant to Section 6.1 above. As used herein, the term “Restated Charter Effective Date” means the date on which an Amended and Restated Certificate of Incorporation of the Corporation (the “Restated Charter”) is filed and becomes effective that increases the authorized capital stock of the Corporation to Seven Hundred Fifty Million (750,000,000) shares of Common Stock and Sixty Million (60,000,000) shares of Preferred Stock, of which all shares are designated “Series A Preferred Stock” having substantially identical rights to the Series A-1 Preferred Stock created hereby, subject to the exception set forth in the next sentence of this Section 8.1 (the “Series A Preferred Stock”). For purposes of the Series A Preferred Stock to be created pursuant to the Restated Charter, references herein to the Series A-1 Original Issue Price shall mean $7.91 per share (as equitably adjusted for any stock dividends, combinations, splits, recapitalizations or similar events with respect to such shares), and references herein to the Series A-1 Conversion Price shall mean the Series A-1 Conversion Price reflecting any adjustments thereto through the Restated Charter Effective Date.      8.2. Mechanics of Conversion. On the Restated Charter Effective Date, all certificates theretofore representing shares of Series A-1 Preferred Stock shall be deemed to represent the number of shares of Series A Preferred Stock provided in Section 8.1 above. On or after the Restated Charter Effective Date, each holder or holders of such certificates shall deliver such certificates, duly endorsed, to the office of the Corporation for reissuance in accordance with the provisions of this Section 8. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder, a certificate or certificates for the number of shares of Series A Preferred Stock to which such holder shall then be entitled as aforesaid. Such conversion shall be deemed to have occurred effective as of the Restated Charter Effective Date.     [Signature Page Follows] 13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed in its name and on its behalf this ____ day of August, 2006 by an officer of the Corporation who acknowledges that this Certificate of Designation is the act of the Corporation and that to the best of his or her knowledge, information and belief and under penalties for perjury, all matters and facts contained in this Certificate of Designation are true in all material respects.   /s/Patrick O. Rogers   Name: Patrick O. Rogers   Title: President and CEO 14 --------------------------------------------------------------------------------

Exhibit 10.1   THIRD AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT   THIS THIRD AMENDMENT (this “Amendment”) is made as of this 5th day of April, 2006 to that certain AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of May 15, 2002, as amended (collectively, the “Employment Agreement”), by and between DAVID E. ULLMAN (“Employee”) and JOS. A. BANK CLOTHIERS, INC. (“Employer”).   FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Employer and Employee, being the sole parties to the Employment Agreement, hereby amend the Employment Agreement as follows:   1. Subject to earlier termination otherwise set forth in the Employment Agreement, the last day of the Employment Period shall be January 31, 2008.   2. Effective February 26, 2006, Employee’s Base Salary shall be $375,000.00.   Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect according to its terms. To the extent of any conflict between the terms of this Amendment and the terms of the remainder of the Employment Agreement, the terms of this Amendment shall control and prevail. Capitalized terms used but not defined herein shall have those respective meanings attributed to them in the Employment Agreement. This Amendment shall hereafter be deemed a part of the Employment Agreement for all purposes. The terms of employment set forth in this Amendment have been approved by the Audit Committee of the Board of Directors of the Employer.   IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.   JOS. A. BANK CLOTHIERS, INC.   By: /s/ Robert N. Wildrick   /s/ David E. Ullman     Robert N. Wildrick, DAVID E. ULLMAN   Chief Executive Officer     --------------------------------------------------------------------------------

EXECUTION COPY     364 DAY CREDIT AGREEMENT   Dated as of March 29, 2006 among TOYOTA MOTOR CREDIT CORPORATION, TOYOTA CREDIT DE PUERTO RICO CORP., and TOYOTA CREDIT CANADA INC., as the Borrowers, CITICORP USA, INC., as Administrative Agent, and The Other Lenders Party Hereto ____________________________________________ CITIGROUP GLOBAL MARKETS INC. and BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Book Managers _____________________________________________ BANK OF AMERICA, N.A., as Syndication Agent ______________________________________________ THE BANK OF TOKYO-MITSUBISHI, LTD., BNP PARIBAS and JPMORGAN CHASE BANK, N.A. as Documentation Agents     -------------------------------------------------------------------------------- TABLE OF CONTENTS     Page     ARTICLE I DEFINITIONS 1 Section  1.1 Definitions 1 Section  1.2 Other Interpretive Provisions 18 ARTICLE II THE CREDITS 19 Section 2.1 Committed Loans 19 Section 2.2 Borrowings, Conversions and Continuations of Committed Loans 20 Section 2.3 Money Market Loans 22 Section 2.4 Prepayments 24 Section 2.5 Termination or Reduction of Commitments 25 Section 2.6 Repayment of Loans 26 Section 2.7 Interest 26 Section 2.8 Fees 27 Section 2.9 Computation of Interest and Fees 28 Section 2.10 Evidence of Debt 28 Section 2.11 Payments Generally 28 Section 2.12 Sharing of Payments 30 Section 2.13 Extension of Maturity Date 31 Section 2.14 Increase in Commitments 33 Section 2.15 Drawings of Bankers’ Acceptances, Drafts and BA Equivalent Notes 34 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 37 Section 3.1 Taxes 37 Section 3.2 Illegality 38 Section 3.3 Inability to Determine Rates 39        i --------------------------------------------------------------------------------   Section 3.4 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans 39 Section 3.5 Funding Losses 40 Section 3.6 Matters Applicable to all Requests for Compensation 41 ARTICLE IV CONDITIONS 42 Section 4.1 Effectiveness 42 Section 4.2 Conditions to all Loans 43 ARTICLE V REPRESENTATIONS AND WARRANTIES 44 Section  5.1 Corporate Existence and Power 44 Section  5.2 Corporate and Governmental Authorization: No Contravention 44 Section  5.3 Binding Effect 44 Section  5.4 Financial Information 44 Section  5.5 Litigation 45 Section  5.6 Compliance with ERISA 45 Section  5.7 Taxes 45 Section  5.8 Subsidiaries 45 Section  5.9 Not an Investment Company 46 Section  5.10 Disclosure 46 ARTICLE VI COVENANTS 46 Section  6.1 Information 46 Section  6.2 Maintenance of Property; Insurance 47 Section  6.3 Conduct of Business and Maintenance of Existence 47 Section  6.4 Compliance with Laws 48 Section  6.5 Negative Pledge 48 Section  6.6 Consolidations 50 Section  6.7 Use of Proceeds 51        ii --------------------------------------------------------------------------------   ARTICLE VII DEFAULTS 51 Section  7.1 Events of Default 51 Section 7.2 Application of Funds 52 ARTICLE VIII THE ADMINISTRATIVE AGENT 53 ARTICLE VIII THE ADMINISTRATIVE AGENT 53 Section 8.1 Appointment and Authorization of Administrative Agent 53 Section 8.2 Delegation of Duties 53 Section 8.3 Liability of Administrative Agent 53 Section 8.4 Reliance by Administrative Agent 54 Section 8.5 Notice of Default 54 Section 8.6 Credit Decision; Disclosure of Information by Administrative Agent 55 Section 8.7 Indemnification of Administrative Agent 55 Section 8.8 Administrative Agent in its Individual Capacity 56 Section 8.9 Successor Administrative Agent 56 Section 8.10 Administrative Agent May File Proofs of Claim 56 Section 8.11 Other Agents, Arrangers and Managers 57 Section 8.12 Sub-Agent 57 ARTICLE IX MISCELLANEOUS 58 Section 9.1 Amendments, Etc 58 Section 9.2 Notices and Other Communications; Facsimile Copies 59 Section 9.3 No Waiver; Cumulative Remedies 60 Section 9.4 Attorney Costs, Expenses and Taxes 60 Section 9.5 Indemnification by the Borrowers 61 Section 9.6 Payments Set Aside 61 Section 9.7 Successors and Assigns 62        iii --------------------------------------------------------------------------------   Section 9.8 Confidentiality 64 Section 9.9 Set-off 65 Section 9.10 Interest Rate Limitation 66 Section 9.11 Counterparts 66 Section 9.12 Integration 66 Section 9.13 Survival of Representations and Warranties 66 Section 9.14 Severability 66 Section 9.15 Tax Forms 66 Section 9.16 Replacement of Lenders 69 Section 9.17 Governing Law 69 Section 9.18 Patriot Act Notice 70 Section 9.19 Judgment 70 Section 9.19 Waiver of Right to Trial by Jury 70 Total: CDN$650M 1   Schedules Schedule 2.1  Commitments and Pro Rata Shares Schedule 4.1(d)         TCCI List of Bilateral Agreements Schedule 9.2  Administrative Agent’s Office, Certain Addresses for Notices Exhibits Exhibit A  Form of Committed Loan Notice Exhibit B  Form of Note Exhibit C  Form of Compliance Certificate Exhibit D  Assignment and Assumption Exhibit E  Form of Money Market Quote Request Exhibit F  Form of Invitation for Money Market Quotes Exhibit G  Form of Money Market Quote Exhibit H  Form of Opinion of Counsel for the Borrowers Exhibit I  Form of Opinion of Peitrantoni Mendez & Alvarez LLP      iv -------------------------------------------------------------------------------- Exhibit J  Form of Opinion of Shearman & Sterling LLP      v -------------------------------------------------------------------------------- 364 DAY CREDIT AGREEMENT   THIS 364 DAY CREDIT AGREEMENT (this “Agreement”) dated as of March 29, 2006 is made among TOYOTA MOTOR CREDIT CORPORATION, a California corporation (“TMCC”), TOYOTA CREDIT DE PUERTO RICO CORP., a corporation organized under the laws of the Commonwealth of Puerto Rico (“TCPR”), TOYOTA CREDIT CANADA INC., a corporation incorporated under the laws of Canada (“TCCI” and, together with TMCC and TCPR, the “Borrowers”), each lender from time to time party hereto (collectively, the “Lenders” and, individually, a “Lender”), CITICORP USA, INC., as Administrative Agent, CITIGROUP GLOBAL MARKETS INC, and BANC OF AMERICA SECURITIES LLC, as Joint Lead Arrangers and Joint Book Managers, BANK OF AMERICA, N.A., as Syndication Agent, and THE BANK OF TOKYO-MITSUBISHI, LTD., BNP PARIBAS and JPMORGAN CHASE BANK, N.A., as Documentation Agents.   WHEREAS, the Borrowers have requested that the Lenders provide a revolving credit facility that may be converted to a term facility, and the Lenders are willing to do so on the terms and conditions set forth herein.   NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:     ARTICLE I   DEFINITIONS   Section  1.1 Definitions. The following terms, as used herein, have the following meanings:   “Absolute Rate Auction” means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.3.   “Administrative Agent” means Citicorp USA, Inc. in its capacity as Administrative Agent for the Lenders hereunder, and its successors in such capacity.   “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 9.2, or such other address or account as the Administrative Agent may from time to time notify to the Borrowers and the Lenders.   “Administrative Questionnaire” means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrowers) duly completed by such Lender.   “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the        1 -------------------------------------------------------------------------------- ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.   “Agent-Related Persons” means the Administrative Agent, together with its Affiliates (including, in the case of CUSA in its capacity as the Administrative Agent, Citigroup Global Markets Inc. as an Arranger and Citibank Canada in its capacity as Sub-Agent), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.   “Aggregate Commitments” means (i) the Commitments of all the Lenders, (ii) when used in relation to TMCC, the Aggregate Tranche A Commitments, (iii) when used in relation to TCPR, the Aggregate Tranche B Commitments and (iv) when used in relation to TCCI, the Aggregate Tranche C Commitments.   “Aggregate Tranche A Commitments” means the Tranche A Commitments of all the Tranche A Lenders.   “Aggregate Tranche B Commitments” means the Tranche B Commitments of all the Tranche B Lenders.   “Aggregate Tranche C Commitments” means the Tranche C Commitments of all the Tranche C Lenders.   “Agreement” means this Credit Agreement.   “Applicable Rate” means the following percentages per annum:   Applicable Rate   Facility Fee   Eurodollar Rate / Bankers’ Acceptances / Drafts/ BA Equivalent Notes   Base Rate / Canadian Prime Rate   0.020%   0.130%   0.000%   If any Borrower converts the Loans made to it to Term Loans pursuant to Section 2.13(c), the “Applicable Rate” for Eurodollar Rate Loans, Bankers’ Acceptances, Drafts and BA Equivalent Notes shall be 0.230% per annum.   “Arranger” means either of Citigroup Global Markets Inc. or Banc of America Securities LLC, in its capacity as a joint lead arranger and a joint book manager.   “Assignment and Assumption” means an Assignment and Assumption substantially in the form of Exhibit D.   “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other external counsel and, without duplication, the reasonable allocated cost of internal legal services and all expenses and disbursements of internal counsel.        2 -------------------------------------------------------------------------------- “Audited Financial Statements” means (i) for TMCC, the audited consolidated balance sheet of TMCC and its Subsidiaries for the fiscal year ended March 31, 2005 (or such later date for which audited financial statements are delivered pursuant to this Agreement) and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of TMCC and its Subsidiaries, including the notes thereto, (ii) for TCPR, the audited balance sheet of TCPR for the fiscal year ended March 31, 2005 (or such later date for which audited financial statements are delivered pursuant to this Agreement) and the related statement of income or operations, shareholders’ equity and cash flows for such fiscal year, including the notes thereto and (iii) for TCCI, the audited balance sheet of TCCI for the fiscal year ended March 31, 2005 (or such later date for which audited financial statements are delivered pursuant to this Agreement) and the related statement of income or operations, shareholders’ equity and cash flows for such fiscal year, including the notes thereto.   “BA Equivalent Note” has the meaning specified in Section 2.15(i).   “BA Maturity Date” means, for each Bankers’ Acceptance, Draft or BA Equivalent Note comprising part of the same Drawing, the date on which the Face Amount for such Bankers’ Acceptance, Draft or BA Equivalent Note, as the case may be, becomes due and payable in accordance with the provisions set forth below, which shall be a Canadian Business Day occurring 30, 60, 90 or 180 days (or, subject to availability, such greater period not to exceed 364 days) after the date on which such Bankers’ Acceptance, Draft or BA Equivalent Note is created and purchased as part of any Drawing, as TCCI may select upon notice received by the Administrative Agent not later than 11:00 A.M. (Toronto time) on a Canadian Business Day at least two Canadian Business Days prior to the date on which such Bankers’ Acceptance or Draft is to be purchased or BA Equivalent Note is to be made (whether as a new Drawing or by renewal); provided, however, that:   (a) TCCI may not select any BA Maturity Date for any Bankers’ Acceptance, Draft or BA Equivalent Note that occurs after the then scheduled Revolving Maturity Date;   (b) the BA Maturity Date for all Bankers’ Acceptances, Draft and BA Equivalent Notes comprising part of the same Drawing shall occur on the same date; and   (c) whenever the BA Maturity Date for any Bankers’ Acceptance, Draft or BA Equivalent Note would otherwise occur on a day other than a Canadian Business Day, such BA Maturity Date shall be extended to occur on the next succeeding Canadian Business Day.   Notwithstanding the foregoing, TCCI may select a BA Maturity Date which would end after the Revolving Maturity Date applicable to TCCI only if it has previously delivered, or delivers concurrently with the applicable Committed Loan Notice, an election to extend the Maturity Date to the Term Maturity Date pursuant to Section 2.13(c).   “Bankers’ Acceptance” has the meaning specified in Section 2.1(c).   “Base Rate” means, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as        3 -------------------------------------------------------------------------------- publicly announced from time to time by Citibank as its “base rate.” The “base rate” is a rate set by Citibank based upon various factors including Citibank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Citibank shall take effect at the opening of business on the day specified in the public announcement of such change.   “Base Rate Committed Loan” means a Committed Loan that is a Base Rate Loan.   “Base Rate Loan” means a Loan denominated in US Dollars that bears interest based on the Base Rate.   “Benefit Arrangement” means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.   “Borrower” means either of Toyota Motor Credit Corporation, Toyota Credit de Puerto Rico Corp. or Toyota Credit Canada Inc., as applicable.   “Borrowing” means a Committed Borrowing or a Money Market Borrowing.   “Business Day” means (i) any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, any of the following: the state where the Administrative Agent’s Office is located, California, New York, and San Juan, Puerto Rico, (ii) if such day relates to any Eurodollar Rate Loan or Money Market LIBOR Loan, any such day on which dealings in US Dollar deposits are conducted by and between banks in the London interbank eurodollar market and (iii) if such day related to any Tranche C Loan, a Canadian Business Day.   “Canadian Business Day” means a day of the year on which banks are not required or authorized by law to close in Toronto, Ontario, Canada.   “Canadian Dollars” and “CDN$” each means lawful money of Canada.   “Canadian Prime Rate” means, for any day, a fluctuating rate per annum equal determined by the Sub-Agent to be the average rates of interest per annum established by each of the Canadian Reference Banks as the reference rate of interest then in effect for determining interest rates on commercial loans denominated in Canadian Dollars made by them, respectively, in Canada. Such rate set by such Canadian Reference Bank based upon various factors including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by a Canadian Reference Bank shall take effect at the opening of business on the day specified in the public announcement of such change.   “Canadian Prime Rate Loan” means a Tranche C Loan denominated in Canadian Dollars that bears interest based on the Canadian Prime Rate.        4 -------------------------------------------------------------------------------- “Canadian Reference Banks” means Royal Bank of Canada and Canadian Imperial Bank of Commerce.   “Citibank” means Citibank, N.A.   “Closing Date” means the first date all the conditions precedent in Section 4.1 are satisfied or waived in accordance with Section 4.1 (or, in the case of Section 4.1(b), waived by the Person entitled to receive the applicable payment).   “Code” means the Internal Revenue Code of 1986, as amended and any successor statute.   “Commitment” means, as to each Lender, its Tranche A Commitment, its Tranche B Commitment or its Tranche C Commitment, as applicable.   “Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type and Tranche and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the appropriate Lenders pursuant to Section 2.1.   “Committed Loan” means a Committed Tranche A Loan, a Committed Tranche B Loan or a Committed Tranche C Loan.   “Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other and (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.2(a), which, if in writing, shall be substantially in the form of Exhibit A. A Committed Loan Notice for a Eurodollar Rate Loan with an Interest Period extending beyond the Revolving Maturity Date applicable to the Borrower giving such notice may only be delivered concurrently with (or, in the case of (b) or (c) above, concurrently with or subsequently to) a notice of election by such Borrower to extend the Maturity Date applicable to such Borrower to the Term Maturity Date pursuant to Section 2.13(c). A Committed Loan Notice for Bankers’ Acceptances or BA Equivalent Notes with BA Maturity Date extending beyond the Revolving Maturity Date applicable to TCCI may only be delivered concurrently with (or, in the case of (b) or (c) above, concurrently with or subsequently to) a notice of election by TCCI to extend the Maturity Date applicable to TCCI to the Term Maturity Date pursuant to Section 2.13(c).   “Committed Tranche A Loan” means a loan made by a Tranche A Lender pursuant to Section 2.1(a).   “Committed Tranche B Loan” means a loan made by a Tranche B Lender pursuant to Section 2.1(b).   “Committed Tranche C Loan” means a loan made by, or the purchase or acceptance of Bankers’ Acceptances or purchase of Drafts by, a Tranche C Lender pursuant to Section 2.1(c).   “Compliance Certificate” means a certificate substantially in the form of Exhibit C.        5 -------------------------------------------------------------------------------- “Consolidated Subsidiary” means, with respect to any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date.   “Control” has the meaning specified in the definition of “Affiliate.”   “CUSA” means Citicorp USA, Inc.   “Debtor Relief Law” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.   “Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.   “Default Rate” means an interest rate equal to (a) in the case of Loans denominated in US Dollars (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan or Money Market Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum and (b) in the case of Loans denominated in Canadian Dollars (i) the Canadian Prime Rate plus (ii) the Applicable Rate, if any, applicable to Canadian Prime Rate Loans plus (iii) 2% per annum, in each case to the fullest extent permitted by applicable Laws.   “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Committed Loans required to be funded by it hereunder within three Business Days of the date required to be funded by it hereunder, and such failure is continuing or (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, and such failure is continuing, unless the subject of a good faith dispute.   “Discount Rate” means, in respect of any Bankers’ Acceptances or Drafts to be purchased by a Tranche C Lender pursuant to Section 2.1(c): (i) for a Tranche C Lender that is a Schedule I Bank, the average rate (calculated on an annual basis of a year of 365 days and rounded up to the nearest five decimal places, if such average is not such a multiple) for Canadian Dollar bankers’ acceptances having a comparable term that appears on the Reuters Screen CDOR Page (or such other page as is a replacement page for such bankers’ acceptances) at 10:00 A.M. (Toronto time) or, if such rate is not available at such time, the applicable discount rate in respect of such Bankers’ Acceptances or Drafts shall be the average (as determined by the Sub-Agent) of the respective actual discount rates (calculated on an annual basis of 365 days and rounded up to the nearest five decimal places, if such average is not such a multiple), quoted to the Sub-Agent by each Canadian Reference Bank as the discount rate at which such Canadian Reference Bank would purchase, as of 10:00 A.M. (Toronto time) on the date of such Drawing, its own bankers’ acceptances having an aggregate Face Amount equal to and with a term to        6 -------------------------------------------------------------------------------- maturity the same as the Bankers’ Acceptances or Drafts to be acquired by such Lender as part of such Drawing; and (ii) for each other Tranche C Lender and any other Lender or Person, the average rate determined by the Sub-Agent pursuant to clause (a) plus 0.05%.   “Draft” means, at any time, either a depository bill within the meaning of the Depository Bills and Notes Act, or a bill of exchange within the meaning of the Bills of Exchange Act (Canada), drawn by the Borrower on a Lender or any other Person and bearing such distinguishing letters and numbers as the Lender or the Person may determine, but which at such time has not been completed as the payee or accepted by the Lender or the Person.   “Drawing” means the simultaneous (i) creation and purchase of Bankers’ Acceptances by the Tranche C Lenders, in accordance with Section 2.15(a), or (ii) the purchase of completed Drafts by a Tranche C Lender in accordance with Section 2.15(a).   “Drawing Fee” means, with respect to each Draft drawn by TCCI and purchased by any Person on any Drawing Date and subject to the provisions of Section 2.15, an amount equal to the product of (i) the Applicable Rate times the aggregate Face Amount of the Draft, multiplied by (ii) a fraction the numerator of which is the number of days in the term to maturity of such Draft and the denominator of which is 365.   “Drawing Purchase Price” means, with respect to each Bankers’ Acceptance or Draft to be purchased by any Tranche C Lender at any time, the amount (adjusted to the nearest whole cent or, if there is no nearest whole cent, the next higher whole cent) obtained by dividing (i) the aggregate Face Amount of such Bankers’ Acceptance, by (ii) the sum of (A) one and (B) the product of (1) the Discount Rate applicable to such Tranche C Lender in effect at such time (expressed as a decimal) multiplied by (2) a fraction the numerator of which is the number of days in the term to maturity of such Bankers’ Acceptance or Draft and the denominator of which is 365 days.   “Eligible Assignee” has the meaning specified in Section 9.7(g).   “Environmental Laws” means any and all Laws relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.   “Equivalent” in (a) US Dollars of Canadian Dollars on any date of determination means the equivalent thereof determined by using the quoted spot rate at which Citibank Canada’s principal office in Toronto, Ontario offers to exchange US Dollars for Canadian Dollars in Toronto, Ontario at 11:00 a.m. (Toronto time) on such date and (b) in Canadian Dollars of US Dollars on any date of determination means the equivalent thereof determined by using the quoted spot rate at which Citibank’s principal office in New York City, New York offers to exchange Canadian Dollars for US Dollars in New York City, New York at 11:00 a.m. (New York City time) on such date.        7 -------------------------------------------------------------------------------- “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.   “ERISA Group” means any Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with such Borrower, or any Subsidiary, are treated as a single employer under Section 414 of the Code.   “Eurodollar Base Rate” has the meaning set forth in the definition of Eurodollar Rate.   “Eurodollar Rate” means for any Interest Period with respect to any Eurodollar Rate Loan, a rate per annum determined by the Administrative Agent pursuant to the following formula:   Eurodollar Rate =  Eurodollar Base Rate                                     1.00 minus Eurodollar Reserve Percentage Where,   “Eurodollar Base Rate” means, for such Interest Period:   (a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in US Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or   (b) if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in US Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or   (c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in US Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by the Administrative Agent and with a term equivalent to such Interest Period would be offered by the Administrative Agent’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period.   “Eurodollar Rate Loan” means a Committed Loan denominated in US Dollars that bears interest at a rate based on the Eurodollar Rate.        8 -------------------------------------------------------------------------------- “Eurodollar Reserve Percentage” means, for any date during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirements) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.   “Event of Default” has the meaning set forth in Section 7.1.   “Exempt Lender” means a Tranche B Lender that is any of the following: (i) a Corporate Lender organized under the Laws of Puerto Rico, (ii) a Corporate Lender organized under the Laws of a jurisdiction other than Puerto Rico that is engaged in the conduct of a trade or business in Puerto Rico, or (iii) a Lender organized under the Laws of a jurisdiction other than Puerto Rico that is not engaged in the conduct of a trade or business in Puerto Rico and that is not a “related person” to TCPR for purposes of Section 1231(a)(1)(A)(i) of the Puerto Rico Code by reason of the fact that such Lender does not own, directly or indirectly in accordance with the attribution rules of Section 1231(a)(3) of the Puerto Rico Code, 50% or more of the value of the stock of TCPR. As used in this definition, “Corporate Lender” means a Lender that is taxable as a corporation under the Puerto Rico Code.   “Face Amount” means, with respect to any Bankers’ Acceptance, Drafts or BA Equivalent Note, the amount payable to the holder of such Bankers’ Acceptance, Draft or BA Equivalent Note on its maturity date.   “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Citibank on such day on such transactions as determined by the Administrative Agent.   “Fee Letter” means a letter, dated as of February 21, 2006 among TMCC, the Administrative Agent, Bank of America, N.A. and the Arrangers.   “FRB” means the Board of Governors of the Federal Reserve System of the United States.   “GAAP” means, in the case of TMCC and TCPR, generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied, and in the        9 -------------------------------------------------------------------------------- case of TCCI, accounting principles generally accepted in Canada as recommended in the Handbook of the Canadian Institute of Chartered Accountants, consistently applied.   “Governmental Authority” means any nation or government, any state, provincial or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, central bank or other entity exercising executive, legislative, taxing, regulatory or administrative powers or functions of or pertaining to government.   “Indemnified Liabilities” has the meaning set forth in Section 9.5.   “Indemnitees” has the meaning set forth in Section 9.5.   “Interbank Rate” means (a) in the case of all payments denominated in US Dollars, the Federal Funds Rate and (b) in the case of all payments denominated in Canadian Dollars, the interest rate, expressed as a percentage per annum, which is customarily used by the Sub-Agent when calculating interest due to it or owing to it from or in connection with correction of errors between it and Canadian chartered banks.   “Interest Payment Date” means, (a) as to any Eurodollar Rate Loan or Money Market Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan or Money Market Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Committed Loan or any Canadian Prime Rate Loan, the last Business Day of each March, June, September and December, the Revolving Maturity Date applicable to the Borrower of such Loan, and, if later than the Revolving Maturity Date, the Maturity Date applicable to the Borrower of such Loan.   “Interest Period” means, (a) as to each Eurodollar Rate Loan, the period commencing on the date such Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the applicable Borrower in its Committed Loan Notice, (b) as to each Money Market LIBOR Loan, the period commencing on the date such Loan is disbursed and ending on the date that is such whole number of months thereafter as the applicable Borrower may elect in accordance with Section 2.3, and (c) as to each Money Market Absolute Rate Loan, the period commencing on the date such Loan is disbursed and ending on the date that is such number of days thereafter as the applicable Borrower may elect in accordance with Section 2.3; provided that:   (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;   (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and        10 -------------------------------------------------------------------------------- (iii) no Interest Period for a Eurodollar Rate Loan shall extend beyond the Maturity Date applicable to such Borrower, and no Interest Period for Money Market Loans shall extend beyond the Revolving Maturity Date applicable to such Borrower.   Notwithstanding the foregoing, a Borrower may select an Interest Period for a Eurodollar Rate Loan which would end after the Revolving Maturity Date applicable to such Borrower only if it has previously delivered, or delivers concurrently with the applicable Committed Loan Notice, an election to extend the Maturity Date to the Term Maturity Date pursuant to Section 2.13(c).   “Invitation for Money Market Quotes” means an Invitation for Money Market Quotes substantially in the form of Exhibit F hereto.   “IRS” means the United States Internal Revenue Service.   “ITA” means the Income Tax Act (Canada) as amended.   “Laws” means, collectively, all federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders of any Governmental Authority.   “Lender” has the meaning specified in the introductory paragraph hereto.   “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the applicable Borrower and the Administrative Agent.   “LIBOR Auction” means a solicitation of Money Market Quotes setting forth Money Market Margins based on the Eurodollar Rate pursuant to Section 2.3.   “Loan” means an extension of credit by a Lender to a Borrower under Article II in the form of a Committed Loan or a Money Market Loan, including a Loan converted to a Term Loan pursuant to Section 2.13(c).   “Loan Documents” means this Agreement, each Note, and the Fee Letter.   “Material Plan” means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000.   “Maturity Date” means, with respect to each Borrower, the Revolving Maturity Date applicable to such Borrower, or if the Loans made to such Borrower are converted to Term Loans pursuant to Section 2.13, the Term Maturity Date applicable to such Borrower.   “Money Market Absolute Rate” has the meaning set forth in Section 2.3(d)(ii).        11 -------------------------------------------------------------------------------- “Money Market Absolute Rate Loan” means a loan denominated in US Dollars to be made by a Lender pursuant to an Absolute Rate Auction.   “Money Market Borrowing” means a borrowing consisting of simultaneous Money Market Loans of the same Type and, in the case of Money Market LIBOR Loans bearing interest calculated based on the Eurodollar Rate, having the same Interest Period made by a Lender pursuant to Section 2.3.   “Money Market LIBOR Loan” means a loan denominated in US Dollars to be made by a Lender pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 3.2).   “Money Market Loan” means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.   “Money Market Margin” has the meaning set forth in Section 2.3(d)(ii).   “Money Market Quote” means an offer, substantially in the form of Exhibit G hereto, by a Lender to make a Money Market Loan in accordance with Section 2.3.   “Money Market Quote Request” means a Money Market Quote Request substantially in the form of Exhibit E hereto.   “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.   “Multiemployer Plan” means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.   “Note” or “Notes” means a promissory note or promissory notes made by a Borrower in favor of a Lender evidencing Loans made by such Lender to such Borrower, substantially in the form of Exhibit B.   “Obligations” means, with respect to any Borrower, all advances to, and debts, liabilities, obligations, covenants and duties of, such Borrower arising under any Loan Document or otherwise with respect to any Loan made to such Borrower, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against such Borrower of any proceeding under any Debtor Relief Laws naming such Borrower as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.   “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any jurisdiction other than the United States or Puerto Rico); (b) with respect to any limited liability company, the certificate or articles of formation or organization and        12 -------------------------------------------------------------------------------- operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.   “Other Taxes” means any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document, excluding taxes, charges and levies payable in respect of any Money Market Loan for any reason except a Regulatory Change occurring after the date that the Money Market Quote for such Money Market Loan was delivered.   “Outstanding Amount” means, with respect to Committed Loans and Money Market Loans on any date, the aggregate outstanding principal amount or in the case of Bankers’ Acceptances, Drafts and BA Equivalent Notes, Face Amount thereof after giving effect to any borrowing and prepayments or repayments of Committed Loans and Money Market Loans, as the case may be, occurring on such date.   “Parent” means, with respect to any Lender, any Person controlling such Lender.   “Participant” has the meaning set forth in Section 9.7(d).   “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.   “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.   “Plan” means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.   “Pro Rata Share” means (a) with respect to each Tranche A Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Tranche A Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Tranche A Commitments at such time; provided that if the commitment of each Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche A Loans have been converted to Term Loans pursuant to Section 2.13(c), then the Pro Rata Share of each Tranche A Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination or conversion and after giving effect to any subsequent assignments made pursuant to the terms hereof, (b) with respect to each Tranche B        13 -------------------------------------------------------------------------------- Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Tranche B Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Tranche B Commitments at such time; provided that if the commitment of each Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche B Loans have been converted to Term Loans pursuant to Section 2.13(c), then the Pro Rata Share of each Tranche B Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination or conversion and after giving effect to any subsequent assignments made pursuant to the terms hereof and (c) with respect to each Tranche C Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Tranche C Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Tranche C Commitments at such time; provided that if the commitment of each Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche C Loans have been converted to Term Loans pursuant to Section 2.13(c), then the Pro Rata Share of each Tranche C Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination or conversion and after giving effect to any subsequent assignments made pursuant to the terms hereof. The initial Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.   “Puerto Rico” means the Commonwealth of Puerto Rico.   “Puerto Rico Code” means the Puerto Rico Internal Revenue Code of 1994, as amended and any successor statute.   “Rating Agency” means S&P or Moody’s.   “Register” has the meaning set forth in Section 9.7(c).   “Regulatory Change” shall mean, with respect to any Lender, the introduction of or any change in or in the interpretation of any Law, or such Lender’s compliance therewith.   “Request for Loans” means (a) with respect to a Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice and (b) with respect to a Money Market Borrowing, a Notice of Money Market Borrowing (as defined in Section 2.3(f)).   “Required Lenders” means, (a) with respect to matters related to TMCC as of any date of determination, Lenders having more than 50% of the Aggregate Tranche A Commitments or, if the commitment of each Tranche A Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche A Loans have been converted to Term Loans pursuant to Section 2.13(c), Tranche A Lenders holding in the aggregate more than 50% of the Total Outstandings applicable to TMCC; provided that the Commitment of, and the portion of the Total Outstandings applicable to TMCC held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders, (b) with respect to matters related to TCPR as of any date of determination, Lenders having more than 50% of the Aggregate Tranche B Commitments or, if the commitment of each Tranche B Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche B Loans have been        14 -------------------------------------------------------------------------------- converted to Term Loans pursuant to Section 2.13(c), Tranche B Lenders holding in the aggregate more than 50% of the Total Outstandings applicable to TCPR; provided that the Commitment of, and the portion of the Total Outstandings applicable to TCPR held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders, (c) with respect to matters related to TCCI as of any date of determination, Lenders having more than 50% of the Aggregate Tranche C Commitments or, if the commitment of each Tranche C Lender to make Loans has been terminated pursuant to Section 7.1 or if the Tranche C Loans have been converted to Term Loans pursuant to Section 2.13(c), Tranche C Lenders holding in the aggregate more than 50% of the Total Outstandings applicable to TCCI; provided that the Commitment of, and the portion of the Total Outstandings applicable to TCCI held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders and (d) in all other cases, each of the Required Lenders as determined under clauses (a), (b) and (c) of this definition.   “Regulation U” means Regulation U of the FRB, as in effect from time to time.   “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of the applicable Borrower as set forth in a written notice from such Borrower to the Administrative Agent. The Administrative Agent may conclusively rely on each such notice unless and until a subsequent writing shall be delivered by a Borrower to the Administrative Agent that identifies the prior writing that is to be superseded and stating that it is to be so superseded. Any document delivered hereunder that is signed by a Responsible Officer of a Borrower shall be conclusively presumed to have been authorized by all necessary corporate action on the part of such Borrower.   “Revolving Maturity Date” means, with respect to any Borrower, the later of (a) March 28, 2007, and (b) if maturity is extended upon the request of such Borrower pursuant to Section 2.13(b), such extended revolving maturity date as determined pursuant to such Section; provided, however, that the Revolving Maturity Date of any Lender that is a non-Consenting Lender to any requested extension pursuant to Section 2.13(b) shall be the Revolving Maturity Date in effect immediately prior to the applicable Revolving Extension Effective Date for all purposes of this Agreement.   “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.   “Schedule I Banks” shall mean, at any time, the Lenders that are listed in Schedule I to the Bank Act (Canada) at such time.   “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.   “Significant Subsidiary” means any Subsidiary which would meet the definition of “Significant Subsidiary” contained in Regulation S-X (or similar successor provision) of the Securities and Exchange Commission.   “Sub-Agent” means Citibank, N.A., Canadian Branch.        15 -------------------------------------------------------------------------------- “Subsidiary” means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, “Subsidiary” means a Subsidiary of a Borrower.   “Taxes” means, with respect to any payment by a Borrower under this Agreement or any other Loan Document, any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, (i) in the case of the Administrative Agent and each Lender, taxes imposed on or measured by its overall net income, and franchise and similar taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or where the Administrative Agent’s Office or a Lender’s Lending Office is located and (ii) any (1) United States or Puerto Rico withholding tax imposed on payments by TMCC or TCPR, respectively or (2) Canadian withhold tax imposed on payments by TCCI, under this Agreement or any other Loan Document to a Tranche C Lender that is subject to such withholding tax (x) with respect to payments on a Money Market Loan, on the date that such Lender delivers a Money Market Quote for such Money Market Loan and (y) with respect to all other payments, on the date such Lender becomes a party to this Agreement.   “Term Loans” of a Borrower means each Loan made to such Borrower that is outstanding on the date that such Borrower elects to convert such Loans to term Loans in accordance with Section 2.13(c).   “Term Maturity Date” applicable to a Borrower means the date that is one year from the Revolving Maturity Date applicable to such Borrower upon conversion of the Loans made to such Borrower to Term Loans in accordance with Section 2.13(c).   “TMC Consolidated Subsidiary” means, at any date, a Subsidiary or other entity the accounts of which would be consolidated with those of Toyota Motor Corporation in its consolidated financial statements if such statements were prepared as of such date.   “Total Outstandings” means (i) the aggregate Outstanding Amount of all Loans, (ii) when used in relation to TMCC, the Outstanding Amount of all Loans made to TMCC, (iii) when used in relation to TCPR, the Outstanding Amount of all Loans made to TCPR and (iv) when used in relation to TCCI, the Outstanding Amount of all Loans (or, in the case of Loans denominated in US Dollars, the Equivalent thereof in Canadian Dollars) made to TCCI.   “Tranche A Availability Period” means the period from and including the Closing Date to the earliest of (a) the Revolving Maturity Date applicable to TMCC, (b) the date of termination of the Aggregate Tranche A Commitments pursuant to Section 2.5, and (c) the date of termination of the commitment of each Tranche A Lender to make Loans pursuant to Section 7.1.   “Tranche A Commitment” means, as to each Lender, its obligation to make Committed Loans to TMCC pursuant to Section 2.1(a) in an aggregate principal amount at any one time        16 -------------------------------------------------------------------------------- outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.   “Tranche A Lender” means each Lender that has a Tranche A Commitment on Schedule 2.1 or any Lender to which a portion of the Tranche A Commitment hereunder has been assigned pursuant to an Assignment and Assumption.   “Tranche A Loan” means an extension of credit by a Lender to TMCC under Article II in the form of a Committed Loan or a Money Market Loan, including a Loan converted to a term Loan pursuant to Section 2.13(c). Tranche A Loans shall be denominated in US Dollars.   “Tranche B Availability Period” means the period from and including the Closing Date to the earliest of (a) the Revolving Maturity Date applicable to TCPR, (b) the date of termination of the Aggregate Tranche B Commitments pursuant to Section 2.5, and (c) the date of termination of the commitment of each Tranche B Lender to make Loans pursuant to Section 7.1.   “Tranche B Commitment” means, as to each Lender, its obligation to make Committed Loans to TCPR pursuant to Section 2.1(b) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.   “Tranche B Lender” means each Lender that has a Tranche B Commitment on Schedule 2.1 or any Lender to which a portion of the Tranche B Commitment hereunder has been assigned pursuant to an Assignment and Assumption.   “Tranche B Loan” means an extension of credit by a Lender to TCPR under Article II in the form of a Committed Loan or a Money Market Loan, including a Loan converted to a term Loan pursuant to Section 2.13(c). Tranche B Loans shall be denominated in US Dollars.   “Tranche C Availability Period” means the period from and including the Closing Date to the earliest of (a) the Revolving Maturity Date applicable to TCCI, (b) the date of termination of the Aggregate Tranche C Commitments pursuant to Section 2.5, and (c) the date of termination of the commitment of each Tranche C Lender to make Loans pursuant to Section 7.1.   “Tranche C Commitment” means, as to each Lender, its obligation to make Committed Loans to TCCI pursuant to Section 2.1(c) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.1 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.   “Tranche C Lender” means each Lender that has a Tranche C Commitment on Schedule 2.1 or any Lender to which a portion of the Tranche C Commitment hereunder has been assigned pursuant to an Assignment and Assumption.        17 -------------------------------------------------------------------------------- “Tranche C Loan” means an extension of credit by a Lender to TCCI under Article II and shall, unless the context otherwise requires, be deemed to include Drafts accepted or purchased by any such Lender, and BA Equivalent Notes issued to such Lender in exchange for Drafts, including a Loan converted to a term Loan pursuant to Section 2.13(c). Tranche C Loans may be denominated in Canadian Dollars (as Canadian Prime Rate Loans, Bankers’ Acceptances, Drafts or BA Equivalent Notes) or US Dollars (as Base Rate Loans or Eurodollar Rate Loans).   “Type” means, with respect to a Loan, its character as a Base Rate Loan, a Eurodollar Rate Loan, a Money Market LIBOR Loan or a Money Market Absolute Rate Loan.   “Unfunded Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.   “United States” and “U.S.” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.   “US Dollar” and “US$” mean lawful money of the United States.   Section  1.2 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:   (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.   (b) (i) The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.   (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.   (iii) The term “including” is by way of example and not limitation.   (iv) The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.   (c) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”        18 -------------------------------------------------------------------------------- (d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.   Section 1.3 Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements.   Section 1.5 References to Agreements and Laws. Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.   Section 1.6 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).     ARTICLE II   THE CREDITS   Section 2.1 Committed Loans. (a) Subject to the terms and conditions set forth herein, each Tranche A Lender severally agrees to make loans in US Dollars (each such loan, a “Committed Tranche A Loan”) to TMCC from time to time, on any Business Day during the Tranche A Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Tranche A Commitment; provided, however, that after giving effect to any Committed Borrowing made by the Tranche A Lenders, (i) the Total Outstandings applicable to TMCC shall not exceed the Aggregate Tranche A Commitments, and (ii) the aggregate Outstanding Amount of the Committed Tranche A Loans of any Tranche A Lender shall not exceed such Lender’s Tranche A Commitment. Within the limits of each Lender’s Tranche A Commitment, and subject to the other terms and conditions hereof, TMCC may borrow under this Section 2.1(a), prepay under Section 2.4, and, unless converted to a Term Loan pursuant to Section 2.13(c), reborrow under this Section 2.1(a). Committed Tranche A Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.   (b) Subject to the terms and conditions set forth herein, each Tranche B Lender severally agrees to make loans in US Dollars (each such loan, a “Committed Tranche B Loan”) to TCPR from time to time, on any Business Day during the Tranche B Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Tranche B Commitment; provided, however, that after giving effect to any Committed Borrowing made by the Tranche B Lenders, (i) the Total Outstandings applicable to TCPR shall not exceed the Aggregate Tranche B Commitments, and (ii) the aggregate Outstanding Amount of the Committed Tranche B Loans of any Tranche B Lender shall not exceed such Lender’s Tranche B Commitment. Within the limits of each Lender’s Tranche B Commitment, and subject to the        19 -------------------------------------------------------------------------------- other terms and conditions hereof, TCPR may borrow under this Section 2.1(b), prepay under Section 2.4, and, unless converted to a Term Loan pursuant to Section 2.13(c), reborrow under this Section 2.1(b). Committed Tranche B Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.   (c) Subject to the terms and conditions set forth herein, each Tranche C Lender severally agrees to make loans to TCCI, and (i) in the case of a Tranche C Lender willing and able to accept Drafts, to create acceptances (“Bankers’ Acceptances”) by accepting Drafts and to purchase such Bankers’ Acceptances in accordance with Section 2.15(a) and (ii) in the case of a Tranche C Lender which is unwilling or unable to accept Drafts, to purchase completed Drafts, which will not be accepted by the Tranche C Lender or any other Tranche C Lender in accordance with Section 2.15(a) from time to time, on any Business Day during the Tranche C Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Tranche C Commitment; provided, however, that after giving effect to any Committed Borrowing made by the Tranche C Lenders, (i) the Total Outstandings applicable to TCCI shall not exceed the Aggregate Tranche C Commitments, and (ii) the aggregate Outstanding Amount of the Committed Tranche C Loans of any Tranche C Lender shall not exceed such Lender’s Tranche C Commitment. Within the limits of each Lender’s Tranche C Commitment, and subject to the other terms and conditions hereof, TCCI may borrow under this Section 2.1(c), prepay under Section 2.4, and, unless converted to a Term Loan pursuant to Section 2.13(c), reborrow under this Section 2.1(c). Committed Tranche C Loans may be Base Rate Loans, Eurodollar Rate Loans, Canadian Prime Rate Loans, Bankers’ Acceptances or BA Equivalent Notes, as further provided herein.   Section 2.2 Borrowings, Conversions and Continuations of Committed Loans.   (a) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the applicable Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 10:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans, (ii) on the requested date of any Borrowing of or conversion of Eurodollar Rate Loans to Base Rate Committed Loans, (iii) on the requested date of any Borrowing of Canadian Prime Rate Loans and (iv) as set forth in Section 2.15(a) for an Bankers’ Acceptances or BA Equivalent Notes. Each telephonic notice by a Borrower pursuant to this Section 2.2(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer or any other Person designated in writing by a Responsible Officer of such Borrower to the Administrative Agent. Except as otherwise provided in Section 2.15(a), each Borrowing of, conversion to or continuation of Loans shall be in a principal amount of US$50,000,000 or a whole multiple of US$5,000,000 in excess thereof in the case of US Dollar denominated Loans and CDN$5,000,000 or a whole multiple of CDN$1,000,000 in excess thereof in the case of Canadian Dollar denominated Loans. Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the applicable Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be        20 -------------------------------------------------------------------------------- borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If TMCC or TCPR fails to specify a Type of Committed Loan in a Committed Loan Notice or if such Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. If TCCI fails to specify a Type of Committed Loan in a Committed Loan Notice, then the applicable Committed Loans shall be made as Canadian Prime Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the applicable Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.   (b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each appropriate Lender of the contents thereof and the amount of its Pro Rata Share of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the applicable Borrower, the Administrative Agent shall notify each appropriate Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Committed Borrowing, each appropriate Tranche A Lender and Tranche B Lender shall make the amount of its Committed Loan available to the Administrative Agent, and each appropriate Tranche C Lender shall make the amount of its Committed Loan available to the Sub-Agent, in immediately available funds at the Administrative Agent’s Office or the office of the Sub-Agent located in Toronto, Canada, as the case may be, not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.2, the Administrative Agent or the Sub-Agent, as the case may be, shall make all funds so received available to the applicable Borrower in like funds as received by the Administrative Agent or the Sub-Agent either by (i) crediting the account of such Borrower on the books of Citibank with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent or the Sub-Agent by such Borrower.   (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the applicable Required Lenders.   (d) The Administrative Agent shall promptly notify the applicable Borrower and the appropriate Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the applicable Borrower and the appropriate Lenders of any change in Citibank’s base rate used in determining the Base Rate promptly following the public announcement of such change. At any time that Canadian Prime Rate Loans are outstanding, the Administrative Agent shall notify TCCI and the Tranche C Lenders of any change in each Canadian Reference Bank’s rate used in determining the Canadian Prime Rate promptly following the public announcement of such change.        21 -------------------------------------------------------------------------------- (e) After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than ten (10) Interest Periods in effect with respect to Committed Loans.   Section 2.3 Money Market Loans.   (a) In addition to Committed Loans pursuant to Section 2.1, TMCC or TCPR may, as set forth in this Section, request the appropriate Lenders during the Tranche A Availability Period or the Tranche B Availability Period, as applicable, to make offers to make Money Market Loans in US Dollars to such Borrower; provided, however, that after giving effect to any Money Market Borrowing (i) the Total Outstandings applicable to TMCC shall not exceed the Aggregate Tranche A Commitments and (ii) the Total Outstandings applicable to TCPR shall not exceed the Aggregate Tranche B Commitments. The Lenders may, but shall have no obligation to, make such offers and the applicable Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section.   (b) When TMCC or TCPR wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Administrative Agent by facsimile transmission a Money Market Quote Request, appropriately completed and signed by a Responsible Officer or any other Person designated in writing by a Responsible Officer of such Borrower to the Administrative Agent, so as to be received no later than 9:00 a.m. on (x) the fourth Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as such Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Business Day, (ii) the aggregate amount of such Borrowing, which shall be US$50,000,000 or a larger multiple of US$5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The applicable Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Business Days (or such other number of days as such Borrower and the Administrative Agent may agree) of any other Money Market Quote Request.   (c) Promptly upon receipt of a Money Market Quote Request, the Administrative Agent shall send to the appropriate Lenders by facsimile transmission an Invitation for Money Market Quotes, which shall constitute an invitation by TMCC or TCPR, as applicable, to each Lender to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section.   (d) (i)  Each Tranche A Lender may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes made by TMCC, and each Tranche B Lender may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes made by TCPR. Each Money Market Quote        22 -------------------------------------------------------------------------------- must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by facsimile transmission at the Administrative Agent’s Office not later than (x) 1:00 p.m. on the fourth Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:00 a.m. on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as TMCC or TCPR, as applicable, and the Administrative Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Administrative Agent (or any Affiliate of the Administrative Agent) in the capacity of a Lender may be submitted, and may only be submitted, if the Administrative Agent or such Affiliate notifies such Borrower of the terms of the offer or offers contained therein not later than 15 minutes prior to the deadline for the other Lenders. Subject to Articles IV and VII, any Money Market Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of TMCC or TCPR, as applicable.   (ii) Each Money Market Quote shall specify (A) the proposed date of Borrowing; (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Lender, (x) must be US$5,000,000 or a larger multiple of US$l,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Lender may be accepted; (C) in the case of a LIBOR Auction, the margin above or below the applicable Eurodollar Rate (the “Money Market Margin”) offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate; (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the “Money Market Absolute Rate”) offered for each such Money Market Loan; and (E) the identity of the quoting Lender. A Money Market Quote may set forth up to five separate offers by the quoting Lender with respect to each Interest Period specified in the related Invitation for Money Market Quotes.   (iii) Any Money Market Quote shall be disregarded if it (A) is not substantially in conformity with the definition thereof or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i).   (e) The Administrative Agent shall promptly notify TMCC or TCPR, as applicable, of the terms (i) of any Money Market Quote submitted by a Lender that is in accordance with subsection (d) and (ii) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Lender with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Administrative Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The        23 -------------------------------------------------------------------------------- Administrative Agent’s notice to the applicable Borrower shall specify (i) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (ii) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (iii) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted.   (f) Not later than 9:00 a.m. on the third Business Day prior to the proposed date of Borrowing of Money Market LIBOR Loans or 10:00 a.m. on the Business Day of the proposed date of Borrowing of Money Market Absolute Rate Loans (or such other time or date as the applicable Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Lenders not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), TMCC or TCPR, as applicable, shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a “Notice of Money Market Borrowing”) shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The applicable Borrower may accept any Money Market Quote in whole or in part; provided that (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the principal amount of each Money Market Borrowing must be US$50,000,000 or a larger multiple of US$5,000,000; and (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be.   (g) If offers are made by two or more Lenders with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Lenders as nearly as possible (in multiples of US$1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error.   Section 2.4 Prepayments.   (a) TMCC and TCPR may, upon notice to the Administrative Agent, and TCCI may, upon notice to the Sub-Agent, at any time or from time to time voluntarily prepay Committed Loans (other than Bankers’ Acceptances, Drafts and BA Equivalent Notes) or Money Market Loans made to it bearing interest at the Base Rate or the Canadian Prime Rate in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent or the Sub-Agent, as the case may be, not later than 10:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate or the Canadian Prime Rate Committed Loans or Money Market Loans bearing interest at the Base Rate pursuant to Section 3.2; (ii) any prepayment of Loans denominated in US Dollars shall be in a principal amount of US$50,000,000 or a whole multiple of US$5,000,000 in excess thereof and (iii) any prepayment of Loans denominated in Canadian Dollars shall be in a principal amount of CDN$5,000,000 or a whole multiple of CDN$1,000,000        24 -------------------------------------------------------------------------------- in excess thereof. Except as provided in the preceding sentence, a Borrower may not prepay all or any portion of the principal amount of any Money Market Loan made to it prior to the last day of the Interest Period therefor. Each such notice shall specify the date and amount of such prepayment, whether the Loans to be prepaid are Committed Loans or Money Market Loans, and the Type(s) of Loans to be prepaid. The Administrative Agent or the Sub-Agent, as the case may be, will promptly notify each appropriate Lender of its receipt of each such notice and the contents thereof with respect to Committed Loans, and of the amount of such Lender’s Pro Rata Share of such prepayment of such Committed Loans. The Administrative Agent will promptly notify each Lender that has made a Money Market Loan that is to be prepaid of the receipt by the Administrative Agent of each notice and the contents thereof with respect to such Money Market Loan and the contents thereof and of the amount of such prepayment of such Money Market Loan. If such notice is given by a Borrower, such Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.5. Each such prepayment of Committed Loans shall be applied to the Committed Loans of the appropriate Lenders in accordance with their respective Pro Rata Shares. Each such prepayment of Money Market Loans shall be applied ratably to the Money Market Loans of the Lenders that made such Loans.   (b) (i) If for any reason the Total Outstandings applicable to TMCC at any time exceed the Aggregate Tranche A Commitments then in effect, TMCC shall immediately prepay Loans in an aggregate amount equal to such excess. (ii) If for any reason the Total Outstandings applicable to TCPR at any time exceed the Aggregate Tranche B Commitments then in effect, TCPR shall immediately prepay Loans in an aggregate amount equal to such excess. (iii) If for any reason the Total Outstandings applicable to TCCI at any time exceed the Aggregate Tranche C Commitments then in effect, TCCI shall (x) immediately prepay Loans in an aggregate amount equal to such excess and (y) to the extent necessary after TCCI have made all prepayments required pursuant to clause (x), cash collateralize the outstanding Bankers’ Acceptances, Drafts and BA Equivalent Notes in accordance with Section 2.15(n) in any aggregate amount sufficient to eliminate such excess.   Section 2.5 Termination or Reduction of Commitments. TMCC may, upon notice to the Administrative Agent, terminate the Aggregate Tranche A Commitments, or from time to time permanently reduce the Aggregate Tranche A Commitments, TCPR may, upon notice to the Administrative Agent, terminate the Aggregate Tranche B Commitments, or from time to time permanently reduce the Aggregate Tranche B Commitments and TCCI may, upon notice to the Sub-Agent, terminate the Aggregate Tranche C Commitments, or from time to time permanently reduce the Aggregate Tranche C Commitments; provided that (i) any such notice shall be received by the Administrative Agent or Sub-Agent, as the case may be, not later than 10:00 a.m. three Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of US$25,000,000 or any whole multiple of US$5,000,000 in excess thereof in the case of Tranche A Commitments or Tranche B Commitments or CDN$10,000,000 or any whole multiple of CDN$5,000,000 in excess thereof in the case of Tranche C Commitments, and (iii) such Borrower shall not terminate or reduce such Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings applicable to such Borrower would exceed the Aggregate Commitments applicable to such Borrower. The Administrative Agent will promptly notify the Lenders of any        25 -------------------------------------------------------------------------------- such notice of termination or reduction of the Aggregate Commitments. Any reduction of the Aggregate Commitments shall be applied to the applicable Commitment of each appropriate Lender according to its Pro Rata Share. All facility fees accrued for the account of the applicable Borrower until the effective date of any termination of the applicable Aggregate Commitments shall be paid on the effective date of such termination.   Section 2.6 Repayment of Loans.   (a) Each Borrower shall repay to the Lenders on the Maturity Date applicable to such Borrower the aggregate principal amount of Loans made to it and outstanding on such date.   (b) Each Borrower shall repay each Money Market Loan made to it on the earlier to occur of (i) the last day of the Interest Period therefor and (ii) the Revolving Maturity Date applicable to such Borrower.   Section 2.7 Interest.   (a) Subject to the provisions of subsection (b) below, (i) subject to Section 3.2, each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; (iii) each Canadian Prime Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Canadian Prime Rate plus the Applicable Rate; (iv) subject to Section 3.2, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof for the Interest Period applicable thereto at a rate per annum equal to the sum of the Eurodollar Rate for such Interest Period plus or minus the Money Market Margin quoted by the Lender making such Loan; and (v) each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof for the Interest Period applicable thereto at a rate per annum equal to the Money Market Absolute Rate quoted by the Lender making such Loan.   (b) If any amount payable by any Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Furthermore, upon the request of the applicable Required Lenders, while any Event of Default exists with respect to any Borrower, such Borrower shall pay interest on the principal amount of all outstanding Obligations of such Borrower hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable on demand.   (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after        26 -------------------------------------------------------------------------------- judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.   Section 2.8 Fees.    (a) Facility Fee. (i) TMCC shall pay to the Administrative Agent for the account of each Tranche A Lender in accordance with its Pro Rata Share, a facility fee equal to the Applicable Rate times the actual daily amount of the Aggregate Tranche A Commitments, regardless of usage (or, if the Aggregate Tranche A Commitments have terminated, on the Outstanding Amount of all Tranche A Loans). The facility fee payable by TMCC shall accrue at all times during the Tranche A Availability Period (and thereafter so long as any Tranche A Loans remain outstanding), including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date (and, if applicable, thereafter on demand).   (ii) TCPR shall pay to the Administrative Agent for the account of each Tranche B Lender in accordance with its Pro Rata Share, a facility fee equal to the Applicable Rate times the actual daily amount of the Aggregate Tranche B Commitments, regardless of usage (or, if the Aggregate Tranche B Commitments have terminated, on the Outstanding Amount of all Tranche B Loans). The facility fee payable by TCPR shall accrue at all times during the Tranche B Availability Period (and thereafter so long as any Tranche B Loans remain outstanding), including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date (and, if applicable, thereafter on demand).   (iii) TCCI shall pay to the Sub-Agent for the account of each Tranche C Lender in accordance with its Pro Rata Share, a facility fee equal to the Applicable Rate times the actual daily amount of the Aggregate Tranche C Commitments, regardless of usage (or, if the Aggregate Tranche C Commitments have terminated, on the Outstanding Amount of all Tranche C Loans). The facility fee payable by TCCI shall accrue in Canadian Dollars at all times during the Tranche C Availability Period (and thereafter so long as any Tranche C Loans remain outstanding), including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date (and, if applicable, thereafter on demand).   (iv) The facility fee payable by each Borrower shall be calculated quarterly in arrears.   (b) Other Fees. The Borrowers shall pay to the Arrangers and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.        27 -------------------------------------------------------------------------------- Section 2.9 Computation of Interest and Fees. All computations (a) of interest for Base Rate Loans when the Base Rate is determined by Citibank’s “base rate” and (b) of interest for Canadian Prime Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All computations of Drawing Fees and Drawing Purchase Price shall be made on the basis of a year of 365 days and the term to maturity of the applicable Draft. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.11(a), bear interest for one day.   Section 2.10 Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to each Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of any Borrower under the Loan Documents to pay any amount owing with respect to the Obligations of such Borrower. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, each Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.   Section 2.11 Payments Generally.   (a) All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by (i) TMCC and TCPR shall be made to the Administrative Agent and (ii) TCCI shall be made to the Sub-Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office or the Sub-Agent’s Office, as the case may be, (x) in US Dollars in the case of payments by TMCC, payments by TCPR and payments in respect of Eurodollar Rate Loans and Base Rate Loans by TCCI and (y) in Canadian Dollars for all other payments by TCCI, and, in each case, in immediately available funds not later than 12:00 noon on the date specified herein. The Administrative Agent or the Sub-Agent, as the case may be, will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent or the Sub-Agent after 12:00 noon shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.   (b) If any payment to be made by any Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of        28 -------------------------------------------------------------------------------- time shall be reflected in computing interest or fees, as the case may be. Whenever any payment hereunder in respect of Bankers’ Acceptances, Drafts or BA Equivalent Notes shall be stated to be due on a day other than a Canadian Business Day such payment shall be made on the next succeeding Canadian Business Day.   (c) Unless a Borrower or any Lender has notified the Administrative Agent or the Sub-Agent, as the case may be, prior to the time any payment is required to be made by it to the Administrative Agent or the Sub-Agent hereunder, that such Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent or the Sub-Agent may assume that such Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent or the Sub-Agent in immediately available funds, then:   (i) if a Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent or the Sub-Agent, as the case may be, the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent or the Sub-Agent to such Lender to the date such amount is repaid to the Administrative Agent or Sub-Agent in immediately available funds at the Interbank Rate from time to time in effect; and   (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent or the Sub-Agent, as the case may be, the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent or the Sub-Agent to the applicable Borrower to the date such amount is recovered by the Administrative Agent or the Sub-Agent (the “Compensation Period”) at a rate per annum equal to the Interbank Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent or the Sub-Agent, then such amount shall constitute such Lender’s Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent or the Sub’Agent’s demand therefor, the Administrative Agent or Sub-Agent may make a demand therefor upon the applicable Borrower, and such Borrower shall pay such amount to the Administrative Agent or the Sub-Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent, the Sub-Agent or any Borrower may have against any Lender as a result of any default by such Lender hereunder.   A notice of the Administrative Agent or the Sub-Agent, as the case may be, to any Lender or any Borrower with respect to any amount owing under this subsection (c) shall be conclusive, absent manifest error.        29 -------------------------------------------------------------------------------- (d) If any Lender makes available to the Administrative Agent or the Sub-Agent, as the case may be, funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the applicable Borrower by the Administrative Agent or the Sub-Agent because the conditions to the applicable Borrowing set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent or the Sub-Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest, on the succeeding Business Day.   (e) The obligations of the Lenders hereunder to make Committed Loans are several and not joint. The failure of any Lender to make any Committed Loan on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan.   (f) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.   (g) For the purposes of the Interest Act (Canada) and disclosure under such act, whenever any interest or fees to be paid by TCCI under this Agreement is to be calculated on the basis of a period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the number of days in the calendar year in which the same is to be ascertained and divided by the actual number of days in such period of time.   (h) Notwithstanding any provision of this Agreement, in no event shall the aggregate “interest” (as defined in section 347 of the Criminal Code (Canada)) payable by TCCI under this Agreement exceed the effective annual rate of interest on the “credit advanced” (as defined in that section) under this Agreement lawfully permitted by that section and, if any payment, collection or demand pursuant to this Agreement in respect of “interest” (as defined in that section) payable by TCCI is determined to be contrary to the provisions of that section, such payment, collection or demand shall be deemed to have been made by mutual mistake of TCCI, the Administrative Agent and the Lenders and the amount of such payment or collection shall be refunded to TCCI. For the purposes of this Agreement, the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the relevant term and, in the event of dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Administrative Agent will be prima facie evidence of such rate.   Section 2.12 Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Committed Loans made by it to a Borrower, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent or the Sub-Agent, as the case may be, of such fact, and (b) purchase from the other Lenders such participations in the Committed Loans made by them to such Borrower as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Committed Loans pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from        30 -------------------------------------------------------------------------------- the purchasing Lender under any of the circumstances described in Section 9.6 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. Each Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by Law, exercise all of its rights of payment (including any right of set-off, but subject to Section 9.9) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. The Administrative Agent or the Sub-Agent, as the case may be, will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.   Section 2.13 Extension of Maturity Date.    (a) Not earlier than 60 days prior to, nor later than 45 days prior to, the Revolving Maturity Date applicable to a Borrower then in effect, such Borrower may, upon notice to the Administrative Agent (which shall promptly notify the appropriate Lenders), request a 364-day extension of the Revolving Maturity Date applicable to such Borrower then in effect. Within 30 days of delivery of such notice, each appropriate Lender shall notify the Administrative Agent whether or not it consents to such extension (which consent may be given or withheld in such Lender’s sole and absolute discretion). Any Lender not responding within the above time period shall be deemed not to have consented to such extension. The Administrative Agent shall promptly notify the applicable Borrower and the appropriate Lenders of the Lenders’ responses. If any Lender declines, or is deemed to have declined, to consent to such extension, the applicable Borrower may cause any such Lender to be replaced as a Lender pursuant to Section 9.16. The applicable Borrower shall be deemed to have withdrawn any request to extend the Revolving Maturity Date applicable to such Borrower if it delivers or is required to deliver a notice of election to convert the Loans to Term Loans pursuant to Section 2.13(c).   (b) The Revolving Maturity Date applicable to a Borrower shall be extended only if all appropriate Lenders committed to lend to such Borrower (after giving effect to any replacements of Lenders permitted herein) (the “Consenting Lenders”) have consented thereto. If so extended, the Revolving Maturity Date applicable to such Borrower, as to the Consenting Lenders, shall be extended to a date 364 days from the Revolving Maturity Date applicable to such Borrower then in effect, effective as of the Revolving Maturity Date applicable to such Borrower then in effect (such existing Revolving Maturity Date being the “Revolving Extension Effective Date”). The Administrative Agent and the applicable Borrower shall promptly confirm to the Lenders such extension and the Revolving Extension Effective Date. As a condition precedent to such extension, the applicable Borrower shall deliver to the Administrative Agent a        31 -------------------------------------------------------------------------------- certificate of such Borrower dated as of the Revolving Extension Effective Date (in sufficient copies for each appropriate Lender) signed by a Responsible Officer of such Borrower (i) certifying and attaching the resolutions adopted by such Borrower approving or consenting to such extension and (ii) certifying that, before and after giving effect to such extension, (A) the representations and warranties of such Borrower contained in Article V and the other Loan Documents are true and correct on and as of the Revolving Extension Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.13, the representations and warranties contained in subsections (a) and (b) of Section 5.4 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.1, and (B) no Default with respect to such Borrower exists. The applicable Borrower shall prepay any Committed Loans outstanding on the Revolving Extension Effective Date (and pay any additional amounts required pursuant to Section 3.5) to the extent necessary to keep outstanding Committed Loans ratable with any revised and new Pro Rata Shares of all the Lenders.   (c) Not later than 30 days prior to the Revolving Maturity Date applicable to a Borrower, such Borrower may, upon notice to the Administrative Agent (which shall promptly notify the appropriate Lenders), elect to convert the Loans made to such Borrower into term Loans payable on the date (the “Term Maturity Date”) one year from the Revolving Maturity Date applicable to such Borrower. Concurrently with delivering any Request for Loans relating to Eurodollar Rate Loans with an Interest Period ending after the Revolving Maturity Date applicable to such Borrower such Borrower shall deliver a notice to the Administrative Agent that it elects to convert the Loans into term Loans in accordance with the preceding sentence. If a Borrower so elects to convert the Loans made to it to term Loans, subject to the satisfaction of the conditions precedent contained in this Section 2.13(c), the Maturity Date applicable to such Borrower shall automatically be extended to the Term Maturity Date effective as of the Revolving Maturity Date applicable to such Borrower then in effect (such existing Revolving Maturity Date being the “Term Extension Effective Date”), and, on and after the Term Extension Effective Date, the Loans made to such Borrower shall be term Loans that (a) may not be reborrowed once repaid, (b) in the case of loans denominated in US Dollars, may be converted from Base Rate Loans to Eurodollar Rate Loans and from Eurodollar Rate Loans to Base Rate Loans and, in the case of Loans denominated in Canadian Dollars, may be continued as Canadian Prime Rate Loans, Bankers’ Acceptances, Drafts or BA Equivalent Notes as provided therein, and (c) are payable in full on the Term Maturity Date applicable to such Borrower. The Administrative Agent and the applicable Borrower shall promptly confirm to the appropriate Lenders such extension and the Term Extension Effective Date. As conditions precedent to such extension, (i) the applicable Borrower shall deliver to the Administrative Agent a certificate of such Borrower dated as of the Term Extension Effective Date (in sufficient copies for each appropriate Lender) signed by a Responsible Officer of such Borrower certifying that no Default applicable to such Borrower exists, and (ii) as of the Term Extension Effective Date, any outstanding Money Market Loans made to such Borrower shall have been prepaid, to the extent permitted by Section 2.4(a), or repaid in accordance with this Agreement, and if such prepayment or repayment is to be made in whole or in part from Committed Loans, such Committed Loans shall have been made at least one Business Day prior to the Term Extension Effective Date.      32 -------------------------------------------------------------------------------- (d) This Section shall supersede any provisions in Section 2.12 or Section 9.1 to the contrary.  Section 2.14 Increase in Commitments.   (a) Provided there exists no Default applicable to a Borrower, upon notice by such Borrower to the Administrative Agent (which shall promptly notify the appropriate Lenders), such Borrower may from time to time, request an increase in the Aggregate Commitments applicable to such Borrower to an amount (for all such requests) not exceeding (x) in the case of the Tranche A Commitments, $3,850,000,000, (y) in the case of the Tranche B Commitments, $250,000,000 and (z) in the case of the Tranche C Commitments, CDN$700,000,000. At the time of sending such notice, such Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than 10 Business Days from the date of delivery of such notice to the appropriate Lenders). Each appropriate Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested increase. Any appropriate Lender not responding within such time period shall be deemed to have declined to increase its Commitment. The Administrative Agent shall notify the applicable Borrower and each appropriate Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase, the applicable Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel. The consent of the Lenders is not required to increase the amount of the Aggregate Commitments pursuant to this Section, except that each appropriate Lender shall have to right to consent to an increase in the amount of its Commitment as set forth in this Section 2.14(a). If the Lenders and Eligible Assignees do not agree to increase the applicable Aggregate Commitments by the amount requested by the applicable Borrower pursuant to this Section 2.14(a), such Borrower may (i) withdraw its request for an increase in its entirety or (ii) accept, in whole or in part, the increases that have been offered.   (b) If the applicable Aggregate Commitments are increased in accordance with this Section, the Administrative Agent and the applicable Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase. The Administrative Agent shall promptly notify the applicable Borrower and the appropriate Lenders of the final allocation of such increase and the Increase Effective Date. As a condition precedent to such increase, the applicable Borrower shall deliver to the Administrative Agent a certificate of such Borrower dated as of the Increase Effective Date (in sufficient copies for each appropriate Lender) signed by a Responsible Officer of such Borrower certifying that no Default applicable to such Borrower exists. The applicable Borrower shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.5) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Pro Rata Shares arising from any nonratable increase in the Commitments under this Section. (c) This Section shall supersede any provisions in Sections 2.12 or 9.1 to the contrary.        33 -------------------------------------------------------------------------------- Section 2.15 Drawings of Bankers’ Acceptances, Drafts and BA Equivalent Notes.   (a) Request for Drawing. Each Drawing shall be made on notice, given not later than 11:00 A.M. (Toronto time) on a Canadian Business Day at least two Canadian Business Days prior to the date of the proposed Drawing, by TCCI to the Administrative Agent, which shall give each Tranche C Lender prompt notice thereof by telecopier. Each notice of a Drawing shall be in writing (including by telecopier), in substantially the form of Exhibit A hereto, specifying therein the requested (i) date of such Drawing (which shall be a Canadian Business Day), (ii) aggregate Face Amount of such Drawing and (iii) initial BA Maturity Date for each Bankers’ Acceptance and Draft comprising part of such Drawing; provided, however, that, if the Administrative Agent determines in good faith (which determination shall be conclusive and binding upon TCCI) that the Drafts to be accepted and purchased (or purchased, as the case may be) as part of any Drawing cannot, due solely to the requested aggregate Face Amount thereof, be accepted and/or purchased ratably by the Tranche C Lenders in accordance with Section 2.01(c), then the aggregate Face Amount of such Bankers’ Acceptances to be created and purchased and Drafts to be purchased shall be reduced to such lesser amount as the Administrative Agent determines will permit such Drafts comprising part of such Drawing to be so accepted and purchased (or to be purchased, as the case may be). The Administrative Agent agrees that it will, as promptly as practicable, notify TCCI of the unavailability of Bankers’ Acceptances. Each Draft in connection with any requested Drawing (A) shall be in a minimum amount of CDN$1,000,000 or an integral multiple of CDN$100,000 in excess thereof, and (B) shall be dated the date of the proposed Drawing. Each Tranche C Lender shall, before 1:00 P.M. (Toronto time) on the date of each Drawing, (i) complete one or more Drafts in accordance with the related Committed Loan Notice, accept such Drafts and purchase the Bankers’ Acceptances created thereby for the Drawing Purchase Price; or (ii) complete one or more Drafts in accordance with the Drawing Notice and purchase such Drafts for the Drawing Purchase Price and shall, before 1:00 P.M. (Toronto time) on such date, make available for the account of its Applicable Lending Office to the Administrative Agent at its appropriate Administrative Agent’s Office, in same day funds, the Drawing Purchase Price payable by such Tranche C Lender for such Drafts less the Drawing Fee payable to such Tranche C Lender with respect thereto under Section 2.15(b). Upon the fulfillment of the applicable conditions set forth in Section 4.2, the Administrative Agent will make the funds it has received from the Tranche C Lenders available to TCCI at the applicable Administrative Agent’s Office.   (b) Drawing Fees. TCCI shall, on the date of each Drawing and on the date of each renewal of any outstanding Bankers’ Acceptances or BA Equivalent Notes, pay to the Administrative Agent, in Canadian Dollars, for the ratable account of the Tranche C Lenders accepting Drafts and purchasing Bankers’ Acceptances or purchasing Drafts which have not been accepted by any Tranche C Lender, the Drawing Fee with respect to such Drafts. TCCI irrevocably authorizes each such Tranche C Lender to deduct the Drawing Fee payable with respect to each Draft of such Tranche C Lender from the Drawing Purchase Price payable by such Tranche C Lender in respect of such Draft in accordance with this Section 2.15 and to apply such amount so withheld to the payment of such Drawing Fee for the account of TCCI and, to the extent such Drawing Fee is so withheld and legally permitted to be so applied, TCCI’s obligations under the preceding sentence in respect of such Drawing Fee shall be satisfied.          34 -------------------------------------------------------------------------------- (c)  Limitations on Drawings. Anything in Section 2.15(a) to the contrary notwithstanding, TCCI may not select a Drawing if the obligation of the Tranche C Lenders to purchase and accept Bankers’ Acceptances shall then be suspended pursuant to Section 2.15(e) or 3.2(b).   (d) Binding Effect of Committed Loan Notices. Each Committed Loan Notice for a Drawing shall be irrevocable and binding on TCCI. In the case of any proposed Drawing, TCCI shall indemnify each Tranche C Lender (absent any gross negligence by the Tranche C Lender) against any loss, cost or expense incurred by such Tranche C Lender as a result of any failure to fulfill on or before the date specified in the Committed Loan Notice for such Drawing the applicable conditions set forth in Section 4.2, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Tranche C Lender to fund the Drawing Purchase Price to be paid by such Tranche C Lender for Drafts when, as a result of such failure, such Drafts are not issued on such date (but, in any event, excluding any loss of profit and the Drawing Fee applicable to such Drafts).   (e) Circumstances Making Bankers’ Acceptances Unavailable. If the Administration Agent in good faith determines that for any reason a market for Bankers’ Acceptances does not exist at any time or the Tranche C Lenders cannot for other reasons, after reasonable efforts, readily sell Bankers’ Acceptances or perform their other obligations under this Agreement with respect to Bankers’ Acceptances, the Administrative Agent will promptly so notify TCCI and each Tranche C Lender. Thereafter, TCCI’s right to request the acceptance and/or purchase of Drafts shall be and remain suspended until the Administration Agent determines and notifies TCCI and each Tranche C Lender that the condition causing such determination no longer exists.   (f) Presigned Draft Forms. To enable the Tranche C Lenders to create Bankers’ Acceptances or purchase Drafts, as the case may be, in accordance with Section 2.01(c) and this Section 2.15, TCCI hereby appoints each Tranche C Lender as its attorney to sign and endorse on its behalf (for the purpose of acceptance and/or purchase of Drafts pursuant to this Agreement), in handwriting or by facsimile or mechanical signature as and when deemed necessary by such Tranche C Lender, blank forms of Drafts. In this respect, it is each Tranche C Lender’s responsibility to maintain an adequate supply of blank forms of Drafts for acceptance under this Agreement. TCCI recognizes and agrees that all Drafts signed and/or endorsed on its behalf by a Tranche C Lender shall bind TCCI as fully and effectually as if signed in the handwriting of and duly issued by the proper signing officers of TCCI. Each Tranche C Lender is hereby authorized (for the purpose of acceptance and/or purchase of Drafts pursuant to this Agreement) to complete and issue such Drafts endorsed in blank in such face amounts as may be determined by such Tranche C Lender; provided that the aggregate amount thereof is equal to the aggregate amount of Drafts required to be purchased by such Tranche C Lender. On request by TCCI, a Tranche C Lender shall cancel all forms of Drafts which have been pre-signed or pre-endorsed by or on behalf of TCCI and which are held by such Tranche C Lender and have not yet been issued in accordance herewith. Each Tranche C Lender further agrees to retain such records in the manner and/or the statutory periods provided in the various Canadian provincial or federal statutes and regulations which apply to such Tranche C Lender. Each Tranche C Lender shall maintain a record with respect to Drafts held by it in blank hereunder, voided by it for any reason, accepted and purchased by it hereunder, and cancelled at their respective maturities.      35 -------------------------------------------------------------------------------- Each Tranche C Lender agrees to provide such records to TCCI at TCCI’s expense upon request. Drafts shall be signed by a duly authorized officer or officers of TCCI or by its attorneys, including its attorneys appointed pursuant to this Section 2.15(f). Notwithstanding that any person whose signature appears on any Drafts as a signatory for TCCI may no longer be an authorized signatory for TCCI at the date of issuance of a Drafts , such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance, and any such Drafts so signed shall be binding on TCCI.   (g) Distribution of Bankers’ Acceptances. Bankers’ Acceptances and Drafts purchased by a Tranche C Lender in accordance with the terms of Section 2.01(c) and this Section 2.15 may, in such Tranche C Lender’s sole discretion, be held by such Tranche C Lender for its own account until the applicable BA Maturity Date or sold, rediscounted or otherwise disposed of by it at any time prior thereto in any relevant market therefor.   (h) Failure to Fund in Respect of Drawings. The failure of any Tranche C Lender to fund the Drawing Purchase Price to be funded by it as part of any Drawing shall not relieve any other Tranche C Lender of its obligation hereunder to fund its Drawing Purchase Price on the date of such Drawing, but no Tranche C Lender shall be responsible for the failure of any other Tranche C Lender to fund the Drawing Purchase Price to be funded or made, as the case may be by such other Tranche C Lender on the date of any Drawing.   (i) Issue of BA Equivalent Notes. TCCI shall, at the request of a Tranche C Lender, issue one or more non-interest bearing promissory notes (each a “BA Equivalent Note”) payable on the date of maturity of the unaccepted Draft referred to below, in such form as such Tranche C Lender may specify, in a principal amount equal to the Face Amount of, and in exchange for, any unaccepted Drafts which such Tranche C Lender has purchased or has arranged to have purchased in accordance with Section 2.1(c).   (j) Payment, Conversion or Renewal of Bankers’ Acceptances. Upon the maturity of a Bankers’ Acceptance, Draft or BA Equivalent Note, TCCI may (i) elect to issue a replacement Bankers’ Acceptance, Draft or BA Equivalent Note by giving a Drawing Notice in accordance with Section 2.15(a), (ii) elect to have all or a portion of the Face Amount of such Bankers’ Acceptance, Draft or BA Equivalent Note converted to a Canadian Prime Rate Loan, by giving a Notice of Borrowing in accordance with Section 2.2, or (iii) pay, on or before 10:00 a.m. (Toronto time) on the maturity date for such Bankers’ Acceptance, Draft or BA Equivalent Note, an amount in Canadian Dollars equal to the Face Amount of such Bankers’ Acceptance, Draft or BA Equivalent Note (notwithstanding that a Tranche C Lender may be the holder thereof at maturity). Any such payment shall satisfy TCCI’s obligations under the Bankers’ Acceptance, Draft or BA Equivalent Note to which it relates and the relevant Lender shall thereafter be solely responsible for the payment of such Bankers’ Acceptances, Drafts or BA Equivalent Notes.   (k) Automatic Conversion. If TCCI fails to pay any Bankers’ Acceptance, Draft or BA Equivalent Note when due, or to issue a replacement Bankers’ Acceptance, Draft or BA Equivalent Note in the Face Amount of such Bankers’ Acceptance, Draft or BA Equivalent Note pursuant to Section 2.15 (j), the unpaid amount due and payable in respect thereof shall be converted, as of such date, and without any necessity for TCCI to give a Notice of Borrowing in accordance with Section 2.2, to a Canadian Prime Rate Loan made by the Tranche C Lenders      36 -------------------------------------------------------------------------------- ratably under this Agreement and shall bear interest calculated and payable as provided in Section 2.7 (l) Payment of Bankers Acceptances on Default. In the event that the maturity of outstanding Bankers’ Acceptances, Drafts and BA Equivalent Notes is accelerated pursuant to Section 6.01, TCCI shall pay to the Sub-Agent in Canadian Dollars in same-day funds the aggregate principal amount of all such Bankers’ Acceptances, Drafts and BA Equivalent Notes in satisfaction of its obligations in respect thereof.   (m) Inconsistencies. In the event of any inconsistency between the provisions of this Section 2.15 and any other provision of Article II with respect to Bankers’ Acceptances or BA Equivalent Notes, the provisions of this Section 2.15 shall prevail.   ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY Section 3.1 Taxes. (a) Any and all payments by any Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future Taxes. If any Borrower shall be required by any Laws to deduct any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), each of the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, such Borrower shall furnish to the Administrative Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof.   (b) In addition, each Borrower agrees to pay to each appropriate Lender Other Taxes incurred by such Lender.   (c) If any Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, such Borrower shall also pay to the Administrative Agent or to such Lender, as the case may be, at the time interest is paid, such additional amount that the Administrative Agent or such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) that the Administrative Agent or such Lender would have received if such Taxes or Other Taxes had not been imposed.   (d) Each Borrower agrees to indemnify the Administrative Agent and each appropriate Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid      37 -------------------------------------------------------------------------------- by the Administrative Agent and such Lender, (ii) amounts payable under Section 3.1(c) and (iii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto. Payment under this subsection (d) shall be made within 15 days after the date the Lender or the Administrative Agent makes a demand therefor.   Section 3.2 Illegality. (a) If any Lender determines that any Regulatory Change occurring on or after the date of this Agreement has made it unlawful, or that any Governmental Authority has asserted that it is unlawful as a result of such Regulatory Change, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans or Money Market LIBOR Loans, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the applicable Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Committed Loans to Eurodollar Rate Loans or to make a Money Market LIBOR Loan for which a Money Market Quote has been delivered shall be suspended until such Lender notifies the Administrative Agent and the applicable Borrower that the circumstances giving rise to such determination no longer exist (and such Lender shall give such notice promptly upon receiving knowledge that such circumstances no longer exist). If a Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Rate Loans or Money Market LIBOR Loans to maturity and shall so specify in a notice pursuant to the preceding sentence, upon receipt of such notice, the applicable Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans or Money Market LIBOR Loans, as the case may be, of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans or Money Market LIBOR Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the applicable Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. (b) Notwithstanding any other provision of this Agreement, if the introduction of or any change in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Tranche C Lender or its Lending Office to perform its obligations hereunder to complete and accept Drafts, to purchase Bankers’ Acceptances or to purchase Drafts or to continue to fund or maintain Bankers’ Acceptances or BA Equivalent Notes hereunder, then, on notice thereof and demand therefor by such Tranche C Lender to TCCI through the Administrative Agent (i) an amount equal to the aggregate Face Amount of all Bankers’ Acceptances, Drafts and BA Equivalent Notes outstanding at such time shall, upon such demand, be deposited by TCCI with the Administrative Agent in accordance with Section 2.15(l) until the BA Maturity Date of each such Bankers’ Acceptance, Drafts and BA Equivalent Note, (ii) upon the BA Maturity Date of any Bankers’ Acceptance, Draft or BA Equivalent Note in respect of which any such deposit has been made, the Administrative Agent shall be, and hereby is, authorized (without notice to or any further action by TCCI) to apply such amount (or the applicable portion thereof) to the payment of such Bankers’ Acceptance, Draft or (iii) the obligation of the Tranche C Lenders to complete and      38 -------------------------------------------------------------------------------- accept Drafts and purchase Bankers’ Acceptances and to purchase Drafts that have not been accepted by a Tranche C Lender shall be suspended until the Administrative Agent shall notify TCCI that such Tranche C Lender has determined that the circumstances causing such suspension no longer exist (and such Lender shall give such notice promptly upon receiving knowledge that such circumstances no longer exist).   Section 3.3 Inability to Determine Rates. If the applicable Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Base Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan made to a Borrower, or that the Eurodollar Base Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan made to a Borrower does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify such Borrower and each Lender. Thereafter, the obligation of the appropriate Lenders to make or maintain Eurodollar Rate Loans to such Borrower shall be suspended until the Administrative Agent (upon the instruction of the applicable Required Lenders) revokes such notice (which revocation shall be made promptly upon such instruction from the applicable Required Lenders). Upon receipt of such notice, the applicable Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein. Section 3.4 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans.  (a) If on or after (i) the date hereof, in the case of Eurodollar Rate Loans, Bankers’ Acceptances, Drafts and BA Equivalent Notes, or (ii) the date that a Money Market Quote is given for a Money Market LIBOR Loan, any Lender determines that as a result of a Regulatory Change, there shall be a material increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or Money Market LIBOR Loan or of purchasing, accepting, making or maintaining Bankers’ Acceptances or BA Equivalent Notes, or a reduction in the amount received or receivable by such Lender in connection with any Eurodollar Rate Loan, Money Market LIBOR Loan, Bankers’ Acceptance, Draft or BA Equivalent Note (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.1 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States, Puerto Rico, Canada or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements utilized in the determination of the Eurodollar Rate), then from time to time within 15 days of demand by such Lender (with a copy of such demand to the Administrative Agent), subject to Section 3.4(c), the applicable Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender determines that the introduction of any Law after the date hereof regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith (including determination that, for purposes of capital adequacy requirements, the Commitment of such Lender does not constitute a      39 -------------------------------------------------------------------------------- commitment with an original maturity of one year or less), has the effect of materially reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender’s obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender’s desired return on capital), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), subject to Section 3.4(c),the applicable Borrower shall pay within 15 days of demand by such Lender such additional amounts as will compensate such Lender for such reduction. (c) Promptly after receipt of knowledge of any Regulatory Change or other event that will entitle any Lender to compensation under this Section 3.4, such Lender shall give notice thereof to the applicable Borrower and the Administrative Agent certifying the basis for such request for compensation in accordance with Section 3.6(a) and designate a different Lending Office if such designation will avoid, or reduce the amount of, compensation payable under this Section 3.4 and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. Notwithstanding anything in Sections 3.4(a) or 3.4(b) to the contrary, no Borrower shall be obligated to compensate any Lender for any amount arising or accruing before the earlier of (i) 180 days prior to the date on which such Lender gives notice to such Borrower and the Administrative Agent under this Section 3.4(c) or (ii) the date such amount arose or began accruing (and such Lender did not know such amount was arising or accruing) as a result of the retroactive application of Regulatory Change or other event giving rise to the claim for compensation. Section 3.5 Funding Losses. Within 15 days after delivery of the certificate described in the Section 3.6(a) by any Lender (with a copy to the Administrative Agent) from time to time, each Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of each of the following (except to the extent incurred by any Lender as a result of any action taken pursuant to Section 3.2): (a) any continuation, conversion, payment or prepayment of any Loan made to such Borrower other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); (b) any failure by such Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by such Borrower; or (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by such Borrower pursuant to Section 9.16; including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained but excluding loss of margin for the period after which any such payment or failure to convert, borrow or prepay. The applicable Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.      40 -------------------------------------------------------------------------------- For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.5, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Base Rate used in determining the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. Section 3.6 Matters Applicable to all Requests for Compensation.  (a) A certificate of the Administrative Agent or any Lender claiming compensation under this Article III and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive if prepared reasonably and in good faith. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods. (b) If (i) the obligation of any Lender to make Eurodollar Rate Loans shall be suspended pursuant to Section 3.2 or (ii) any Lender has demanded compensation under Section 3.1 or Section 3.4 with respect to Eurodollar Rate Loans, the applicable Borrower may give notice to such Lender through the Administrative Agent that, unless and until such Lender notifies such Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, effective 5 Business Days after the date of such notice from such Borrower (A) all Loans which would otherwise be made by such Lender as Eurodollar Rate Loans shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Eurodollar Rate Loans of the other Lenders), and (B) after each of such Lender’s Eurodollar Rate Loans has been repaid, all payments of principal which would otherwise be applied to Eurodollar Rate Loans shall be applied to repay such Lender’s Base Rate Loans instead. (c) If any Lender makes a claim for compensation or other payment under Section 3.1 or Section 3.4 or if any Lender determines that it is unlawful or impermissible for it to make, maintain or fund Eurodollar Rate Loans or Money Market LIBOR Loans pursuant to Section 3.2, the applicable Borrower may replace such Lender in accordance with Section 9.16. (d) Prior to giving notice pursuant to Section 3.2 or to demanding compensation or other payment pursuant to Section 3.1 or Section 3.4, each Lender shall consult with the applicable Borrower and the Administrative Agent with reference to the circumstances giving rise thereto; provided that nothing in this Section 3.6(d) shall limit the right of any Lender to require full performance by such Borrower of its obligations under such Sections.        41 -------------------------------------------------------------------------------- ARTICLE IV   CONDITIONS   Section 4.1 Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied:   (a) Receipt by the Administrative Agent of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the applicable Borrower, each dated the Closing Date (or,   in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and its legal counsel: (i) executed counterparts of this Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and each Borrower; (ii) a Note executed by each Borrower in favor of each Lender requesting a Note; (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents; (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Borrower is duly organized or formed, and that such Borrower is validly existing, in good standing and qualified to engage in business, in the case of TMCC, California, in the case of TCPR, in Puerto Rico and, in the case of TCCI, in Canada; (v) a favorable opinion of the General Counsel of each Borrower, addressed to the Administrative Agent and each Lender, as to the matters and in the form set forth in Exhibit H; (vi) a favorable opinion of Pietrantoni Méndez & Alvarez LLP, counsel to the Administrative Agent, addressed to the Administrative Agent and each Lender, as to the matters and in the form set forth in Exhibit I-1; (vii) a favorable opinion of Stikeman Elliott LLP, counsel to TCCI, addressed to the Administrative Agent and each Lender, as to the matters and in the form set forth in Exhibit I-2; (viii) a favorable opinion of Shearman & Sterling LLP, counsel to the Administrative Agent, addressed to the Administrative Agent and each Lender, as to the matters and in the form set forth in Exhibit J;      42 --------------------------------------------------------------------------------   (ix) on the Closing Date, the following statements shall be true and the Administrative Agent shall have received for the account of each Lender a certificate of a Responsible Officer of each Borrower, stating that: (A) the representations and warranties contained in Article V hereof are  correct on and as of the Closing Date; and (B) no event has occurred and is continuing that constitutes a Default; and (x) such other assurances, certificates, documents or consents as the Administrative Agent or the applicable Required Lenders reasonably may require. (b) Any fees required to be paid on or before the Closing Date shall have been paid. (c) Unless waived by the Administrative Agent, the Borrowers shall have paid all Attorney Costs of the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrowers and the Administrative Agent). (d) The Borrowers shall have terminated the commitments, and paid in full all indebtedness, interest, fees and other amounts outstanding, under (i) the 364-Day Credit Agreement dated as of March 30, 2005 among TMCC, TCPR, the lenders parties thereto, Bank of America, N.A., as syndication agent, and The Bank of Tokyo-Mitsubishi, Ltd., BNP Paribas and JPMorgan Chase Bank, as documentation agents, and Citicorp USA, Inc., as administrative agent for the lenders and (ii) the credit facilities of TCCI listed on Schedule 4.1(d) hereto. Each of the Lenders that is a party to any of the foregoing credit facilities hereby waives, upon execution of this Agreement, the requirement of prior notice under such credit agreement relating to the termination of commitments thereunder. Section 4.2 Conditions to all Loans. The obligation of each Lender to honor any Request for Loans (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurodollar Rate Loans) made by any Borrower is subject to the following conditions precedent: (a) The representations and warranties of such Borrower contained in Article V (except for the representations and warranties set forth in Section 5.4(b), the accuracy of which it is expressly agreed shall not be a condition to making Loans) shall be true and correct on and as of the date of such Loan, except (A) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and (B) except that for purposes of this Section 4.2, the representations and warranties contained in Section 5.4(a) shall be deemed to refer to the most recent statements furnished from time to time pursuant to Section 6.1(a).      43 -------------------------------------------------------------------------------- (b) No Default with respect to such Borrower shall exist, or would result from such proposed Loan. (c) The Administrative Agent shall have received a Request for Loans in accordance with the requirements hereof. Each Request for Loans (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by any Borrower shall be deemed to be a representation and warranty by such Borrower that the conditions specified in Sections 4.2(a) and (b) have been satisfied on and as of the date of the applicable Loans.   ARTICLE V   REPRESENTATIONS AND WARRANTIES   Each Borrower represents and warrants to the Administrative Agent and the Lenders that:   Section  5.1 Corporate Existence and Power. Such Borrower is a corporation duly incorporated, validly existing and in good standing under the Laws of its jurisdiction or organization, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Such Borrower is in compliance with all Laws except (i) where failure to be so could not reasonably be expected to cause a material adverse change in the business, financial position, results of operations or prospects of such Borrower and its Consolidated Subsidiaries considered as a whole or (ii) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted.   Section  5.2 Corporate and Governmental Authorization: No Contravention. The execution, delivery and performance by such Borrower of this Agreement and each other Loan Document are within such Borrower’s corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Governmental Authority and do not contravene, or constitute a default under, any provision of applicable Law or of the Organization Documents of such Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Borrower or any of its Subsidiaries.   Section  5.3 Binding Effect. This Agreement constitutes a valid and binding agreement of such Borrower and each other Loan Document, when executed and delivered by such Borrower in accordance with this Agreement, will constitute a valid and binding obligation of such Borrower, in each case enforceable in accordance with its terms.   Section  5.4 Financial Information.   (a) The Audited Financial Statements applicable to such Borrower (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (ii) fairly present, in conformity with GAAP consistently        44 -------------------------------------------------------------------------------- applied throughout the period covered thereby, except as otherwise expressly provided therein, (A) in the case of TMCC, the consolidated financial position of TMCC and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year, (B) in the case of TCPR, the financial position of TCPR as of such date and its results of operations and cash flow for such fiscal year and (C) in the case of TCCI, the financial position of TCCI as of such date and its results of operations and cash flow for such fiscal year. (b) Since the date of the Audited Financial Statements, there has been no material adverse change in the business, financial position, results of operations or prospects of such Borrower and its Consolidated Subsidiaries, considered as a whole.   Section  5.5 Litigation. There is no action, suit or proceeding pending against, or to the knowledge of such Borrower threatened against or affecting, such Borrower or any of its Subsidiaries before any court, arbiter, or Governmental Authority in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of such Borrower and its Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Loan Document.   Section  5.6 Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA, the Internal Revenue Code and the Puerto Rico Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.   Section  5.7 Taxes. Such Borrower and its Subsidiaries have filed all income tax returns required to be filed under the Code, the Puerto Rico Code and the ITA and all other material tax returns which are required to be filed by them and have paid all taxes, assessments, fees and other governmental charges due pursuant to such returns or pursuant to any assessment received by such Borrower or any Subsidiary. The charges, accruals and reserves on the books of such Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of such Borrower, adequate.   Section  5.8 Subsidiaries. (a) In respect of TMCC, each of TMCC’s Subsidiaries is a Person duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation, and has all organizational powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. (b) In respect of TCPR, TCPR does not have any Subsidiaries. (c) In respect of TCCI, TCCI does not have any Subsidiaries.        45 --------------------------------------------------------------------------------          Section  5.9 Not an Investment Company. Such Borrower is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.   Section  5.10 Disclosure. All information heretofore furnished by such Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by such Borrower to the Administrative Agent or any Lender will be, true, accurate and complete in all material respects on the date as of which such information is stated or certified.                                         ARTICLE VI   COVENANTS   Each Borrower agrees that, so long as any Lender has any Commitment hereunder to such Borrower or any Loan or any Obligation of such Borrower hereunder shall remain unpaid or unsatisfied:   Section  6.1 Information. Such Borrower will deliver to the Administrative Agent and each of the Lenders:   (a) as soon as available and in any event within 120 days after the end of each fiscal year of such Borrower, a consolidated balance sheet of such Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of nationally recognized standing;   (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of such Borrower, a consolidated balance sheet of such Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of such Borrower’s fiscal year ended at the end of such quarter setting forth in the case of such statements of income and cash flow in comparative form the figures for the corresponding quarter and the corresponding portion of such Borrower’s fiscal year; provided, however, that TCCI shall not be required to provide financial information under this subsection (b);   (c) simultaneously with the delivery of each set of financial statements referred to in subsection (a) above, a Compliance Certificate;   (d) within 5 days after any officer of such Borrower obtains knowledge of any Default in respect of such Borrower, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of such Borrower setting forth the details thereof and the action which such Borrower is taking or proposes to take with respect thereto;   (e) promptly after the same are available, copies of all annual registration statements (other than exhibits thereto, pricing supplements and any registration statements (x) on Form S-8 or its equivalent or (y) in connection with asset securitization transactions) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which such Borrower shall have filed with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 and not otherwise required to be delivered to the Administrative Agent pursuant hereto;      46 -------------------------------------------------------------------------------- (f) within 15 days after any officer of such Borrower at any time obtains knowledge that any representation or warranty set forth in Section 5.6 would not be true if made at such time, a certificate of the chief financial officer or the chief accounting officer of such Borrower setting forth the details thereof and the action which such Borrower is taking or proposes to take with respect thereto; and (g) from time to time such additional information regarding the financial position or business of such Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request.   Documents required to be delivered pursuant to Section 6.1(a), (b) or (e) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which such Borrower posts such documents, or provides a link thereto on such Borrower’s website on the Internet at the website address listed on Schedule 9.2; or (ii) on which such documents are posted on such Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) such Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests such Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) such Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent, which shall notify the Lenders, of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by any Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.   Section  6.2 Maintenance of Property; Insurance.   (a) Such Borrower will keep, and will cause each Significant Subsidiary to keep, all material property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.   (b) Such Borrower will maintain, and will cause each Significant Subsidiary to maintain, with financially sound and reputable insurance companies insurance in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against by companies of established repute engaged in the same or similar business as such Borrower or such Significant Subsidiary, and such Borrower will promptly furnish to the Administrative Agent and the Lenders such information as to insurance carried as may be reasonably requested in writing by the Administrative Agent.    47 -------------------------------------------------------------------------------- Section  6.3 Conduct of Business and Maintenance of Existence. Such Borrower will continue, and will cause each Significant Subsidiary to continue, to engage in business of the same general type as conducted by such Borrower and its Significant Subsidiaries on the Closing Date, and will preserve, renew and keep in full force and effect, and will cause each Significant Subsidiary to preserve, renew and keep in full force and effect, their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 6.3 shall prohibit (i) any merger or consolidation involving such Borrower which is permitted by Section 6.6, (ii) the merger of a Significant Subsidiary into such Borrower or the merger or consolidation of a Significant Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Significant Subsidiary and if, in each case, after giving effect thereto, no Default with respect to such Borrower shall have occurred and be continuing or (iii) the termination of the corporate existence of any Significant Subsidiary if such Borrower in good faith determines that such termination is in the best interest of such Borrower and is not materially disadvantageous to the Lenders.   Section  6.4 Compliance with Laws. Such Borrower will comply, and cause each Significant Subsidiary to comply, in all material respects with all applicable Laws (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings.   Section  6.5 Negative Pledge. Such Borrower will not pledge or otherwise subject to any lien any property or assets of such Borrower unless the Loans and the Obligations of such Borrower under this Agreement are secured by such lien equally and ratably with all other obligations secured thereby so long as such other obligations shall be so secured; provided, however, that such covenant will not apply to liens securing obligations which do not in the aggregate at any one time outstanding exceed 20% of Net Tangible Assets (as defined below) of such Borrower and it Consolidated Subsidiaries and also will not apply to:   (a) the pledge of any assets of such Borrower to secure any financing by such Borrower of the exporting of goods to or between, or the marketing thereof in, jurisdictions other than the United States, Puerto Rico and Canada in connection with which such Borrower reserves the right, in accordance with customary and established banking practice, to deposit, or otherwise subject to a lien, cash, securities or receivables, for the purpose of securing banking accommodations or as the basis for the issuance of bankers’ acceptances or in aid of other similar borrowing arrangements;   (b) the pledge of receivables of such Borrower payable in currencies other than US Dollars to secure borrowings in jurisdictions other than the United States, Puerto Rico and Canada;   (c) any deposit of assets of such Borrower in favor of any governmental bodies to secure progress, advance or other payments under a contract or statute;   (d) any lien or charge on any property of such Borrower, tangible or intangible, real or personal, existing at the time of acquisition or construction of such property (including acquisition through merger or consolidation) or given to secure the payment of all or any part of the purchase or construction price thereof or to secure any indebtedness incurred prior to, at the      48 -------------------------------------------------------------------------------- time of, or within one year after, the acquisition or completion of construction thereof for the purpose of financing all or any part of the purchase or construction price thereof;   (e) bankers’ liens or rights of offset;   (f) any lien securing the performance of any contract or undertaking not directly or indirectly in connection with the borrowing of money, obtaining of advances or credit or the securing of debt, if made and continuing in the ordinary course of business; (g) any lien to secure nonrecourse obligations in connection with such Borrower’s engaging in leveraged or single-investor lease transactions;   (h) any lien to secure payment obligations with respect to (x) rate swap transactions, swap options, basis swaps, forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options, interest rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, credit protection transactions, credit swaps, credit default swaps, credit default options, total return swaps, credit spread transactions, repurchase transactions, reverse repurchase transactions, buy/sell-back transactions, securities lending transactions, weather index transactions, or forward purchases or sales of a security, commodity or other financial instrument or interest (including any option with respect to any of these transactions), or (y) transactions that are similar those described above;       (i) for the avoidance of doubt, any lien or security interest granted or arising in connection with a bona fide securitization transaction by which such Borrower sells vehicle loan receivables, vehicle installment contracts, vehicle leases (together with or without the underlying vehicles), and/or other receivables or assets, the records relating thereto and the proceeds, rights and benefits accruing to it thereunder (the “Securitized Assets”) and underlying vehicles if not included with the Securitized Assets to a trust or entity established for the purpose of, among other things, purchasing, holding or owning Securitized Assets; and   (j) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any lien, charge or pledge referred to in the foregoing clauses (a) to (i), inclusive, of this Section 6.5; provided, however, that the amount of any and all obligations and indebtedness secured thereby shall not exceed the amount thereof so secured immediately prior to the time of such extension, renewal or replacement and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the charge or lien so extended, renewed or replaced (plus improvements on such property).   “Net Tangible Assets” means, with respect to any Borrower, the aggregate amount of assets (less applicable reserves and other properly deductible items) of such Borrower and its Consolidated Subsidiaries after deducting therefrom all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles of such Borrower and its Consolidated Subsidiaries, all as set forth on the most recent balance sheet of such Borrower and its Consolidated Subsidiaries prepared in accordance with GAAP.        49 -------------------------------------------------------------------------------- Section  6.6 Consolidations. Mergers and Sales of Assets. (a) Such Borrower shall not consolidate with or merge into any other Person or convey, transfer or lease (whether in one transaction or in a series of transactions) all or substantially all of its properties and assets to any Person, unless:   (i) the Person formed by such consolidation or into which such Borrower is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all of the properties and assets of such Borrower shall be a Person organized and existing under the Laws of the United States of America, any State thereof, the District of Columbia or Puerto Rico or, in the case of TCCI, Canada or any province of Canada (the “Successor Corporation”) and shall expressly assume, by an amendment or supplement to this Agreement, signed by such Borrower and such Successor Corporation and delivered to the Administrative Agent, such Borrower’s obligation with respect to the due and punctual payment of the principal of and interest on all the Loans made to such Borrower and the due and punctual payment of all other Obligations payable by such Borrower hereunder and the performance or observance of every covenant herein on the part of such Borrower to be performed or observed;   (ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of such Borrower as a result of such transaction as having been incurred by such Borrower at the time of such transaction, no Default with respect to such Borrower shall have happened and be continuing;   (iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of such Borrower would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Section 6.5 hereof, such Borrower or the Successor Corporation, as the case may be, takes such steps as shall be necessary effectively to secure the Loans and the Obligations of such Borrower under this Agreement equally and ratably with (or prior to) all indebtedness secured thereby; and   (iv) such Borrower has delivered to the Administrative Agent a certificate signed by an executive officer and a written opinion or opinions of counsel satisfactory to the Administrative Agent (who may be counsel to such Borrower), each stating that such amendment or supplement to this Agreement complies with this Section 6.6 and that all conditions precedent herein provided for relating to such transaction have been complied with.   (b) Upon any consolidation or merger or any conveyance, transfer or lease of all or substantially all of the properties and assets of such Borrower in accordance with Section 6.6(a), the Successor Corporation shall succeed to, and be substituted for, and may exercise every right and power of, such Borrower under this Agreement and the Loans with the same effect as if the Successor Corporation had been named as a Borrower therein and herein, and thereafter, such Borrower, except in the case of a lease of such Borrower’s properties and assets, shall be released from its liability as obligor on any of the Loans and under this Agreement.        50 -------------------------------------------------------------------------------- Section  6.7 Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by such Borrower for its general corporate purposes including, without limitation, the refunding of its maturing commercial paper. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate of buying or carrying any “margin stock” within the meaning of Regulation U. During the Tranche A Availability Period, the Tranche B Availability Period and the Tranche C Availability Period, as applicable, subject to the other terms and conditions of this Agreement, such Borrower may request and use the proceeds of Loans of one Type to repay outstanding Loans of another Type.     ARTICLE VII   DEFAULTS   Section  7.1 Events of Default. If one or more of the following events (“Events of Default”) shall have occurred and be continuing with respect to a Borrower:   (a) such Borrower shall fail to pay when due any principal of any Loan made to it or shall fail to pay within 5 days of the due date thereof any interest on any Loan, any fees or any other amount payable by it hereunder;   (b) such Borrower shall fail to observe or perform any covenant contained in Section 6.1(d), Section 6.5, Section 6.6 or Section 6.7;   (c) such Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to such Borrower by the Administrative Agent at the request of any Lender;   (d) any representation, warranty, certification or statement made by such Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made);   (e) indebtedness for borrowed money (i) in the case of TMCC or any of its Subsidiaries in an aggregate amount in excess of US$ 50,000,000, (ii) in the case of TCPR or any of its Subsidiaries in an aggregate amount in excess of US$ 50,000,000, or (iii) in the case of TCCI or any of its Subsidiaries in an aggregate amount in excess CDN$ 50,000,000, shall not be paid when due or shall be accelerated prior to its stated maturity date and, within 10 days after written notice thereof is given to such Borrower by the Administrative Agent, such indebtedness shall not be discharged or such acceleration shall not be rescinded or annulled;   (f) such Borrower or any Significant Subsidiary of such Borrower shall commence or consent to the commencement of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding      51 -------------------------------------------------------------------------------- under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding;   (g) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $10,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $50,000,000;   (h) judgments or orders for the payment of money in excess of $50,000,000 in the aggregate shall be rendered against such Borrower or any Significant Subsidiary of such Borrower and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; or   (i) such Borrower shall cease to be a TMC Consolidated Subsidiary;   then, and in every such event, the Administrative Agent shall, at the request of, or may, with the consent of, the applicable Required Lenders and after notice to the applicable Borrower (i) terminate the commitment of each Lender to make Loans to such Borrower, and they shall thereupon terminate, and (ii) declare the unpaid principal amount of all outstanding Loans made to such Borrower, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document by such Borrower to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Borrower; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans to such Borrower shall automatically terminate, the unpaid principal amount of all outstanding Loans made to such Borrower and all interest and other amounts as aforesaid shall automatically become due and payable.   Section 7.2 Application of Funds. After the exercise of remedies provided for in Section 7.1 (or after the Loans have automatically become immediately due and payable), any amounts received on account of the Obligations of any Borrower shall be applied by the Administrative Agent in the following order: First, to payment of that portion of the Obligations of such Borrower constituting fees, indemnities, expenses and other amounts (including Attorney Costs and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;      52 -------------------------------------------------------------------------------- Second, to payment of that portion of the Obligations of such Borrower constituting fees, indemnities and other amounts (other than principal and interest) payable to the appropriate Lenders (including Attorney Costs and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them; Third, to payment of that portion of the Obligations of such Borrower constituting accrued and unpaid interest on the Loans, ratably among the appropriate Lenders in proportion to the respective amounts described in this clause Third payable to them;         Fourth, to payment of that portion of the Obligations of such Borrower constituting unpaid principal of the Loans, ratably among the appropriate Lenders in proportion to the respective amounts described in this clause Fourth held by them; and Last, the balance, if any, after all of the Obligations of such Borrower have been indefeasibly paid in full, to such Borrower or as otherwise required by Law. ARTICLE VIII   THE ADMINISTRATIVE AGENT   Section 8.1 Appointment and Authorization of Administrative Agent.  Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. Section 8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. Section 8.3 Liability of Administrative Agent. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this      53 -------------------------------------------------------------------------------- Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Borrower or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Borrower or any Affiliate thereof. Section 8.4 Reliance by Administrative Agent.  (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, facsimile or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrowers), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the applicable Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the applicable Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.1, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto. Section 8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or a Borrower referring to this Agreement, describing such Default and stating that such notice is a “notice of default.” The Administrative Agent will notify the Lenders of its receipt of      54 -------------------------------------------------------------------------------- any such notice. The Administrative Agent shall take such action with respect to such Default as may be directed by the applicable Required Lenders in accordance with Article VII; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable or in the best interest of the Lenders.   Section 8.6 Credit Decision; Disclosure of Information by Administrative Agent. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender acknowledges that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to a Borrower hereunder. Each Lender also acknowledges that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Borrower or any of its Affiliates which may come into the possession of any Agent-Related Person. Section 8.7 Indemnification of Administrative Agent. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrowers to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Agent-Related Person’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the applicable Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section; provided, further, that such Indemnified Liability was incurred by or asserted against such Agent-Related Person acting as or for the Administrative Agent in connection with such capacity. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the      55 -------------------------------------------------------------------------------- Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent.         Section 8.8 Administrative Agent in its Individual Capacity. CUSA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each Borrower and its Affiliates as though CUSA were not the Administrative Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, CUSA or its Affiliates may receive information regarding a Borrower or any of its Affiliates (including information that may be subject to confidentiality obligations in favor of a Borrower or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, CUSA shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” include CUSA in its individual capacity. Section 8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor administrative agent shall be consented to by the Borrowers in writing at all times other than during the existence of an Event of Default (which consent of the Borrowers shall not be unreasonably withheld). If no successor administrative agent is so appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrowers, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor administrative agent, and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article VIII and Sections 9.4 and 9.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Section 8.10 Administrative Agent May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,      56 -------------------------------------------------------------------------------- composition or other judicial proceeding relative to a Borrower, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on such Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing by such Borrower and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Section 2.8 and Section 9.4) allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.8 and Section 9.4. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. Section 8.11 Other Agents, Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. Section 8.12 Sub-Agent. The Sub-Agent is not a non-resident of Canada for purposes of Part XIII of the ITA and, as such, it and not the Administrative Agent has been designated under this Agreement to carry out certain duties of the Administrative Agent in respect of TCCI. The Sub-Agent shall be subject to each of the obligations in this Agreement to be performed by the Administrative Agent, and each of TCCI and the Tranche C Lenders agrees that the Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the      57 -------------------------------------------------------------------------------- Administrative Agent under this Agreement as relate to the performance of its obligations hereunder. References in Sections 2.15 and 3.1 to the Administrative Agent shall also include the Sub-Agent.   ARTICLE IX MISCELLANEOUS Section 9.1 Amendments, Etc. Except as otherwise set forth in the last sentence of this Section, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Borrower therefrom, shall be effective unless in writing signed by the applicable Required Lenders and the applicable Borrower, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall: (a) waive any condition set forth in Section 4.1(a) without the written consent of each Lender; (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 7.1) without the written consent of such Lender; (c) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; (d) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the applicable Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of any Borrower to pay interest at the Default Rate; (e) change Section 2.12 or Section 7.2 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each affected Lender; (f) change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender that has a Commitment under the affected Tranche; provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by      58 -------------------------------------------------------------------------------- the parties thereto. Notwithstanding anything to the contrary herein, any amendment or waiver of any term of any Money Market Loan (except the increase in the principal amount thereof or the extension of any Interest Period until after the Revolving Maturity Date applicable to the Borrower of such Loan) made by a Lender hereunder shall be effective if signed by such Lender and the applicable Borrower and acknowledged by the Administrative Agent and (ii) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender. Section 9.2 Notices and Other Communications; Facsimile Copies.   (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or (subject to subsection (c) below) electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows: (i) if to a Borrower or the Administrative Agent, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 9.2 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and (ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrowers and the Administrative Agent. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative Agent pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on the Borrowers, the Administrative Agent and the Lenders. The Borrowers may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.      59 -------------------------------------------------------------------------------- (c) Limited Use of Electronic Mail. Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.1, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose.   (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices) purportedly given by or on behalf of a Responsible Officer of a Borrower or any other Person designated in writing by a Responsible Officer of a Borrower to the Administrative Agent even if (i) such notices were not otherwise made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrowers shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of a Responsible Officer of a Borrower or any other Person designated in writing by a Responsible Officer of a Borrower to the Administrative Agent. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. Section 9.3 No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law. Section 9.4 Attorney Costs, Expenses and Taxes. The Borrowers agree (a) to pay or reimburse the Administrative Agent for all costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs, and (b) to pay or reimburse the Administrative Agent and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any “workout” or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and expenses shall include all search and filing charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. All amounts due under this Section 9.4 shall be payable within ten Business Days after delivery to the Borrowers of a certificate setting forth in reasonable detail the basis for the amounts demanded. The agreements in this Section shall survive the termination of the Aggregate Commitments and repayment of all other Obligations.      60 -------------------------------------------------------------------------------- Section 9.5 Indemnification by the Borrowers. Whether or not the transactions contemplated hereby are consummated, the Borrowers shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or the use or proposed use of the proceeds therefrom, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee have any liability for any indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). All amounts due under this Section 9.5 shall be payable within 10 Business Days after the Borrowers receive demand therefor setting forth in reasonable detail the basis for such demand. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. Notwithstanding the foregoing, the Borrowers shall not, in connection with any single proceeding or series of related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm or internal legal department (in addition to any local counsel) for all Indemnitees, such firm or internal legal department to be selected by the Administrative Agent; provided that if an Indemnitee shall have reasonably concluded that (i) there may be legal defenses available to it which are different from or additional to those available to other Indemnitees and may conflict therewith or (ii) the representation of such Indemnitee and the other Indemnitees by the same counsel would otherwise be inappropriate under applicable principles of professional responsibility, such Indemnitee shall have the right to select and retain separate counsel to represent such Indemnitee in connection with such proceeding(s) at the expense of the Borrowers. Section 9.6 Payments Set Aside. To the extent that any payment by or on behalf of any Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises any right of set-off, and such payment or the proceeds of such set-off or any      61 -------------------------------------------------------------------------------- part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Interbank Rate from time to time in effect. Section 9.7 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Committed Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Committed Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund (as defined in subsection (f) of this Section) with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Committed Loans outstanding thereunder) subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than US$10,000,000 in the case of Tranche A Commitments or Tranche B Commitments or less than CDN$10,000,000 in the case of Tranche C Commitments unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing in respect of such Borrower, the applicable Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Committed Loans or the Commitment assigned; (iii) any assignment of a Commitment must be approved by the Administrative Agent (which approval shall not be unreasonably withheld or delayed) unless the Person that is the proposed      62 -------------------------------------------------------------------------------- assignee is itself a Lender or an Affiliate of a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of US$3,500. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.1, 3.4, 3.5, 9.4 and 9.5 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, each Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. If the Eligible Assignee is required to deliver documents pursuant to Section 9.15, it shall deliver those documents to the applicable Borrower and the Administrative Agent in accordance with Section 9.15. (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Lender may at any time, without the consent of, or notice to, any Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or a Borrower or any of the Borrowers’ Affiliates) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) in the case of a Tranche C Lender, such Participant is not a non-resident of Canada for purposes of Part XIII of the ITA and (iv) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of      63 -------------------------------------------------------------------------------- the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 9.1 that directly affects such Participant. Subject to subsection (e) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.1, 3.4 and 3.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 9.9 as though it were a Lender, provided such Participant agrees to be subject to Section 2.12 as though it were a Lender.  (e) A Participant shall not be entitled to receive any greater payment under Section 3.1 or Section 3.4 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of the participation to such Participant is made with the Borrowers’ prior written consent. A Participant shall not be entitled to the benefits of Section 3.1 unless the Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the benefit of each Borrower, to comply with Section 9.15 as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) As used herein, the following terms have the following meanings: “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and (ii) unless an Event of Default with respect to such Borrower has occurred and is continuing, the applicable Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Borrower or any of the Borrowers’ Affiliates; and provided, further, that, with respect to any Tranche C Commitment or any Tranche C Loans, any Person that is a non-resident of Canada for purposes of Part XIII of the ITA shall not qualify as an Eligible Assignee. “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. Section 9.8 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including      64 -------------------------------------------------------------------------------- accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority or self-regulatory body; (c) to the extent required by applicable Laws or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any credit derivative transaction relating to obligations of a Borrower; (g) with the consent of the applicable Borrower; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than a Borrower; or (i) to the National Association of Insurance Commissioners or any other similar organization. In addition, the Administrative Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Administrative Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Loans. For the purposes of this Section, “Information” means all information received from a Borrower relating to such Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such Borrower; provided that, in the case of information received from a Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, “Information” shall not include, and the Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) that are provided to the Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans and transactions contemplated hereby. Section 9.9 Set-off. Upon the occurrence and during the continuance of any Event of Default with respect to a Borrower, nothing in this Agreement shall preclude any Lender, at any time and from time to time, from exercising any right of set off, counterclaim, or other rights it may have otherwise than under this Agreement and or from applying amounts realized against any and all Obligations owing by such Borrower to such Lender hereunder or under any other Loan Document, now or hereafter existing. Each Lender agrees promptly to notify the applicable Borrower and the Administrative Agent after any such set-off and application made      65 -------------------------------------------------------------------------------- by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.   Section 9.10 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the applicable Borrower. Section 9.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 9.12 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. Section 9.13 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Borrowing and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. Section 9.14 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 9.15 Tax Forms.      66 -------------------------------------------------------------------------------- (a) (i) Each Tranche A Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to the Administrative Agent, prior to becoming a party to this Agreement (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Foreign Lender by TMCC pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by TMCC pursuant to this Agreement) or such other evidence satisfactory to TMCC and the Administrative Agent that such Foreign Lender is entitled to an exemption from, or reduction of, U.S. withholding tax, including any exemption pursuant to Section 881(c) of the Code. Thereafter and from time to time, each such Foreign Lender shall (A) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States Laws and regulations to avoid, or such evidence as is satisfactory to TMCC and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Foreign Lender by TMCC pursuant to this Agreement, (B) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (C) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that TMCC make any deduction or withholding for taxes from amounts payable to such Foreign Lender. (ii) As of the date that each Lender becomes a Tranche B Lender under this Agreement, each such Lender represents and warrants to the Administrative Agent and each Borrower that it is an Exempt Lender and agrees that, if Puerto Rico or United States taxing authorities at any time after the date of this Agreement require that such Lender deliver any certificate, statement or form as a condition to exemption from, or reduction of, withholding taxes under the Puerto Rico Code or the Code on any payments by TCPR to such Lender under this Agreement, such Lender shall deliver such certificate, statement or form to the Administrative Agent prior to becoming a party to this Agreement (or upon accepting an assignment of an interest herein). Thereafter and from time to time, each such Lender shall (A) promptly submit to the Administrative Agent such duly completed and signed certificates, statements or forms as shall be adopted from time to time by the relevant Puerto Rico or United States taxing authorities and such other evidence as is satisfactory to TCPR and the Administrative Agent of any available exemption from, or reduction of, Puerto Rico and United States withholding taxes in respect of all payments to be made to such Lender by TCPR pursuant to this Agreement, (B) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (C) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that TCPR make any deduction or withholding for taxes from amounts payable to such Lender.      67 -------------------------------------------------------------------------------- (iii) As of the date that each Lender becomes a Tranche C Lender under this Agreement, each such Lender represents and warrants to the Administrative Agent and TCCI that it is not a non-resident in Canada for purposes of Part XIII of the ITA and agrees that as long as it is a Tranche C Lender it will not be a non-resident of Canada for purposes of Part XIII of the ITA. (iv) Each Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Lender under any of the Loan Documents (for example, in the case of a typical participation by such Lender), shall deliver to the Administrative Agent on the date when such Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Administrative Agent (in the reasonable exercise of its discretion), (A) two duly signed completed copies of the certificates, statements or forms required to be provided by such Lender as set forth above, to establish the portion of any such sums paid or payable with respect to which such Lender acts for its own account that is not, in the case of a Tranche A Lender, subject to United States withholding tax or in the case of a Tranche B Lender, subject to Puerto Rico or United States withholding tax; (B) any information such Lender chooses to transmit with such certificates, statements or forms, and any other certificate or statement of exemption required under the Code or, in the case of a Tranche B Lender; and (C) in the case of a Tranche C Lender evidence that no Person for whom such Lender is receiving any portion of any sums paid or payable to such Lender is a non-resident of Canada for purposes of Part XIII of the ITA. (v) No Borrower shall be required to pay any additional amount to any Lender under Section 3.1 (A) with respect to any Taxes required to be deducted or withheld on the basis of the information, certificates or statements of exemption such Lender transmits pursuant to this Section 9.15(a) or (B) if such Lender shall have failed to satisfy the foregoing provisions of this Section 9.15(a); provided that if such Lender shall have satisfied the requirement of this Section 9.15(a) on the date such Lender became a Lender or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 9.15(a) shall relieve such Borrower of its obligation to pay any amounts pursuant to Section 3.1 in the event that, as a result of any change in any applicable Law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate. (vi) The Administrative Agent may, without reduction, withhold any Taxes required to be deducted and withheld from any payment under any of the Loan Documents with respect to which a Borrower is not required to pay additional amounts under this Section 9.15(a). (b) Upon the request of the Administrative Agent, each Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Administrative Agent may withhold from any interest payment to 68 --------------------------------------------------------------------------------  such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (c) If any Governmental Authority asserts that the Administrative Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Commitments, repayment of all other Obligations hereunder and the resignation of the Administrative Agent. Section 9.16 Replacement of Lenders. Under any circumstances set forth herein providing that a Borrower shall have the right to replace a Lender as a party to this Agreement and if any Lender is a Defaulting Lender or has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding, such Borrower may, upon notice to such Lender and the Administrative Agent, replace such Lender by causing such Lender to assign its Commitment (with the assignment fee to be paid by such Borrower in such instance) pursuant to Section 9.7(b) to one or more other Lenders or Eligible Assignees procured by such Borrower; provided, however, that if such Borrower elects to exercise such rights with respect to any Lender pursuant to Section 3.6(c), it shall be obligated to replace all Lenders that have made similar requests for compensation pursuant to Section 3.1 or 3.4. The applicable Borrower shall (y) pay in full all principal, interest, fees and other amounts owing to such Lender through the date of replacement (including any amounts payable pursuant to Section 3.5) and (z) release such Lender from its obligations under the Loan Documents. Any Lender being replaced shall execute and deliver an Assignment and Assumption with respect to such Lender’s Commitment and outstanding Loans. Section 9.17 Governing Law.  (a) THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE COUNTY OF NEW YORK IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY      69 -------------------------------------------------------------------------------- OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. Section 9.18 Patriot Act Notice. Each Lender that is subject to the Act (as hereinafter defined) and the Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies such Borrower, which information includes the name and address of such Borrower and other information that will allow such Lender or the Agent, as applicable, to identify such Borrower in accordance with the Act. Section 9.19 Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in US Dollars or Canadian Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase US Dollars or Canadian Dollars with such other currency at Citibank’s principal office in London at 11:00 A.M. (London time) on the Business Day preceding that on which final judgment is given. (b) The obligation of TCCI in respect of any sum due from it in any currency (the “Primary Currency”) to any Tranche C Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, TCCI agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender or the Administrative Agent (as the case may be) agrees to remit to TCCI such excess. Section 9.19 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE      70 -------------------------------------------------------------------------------- WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 71 --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.   TOYOTA MOTOR CREDIT CORPORATION   By: /s/ George E. Borst   Title: President and Chief Executive Officer     TOYOTA CREDIT DE PUERTO RICO CORP.   By: /s/ George E. Borst   Title: President and Chief Executive Officer     TOYOTA CREDIT CANADA INC.   By: /s/ L. Baldesarra   Title: SVP and Secretary       S-1 --------------------------------------------------------------------------------   CITICORP USA, INC., as   Administrative Agent and a Lender     By: /s/ Wajeeh Faheem   Title: Vice President       S-2 --------------------------------------------------------------------------------   BANK OF AMERICA, N.A., as   Syndication Agent and a Lender     By: /s/ Alan H. Roche   Title: Managing Director     S-3 --------------------------------------------------------------------------------   THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. LOS ANGELES BRANCH,   as a Lender     By: /s/ Kimihisa Imada   Title: General Manager         BANK OF TOKYO-MITSUBISHI UFJ (CANADA),   as a Lender     By: /s/ Atsushi Tanaka   Title: Executive Vice President     S-4 --------------------------------------------------------------------------------   BNP PARIBAS,   as a Lender     By: /s/ Gaye Plunkett   Title: Vice President     By: /s/ Christopher Grumboski   Title: Director         S-5 --------------------------------------------------------------------------------     BNP PARIBAS (CANADA),   as a Lender     By: /s/ Colin Dickinson   Title: Director       S-1 --------------------------------------------------------------------------------   JPMORGAN CHASE BANK, N.A.,   as a Lender     By: /s/ Frances L. Bonham   Title: Managing Director     JPMORGAN CHASE BANK, N.A., TORONTO BRANCH,   as a Lender     By: /s/ Drew McDonald   Title: Vice President     S-2 --------------------------------------------------------------------------------   DEUTSCHE BANK AG NEW YORK BRANCH,   as a Lender     By: /s/ Michael Dietz   Title: Director     By: /s/ Brian Collins   Title: Vice President     S-3 --------------------------------------------------------------------------------   HSBC BANK USA, N.A.,   as a Lender     By: /s/ Christopher Samms   Title: Senior Vice President     S-4 --------------------------------------------------------------------------------   SUMITOMO MITSUI BANKING CORPORATION,   as a Lender     By: /s/ Masahiko Oshima   Title: General Manager     SUMITOMO MITSUI BANKING CORPORATION OF CANADA,   as a Lender     By: /s/ Minami Aida_   Title: President and C.E.O     S-5 --------------------------------------------------------------------------------   BARCLAYS BANK PLC,   as a Lender     By: /s/ Alison McGuigan   Title: Associate Director       S-6 --------------------------------------------------------------------------------   CREDIT SUISSE NEW YORK BRANCH,   as a Lender     By: /s/ Mark E. Gleason   Title: Director     By: /s/ Mikhail Faybusovich   Title: Associate     S-7 --------------------------------------------------------------------------------   DRESDNER BANK AG NEW YORK BRANCH AND GRAND CAYMAN BRANCH,   as a Lender     By: /s/ Thomas R. Brady   Title: Director     By: /s/ Joseph M. Mormak   Title: Vice President     S-8 --------------------------------------------------------------------------------   MERRILL LYNCH BANK USA,   as a Lender     By: /s/ Louis Alder   Title: Director     S-9 --------------------------------------------------------------------------------   MIZUHO CORPORATE BANK LTD.,   as a Lender       By: /s/ Shinji Yamada   Title: Joint General Manager     S-10 --------------------------------------------------------------------------------   MIZUHO CORPORATE BANK (CANADA),   as a Lender       By: /s/ Minoru Yoshida   Title: Executive Vice President     S-11 --------------------------------------------------------------------------------   MORGAN STANLEY BANK,   as a Lender     By: /s/ Eugene F. Martin   Title: Vice President     S-12 --------------------------------------------------------------------------------   THE ROYAL BANK OF SCOTLAND PLC,   as a Lender     By: /s/ Frank Guerra   Title: Managing Director     S-13 --------------------------------------------------------------------------------   UBS LOAN FINANCE LLC,   as a Lender     By: /s/ Irja R. Otsa   Title: Associate Director     By: /s/ Richard L. Tavrow   Title: Director     S-14 --------------------------------------------------------------------------------   WACHOVIA BANK NATIONAL ASSOCIATION,   as a Lender       By: /s/ James Travagline   Title: Vice President     S-15 --------------------------------------------------------------------------------   ROYAL BANK OF CANADA,   as a Lender     By: /s/ Barton Lund   Title: Authorized Signatory       ROYAL BANK OF CANADA,   as a Lender     By: /s/ Mark Beck   Title: Attorney-in-Fact         S-16 --------------------------------------------------------------------------------   TORONTO-DOMINION (TEXAS) LLC,   as a Lender     By: /s/ Jim Bridwell   Title: Authorized Signatory     S-17 --------------------------------------------------------------------------------   THE TORONTO-DOMINION BANK,   as a Lender     By: /s/ Parin Kanji   Title: Manager       S-18 --------------------------------------------------------------------------------   ING LUXEMBOURG S.A.,   as a Lender     By: /s/ Yves Verhulst   Title: Director     By: /s/ Philippe Gusbin   Title: Director     S-19 --------------------------------------------------------------------------------   BANCO SANTANDER CENTRAL HISPANO, S.A.,   as a Lender     By: /s/ Ignacio Campillo   Title: Executive Director     By: /s/ L. Ruben Perez-Romo   Title: Vice President     S-20 --------------------------------------------------------------------------------   MELLON BANK, N.A.,   as a Lender     By: /s/ David B. Wirl   Title: Vice president     S-21 --------------------------------------------------------------------------------   THE BANK OF NOVA SCOTIA,   as a Lender     By: /s/ N. Bell   Title: Senior Manager     S-22 --------------------------------------------------------------------------------   COMERICA BANK,   as a Lender     By: /s/ Toru Ogura   Title: Vice President     S-23 --------------------------------------------------------------------------------   FIFTH THIRD BANK,   as a Lender     By: /s/ Gary S. Losey   Title: Relationship Manager     S-24 --------------------------------------------------------------------------------   HARRIS NESBIT FINANCING, INC.,   as a Lender     By: /s/ Joseph W. Linder   Title: Vice President     S-25 --------------------------------------------------------------------------------   BANK OF MONTREAL,   as a Lender     By: /s/ Joseph W. Linder   Title: Vice President       S-26 --------------------------------------------------------------------------------   PNC BANK, NATIONAL ASSOCIATION,   as Syndication Agent and a Lender     By: /s/ Louis K. McLinder   Title: Vice President     S-27 --------------------------------------------------------------------------------   THE BANK OF NEW YORK,   as a Lender     By: /s/ Robert Besser   Title: Vice President     S-28 --------------------------------------------------------------------------------   BANCO POPULAR DE PUERTO RICO,   as a Lender     By: Hector Gonzalez   Title: Vice President     S-29 --------------------------------------------------------------------------------   CANADIAN IMPERIAL BANK OF COMMERCE,   as a Lender     By: /s/ Ralph Sehgal   Title: Executive Director     By: /s/ Patti Perras Shugart   Title: Managing Director           S-30 -------------------------------------------------------------------------------- SCHEDULE 2.1   COMMITMENTS   AND PRO RATA SHARES   Lender   Tranche A Commitment   Tranche B Commitment   Tranche C Commitment   Pro Rata Share of Tranche A   Pro Rata Share of Tranche B   Pro Rata Share of Tranche C   Citicorp USA, Inc.   US$247,383,620.69   US$15,116,379.31     9.05%   9.05%     Bank of America, N.A.   US$247,383,620.69   US$15,116,379.31     9.05%   9.05%     The Bank of Tokyo-Mitsubishi UFJ, Ltd. Los Angeles Branch   US$172,775,862.07   US$10,557,471.26     6.32%   6.32%     Bank of Tokyo-Mitsubishi UFJ (Canada)       CDN$60,000,000.00       9.23%   BNP Paribas   US$172,775,862.07   US$10,557,471.26     6.32%   6.32%     BNP Paribas (Canada)       CDN$30,000,000.00       4.62%   JPMorgan Chase Bank, N.A.   US$172,775,862.07   US$10,557,471.26     6.32%   6.32%     JPMorgan Chase Bank, N.A., Toronto Branch       CDN$50,000,000.00       7.69%   Deutsche Bank AG New York Branch   US$133,508,620.69   US$8,158,045.98     4.89%   4.89%     HSBC Bank USA, National Association   US$133,508,620.69   US$8,158,045.98     4.89%   4.89%     Sumitomo Mitsui Banking Corporation   US$133,508,620.69   US$8,158,045.98     4.89%   4.89%     Sumitomo Mitsui Banking Corporation of Canada       CDN$60,000,000.00       9.23%   Barclays Bank PLC   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Credit Suisse New York Branch   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Dresdner Bank AG New York Branch and Grand Cayman Branch   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Merrill Lynch Bank USA   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Mizuho Corporate Bank Ltd.   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Mizuho Corporate Bank (Canada)       CDN$30,000,000.00       4.62%   Morgan Stanley Bank   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     The Royal Bank of Scotland plc   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     UBS Loan Finance LLC   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Wachovia Bank, National Association   US$86,387,931.03   US$5,278,735.63     3.16%   3.16%     Royal Bank of Canada   US$78,534,482.76   US$4,798,850.57   CDN$180,000,000.00   2.87%   2.87%   27.69%   Toronto-Dominion (Texas) LLC       US$78,534,482.76   US$4,798,850.57     2.87%   2.87%     The Toronto-Dominion Bank       CDN$50,000,000.00       7.69%   ING Luxembourg S.A.   US$62,827,586.21   US$3,839,080.46     2.30%   2.30%     Banco Santander Central Hispano, S.A.   US$47,120,689.66   US$2,879,310.34     1.72%   1.72%     Mellon Bank, N.A.   US$47,120,689.66   US$2,879,310.34     1.72%   1.72%     The Bank of Nova Scotia   US$47,120,689.66   US$2,879,310.34   CDN$50,000,000.00   1.72%   1.72%   7.69%   Comerica Bank   US$31,413,793.10   US$1,919,540.23     1.15%   1.15%     Fifth Third Bank   US$31,413,793.10   US$1,919,540.23     1.15%   1.15%     Harris Nesbitt Financing, Inc.   US$31,413,793.10   US$1,919,540.23     1.15%   1.15%     Bank of Montreal       CDN$40,000,000.00       6.15%   PNC Bank, National Association   US$31,413,793.10   US$1,919,540.23     1.15%   1.15%     The Bank of New York   US$31,413,793.10   US$1,919,540.23     1.15%   1.15%     Banco Popular de Puerto Rico   US$23,560,344.83   US$1,439,655.17     0.86%   0.86%     Canadian Imperial Bank of Commerce       CDN$100,000,000.00       15.38%     US$2,733,000,000   US$167,000,000   CDN$650,000,000   100.00%   100.00%   100.00%         1 --------------------------------------------------------------------------------     SCHEDULE 4.1(d)   TCCI LIST OF BILATERAL AGREEMENTS   Short Name Full Name Amount Date of       Agreement         BMO Bank of Montreal CDN$40,000,000 Oct. 30, 2003 BNP P BNP PARIBAS (Canada) CDN$30,000,000 Nov. 27, 2003 BNS The Bank of Nova Scotia CDN$50,000,000 Jun. 14, 2004 BOTM Bank of Tokyo-Mitsubishi UFJ (Canada) CDN$60,000,000 Nov. 6, 2003 CIBC Canadian Imperial Bank of Commerce CDN$100,000,000 Feb. 15, 1999 JPMC JPMorgan Chase Bank, N.A., Toronto Branch CDN$50,000,000 Feb. 15, 1999 Mizuho Mizuho Corporate Bank (Canada) CDN$30,000,000 Oct. 20, 2003 RBC Royal Bank of Canada CDN$200,000,000 Apr. 30, 1999 SMBC Sumitomo Mitsui Banking Corporation of Canada CDN$40,000,000 Oct. 29, 2003 TD The Toronto-Dominion Bank CDN$50,000,000 Sept. 24, 2002             Total: CDN$650M       1 --------------------------------------------------------------------------------   SCHEDULE 9.2   ADMINISTRATIVE AGENT’S OFFICE,   CERTAIN ADDRESSES FOR NOTICES     BORROWER:      Toyota Motor Credit Corporation   Borrower’s Address (for all purposes) Toyota Motor Credit Corporation 19001 South Western Avenue P.O. Box 2991 Mail Stop NF-10 Torrance, Ca. 90509 Attention: Jeff Carter, National Treasury Manager Telephone: (310) 468-6197 Facsimile: (310) 381-6655 (With a copy to): Toyota Motor Credit Corporation 19001 South Western Avenue P.O. Box 2991 Mail Stop NF-10 Torrance, Ca. 90509 Attention: Janet Rydell, Cash Manager Telephone: (310) 468-6176 Facsimile: (310) 381-5219   Toyota Credit de Puerto Rico Corp.   Borrower’s Address (for all purposes) Toyota Credit de Puerto Rico Corp. c/o Toyota Motor Credit Corporation Attn: Treasury 19001 South Western Avenue P.O. Box 2991 Mail Stop NF-10 Torrance, Ca. 90509 Attention: Jeff Carter, National Treasury Manager Telephone: (310) 468-6197 1 -------------------------------------------------------------------------------- Facsimile: (310) 381-6655 (With a copy to): Toyota Motor Credit Corporation 19001 South Western Avenue P.O. Box 2991 Mail Stop NF-10 Torrance, Ca. 90509 Attention: Janet Rydell, Cash Manager Telephone: (310) 468-6176 Facsimile: (310) 381-5219 Toyota Credit Canada Inc.   Borrower’s Address (for all purposes) Toyota Credit Canada Inc. 80 Micro Court, Suite 200 Markham, Ontario Canada L3R 925 Attention: Treasury Manager Telephone: (905) 513-5411 Facsimile: (905) 513-8335 (With a copy to): Toyota Motor Credit Corporation 19001 South Western Avenue P.O. Box 2991 Mail Stop NF-10 Torrance, Ca. 90509 Attention: Janet Rydell, Cash Manager and Jeff Carter, National Treasury Manager Telephone: (310) 468-6176 Facsimile: (310) 381-5219 ADMINISTRATIVE AGENT: CITICORP USA, INC. Administrative Agent’s Office  (for Notices of Payments and Requests for Loans): Citicorp USA, Inc. Two Penns Way New Castle, Delaware Attention:    Telephone:(302)    Facsimile: (212)             (for Payments):           (Other Notices as Administrative Agent):        2 -------------------------------------------------------------------------------- EXHIBIT A   FORM OF COMMITTED LOAN NOTICE     Date: ___________, _____ To: Citicorp USA, Inc., as Administrative Agent   Ladies and Gentlemen: Reference is made to that certain 364 Day Credit Agreement, dated as of March 29, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. The undersigned hereby requests (select one): ___ A Borrowing of Committed Loans ___ A conversion or continuation of Loans 1. On ________ (a Business Day). 2. In the amount of [US][CN]$_______ . 3. Comprised of _________. [Type of Committed Loan requested] 4. For Eurodollar Rate Loans: with an Interest Period of _____months. 5. For Bankers’ Acceptances, Drafts and BA Equivalent Notes: with BA Maturity Date of _____days. [The Committed Borrowing requested herein complies with the proviso to the first sentence of Section 2.1[(a)][(b)][c] of the Agreement.] [TOYOTA MOTOR CREDIT CORPORATION] [TOYOTA CREDIT DE PUERTO RICO CORP.] [TOYOTA CREDIT CANADA INC.]     By:   Form of Committed Loan Notice A-1 --------------------------------------------------------------------------------   Name: ________________ Title: _________________ Form of Committed Loan Notice A-2 -------------------------------------------------------------------------------- EXHIBIT B   FORM OF NOTE     __________, 200_   FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay, without setoff or counterclaim, to _____________________ or to its order (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of each Loan from time to time made by the Lender to the Borrower under that certain 364 Day Credit Agreement, dated as of March 29, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in US Dollars in immediately available funds at the Administrative Agent’s Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. Form of Note B-1 -------------------------------------------------------------------------------- THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.   [TOYOTA MOTOR CREDIT CORPORATION] [TOYOTA CREDIT DE PUERTO RICO CORP.] [TOYOTA CREDIT CANADA INC.]     By:   Name:   Title:  Form of Note B-2 -------------------------------------------------------------------------------- LOANS AND PAYMENTS WITH RESPECT THERETO     Date   Type of Loan Made   Amount of Loan Made   End of Interest Period   Amount of Principal or Interest Paid This Date   Outstanding Principal Balance This Date   Notation Made By                                                                                                                                                                                                                                                 Form of Note B-3 -------------------------------------------------------------------------------- EXHIBIT C   FORM OF COMPLIANCE CERTIFICATE         As required by Section 6.1(c) of the 364 Day Credit Agreement, dated as of March 29, 2006, among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents (the “Agreement”), I, __________________, do hereby certify that I am the chief financial officer of [Toyota Motor Credit Corporation] [Toyota Credit de Puerto Rico Corp.] [Toyota Credit Canada Inc.] (the “Company”), and further certify on behalf of the Company that, to the best of my knowledge, no Default (as defined in the Agreement) under the Agreement exists as of the date of this Certificate.     Certified this _____ day of ______________, 200_             Name: ___________________________________ Form of Compliance Certificate C-1 -------------------------------------------------------------------------------- EXHIBIT D   ASSIGNMENT AND ASSUMPTION   This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at Law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.   1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund of [identify Lender]1] 3. Borrower(s): [Toyota Motor Credit Corporation][Toyota Credit de Puerto Rico Corp.][Toyota Credit Canada Inc.] 4. Administrative Agent: ______________________, as the administrative agent under the Credit Agreement 5. Credit Agreement: 364 Day Credit Agreement, dated as of March 29, 2006, among     Toyota Motor Credit Corporation, a California corporation,     Toyota Credit de Puerto Rico Corp., a corporation organized     under the laws of Puerto Rico, Toyota Credit Canada Inc., a     corporation organized under the laws of Canada, the    __________________________   1 Select as applicable.         Assignment and Assumption D-1 --------------------------------------------------------------------------------                                       Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. 6.   Assigned Interest2:     Facility Assigned:   Tranche [A][B][C] Aggregate Amount of Tranche [A][B][C] Commitment/Loans for all Lenders*      Amount of   Tranche [A][B][C] Commitment/Loans   Assigned*      Percentage   Assigned of   Tranche [A][B][C] Commitment/Loans3 Commitment/Committed Loans being assigned   [US][CN]$_______________   [US][CN]$________________   ______________%   [7. Trade Date: __________________]4   Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]   [8. The Assignee represents and warrants to the Assignor and to TCCI that it is not a non-resident of Canada for purposes of Part XIII of the Income Tax Act (Canada).]5 The terms set forth in this Assignment and Assumption are hereby agreed to:      ASSIGNOR [NAME OF ASSIGNOR]    By: _____________________________ Title:    ASSIGNEE [NAME OF ASSIGNEE]    By: _____________________________     * Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.   2 The reference to "Loans" in the table should be used only if the Credit Agreement provides for Term Loans.   3 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.   4 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.   5 To be inserted in the case of an assignment by a Tranche C Lender.   Assignment and Assumption D-2 --------------------------------------------------------------------------------                                               Title:       Assignment and Assumption D-3 --------------------------------------------------------------------------------   [Consented to and]6 Accepted:      [NAME OF ADMINISTRATIVE AGENT], as    Administrative Agent      By: _________________________________    Title:      [Consented to:]7      By: _________________________________    Title:  ______________________ 6 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.   7 To be added only if the consent of the applicable Borrower and/or other parties is required by the terms of the Credit Agreement.   Assignment and Assumption D-4 -------------------------------------------------------------------------------- ANNEX 1 TO ASSIGNMENT AND ASSUMPTION (364 DAY CREDIT AGREEMENT, DATED AS OF MARCH 29, 2006, AMONG TOYOTA MOTOR CREDIT CORPORATION, A CALIFORNIA CORPORATION, TOYOTA CREDIT DE PUERTO RICO CORP., A CORPORATION ORGANIZED UNDER THE LAWS OF PUERTO RICO, TOYOTA CREDIT CANADA INC., A CORPORATION ORGANIZED UNDER THE LAWS OF CANADA, THE LENDERS FROM TIME TO TIME PARTY THERETO, CITICORP USA, INC., AS ADMINISTRATIVE AGENT, CITIGROUP GLOBAL MARKETS INC. AND BANC OF AMERICA SECURITIES LLC, AS JOINT LEAD ARRANGERS AND JOINT BOOK MANAGERS, BANK OF AMERICA, N.A., AS SYNDICATION AGENT, AND THE BANK OF TOKYO-MITSUBISHI, LTD. AND JPMORGAN CHASE BANK, N.A., AS DOCUMENTATION AGENTS) STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim created by the Assignor and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of any Borrower or any of its Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by any Borrower or any of its Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.1 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) attached hereto is any withholding tax documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or Assignment and Assumption D-5 -------------------------------------------------------------------------------- any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the Law of the State of New York.   Assignment and Assumption D-6 -------------------------------------------------------------------------------- EXHIBIT E   FORM OF MONEY MARKET QUOTE REQUEST   Date: ___________, _____ To: Citicorp USA, Inc., as Administrative Agent   Ladies and Gentlemen: Reference is made to that certain 364 Day Credit Agreement, dated as of March 29, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. The undersigned hereby requests Money Market Quotes for (select one): ___ Money Market Absolute Rate for      ___ Money Market Margin for         Money Market Absolute Rate Loans       Money Market LIBOR Loans 1. On _________  (a Business Day). 2. In the amount of US$_______. 3. For an Interest Period of  _____________. The Money Market Loans for which Money Market Quotes are requested herein would comply with the proviso to the first sentence of Section 2.3(a) of the Agreement.   [TOYOTA MOTOR CREDIT CORPORATION]   [TOYOTA CREDIT DE PUERTO RICO CORP.]     By:   Name:   Title:   Form of Money Market Quote Request E-1 -------------------------------------------------------------------------------- EXHIBIT F   FORM OF INVITATION FOR MONEY MARKET QUOTES   Date: ___________, _____ To: Lenders party to the Agreement (as defined below)   Ladies and Gentlemen: Reference is made to that certain 364 Day Credit Agreement, dated as of March 29, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. On behalf of [TMCC][TCPR], you are invited to submit Money Market Quotes for (select one): ___ Money Market Absolute Rate for      ___ Money Market Margin for        Money Market Absolute Rate Loans      Money Market LIBOR Loans 1. On _______________________________________ (a Business Day). 2. In the amount of US$ _______. 3. For an Interest Period of  __________________.   Please respond to this invitation by no later than [1 :00 p.m.] [9:00 a.m.] on [date].   CITICORP USA, INC., as Administrative Agent     By:________________________________         Authorized Officer   Form of Invitation for Money Market Quotes F-1 -------------------------------------------------------------------------------- EXHIBIT G   FORM OF MONEY MARKET QUOTE   Date: ___________, _____ To: Citicorp USA, Inc., as Administrative Agent   Ladies and Gentlemen: Reference is made to that certain 364 Day Credit Agreement, dated as of March 29, 2006 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. In response to your invitation on behalf of [TMCC][TCPR] dated ______________, 20__, we hereby make the following Money Market Quote on the following terms:   1. Quoting Lender:      ________________________   2. Person to contact at Quoting Lender:     Name: ________________________ Tel: ________________________ Fax: ________________________ email: ________________________   3. Date of Borrowing:           _______________________8   4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:   Principal Amount9   Interest Period10   [Money Market                Margin]11   [Absolute Rate12]   US$         US$         _________________   8As specified in the related Invitation.   9 Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offer exceeds the amount the Lender is willing to lend. Bids must be made for US$5,000,000 or larger multiple of US$1,000,000.   Form of Money Market Quote G-1 --------------------------------------------------------------------------------   The Money Market Loans for which Money Market Quotes are submitted herein comply with the requirements of the Agreement. We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Agreement, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part.   Very truly yours,   [NAME OF LENDER]   Dated:_______________                By: _____________________                                                    Authorized Officer   ______________________________ 10Not less than one month or not less than 14 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period   11Margin over or under the Eurodollar Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/100,000 of 1%) and specify whether “PLUS” or “MINUS.”   12Specify rate of interest per annum (to the nearest 1/10,000th of 1%).   Form of Money Market Quote G-2 -------------------------------------------------------------------------------- EXHIBIT H   FORM OF OPINION OF COUNSEL FOR THE BORROWERS     To the Lenders and the Administrative Agent Referred to Below c/o Citicorp USA, Inc., as Administrative Agent Two Penns Way New Castle, DE 19720   Re: Credit Agreement   Ladies and Gentlemen:   I and my staff have acted as counsel for Toyota Motor Credit Corporation, Toyota Credit de Puerto Rico Corp. and Toyota Credit Canada Inc. (the “Borrowers”) in connection with the 364 Day Credit Agreement, dated as of March 29, 2006, among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico, Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you pursuant to Section 4.1(a)(v) of the Credit Agreement.   I am General Counsel of TMCC and as such I, or members of my staff, have participated in the negotiation of the Credit Agreement. I, or members of my staff, have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and Law as we have deemed necessary or advisable for purposes of this opinion.   Upon the basis of the foregoing and in reliance thereon, I am of the opinion, subject to the assumptions and limitations set forth herein, that:   1. TMCC is a corporation duly incorporated, validly existing and in good standing under the Laws of California, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.   2. The execution, delivery and performance by each Borrower of the Credit Agreement and the Notes to be delivered by it do not contravene, or constitute a default under, any debt instrument or any other material agreement, judgment, injunction, order, decree or other instrument binding upon such Borrower. As to debt instruments or   Form of Opinion of Counsel to the Borrower H-1 -------------------------------------------------------------------------------- agreements which, by their terms, are or may be governed by the Law of a jurisdiction other than California, I have assumed that such debt instruments and agreements are governed by the Law of California for purposes of the opinion expressed in this paragraph.   3. The Credit Agreement and the Notes are governed, by their terms, by New York Law. I express no opinion on the enforceability of the Loan Documents under New York Law. If California Law were to apply, the Credit Agreement would constitute a valid and binding agreement of each Borrower and each Note would constitute a valid and binding obligation of the Borrower party thereto, in each case enforceable in accordance with its terms.   4. There is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, any Borrower before any court or arbitrator or any Governmental Authority, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or results of operations of such Borrower or which in any manner draws into question the validity of the Credit Agreement or the Notes.   5. Each of TMCC’s corporate Subsidiaries is a corporation validly existing and in good standing under the Laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.   The opinion set forth in paragraph 3 is subject to: (i) the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar Laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) limitations on the remedy of specific performance and injunctive and other forms of equitable relief due to the possible existence of equitable defenses or due to the discretion of the court before which any proceeding therefor may be brought, (iii) the unenforceability under certain circumstances of provisions to the effect that failure to exercise, or delay in exercising, rights or remedies will not operate as a waiver of any such right or remedy, (iv) limitations based upon statutes or upon public policy limiting a Person’s right to waive the benefits of statutory provisions or of a common law right, (v) limitations on the right of a creditor to exercise remedies or impose penalties for late payments or other defaults by a borrower, if it is determined that (a) either the defaults are not material, such penalties bear no reasonable relation to the damage suffered by the creditor as a result of such delinquencies or defaults, or it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (b) the creditor’s enforcement of such covenants or provisions under the circumstances would violate the creditor’s implied covenant of good faith and fair dealing, (vi) the unenforceability under certain circumstances, under California or federal Law or court decisions, of provisions releasing a party from, or indemnifying a party against, liability for its own wrongful or grossly negligent acts or where such release or indemnification is contrary to public policy, (vii) the effect of California Law, which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause of a contract which the court finds to have been unconscionable at the time it   Form of Opinion of Counsel to the Borrower H-2 -------------------------------------------------------------------------------- was made, or an unfair portion of an adhesion contract, (viii) the effect of California Law, which provides that when a contract permits one party to a contract to recover attorneys’ fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys’ fees, (ix) compliance with, and limitations imposed by, procedural requirements of state Law, including the provisions of the California Commercial Code relating to the exercise of remedies by a creditor; and (x) limitations under California Law as to the right to retain or collect unearned interest. The foregoing limitations, however, do not render the Credit Agreement and the Notes invalid as a whole, and there exists, in the Credit Agreement and the Notes or pursuant to applicable Law, legally adequate remedies for the realization of the principal benefits intended to be provided by the Credit Agreement and the Notes.   I am a member of the Bar of the State of California and the foregoing opinion is limited to the Laws of the State of California and the federal Laws of the United States of America. In giving the foregoing opinion, (i) I express no opinion as to the effect (if any) of any Law of any jurisdiction (except the State of California) in which any Lender is located which limits the rate of interest that such Lender may charge or collect; (ii) I have assumed, without independent investigation, that the execution, delivery and performance by the Lenders of the Credit Agreement are within the Lenders’ powers and have been duly authorized by all necessary action; and (iii) I have assumed, without independent investigation, that each of the Lenders is exempt from the limitations on interest contained in Article XV, Section 1 of the Constitution of the State of California.   The references in this opinion to facts based on the “best of my knowledge” refer only to my own actual, present knowledge and the knowledge of the members of my staff who have given substantive consideration to the matters referred to herein.   This opinion is furnished by me as General Counsel for TMCC to you in connection with the Credit Agreement, is solely for your benefit and may not be relied upon by any other person, other than an Eligible Assignee or Participant pursuant to Section 9.7 of the Credit Agreement, without my prior written consent. Notwithstanding the foregoing grant of permission to Eligible Assignees to rely on this opinion, I express no opinion with respect to the effect of any such Eligible Assignee failing to comply with any legal requirement in order for it to enforce the Credit Agreement. I express no opinion as to enforceability of the Loan Documents by a Participant.   Respectfully submitted,     Geri Brewster                                 General Counsel       Form of Opinion of Counsel to the Borrower H-3 -------------------------------------------------------------------------------- EXHIBIT I   FORM OF OPINION Of PIETRANTONI MÉNDEZ & ALVAREZ LLP     To the Lenders and the Administrative Agent Referred to Below c/o Citicorp USA, Inc., as Administrative Agent Two Penns Way New Castle, DE 19720   Re: Credit Agreement   Ladies and Gentlemen:   We have acted as special Commonwealth of Puerto Rico counsel for Citicorp USA, Inc., as Administrative Agent (the “Administrative Agent”), in connection with the 364 Day Credit Agreement, dated as of March 29, 2006, among Toyota Motor Credit Corporation, a California corporation, Toyota Credit de Puerto Rico Corp., a corporation organized under the laws of Puerto Rico (the “Borrower”), Toyota Credit Canada Inc., a corporation organized under the laws of Canada, the Lenders from time to time party thereto, Citicorp USA, Inc., as Administrative Agent, Citigroup Global Markets Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Joint Book Managers, Bank of America, N.A., as Syndication Agent, and The Bank of Tokyo-Mitsubishi, Ltd. and JPMorgan Chase Bank, N.A., as Documentation Agents. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you pursuant to Section 4.1(a)(vi) of the Credit Agreement.   We have participated in the negotiation of the Credit Agreement and have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and Law as we have deemed necessary or advisable for purposes of this opinion.   Upon the basis of the foregoing and in reliance thereon, we are of the opinion, subject to the assumptions and limitations set forth herein, that:   1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the Laws of Puerto Rico, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.   2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Governmental Authority and do not contravene, or constitute a default   Form of Opinion of Pietrantoni Méndez & Alvarez LLP I-1 -------------------------------------------------------------------------------- under, any provision of applicable Law or of the articles of incorporation or bylaws of the Borrower.   3. The Credit Agreement and the Notes are governed, by their terms, by New York Law. We express no opinion on the enforceability of the Loan Documents under New York Law. If the Law of Puerto Rico were to apply, the Credit Agreement would constitute a valid and binding agreement of the Borrower and each Note would constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms.   The opinion set forth in paragraph 3 is subject to: (i) the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or other similar Laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) limitations on the remedy of specific performance and injunctive and other forms of equitable relief due to the possible existence of equitable defenses or due to the discretion of the court before which any proceeding therefor may be brought, (iii) the unenforceability under certain circumstances of provisions to the effect that failure to exercise, or delay in exercising, rights or remedies will not operate as a waiver of any such right or remedy, (iv) limitations based upon statutes or upon public policy limiting a Person’s right to waive the benefits of statutory provisions or of a common law right, (v) limitations on the right of a creditor to exercise remedies or impose penalties for late payments or other defaults by a borrower, if it is determined that (a) either the defaults are not material, such penalties bear no reasonable relation to the damage suffered by the creditor as a result of such delinquencies or defaults, or it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (b) the creditor’s enforcement of such covenants or provisions under the circumstances would violate the creditor’s implied covenant of good faith and fair dealing, (vi) the unenforceability under certain circumstances, under the Law of Puerto Rico or federal Law or court decisions, of provisions releasing a party from, or indemnifying a party against, liability for its own wrongful or negligent acts or where such release or indemnification is contrary to public policy, (vii) the effect of the Law of Puerto Rico, which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause of a contract which the court finds to have been unconscionable at the time it was made, or an unfair portion of an adhesion contract, (viii) compliance with, and limitations imposed by, procedural requirements of the Law of Puerto Rico; and (ix) limitations under the Law of Puerto Rico as to the right to retain or collect unearned interest. The foregoing limitations, however, do not render the Credit Agreement and the Notes invalid as a whole, and there exists, in the Credit Agreement and the Notes or pursuant to applicable Law, legally adequate remedies for the realization of the principal benefits intended to be provided by the Credit Agreement and the Notes.   We are members of the Bar of the Commonwealth of Puerto Rico and the foregoing opinion is limited to the Laws of Puerto Rico and the federal Laws of the United States of America. In giving the foregoing opinion, (i) we express no opinion as to the effect (if any) of any Law of any jurisdiction (except Puerto Rico) in which any Lender is located which limits the rate of interest that such Lender may charge or collect; and (ii) we have assumed, without independent investigation, that the execution, delivery   Form of Opinion of Pietrantoni Méndez & Alvarez LLP I-2 -------------------------------------------------------------------------------- and performance by the Lenders of the Credit Agreement and the Notes are within the Lenders’ powers and have been duly authorized by all necessary action..   This opinion is furnished to you in connection with the Credit Agreement, is solely for your benefit and may not be relied upon by, nor may copies be delivered to, any other person, other than an Eligible Assignee or Participant pursuant to Section 9.7 of the Credit Agreement, without our prior written consent. Notwithstanding the foregoing grant of permission to Eligible Assignees to rely on this opinion, we express no opinion with respect to the effect of any such Eligible Assignee failing to comply with any legal requirement in order for it to enforce the Credit Agreement.   Respectfully submitted,                 Form of Opinion of Pietrantoni Méndez & Alvarez LLP I-3 -------------------------------------------------------------------------------- EXHIBIT J   FORM OF OPINION OF SHEARMAN & STERLING LLP     __________, 2006   To the Initial Lenders party to the Credit Agreement referred to below and to Citicorp USA, Inc., as Administrative Agent   Toyota Motor Credit Corporation Toyota Credit De Puerto Rico Corp. Toyota Credit Canada Inc.   Ladies and Gentlemen:   We have acted as counsel to Citicorp USA, Inc., as Administrative Agent (the “Agent”), in connection with the 364-Day Credit Agreement, dated as of March 29, 2006 (the “Credit Agreement”), among Toyota Motor Credit Corporation, a California corporation (“TMCC”), Toyota Credit De Puerto Rico Corp., a corporation organized under the laws of the Commonwealth of Puerto Rico (“TCPR”), Toyota Credit Canada Inc., a corporation organized under the laws of Canada (“TCCI” and, together with TMCC and TCPR, the “Borrowers”), and each of you. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined.   In that connection, we have reviewed originals or copies of the following documents:   (a)   The Credit Agreement. (b)   The Notes executed by the Borrowers and delivered on the date hereof. The documents described in the foregoing clauses (a) and (b) are collectively referred to herein as the “Opinion Documents”.   We have also reviewed originals or copies of such other agreements and documents as we have deemed necessary as a basis for the opinion expressed below.   In our review of the Opinion Documents and other documents, we have assumed:   (A)   The genuineness of all signatures.   (B)   The authenticity of the originals of the documents submitted to us.   Opinion of Shearman & Sterling LLP J-1 -------------------------------------------------------------------------------- (C)   The conformity to authentic originals of any documents submitted to us as copies.   (D)   As to matters of fact, the truthfulness of the representations made in the Credit Agreement.   (E)   That the Credit Agreement is the legal, valid and binding obligation of each party thereto, other than the Borrowers, enforceable against each such party in accordance with its terms.   (F)   That:   (1) Each Borrower is an entity duly organized and validly existing under the laws of the jurisdiction of its organization.   (2) Each Borrower has full power to execute, deliver and perform, and has duly executed and delivered, the Opinion Documents to which it is a party.   (3) The execution, delivery and performance by each Borrower of the Opinion Documents to which it is a party have been duly authorized by all necessary action (corporate or otherwise) and do not:   (a) contravene its certificate or articles of incorporation, by-laws or other organizational documents;   (b) except with respect to Generally Applicable Law, violate any law, rule or regulation applicable to it; or   (c) result in any conflict with or breach of any agreement or document binding on it of which any addressee hereof has knowledge, has received notice or has reason to know.   (4) Except with respect to Generally Applicable Law, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or (to the extent the same is required under any agreement or document binding on it of which an addressee hereof has knowledge, has received notice or has reason to know) any other third party is required for the due execution, delivery or performance by each Borrower of any Opinion Document or, if any such authorization, approval, action, notice or filing is required, it has been duly obtained, taken, given or made and is in full force and effect.   We have not independently established the validity of the foregoing assumptions.     Opinion of Shearman & Sterling LLP J-2 -------------------------------------------------------------------------------- “Generally Applicable Law” means the federal law of the United States of America, and the law of the State of New York (including the rules or regulations promulgated thereunder or pursuant thereto), that a New York lawyer exercising customary professional diligence would reasonably be expected to recognize as being applicable to either Borrower, the Opinion Documents or the transactions governed by the Opinion Documents. Without limiting the generality of the foregoing definition of Generally Applicable Law, the term “Generally Applicable Law” does not include any law, rule or regulation that is applicable to either Borrower, the Opinion Documents or such transactions solely because such law, rule or regulation is part of a regulatory regime applicable to any party to any of the Opinion Documents or any of its affiliates due to the specific assets or business of such party or such affiliate.   Based upon the foregoing and upon such other investigation as we have deemed necessary and subject to the qualifications set forth below, we are of the opinion that each Opinion Document is the legal, valid and binding obligation of each Borrower that is a party thereto, enforceable against such Borrower in accordance with its terms.   Our opinion expressed above is subject to the following qualifications:   (a) Our opinion is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally (including without limitation all laws relating to fraudulent transfers). (b) Our opinion is subject to the effect of general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). (c) We express no opinion with respect to the enforceability of indemnification provisions, or of release or exculpation provisions, contained in the Opinion Documents to the extent that enforcement thereof is contrary to public policy regarding the indemnification against or release or exculpation of criminal violations, intentional harm or violations of securities laws. (d) We express no opinion with respect to the enforceability of any indemnity against loss in converting into a specified currency the proceeds or amount of a court judgment in another currency. (e) Our opinion is limited to Generally Applicable Law.   A copy of this opinion letter may be delivered by any of you to any person that becomes a Lender in accordance with the provisions of the Credit Agreement. Any such person may rely on the opinion expressed above as if this opinion letter were addressed and delivered to such person on the date hereof.     Opinion of Shearman & Sterling LLP J-3 --------------------------------------------------------------------------------           This opinion letter is rendered to you in connection with the transactions contemplated by the Opinion Documents. This opinion letter may not be relied upon by you or any person entitled to rely on this opinion pursuant to the preceding paragraph for any other purpose without our prior written consent.   Opinion of Shearman & Sterling LLP J-4 --------------------------------------------------------------------------------     This opinion letter speaks only as of the date hereof. We expressly disclaim any responsibility to advise you of any development or circumstance of any kind, including any change of law or fact, that may occur after the date of this opinion letter that might affect the opinion expressed herein.   Very truly yours, WEH:SLH   Opinion of Shearman & Sterling LLP J-5 --------------------------------------------------------------------------------  

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. OPTION TO PURCHASE COMMON STOCK OF GEM SOLUTIONS, INC. Void after December 7, 2016 This certifies that, for value received, Rusty Wright (“Holder”) is entitled, subject to the terms set forth below, to purchase from GeM Solutions, Inc., a Delaware corporation (the “Company”), shares of the common stock, $.001 par value per share, of the Company (“Common Stock”), as constituted on the date hereof, with the Notice of Exercise attached hereto duly executed, and simultaneous payment therefor in lawful money of the United States or as otherwise provided in Section 3 hereof, at the Exercise Price then in effect. The number, character and Exercise Price of the shares of Common Stock issuable upon exercise hereof are subject to adjustment as provided herein. 1. Term of Option. Subject to compliance with the vesting provisions identified at Section 2.3 hereof, this Option shall be exercisable, in whole or in part, during the term commencing on the Option Issue Date and ending at 5:00 p.m. EST on December 7, 2016 (the “Option Expiration Date”) and shall be void thereafter. 2. Number of Shares, Exercise Price and Vesting Provisions. 2.1 Number of Shares. The number of shares of Common Stock which may be purchased pursuant to this Option shall be 350,000 shares (the “Shares”), subject, however, to adjustment pursuant to Section 11 hereof. 2.2 Exercise Price. The Exercise Price at which this Option, or portion thereof, may be exercised shall be $0.25 per Share, subject, however, to adjustment pursuant to Section 11 hereof.   --------------------------------------------------------------------------------   2.3 Vesting. Subject to Sections 11 and 3.3(a) hereof, this Option shall vest in accordance with the following schedule: (i) Options to purchase 116,666 shares shall vest and become exercisable on June 8, 2007; (ii) Options to purchase 116,667 shares shall vest and become exercisable on December 8, 2007; and (iii) Options to purchase 116,667 shares shall vest and become exercisable on June 8, 2008. 3. Exercise of Option. 3.1 Payment of Exercise Price. Subject to the terms hereof, the purchase rights represented by this Option are exercisable by the Holder in whole or in part, at any time, or from time to time, by the surrender of this Option and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) accompanied by payment of the Exercise Price in full (i) in cash or by bank or certified check for the Shares with respect to which this Option is exercised; (ii) by delivery to the Company of shares of the Company’s Common Stock having a Fair Market Value (as defined below) equal to the aggregate Exercise Price of the Shares being purchased which Holder is the record and beneficial owner of and which have been held by the Holder for at least six (6) months; provided, however, that such method of payment is then permitted under applicable law; (iii) if the sale of the Shares is covered by an effective registration statement, by delivering to the Company a Notice of Exercise together with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to sell a sufficient portion of the Shares and deliver the sales proceeds directly to the Company to pay the Exercise Price; (iv) by set off against any amounts owed to the Holder by the Company; (v) by reducing the number of shares of Common Stock otherwise issuable under the Option to the Holder upon the exercise of the Option by a number of shares of Common Stock having a Fair Market Value (as defined below) equal to the aggregated exercise price; provided, however, that such method of payment is then permitted under applicable law; (vi) to the extent permitted by applicable law, by: (A) delivery of a promissory note of the Holder to the Company on terms determined by the Board of Directors (the “Board”), or (B) payment of such other lawful consideration as the Board may determine; or (vii) by any combination of the procedures set forth in subsections (i), (ii), (iii), (iv), (v), and (vi) of this Section 3.1. 3.2 Fair Market Value. If previously owned shares of Common Stock are tendered as payment of the Exercise Price, the value of such shares shall be the “Fair Market Value” of such shares on the trading date immediately preceding the date of exercise. For the purpose of this Agreement, the “Fair Market Value” shall be: 2 --------------------------------------------------------------------------------   (a) If the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), the Fair Market Value on any given date shall be the average of the highest bid and lowest asked prices of the Common Stock as reported for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported; (b) If the Common Stock is admitted to trading on a United States securities exchange or the NASDAQ National Market System, the Fair Market Value on any date shall be the closing price reported for the Common Stock on such exchange or system for such date or, if no sales were reported for such date, for the last day preceding such date for which a sale was reported; (c) If the Common Stock is traded in the over-the-counter market and not on any national securities exchange nor in the NASDAQ Reporting System, the Fair Market Value shall be the average of the mean between the last bid and ask prices per share, as reported by the National Quotation Bureau, Inc., or an equivalent generally accepted reporting service, or if not so reported, the average of the closing bid and asked prices for a share as furnished to the Company by any member of the National Association of Securities Dealers, Inc., selected by the Company for that purpose; or (d) If the Fair Market Value of the Common Stock cannot be determined on the basis previously set forth in this definition on the date that the Fair Market Value is to be determined, the Board of Directors of the Company shall in good faith determine the Fair Market Value of the Common Stock on such date. If the tender of previously owned shares would result in an issuance of a whole number of Shares and a fractional Share of Common Stock, the value of such fractional share shall be paid to the Company in cash or by check by the Holder. 3.3 Termination of Employment or Service; Death. (a) If Holder shall cease to be employed by or provide management services to the Company as a result of Holder resigning or otherwise voluntarily leaving the employ of the Company or ceasing to provide services to the Company, all Options may be exercised only within ninety (90) days after the termination of employment or cessation of service and prior to the Option Termination Date. In the event that any termination of employment or cessation of service shall be for Cause (as defined below), then this Option shall forthwith terminate. In the event that the Company shall terminate Holder’s employment with Company or service relationship with the Company for any reason other than for Cause (as defined below), all Options may be exercised at any time within two (2) years after such termination of employment or service relationship and prior to the Option Termination Date. 3 --------------------------------------------------------------------------------   For purposes of this Option, the term “Cause” shall mean (a) if Holder is a party to a written agreement with the Company, or provides services to the Company pursuant to a services agreement between the Company and a third party, which contains a definition of “cause” or “for cause” or words of similar import for purposes of termination of employment or service thereunder by the Company, “cause” or “for cause” as defined in such agreement; (b) in all other cases (i) the Holder’s intentional, persistent failure, dereliction, or refusal to perform such duties as are reasonably assigned to him or her by the officers or directors of the Company; (ii) the Holder’s fraud, dishonesty or other deliberate injury to the Company in the performance of his or her duties on behalf of, or for, the Company; (iii) the Holder’s conviction of a crime which constitutes a felony involving moral turpitude, fraud or deceit in the jurisdiction in which the Holder is employed, regardless of whether such crime involves the Company; (iv) the willful commission by the Holder of a criminal or other act that causes substantial economic damage to the Company or substantial injury to the business reputation of the Company; or (v) the Holder’s material breach of his or her employment agreement, or the material breach of a services agreement by and between the Company and a third party pursuant to which the Holder provides services to the Company, if any. For purposes of this Option, no act, or failure to act, on the part of any person shall be considered “willful” unless done or omitted to be done by the person other than in good faith and without reasonable belief that the person’s action or omission was in the best interest of the Company. (b) If Holder shall die while employed by or providing services to the Company and prior to the Option Termination Date, any Options then exercisable may be exercised only within one (1) year after Holder’s death, prior to the Option Termination Date, and only by the Holder’s personal representative or persons entitled thereto under the Holder’s will or the laws of descent and distribution. (c) This Option may not be exercised for more Shares (subject to adjustment as provided in Section 11 hereof) after the termination of the Holder’s employment, cessation of services to the Company, or death, as the case may be, than the Holder was entitled to purchase thereunder at the time of the termination of the Holder’s employment, the cessation of services to the Company, or death. 3.4 Exercise Date; Delivery of Certificates. This Option shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and Holder shall be treated for all purposes as the holder of record of such Shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within ten (10) days thereafter, the Company at its expense shall issue and deliver to the Holder a certificate or certificates for the number of Shares issuable upon such exercise. In the event that this Option is exercised in part, the Company at its expense will execute and deliver a new Option of like tenor exercisable for the number of shares for which this Option may then be exercised. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Option. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction. 5. Replacement of Option. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Option and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense shall execute and deliver, in lieu of this Option, a new Option of like tenor and amount. 4 --------------------------------------------------------------------------------   6. Rights of Stockholder. Except as otherwise contemplated herein, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company that may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Option shall have been exercised as provided herein. 7. Transfer of Option. 7.1. Non-Transferability. This Option shall not be assigned, transferred, pledged or hypothecated in any way, nor subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. Any attempted assignment, transfer, pledge, hypothecation or other disposition of this Option contrary to the provisions hereof, and the levy of an execution, attachment, or similar process upon the Option, shall be null and void and without effect. 7.2. Compliance with Securities Laws; Restrictions on Transfers. In addition to restrictions on transfer of this Option and Shares set forth in Section 7.1 above. (a) The Holder of this Option, by acceptance hereof, acknowledges that this Option and the Shares to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment (unless such shares are subject to resale pursuant to an effective prospectus), and that the Holder will not offer, sell or otherwise dispose of any Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of applicable federal and state securities laws. Upon exercise of this Option, the Holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Shares of Common Stock so purchased are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment (unless such shares are subject to resale pursuant to an effective prospectus), and not with a view toward distribution or resale. 5 --------------------------------------------------------------------------------   (b) Neither this Option nor any share of Common Stock issued upon exercise of this Option may be offered for sale or sold, or otherwise transferred or sold in any transaction which would constitute a sale thereof within the meaning of the 1933 Act, unless (i) such security has been registered for sale under the 1933 Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities; or (ii) exemptions from the registration requirements of the 1933 Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the 1933 Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company. The Holder of this Option, by acceptance hereof, acknowledges that the Company has no obligation to file a registration statement with the Securities and Exchange Commission or any state securities commission to register the issuance of the Shares upon exercise hereof or the sale or transfer of the Shares after issuance. (c) All Shares issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws). THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION THEREFROM. (d) Holder recognizes that investing in the Option and the Shares involves a high degree of risk, and Holder is in a financial position to hold the Option and the Shares indefinitely and is able to bear the economic risk and withstand a complete loss of its investment in the Option and the Shares. The Holder is a sophisticated investor and is capable of evaluating the merits and risks of investing in the Company. The Holder has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s management, has been given full and complete access to information concerning the Company, and has utilized such access to its satisfaction for the purpose of obtaining information or verifying information and has had the opportunity to inspect the Company’s operation. Holder has had the opportunity to ask questions of, and receive answers from the management of the Company (and any person acting on its behalf) concerning the Option and the Shares and the agreements and transactions contemplated hereby, and to obtain any additional information as Holder may have requested in making its investment decision. (e) Holder acknowledges and represents: (i) that he has been afforded the opportunity to review and is familiar with the business prospects and finances of the Company and has based his decision to invest solely on the information contained therein and has not been furnished with any other literature, prospectus or other information except as included in such reports; (ii) Holder is acquiring the Options and Shares for investment purposes only and not with a view toward distribution; (iii) he understands that no federal or state agency has approved or disapproved the Option or Shares or made any finding or determination as to the fairness of the Option and Common Stock for investment; and (iv) that the Company has made no representations, warranties, or assurances as to (A) the future trading value of the Common Stock, (B) whether there will be a public market for the resale of the Common Stock or (C) the filing of a registration statement with the Securities and Exchange Commission or any state securities commission to register the issuance of the Shares upon exercise hereof or the sale or transfer of the Shares after issuance. 6 --------------------------------------------------------------------------------   8. Reservation and Issuance of Stock; Payment of Taxes. (a) The Company covenants that during the term that this Option is exercisable, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Shares upon the exercise of this Option, and from time to time will take all steps necessary to amend its Articles of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon the exercise of the Option. (b) The Company further covenants that all shares of Common Stock issuable upon the due exercise of this Option will be free and clear from all taxes or liens, charges and security interests created by the Company with respect to the issuance thereof, however, the Company shall not be obligated or liable for the payment of any taxes, liens or charges of Holder, or any other party contemplated by Section 7, incurred in connection with the issuance of this Option or the Common Stock upon the due exercise of this Option. The Company agrees that its issuance of this Option shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the shares of Common Stock upon the exercise of this Option. The Common Stock issuable upon the due exercise of this Option, will, upon issuance in accordance with the terms hereof, be duly authorized, validly issued, fully paid and non-assessable. (c) Upon exercise of the Option, the Company shall have the right to require the Holder to remit to the Company an amount sufficient to satisfy federal, state and local tax withholding requirements prior to the delivery of any certificate for Shares of Common Stock purchased pursuant to the Option, if in the opinion of counsel to the Company such withholding is required under applicable tax laws. (d) If Holder is obligated to pay the Company an amount required to be withheld under applicable tax withholding requirements, Holder may pay such amount (i) in cash; (ii) in the discretion of the Board of Directors of the Company, through the delivery to the Company of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the tax obligation provided that the previously owned shares delivered in satisfaction of the withholding obligations must have been held by the Holder for at least six (6) months; (iii) in the discretion of the Board of Directors of the Company, through the withholding of Shares of Common Stock otherwise issuable to the Holder in connection with the Option exercise; or (iv) in the discretion of the Board of Directors of the Company, through a combination of the procedures set forth in subsections (i), (ii) and (iii) of this Section 8(d). 7 --------------------------------------------------------------------------------   9. Notices. (a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Option. (b) All notices, advices and communications under this Option shall be deemed to have been given, (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing, addressed as follows: If to the Company: GeM Solutions, Inc. 7935 Airport Pulling Road Suite 201 Naples, FL 34109 With a copy to: Fox Rothschild LLP P.O. Box 5231 Princeton, NJ 08543-5231 Attn.: Vincent A. Vietti, Esquire and to the Holder: at the address set forth in the records of the Company. Either of the Company or the Holder may from time to time change the address to which notices to it are to be mailed hereunder by notice in accordance with the provisions of this Paragraph 9. 10. Amendments. (a) The Company may amend, modify or terminate this Option, including but not limited to, substituting therefor another Option of the same or a different type and changing the date of exercise or realization, provided that the Holder’s consent to such action shall be required unless the Company determines that the action, taking into account any related action, would not materially and adversely affect the Holder. (b) No waivers of, or exceptions to, any term, condition or provision of this Option, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 8 --------------------------------------------------------------------------------   11. Adjustments. The number of Shares of Common Stock purchasable hereunder and the Exercise Price is subject to adjustment from time to time upon the occurrence of certain events, as follows: 11.1. Split, Subdivision, Combination of Shares, Reclassification or Recapitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, applicable to securities as to which purchase rights under this Option exist or any distribution to holders of the securities as to which purchase rights under this Option exist other than an ordinary cash dividend, the Exercise Price and the number and kind of securities issuable upon exercise of this Option shall be proportionately adjusted. Any adjustment under this Section 11.1 shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend. If this Section 11.1 applies and Section 11.3 also applies to any event, Section 11.3 shall be applicable to such event, and this Section 11.1 shall not be applicable. 11.2 Liquidation or Dissolution. In the event the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, this Option will: (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation, dissolution, sale or disposition, and (ii) terminate effective upon such liquidation, dissolution, sale or disposition, except to the extent exercised before such effective date 11.3 Reorganization and Change in Control Events. (1) Definitions. (a) A “Reorganization Event” shall mean: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the outstanding shares of Common Stock are converted into or exchanged for the right to receive cash, securities or other property; or (ii) any exchange of all of the outstanding shares of Common Stock for cash, securities or other property pursuant to a share exchange transaction. (b) A “Change in Control Event” shall mean: (i) the acquisition by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (each, a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 30% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan or related trust sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined in Section 11.3(1)(b)(iii) below) that complies with clauses (x) and (y) of subsection (iii) of this definition; 9 --------------------------------------------------------------------------------   (ii) an event that results in the Continuing Directors (as defined below) not constituting a majority of the Board (or, if applicable, the board of directors of a successor corporation to the Company). “Continuing Director” means, at any date, a member of the Board: (x) who was a member of the Board on the date of the initial issuance of this Option, or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or (iii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination, which shall include, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Common Stock and Outstanding Voting Securities, respectively, immediately prior to such Business Combination, and (y) no Person (excluding the Acquiring Corporation or any employee benefit plan or related trust maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 30% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination). 10 --------------------------------------------------------------------------------   (2) Effect on Option. (a) Reorganization Event. Upon the occurrence of a Reorganization Event (regardless of whether such event also constitutes a Change in Control Event), or the execution by the Company of any agreement with respect to a Reorganization Event (regardless of whether such event will result in a Change in Control Event), this Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); provided, however, that if such Reorganization Event also constitutes a Change in Control Event, such assumed or substituted options shall be immediately exercisable in full upon the occurrence of such Reorganization Event. For purposes hereof, this Option shall be considered to be assumed if, following consummation of the Reorganization Event, this Option confers the right to purchase, for each share of Common Stock subject to this Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation (or an affiliate thereof), provide for the consideration to be received upon the exercise of this Option to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, this, then the this Options shall become exercisable in full as of a date at least thirty (30) days prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by Holder before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the “Acquisition Price”), then this Option shall terminate upon consummation of such Reorganization Event and Holder shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which: (A) the Acquisition Price multiplied by the number of shares of Common Stock issuable upon exercise of this Option (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. (b) Change in Control Event that is not a Reorganization Event. Upon the occurrence of a Change in Control Event that does not also constitute a Reorganization Event, this Option shall automatically become immediately exercisable in full. 12. Intentionally Omitted. 11 --------------------------------------------------------------------------------   13. Severability. Whenever possible, each provision of this Option shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Option is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Option in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Option shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 14. Governing Law. The corporate law of the State of Delaware shall govern all issues and questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, interpretation and enforceability of this Option and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Florida, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. 15. Jurisdiction. The Holder and the Company agree to submit to personal jurisdiction and to waive any objection as to venue in the federal or state courts of Florida. Service of process on the Company or the Holder in any action arising out of or relating to this Option shall be effective if mailed to such party at the address listed in Section 9 hereof. 16. Arbitration. If a dispute arises as to interpretation of this Option, it shall be decided finally by three arbitrators in an arbitration proceeding conforming to the Rules of the American Arbitration Association applicable to commercial arbitration. The arbitrators shall be appointed as follows: one by the Company, one by the Holder and the third by the said two arbitrators, or, if they cannot agree, then the third arbitrator shall be appointed by the American Arbitration Association. The third arbitrator shall be chairman of the panel and shall be impartial. The arbitration shall take place in the county in which the Company’s corporate headquarters is located. The decision of a majority of the arbitrators shall be conclusively binding upon the parties and final, and such decision shall be enforceable as a judgment in any court of competent jurisdiction. Each party shall pay the fees and expenses of the arbitrator appointed by it, its counsel and its witnesses. The parties shall share equally the fees and expenses of the impartial arbitrator. 17. Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by the Company of this Option: (i) are within the Company’s corporate power; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of the Company’s articles of incorporation or bylaws; (iv) will not violate in any material respect, any law or regulation, including any and all Federal and state securities laws, or any order or decree of any court or governmental instrumentality; and (v) will not, in any material respect, conflict with or result in the breach or termination of, or constitute a default under any agreement or other material instrument to which the Company is a party or by which the Company is bound. 12 -------------------------------------------------------------------------------- 18. Successors and Assigns. This Option shall inure to the benefit of and be binding on the respective successors, assigns and legal representatives of the Holder and the Company. [Signature page follows] 13 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the Company and Holder have caused this Option to be executed this 8th day of December, 2006.     GeM Solutions, Inc.   By: /s/ John E. Baker       --------------------------------------------------------------------------------       John E. Baker, Chief Financial Officer   AGREED AND ACCEPTED:       Rusty Wright     /s/ Rusty Wright       --------------------------------------------------------------------------------       Signature       [Signature Page to Option] 14 -------------------------------------------------------------------------------- NOTICE OF EXERCISE   TO: Chief Executive Officer GeM Solutions, Inc. 7935 Airport Pulling Road Suite 201 Naples, FL 34109 (1) The undersigned hereby elects to purchase ___________ shares of Common Stock of GeM Solutions, Inc. pursuant to the terms of the attached Option, and tenders herewith payment of the purchase price for such shares in full in the following manner (please check one of the following choices):   [emptybox.gif] In Cash   [emptybox.gif] Cashless exercise through a broker;   [emptybox.gif] Delivery of previously owned shares;   [emptybox.gif] Cashless exercise by reducing the number of shares of Common Stock otherwise issuable under the Option; or   [emptybox.gif] Set off against amounts owed to the undersigned. (2) In exercising this Option, the undersigned hereby confirms and acknowledges that the shares of Common Stock to be issued upon conversion thereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment (unless such shares are subject to resale pursuant to an effective prospectus), and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. (3) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned.                 --------------------------------------------------------------------------------       --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Date)     (Signature)   15 --------------------------------------------------------------------------------

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  Exhibit 10.1 EMPLOYMENT AGREEMENT      THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of March 28, 2006, between RTW, INC., a Minnesota corporation (the “Company”), and Jeffrey B. Murphy (“Employee”).      The Company and Employee are desirous of setting forth the terms and conditions of the employment by the Company of Employee as its President and Chief Executive Officer.      In consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties intending to be legally bound do hereby agree as follows:      1. Term. The Company agrees to employ Employee and Employee agrees to serve the Company for a term beginning on the date hereof and terminating on March 31, 2007 (the “Expiration Date”) unless and until terminated in accordance with the terms of this Agreement (the “Original Term”). Upon the expiration of the Original Term of this Agreement, and on each successive anniversary thereafter, the term of employment under this Agreement will be extended for one additional year, unless at least 60 days prior to any such anniversary, either Employee or the Company delivers to the other written notice of the notifying party’s desire not to extend the term of employment. Notice by the Company of its desire not to extend the term of employment as provided in this Section will constitute Termination without Cause and entitle Employee to the benefits of Section 9 below.      2. Services to be Rendered by Employee. Employee agrees to serve the Company as its President and Chief Executive Officer and, in addition, at no additional compensation, serve as a member of the Board of Directors of RTW, Inc., and in such other directorships, Board committee memberships and offices of the Company and its subsidiaries to which Employee may from time to time be elected or appointed by the Chairman of the Board and the shareholders. Employee will perform such duties and exercise such powers as from time to time may be assigned to him consistent with his position, knowledge and experience, either orally or in writing, by the Board of Directors of the Company and will carry out his duties under the ultimate general direction and control of the Board of Directors. In his capacity as President and Chief Executive Officer, Employee will perform all reasonable acts customarily associated with such position, or necessary or desirable to protect and advance the best interests of the Company, together with such other reasonable duties as may be determined and assigned to him by the Board of Directors. Employee will perform such acts and carry out such duties, and will in all other respects serve the Company, faithfully and to the best of his ability.   --------------------------------------------------------------------------------        3. Time to be Devoted by Employee. Employee agrees to devote substantially all of his business time, attention, efforts and abilities to the business of the Company and to use his best efforts to promote the interests of the Company. Employee confirms that he has no business interests of any kind that will require a significant portion of his business time. Employee may attend, however, to personal business and investments, engage in charitable activities and community affairs, and serve on a reasonable number of corporate, educational and civic boards so long as those activities do not interfere with Employee’s duties under this Agreement, and in the case of service on any other corporate boards, Employee obtains prior approval from the Board of Directors.      4. Compensation Payable to Employee. As compensation for all of Employee’s services (including services as director, Board committee member and officer of the Company and its subsidiaries) during the term of employment hereunder, the Company will pay to Employee a base salary at the rate of Three Hundred Fifty Thousand Dollars ($350,000) per annum (the “Annual Salary”), payable in semi-monthly installments, which base salary will be pro-rated for any partial years. The Compensation Committee will review the base salary annually in discussion with Employee and make recommendations for approval to the Board of Directors. Employee will participate with other corporate officers in any incentive compensation plan as may be adopted by the Board of Directors from time to time.      5. Expenses. During the term of employment, the Company will reimburse Employee for reasonable travel and other expenses incurred in performing his duties according to Company policies then in effect. Payments to Employee under this paragraph will be made after the Employee presents expense vouchers in such detail as the Company may from time to time reasonably require.      6. Benefits. Employee’s benefits will be the same as provided for any other executive officer except that the Company will additionally provide Employee with a $2.0 million term life insurance policy for the benefit of his wife and family. The policy will be of reasonable cost as determined by the Board of Directors and the cost will be included in Employee’s W-2 at year end for tax purposes. Further, the Company will, at the Company’s expense, maintain directors and officers’ liability insurance coverage during the term of this Agreement with minimum limits of $5,000,000, unless the cost thereof is not economically feasible as determined by the Board of Directors.      7. Stock Option(s).           7.1. Grant. In addition to options granted in conjunction with the Company’s 2005 Incentive Program, the Company hereby further grants Employee ten-year stock options to purchase up to 10,000 shares of the Company’s Common Stock (the “Option(s)”). The per share price to be paid by Employee upon exercise of the Option(s) is the closing price of the Company’s Common Stock, as 2 --------------------------------------------------------------------------------   reported by NASDAQ, on the date this agreement is executed. The Option(s) will be incentive stock options to the extent allowed by the Internal Revenue Code. The Compensation Committee will consider similar future grants as part of its duty in reviewing Employee’s annual compensation.           7.2. Vesting. The Option(s) will become exercisable in three (3) installments of the Company’s Common Stock (“Option Installment”) as follows: (i) the first Option Installment representing 3,334 shares is immediately exercisable as of the date this agreement is executed, and (ii) two additional Option Installments of 3,333 shares will vest on each of the following two anniversary dates of this Agreement, if the Employee is still employed by the Company on such dates.           7.3. Exercise Period. The Option(s) will become void and expire as to all unexercised Option shares ten years from the effective date of this Agreement.           7.4. Additional Terms. The remaining terms of the Option(s) are as set forth in the Option Agreement(s) dated this date.      8. Termination.           8.1. General. This Agreement and Employee’s employment may be terminated as set forth in Section 8.2. In the event of termination of employment for any of the following reasons, Employee must resign as a director and officer of the Company and any of its subsidiaries at or prior to the effective Date of Termination.           8.2. Events of Termination. The Agreement may be terminated as follows:   (i)   By Employee, upon 60 days prior written notice to the Company;     (ii)   By Employee for Good Reason (as defined in Section 8.4 (iii) of this Agreement) upon 60 days prior written notice to the Company;     (iii)   By the Company for Cause (as defined in this Agreement), immediately upon written notice to Employee;     (iv)   By the Company for any reason (without cause) and at any time, upon 60 days prior written notice to Employee; or     (v)   By the Company at any time in the event of Employee’s Disability (as defined in this Agreement.)           8.3. Death. This Agreement will automatically terminate upon Employee’s death.           8.4. Definitions. For purposes of this Agreement, the following terms have the meanings set forth below: 3 --------------------------------------------------------------------------------     (i)   Disability. “Disability” means that if, in the reasonable judgment of the Board of Directors, the Employee’s incapacity due to physical or mental illness, or otherwise, keeps him from performing satisfactorily all of his duties hereunder on a substantially full-time basis for a period of three months during the term of this Agreement.     (ii)   Cause. The Company will have “Cause” to terminate Employee’s employment hereunder upon Employee’s:   (A)   refusal or neglect to perform and discharge his duties and responsibilities hereunder;     (B)   gross misconduct that is injurious to the Company;     (C)   fraud, embezzlement or other act of dishonesty of Employee with respect to the Company;     (D)   conviction of, or plea of guilty or nolo contendere entered by Employee to, a felony or crime involving moral turpitude or which conviction or plea is likely to have a material adverse effect upon the Company or upon Executive’s ability to perform his duties hereunder;     (E)   willful or prolonged absence from work by Employee (other than by reason of disability due to physical or mental illness); or     (F)   willful commission of acts or making of false statements by Employee that reflect adversely, in material respects, upon the Company or its business, customers or other employees.   (iii)   Good Reason. “Good Reason” means the Company, without express written consent,   (A)   materially reduces Employee’s principal duties, responsibilities, or authority as President and Chief Executive Officer, including requiring Employee to report to any person or body other than the Board of Directors of the Company;     (B)   reduces Employee’s annual base compensation as described in Section 4; or     (C)   materially breaches this Agreement. 4 --------------------------------------------------------------------------------         The occurrence of an event described in this subparagraph 8.4(iii) will not constitute Good Reason unless, within 60 days thereof Employee provides the Company written notice stating that an event of Good Reason has occurred and describing that event, and the Company does not correct the same, if the same is correctable, within 30 days.     (iv)   Date of Termination. The term “Date of Termination” means the earlier of:   (A)   the Expiration Date, or     (B)   if Employee’s employment is terminated by his death, the date of his death, or     (C)   if Employee’s employment is terminated for any other reason, the date on which notice of termination is given either to Employee by the Company or to the Company by Employee unless another date is specified in the Notice of Termination.      9. Consequences of Termination.           9.1. Termination for Cause; Voluntary Resignation without Good Reason. If employment is terminated by the Company for Cause or by Employee without Good Reason, then Employee will be paid (i) his base salary to the date of termination and (ii) the unpaid portion of any bonus or incentive amount earned for the fiscal year ending prior to the termination of employment that Employee is entitled to receive under the terms of the annual incentive plan. Employee will not be entitled to receive any base salary or fringe benefits for any period after the date of termination, except for the right to receive benefits that have become vested under any benefit plan or to which Employee is entitled as a matter of law.           9.2. Termination without Cause; Resignation for Good Reason. If the Company terminates employment without Cause or does not extend the term of employment, or if Employee resigns employment for Good Reason, then:   (i)   For a period of nine months after the effective date of the termination of employment;   (A)   The Company will continue to pay Employee’s then current base salary in accordance with the Company’s normal payroll practice; and 5 --------------------------------------------------------------------------------     (B)   Employee will be entitled to continued participation in the health care coverage and life insurance benefit plans of the Company, as in effect on the date of termination. The Company will continue to pay its share of the health care and life insurance premiums for this coverage, and Employee will pay his share of the cost associated with that coverage as if he were still actively employed by the Company. If Employee cannot be covered under any of the Company’s group plans or policies, the Company will reimburse Employee for his full cost of obtaining comparable alternative or individual coverage elsewhere, less any contribution that Employee would have been required to make under the Company’s group plans or policies. If, during the aforesaid nine-month period, Employee is employed by a third party and becomes eligible for any health care coverage provided by that third party, the Company will not, thereafter, be obligated to provide Employee with the insurance benefits described in this clause (B). This nine -month coverage will run concurrently with COBRA and thereafter Employee will be responsible for the full cost of any such coverage for which he may be entitled by law.   (ii)   The Company will pay the unpaid portion of any bonus or incentive amount earned by Employee for the fiscal year ending prior to the termination of employment that Employee is entitled to receive under the terms of the applicable incentive plan as well as any pro-rata bonus or incentive amount through the date of termination. Any pro rata bonus or other incentive amount due pursuant to this paragraph 9.2 (ii) will be due on the date the payments are made to other employees of the Company.     (iii)   The Company will pay Employee $25,000 for out-placement and job search services.           9.3. Termination in the Event of Death or Disability. If employment terminates due to Employee’s Death or if the Company terminates employment due to a Disability, then:   (i)   The Company will continue to pay base salary to Employee’s estate or to Employee for the remainder of the month in which the death occurs or in 6 --------------------------------------------------------------------------------         which employment is terminated due to Disability, together with the unpaid portion of any bonus or incentive amount earned by Employee for the fiscal year ending prior to the termination of employment which he is entitled to receive under the terms of the applicable incentive plan as well as any pro-rata bonus or incentive amount through the date of termination; and in the event of termination due to Disability, Employee will continue to receive, during that month, all of the fringe benefits then being paid or provided to him; and     (ii)   Employee will be entitled to receive all Disability and other benefits, such as continued health coverage or life insurance proceeds, provided in accordance with the terms and condition of the health care coverage, life insurance, disability, or other employee benefit plans of the Company and applicable law.      10. Confidentiality. Employee agrees while in the employ of the Company (otherwise than in the performance of his duties hereunder) and thereafter not to, directly or indirectly, make use of, or divulge to any person, firm, corporation, entity or business organization, and to use his best efforts to prevent the publication or disclosure of, any confidential or proprietary information concerning the business, accounts or finances of, or any of the methods of doing business used by, the Company or its affiliates or of the dealings, transactions or affairs of the Company or its affiliates or any of their respective customers that have or may have come to his knowledge during his employment by the Company.      11. Notices. All notices under this Agreement must be in writing and will be effective either (i) when delivered in person at the address set forth below, or (ii) three business days after deposit in a sealed envelope in the United States Mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the recipient as set forth below, whichever is earlier.           All notices to the Company must be sent to:           RTW, Inc.     8500 Normandale Lake Boulevard     Minneapolis, MN 55437     Attn: Chairman of the Board 7 --------------------------------------------------------------------------------             All notices to Employee must be sent to:           Mr. Jeffrey B. Murphy     327 Jesse James Lane     Mahtomedi, MN 55115           These addresses may be changed by notice given in accordance with this Section 11.      12. Miscellaneous. This Agreement may not be changed nor may any provision hereof be waived, except by an instrument in writing duly signed by the party to be charged. This Agreement will be interpreted, governed and controlled by the internal laws of the State of Minnesota, without reference to principles of conflict of law. This Agreement will terminate in the event of the liquidation and winding up of the business of the Company but will continue in effect in the event of the merger or sale of the Company into or to another entity or the transfer of substantially all of the assets of the Company to another entity. The provisions of Section 10 hereof will survive any termination of this Agreement. This agreement replaces in its entirety Employee’s employment agreement dated as of March 12, 2004. [Remainder of page intentionally left blank.] 8 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above written.                   COMPANY:       EMPLOYEE:                       RTW, Inc.                               By:   /s/ John O. Goodwyne       /s/ Jeffrey B. Murphy                           John O. Goodwyne                           Jeffrey B. Murphy         Chairman of the Board                           President and CEO     9

Exhibit 10.3 September 14, 2006 Energy Transfer Partners, L.P. 8801 South Yale Avenue Tulsa, Oklahoma 74137 Ladies and Gentlemen: Reference is hereby made to (i) that certain Purchase and Sale Agreement (the “CCE Acquisition Agreement”), dated as of September 14, 2006, by and among Energy Transfer Partners, L.P., a Delaware limited partnership (“ETP”), EFS-PA, LLC, a Delaware limited liability company (“EFS-PA”), CDPQ Investments (U.S.) Inc., a Delaware corporation, Lake Bluff Inc., a Delaware corporation, Merrill Lynch Ventures, L.P. 2001, a Delaware limited partnership, and Kings Road Holdings I LLC, a Delaware limited liability company, and (ii) that certain Redemption Agreement (the “Redemption Agreement”), dated as of September 14, 2006, by and between CCE Holdings, LLC, a Delaware limited liability company (“CCE Holdings”), and ETP. Capitalized terms used herein but not defined herein shall have the meanings set forth in the Redemption Agreement. Upon the closing of the transactions contemplated by the CCE Acquisition Agreement, CCE Acquisition LLC, a Delaware limited liability company (“CCE Acquisition”), and CCEA Corp., a Delaware corporation (“CCEA”), which are wholly owned subsidiaries of Southern Union Company (“Southern Union”), and ETP will own all of the membership interests in CCE Holdings. This letter is to set forth the understanding between Southern Union and ETP as to certain matters pertaining to the ownership and operation of CCE Holdings. 1. Waiver of Right of First Refusal. Promptly following the execution and delivery of this letter agreement, Southern Union will cause CCE Acquisition and CCEA to execute and deliver to ETP a waiver of their rights under Section 8.4 of the Amended and Restated Limited Liability Company Agreement, dated as of November 5, 2004, as amended, of CCE Holdings, related to the transfer of Class B Membership Interests pursuant to the CCE Acquisition Agreement. 2. Actions Upon Closing of CCE Acquisition Agreement. Upon the closing of the transactions contemplated by the CCE Acquisition Agreement: (a) Southern Union will cause CCE Acquisition and CCEA to enter into, and ETP will enter into, that certain Second Amended and Restated Limited Liability Company Agreement of CCE Holdings in the form attached hereto as Exhibit A. (b) The parties hereto will cause CCE Holdings, and Southern Union will cause its indirect, wholly owned subsidiary, SU Pipeline Management LP, to enter into that certain Amended and Restated Administrative Services Agreement in the form attached hereto as Exhibit B; and -------------------------------------------------------------------------------- Energy Transfer Partners, L.P. September 14, 2006 Page 2 (c) The Transfer Restriction Agreement dated as of November 4, 2004 given by Southern Union in favor of EFS-PA automatically shall terminate. 3. Actions Upon Termination of Redemption Agreement. If the transactions contemplated by the CCE Acquisition Agreement have been consummated but the transactions contemplated by the Redemption Agreement have not been consummated and the Redemption Agreement has been terminated, (i) Southern Union will cause CCE Acquisition and CCEA to, and ETP shall, enter into that certain Third Amended and Restated Limited Liability Company Agreement of CCE Holdings in substantially the form attached hereto an Exhibit C, with such changes thereto as mutually agreed by the parties hereto as a result of negotiations in good faith with respect to any such changes, it being understood that the intent of the Third Amended and Restated Limited Liability Company Agreement of CCE Holdings is to provide ETP with the risks and rewards (including the profits and losses and cash flow) of Transwestern Pipeline Company, LLC, a Delaware limited liability company (“Transwestern”), and to provide Southern Union with the risks and rewards (including the profits and losses and cash flow) of CrossCountry Citrus, LLC, a Delaware limited liability company (“CC Citrus”), and its subsidiaries; (ii) the parties hereto will negotiate in good faith to enter into arrangements mutually satisfactory to such parties that are similar to those contained in the term sheet for a Transition Services Agreement set forth on Exhibit B to the Redemption Agreement and/or the Amended and Restated Administrative Services Agreement attached hereto as Exhibit B and that will enable ETP to exercise effective management and control over the business and affairs of Transwestern in conjunction with services provided by CCE Holdings and its affiliates and that will enable Southern Union to exercise effective management and control over the business and affairs of CC Citrus, (iii) Southern Union will take all necessary action to cause Transwestern Holding Company, LLC, a Delaware limited liability company (“TW Holdings”), to repay all of its outstanding indebtedness within 60 days following the termination of the Redemption Agreement (without transferring or encumbering its equity interests in, or assets of, Transwestern and without the use of any borrowings, financial support or guaranties from Transwestern), (iv) the parties hereto will cooperate to facilitate the refinancing by TPC of the Existing TPC Debt to the extent such debt would become due and payable as a result of the transactions contemplated by the CCE Acquisition Agreement or the Redemption Agreement, after taking into account any consents or waivers previously obtained by TPC, and in connection therewith, ETP will use its commercially reasonable best efforts to make available a bridge loan or other replacement financing to the extent necessary for TPC to avoid an acceleration of the payment of such debt, with all costs of such refinancing (including legal fees) to be borne by TPC, (v) Southern Union will cause CCE Holdings to pay to ETP an amount equal to the Cash Redemption Amount (as such term is defined in the Redemption Agreement) determined on the basis that the “Closing Date” for -------------------------------------------------------------------------------- Energy Transfer Partners, L.P. September 14, 2006 Page 3 purposes of the determination of the Cash Redemption Amount is the date of the termination of the Redemption Agreement, and (vi) the parties hereto will follow the procedures specified in Section 2.4 of the Redemption Agreement to determine the Post-Closing Adjustment Amount, substituting Southern Union for CCE Holdings, and if the Post-Closing Adjustment Amount is positive, then ETP will pay to Southern Union the Post-Closing Adjustment Amount or, if the Post-Closing Adjustment Amount is negative, then Southern Union will pay to ETP the absolute value of the Post-Closing Adjustment, in each case in accordance with the procedures specified in Section 2.4(c) of the Redemption Agreement, substituting Southern Union for CCE Holdings. 4. Confidential Project Information. Upon the closing of the transactions contemplated by the Redemption Agreement and for a period of three and one-half years thereafter, Southern Union shall, and shall cause its Affiliates to: (i) maintain the confidentiality of any proprietary business information of TPC relating to the economic terms and conditions of the TPC Expansion Projects (the “Project Information”); provided, however, that such confidentiality obligation shall not apply in the event such Project Information is or becomes generally available to the public, and (ii) not use such Project Information in a manner intended to be detrimental to TPC’s pursuit of the TPC Expansion Projects or otherwise take any action to oppose or challenge the TPC Expansion Projects. 5. Termination of Confidentiality Agreement. Upon the closing of the transaction contemplated by the Redemption Agreement, the Confidentiality Agreement, dated July 25, 2006, between ETP and Southern Union, shall terminate. [THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK.] -------------------------------------------------------------------------------- Energy Transfer Partners, L.P. September 14, 2006 Page 4 Please signify your acceptance of and agreement with the foregoing by executing one copy of this letter where indicated below.   Sincerely yours, SOUTHERN UNION COMPANY By:   /s/ Robert O. Bond Name:   Robert O. Bond Title:   Senior Vice President, Pipeline Operations Accepted and agreed to as of September     , 2006.   ENERGY TRANSFER PARTNERS, L.P. By:   Energy Transfer Partners GP, L.P., its general partner By:   Energy Transfer Partners, L.L.C., its general partner By:   /s/ Kelcy Warren Name:   Kelcy Warren Title:   Co-Chief Executive Officer

EXHIBIT 10.7 VOTING AGREEMENT VOTING AGREEMENT dated July 3, 2006 (as amended, this “Voting Agreement”) is by and between VELOCITY EXPRESS CORPORATION, a Delaware corporation (“Parent”) and the individuals listed on Schedule A annexed hereto (collectively, the “Stockholders” and each individually is a “Stockholder”). RECITALS WHEREAS, the Stockholders are the record and beneficial owners of shares of common stock, par value $0.001 per share the (“Shares”), of CD&L, Inc., a Delaware corporation (the “Company”) in the amounts set forth opposite the Stockholder’s name on Schedule A hereto; and WHEREAS, prior to the execution and delivery of this Voting Agreement, the Board of Directors of the Company has taken all actions required to: (a) approve the execution and delivery of that certain Agreement and Plan of Merger of even date herewith, by and between the Company, Buyer and CD&L Acquisition Corp., a Delaware corporation (“Merger Sub”) (the “Merger Agreement”), pursuant to which Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and as a direct wholly owned subsidiary of Parent (the “Merger”); (b) prevent any right issued pursuant to that certain Stockholder Protection Rights Agreement, dated as of December 27, 1999 between the Company and American Stock Transfer & Trust Company, as Rights Agent, and amended as of April 14, 2004 (the “Stockholder Protection Rights Agreement”) from being exercisable pursuant to the Stockholder Protection Rights Agreement as a result of the transactions contemplated herein and under the Merger Agreement or Purchase Agreement (as defined below); (c) prevent any Flip-in Date, Flip-over Transaction or Event, Stock Acquisition Date or Separation Time (as each such term is defined in the Stockholder Protection Rights Agreement) from occurring as a result of the transactions contemplated herein or under the Merger Agreement or Purchase Agreement (as defined below); and (d) waive the applicability of Section 203 of the Delaware General Corporation Law with respect to the acquisition by the Company, Newco and their affiliates and associates of 15% or more of the Company’s outstanding voting stock; WHEREAS, concurrent with the execution of this Voting Agreement, Parent and the Stockholders have entered into a Series A Convertible Subordinated Debenture Purchase Agreement dated of even date herewith (as amended from time to time, the “Purchase Agreement”) pursuant to which Parent is acquiring from Stockholders all of their Series A Convertible Subordinated Debentures; WHEREAS, as an inducement and a condition to entering into the Merger Agreement and the Purchase Agreement, Parent requires that each of the Stockholders agree, and each of the Stockholders is willing to agree, to enter into this Voting Agreement. -------------------------------------------------------------------------------- NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Parent and each of the Stockholders, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. In addition to the terms defined elsewhere herein, capitalized terms used and not defined herein have the respective meanings ascribed to them in the Merger Agreement. For purposes of this Voting Agreement:     (a) “Beneficially Own” or “Beneficial Ownership” with respect to any securities means having “beneficial ownership” of such securities as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act.     (b) “Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. 2. Disclosure. Each of the Stockholders hereby agrees to permit the Company and Parent to publish and disclose in the Company’s Proxy Statement, and any press release or other disclosure document which Parent and the Company reasonably determine to be necessary or desirable in connection with the Merger and any transactions related thereto, each Stockholder’s identity and ownership of the Shares and the nature of each Stockholder’s commitments, arrangements and understandings under this Voting Agreement. 3. Voting of Company Stock. (a) Each of the Stockholders hereby agrees that, during the period commencing on the Closing of the Purchase Agreement and continuing until the first to occur of (x) the Effective Time of the Merger, (y) the date of a Company Adverse Recommendation Change by the Board of Directors of the Company (the “Board”) in connection with a Superior Competing Transaction and a termination of the Merger Agreement as a result thereof in accordance with the terms of the Merger Agreement, or (z) the date of termination of the Merger Agreement for any reason in accordance with its terms (whichever date is first, the “Termination Date”), at any meeting of the holders of the Shares, however called, or in connection with any written consent of the holders of the Shares, he shall vote (or cause to be voted) the Shares held of record or Beneficially Owned by the Stockholder, whether now owned or hereafter acquired: (i) in favor of approval of the Merger, adoption of the Merger Agreement and any actions required in furtherance thereof and hereof, (ii) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty, or any other obligation or agreement, of the Company under the Merger Agreement or any Stockholder under this Voting Agreement, and   2 -------------------------------------------------------------------------------- (iii) except as otherwise agreed to in writing in advance by Parent, against the following actions (other than the Merger and the transactions contemplated by this Voting Agreement and the Merger Agreement):     (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company;     (B) a sale, lease or transfer of a material amount of assets of the Company, or a reorganization, recapitalization, dissolution or liquidation of the Company; or     (C) (1) any change in a majority of the individuals who constitute the Company’s board of directors;          (2) any change in the present capitalization of the Company or any amendment of the Company’s Certificate of Incorporation or By-Laws;          (3) any material change in the Company’s corporate structure or business; or          (4) any other action which, in the case of each of the matters referred to in clauses (C)(1), (2) or (3), is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially and adversely affect the Merger and the transactions contemplated by this Voting Agreement and the Merger Agreement; provided, however, that the restrictions in this clause (iii) shall not apply to a vote in connection with a Superior Competing Offer if such vote is made subsequent to a Company Adverse Recommendation Change by the Board attributable to such Superior Competing Transaction. (b) Each of the Stockholders agrees that the Stockholder’s obligations under this Voting Agreement are unconditional and will remain in full force and effect notwithstanding that the Company may have received a proposal for a Competing Transaction unless there is a termination of the Merger Agreement for any reason in accordance with its terms, in which case this Voting Agreement shall terminate, or unless the offer constitutes a Superior Competing Transaction and there has been a Company Adverse Recommendation Change. Further, none of the Stockholders will enter into any agreement or understanding with any Person the effect of which would be inconsistent with or violative of any provision contained in this Section 3. Nothing in this Section 3 shall require any Stockholder to exercise any options or warrants with respect to the Shares or to convert any convertible notes or other convertible securities. (c) Contemporaneously with the execution of this Agreement, each Stockholder, severally and not jointly, agrees to deliver to Purchaser a proxy in the form attached hereto as Exhibit A, which shall be irrevocable, with respect to the Shares, subject to the other terms of this Agreement.   3 -------------------------------------------------------------------------------- 4. Covenants, Representations and Warranties of each Stockholder. Each of the Stockholders hereby represents and warrants (with respect to such Stockholder only and not with respect to each other Stockholder) to, and agrees with, Parent as follows:     (a) Ownership of Securities. Such Stockholder is the sole record and Beneficial Owner of the number of Shares set forth opposite such Stockholder’s name on Schedule A hereto. On the date hereof, the Shares set forth opposite the Stockholder’s name on Schedule A hereto constitute all of the Shares owned of record or Beneficially Owned by such Stockholder or with respect to which such Stockholder has voting power by proxy, voting agreement, voting trust or other similar instrument. Such Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth in Section 3 hereof, sole power of disposition, sole power of conversion, sole power to demand and waive appraisal rights and sole power to agree to all of the matters set forth in this Voting Agreement, in each case with respect to all of the Shares set forth opposite such Stockholder’s name on Schedule A hereto, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws, and the terms of this Voting Agreement.     (b) Authorization. Such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder’s obligations under this Voting Agreement. The execution, delivery and performance of this Voting Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, stockholders agreement, voting trust, trust or similar agreement. This Voting Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement enforceable against such Stockholder in accordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Stockholder is a trustee whose consent is required for the execution and delivery of this Voting Agreement or the consummation by such Stockholder of the transactions contemplated hereby. If such Stockholder is married and such Stockholder’s Shares constitute community property, this Voting Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, such Stockholder’s spouse, enforceable against such person in accordance with its terms.     (c) No Conflicts. (i) Except as may be required under Section 13 of the Exchange Act, no filing with, and no permit, authorization, consent or approval of, any state or federal public body or authority is necessary for the execution of this Voting Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby   4 --------------------------------------------------------------------------------   and (ii) none of the execution and delivery of this Voting Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (A) conflict with or result in any breach of the organizational documents of such Stockholder (if applicable), (B) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, material modification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which such Stockholder is a party or by which such Stockholder or any of its properties or assets may be bound, or (C) violate any order, writ injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or any of its properties or assets.     (d) No Encumbrances. Except as applicable in connection with the transactions contemplated by Section 3 hereof, such Stockholder’s Shares at all times during the term hereof will be Beneficially Owned by such Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever.     (e) No Solicitation. Such Stockholder agrees not to take any action in his capacity as a record or beneficial owner of Shares inconsistent with or in violation of Section 6.2 of the Merger Agreement, provided that this paragraph (e) shall not apply to actions which would otherwise be permitted to be taken by the Company under Section 6.2 of the Merger Agreement.     (f) Restriction on Transfer; Proxies and Non-Interference. Such Stockholder shall not, directly or indirectly (i) except for a Permitted Transfer (as defined below) and except as contemplated by the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of any such Stockholder’s Shares or any interest therein, (ii) except as contemplated by this Voting Agreement, grant any proxies or powers of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to the Shares, or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder’s obligations under this Voting Agreement.     (g) Reliance by Parent. Such Stockholder understands and acknowledges that Parent is entering into the Merger Agreement and the Purchase Agreement in reliance upon such Stockholder’s execution and delivery of this Voting Agreement.   5 --------------------------------------------------------------------------------   (h) Permitted Transfer. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, any Stockholder may sell or transfer any Shares to any Stockholder or any other Person who executes and delivers to Parent an agreement, in form and substance acceptable to Parent, to be bound by the terms of this Agreement to the same extent as the transferring Stockholder (any such transfer, a “Permitted Transfer”). 5. Waiver of Appraisal Rights. Each of the Stockholders hereby irrevocably waives any and all appraisal, dissenter or other similar rights which the Stockholder may otherwise have with respect to the consummation of the Merger, including without limitation, any rights pursuant to Section 262 of the Delaware General Corporation Law. Each of the Stockholders acknowledges that it has been afforded a reasonably opportunity to review information and ask questions regarding the Merger Agreement and the Merger. 6. Stop Transfer Legend.     (a) Each of the Stockholders agrees and covenants to Parent that such Stockholder shall not request that the Company register the transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholder’s Shares, unless such transfer is made in compliance with this Voting Agreement.     (b) Without limiting the covenants set forth in paragraph (a) above, in the event of a stock dividend or distribution, or any change in Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, other than pursuant to the Merger, the term “Shares” shall be deemed to refer to and include the Shares into which or for which any or all of the Shares may be changed or exchanged and appropriate adjustments shall be made to the terms and provisions of this Voting Agreement. 7. Further Assurances. From time to time, at Parent’s request and without further consideration, each Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Voting Agreement. 8. Stockholder Capacity. If any Stockholder is or becomes during the term hereof a director or an officer of the Company, such Stockholder makes no agreement or understanding herein in his capacity as such director or officer. Each of the Stockholders signs solely in his or her capacity as the record and Beneficial Owner of the Stockholder’s Shares. 9. Termination. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the Shares shall terminate upon the earlier of (a) the Termination Date regardless of the circumstances or (b) the Effective Time of the Merger.   6 -------------------------------------------------------------------------------- 10. Miscellaneous.     (a) Entire Agreement. This Voting Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.     (b) Certain Events. Subject to Section 4(f) hereof, each of the Stockholders agrees that this Voting Agreement and the obligations hereunder shall attach to each such Stockholder’s Shares and shall be binding upon any Person to which legal or Beneficial Ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation, each Stockholder’s heirs, guardians, administrators or successors. Notwithstanding any such transfer of Shares, the transferor shall remain liable for the performance of all obligations under this Voting Agreement.     (c) Assignment. This Voting Agreement shall not be assigned by operation of law or otherwise without the prior written consent of Parent in the case of an assignment by any Stockholder and each Stockholder in the case of any assignment by Parent; provided that Parent may assign, in its sole discretion, its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations.     (d) Amendment and Modification. This Voting Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto affected by such amendment.     (e) Notices. Any notice or other communication required or which may be given hereunder shall be in writing and delivered (i) personally, (ii) via telecopy, (iii) via overnight courier (providing proof of delivery) or (iv) via registered or certified mail (return receipt requested). Such notice shall be deemed to be given, dated and received (i) when so delivered personally, via telecopy upon confirmation, or via overnight courier upon actual delivery or (ii) two days after the date of mailing, if mailed by registered or certified mail. Any notice pursuant to this section shall be delivered as follows:          If to the Stockholder, to the address set forth for the Stockholder on Schedule A to this Voting Agreement.   If to Parent:    Velocity Express Corporation    One Morningside Drive North    Building B, Suite 300    Westport, CT 06880    Attn: General Counsel    Facsimile: 952.835.4997   7 -------------------------------------------------------------------------------- with copies to:    Budd Larner, PC    150 John F. Kennedy Parkway    Short Hills, NJ 07078    Attention: James F. Fitzsimmons, Esq.    Fax: 973.379.7734 and to    Briggs and Morgan, P.A.    2200 IDS Center    80 South Eighth Street    Minneapolis, MN 55402    Attention: Avron L. Gordon, Esq.    Fax: 612.977.8650     (f) Severability. Whenever possible, each provision or portion of any provision of this Voting Agreement will be interpreted in such a manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Voting Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision of this Voting Agreement in such jurisdiction, and this Voting Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.     (g) Specific Performance. Each of the parties hereto agrees, recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Voting Agreement will cause the other parties to sustain damages for which they would not have an adequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach any aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements (without any requirement to post bond or other security and without having to prove actual damages) and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity.     (h) Remedies Cumulative. All rights, powers and remedies provided under this Voting Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any such rights, powers or remedies by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.   8 --------------------------------------------------------------------------------   (i) No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Voting Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, will not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.     (j) No Third Party Beneficiaries. This Voting Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.     (k) Governing Law. This Voting Agreement will be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof.     (l) Submission to Jurisdiction. Each party to this Voting Agreement irrevocably consents and agrees that any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof will be brought in the state or federal courts located within the jurisdiction of the United States District Court for the Southern District of New York, and, by execution and delivery of this Voting Agreement, each party to this Voting Agreement hereby irrevocably submits to and accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts and appellate courts from any appeal thereof. Each party to this Voting Agreement further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof in the manner set forth in Section 10(e). Each party to this Voting Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Voting Agreement brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing in this Section 10(l) shall be deemed to constitute a submission to jurisdiction, consent or waiver with respect to any matter not specifically referred to herein.     (m) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN CONNECTION WITH THIS VOTING AGREEMENT.     (n) Description Headings. The description headings used herein are for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Voting Agreement.   9 --------------------------------------------------------------------------------   (o) Counterparts. This Voting Agreement may be executed in counterparts, each of which will be considered one and the same Voting Agreement and will become effective when such counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.     (p) No Survival. No representations, warranties and covenants of the Stockholder in this Agreement shall survive the Merger. The Stockholder shall have no liability hereunder except for any willful and material breach of this Agreement by the Stockholder.     (q) Action in Stockholder Capacity Only. The parties acknowledge that this Agreement is entered into by each Stockholder solely in such Stockholder’s capacity as the beneficial owner of such Stockholder’s Shares and, notwithstanding anything herein to the contrary, nothing in this Agreement in any way restricts or limits any action taken by such Stockholder or any designee or related party of such Stockholder in his or her capacity as a director or officer of the Company and the taking of any actions in his or her capacity as an officer or director of the Company will not be deemed to constitute a breach of this Agreement, regardless of the circumstances related thereto. [SIGNATURE PAGE FOLLOWS]   10 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Parent and each of the Stockholders have caused this Voting Agreement to be duly executed as of the day and year first above written.   Parent:   VELOCITY EXPRESS CORPORATION   By:   /s/ Edward W. Stone   Name:   Edward W. Stone   Title:   Chief Financial Officer Stockholders:   /s/ Albert W. Van Ness, Jr.   Albert W. Van Ness, Jr.   /s/ William T. Brannan   William T. Brannan   /s/ Michael Brooks   Michael Brooks   /s/ Russell J. Reardon   Russell J. Reardon   /s/ Matthew J. Morahan   Matthew J. Morahan   /s/ Vincent P. Brana   Vincent P. Brana   /s/ Jack McCorkell   Jack McCorkell   11 -------------------------------------------------------------------------------- SCHEDULE A Stockholders   Stockholder Name and Address    Number of Shares      Albert W. Van Ness, Jr. 89 Silver Oaks Circle, Unit 5104 Naples, FL 34119    136,160    William T. Brannan 2 Carmella Court Cedar Grove, NJ 07009    113,796    Michael Brooks 3986 N W 52nd Place Boca Raton, Fl 33496    251,955    Russell J. Reardon 11 Old Quarry Road Cedar Grove, NJ 07009    74,238    Matthew J. Morahan 18126 Southeast Village Circle Tequesta, FL 33469    360,512    Vincent P. Brana 527 Eastgate Road Ho-ho-kus, NJ 07423    357,000    Jack McCorkell 125 County Park Drive Cranford, NJ 07016    52,609      12 -------------------------------------------------------------------------------- EXHIBIT A IRREVOCABLE PROXY Reference is made to that certain Voting Agreement dated the date hereof (the “Voting Agreement”) by and among Velocity Express Corporation, a Delaware corporation (“Purchaser”), CD&L Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Purchaser (“Merger Sub”), and the stockholders of the Company signatory thereto. 1. Irrevocable Proxy. (a) The undersigned stockholder (the “Stockholder”) of CD&L, Inc., a Delaware corporation (the “Company”) hereby irrevocably appoints and constitutes each of the Chief Executive Officer, the President, the Chief Financial Officer and the Secretary of Purchaser (collectively the “Proxyholders”), as the agents, attorneys and proxies of the undersigned Stockholder, with full power of substitution and resubstitution, to the full extent of the undersigned Stockholder’s rights with respect to the shares of Common Stock of the Company that are listed below (the “Shares”), and any and all other shares or securities issued or issuable in respect thereof on or after the date hereof and prior to the date this Irrevocable Proxy terminates, to vote the Shares as set forth in this paragraph 1. (b) The Proxyholders are empowered at any time prior to termination of this Irrevocable Proxy to exercise all voting rights with respect to such Shares (including, without limitation, the power to execute and deliver written consents with respect to the Shares) of the undersigned Stockholder at every annual, special or other meeting of stockholders of the Company and at any adjournment or postponement thereof, however called, or pursuant to any written consent in lieu of a meeting or otherwise (such rights, the “Proxy Rights”) in accordance with Section 3(a) of the Voting Agreement. (c) The Proxyholders may not exercise these Proxy Rights with respect to any matter except as specifically authorized herein. The Stockholder may vote the Shares on all such other matters, subject to such other agreements as the Stockholder may be subject or by which the Stockholder or the Shares may be bound. The Proxy Rights granted by Stockholder to the Proxyholders hereby is granted as of the date of this Irrevocable Proxy in order to secure the obligations of such Stockholder set forth in Section 3(a) of the Voting Agreement, and is irrevocable and coupled with an interest in such obligations. 2. Termination. This Irrevocable Proxy will terminate upon the termination of the Voting Agreement in accordance with its terms. 3. Miscellaneous. a. Upon the execution hereof, all prior proxies, voting agreements or powers-of-attorney given by the undersigned Stockholder with respect to the Shares and any and all other shares or securities issued or issuable in respect thereof on or after the date hereof, or which are other inconsistent herewith, are hereby revoked and no subsequent proxies or powers-of attorney will be given, nor voting agreements made until such time as this Irrevocable Proxy shall be terminated in accordance with its terms.   13 -------------------------------------------------------------------------------- b. All authority conferred herein shall survive the insolvency, liquidation, death or incapacity of the Stockholder and any obligation of the Stockholder hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the Stockholder. c. The undersigned Stockholder authorizes the Proxyholders to file this Irrevocable Proxy and any substitution or revocation of substitution with the Secretary of the Company and with any inspector of elections at any meeting of stockholders of the Company. d. The Provisions of Section 10 of the Voting Agreement, to the extent applicable, shall be incorporated herein by reference. [SIGNATURE PAGE FOLLOWS]   14 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned Stockholder has caused this Irrevocable Proxy to be executed personally or by a duly authorized representative thereof as of the day and year set forth below. DATED: June     , 2006   Signature     Name:     Title:     Address:           Number of Shares Held Beneficially and of Record by Stockholder:              Shares owned beneficially              Shares owned of record [SIGNATURE PAGE TO IRREVOCABLE PROXY]   15

Exhibit 10.99.1 RESTRICTED STOCK AWARD AGREEMENT FOR PATH 1 NETWORK TECHNOLOGIES INC. COMMON STOCK UNDER THE 2004 EQUITY INCENTIVE PLAN THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of the 15th day of November, 2005 by and between Path 1 Network Technologies Inc., a Delaware corporation (the “Company”), and Thomas L. Tullie (herein referred to as the “Participant”); WITNESSETH: WHEREAS, the Participant serves as Chief Executive Officer for the Company; WHEREAS, the Company has previously adopted the Path 1 Network Technologies Inc. 2004 Equity Incentive Plan (the “Plan”); WHEREAS, pursuant to the Plan, the Company has awarded the Participant shares of common stock under the Plan subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows (all capitalized terms used herein, unless otherwise defined, have the meaning ascribed to such terms in the Plan): 1. The Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). 2. Grant of Award. The Company hereby grants to the Participant an award (the “Award”) of Two Hundred Fifty Thousand (250,000) shares of Company common stock, par value $0.001 (the “Stock”), on the terms and conditions set forth herein and in the Plan. 3. Terms of Award. (a) Escrow of Shares. A certificate representing the shares of Stock subject to the Award (the “Restricted Stock”) shall be issued in the name of the Participant and shall be escrowed with the Controller of the Company (the “Escrow Agent”) subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. (b) Time Vesting. The shares of Restricted Stock will vest in one lump amount on November 15, 2007 subject to and based on the Participant’s continuous service with the Company through November 15, 2007. In the event the Participant’s service with the Company is terminated before November 15, 2007 (i) without “Cause” or (ii) by the Participant voluntarily for “Good Reason”, then, if and only if the condition stated in Section 4.3 of the employment letter agreement dated November 13, 2005 between the Company and the Participant is satisfied, any shares of Restricted Stock that have not yet been vested shall immediately vest. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed Vested Stock. The Participant expressly acknowledges that nothing in the Plan or in this Agreement gives him any right to continue his service with the Company for any period of time, nor does the Plan or this Agreement interfere in any way with his right or the Company’s right to terminate that service at any time, for any reason, with or without cause (subject to any applicable consequences under any express written contracts). -------------------------------------------------------------------------------- (c) Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. Cash dividends declared and paid by the Company with respect to the shares of Restricted Stock shall be paid to the Participant. (d) Vested Stock—Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates representing such Stock and the Secretary of the Company shall (subject to Section 11 below) deliver to the Participant certificates representing such Vested Stock free and clear of all restrictions. (e) Forfeiture. In the event the Participant’s employment with the Company is, prior to all shares of Restricted Stock becoming Vested Stock, terminated for any reason other than (i) death, (ii) disability, (iii) without Cause, or (iv) by the Participant for Good Reason, then all shares of Restricted Stock which have not yet been vested shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever. 4. Change of Control Vesting. (a) Upon a Change of Control, all Restricted Stock shall immediately become Vested Stock and the Company shall deliver to the Participant certificates representing the Vested Stock free and clear of all restrictions. (b) “Change of Control” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 5. Cause. “Cause” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 6. Good Reason. Voluntary termination for “Good Reason” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 7. Stock Powers and the Beneficiary. The Participant hereby agrees to execute and deliver to the Controller of the Company a stock power (endorsed in blank) in the form of Exhibit B hereto covering his Award and authorizes the Controller to deliver to the Company any and all shares of Restricted Stock that are forfeited under the provisions of this Agreement, together with such stock power. 8. Non-transferability of Award. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any shares of Restricted Stock or any interest therein in any manner whatsoever before they vest. 9. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing. 10. Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of California, without regard to its conflicts of laws provisions. 11. Withholding. The Company and the Participant shall comply with all federal and state laws and regulations, if any, respecting the withholding, deposit and payment of any income, employment   2 -------------------------------------------------------------------------------- or other taxes relating to the Award. No share certificate shall be delivered to the Participant except upon payment of all required employee-side withholding taxes by the Participant to the Company. Any delay by the Participant in making such payment shall not affect the due date for such delivery nor the date as of which the value of Shares is measured for withholding tax purposes. 12. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. 13. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. 14. Entire Agreement; No Amendments. The parties acknowledge that this Award constitutes 250,000 of the Initial Shares which were to be granted by the Company to the Participant pursuant to the employment letter agreement dated November 13, 2005 between the Company and the Participant, and satisfies all of the Company’s obligations with regard to such 250,000 of the Initial Shares. This Agreement constitutes the complete agreement of the parties with regard to the subject matter hereof, including the employment letter agreement, and supersedes all prior or contemporaneous commitments and agreements, oral or written, with regard thereto. This Agreement may not be amended except in writing and signed by the parties hereto. 15. Attorneys. The parties acknowledge that they have the right to have been represented by legal counsel of their own choosing, and that Heller Ehrman LLP and Hayden Trubitt are representing the Company and are not representing the Participant. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   Path 1 Network Technologies Inc. (a Delaware corporation) By:   /s/    JEREMY FERRELL Its:   Interim CFO   Participant: /s/    THOMAS L. TULLIE Thomas L. Tullie   3 -------------------------------------------------------------------------------- Exhibit A 2004 EQUITY INCENTIVE PLAN -------------------------------------------------------------------------------- Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, Thomas L. Tullie, an individual, hereby irrevocably assigns and conveys to                                     ,                                          (            ) shares of the Common Stock of Path 1 Network Technologies Inc., a Delaware corporation, $0.001 par value, and appoints                      as attorney to transfer such shares on the books of such corporation. Dated: ___________       Thomas L. Tullie -------------------------------------------------------------------------------- RESTRICTED STOCK AWARD AGREEMENT FOR PATH 1 NETWORK TECHNOLOGIES INC. COMMON STOCK UNDER THE 2000 STOCK OPTION/STOCK ISSUANCE PLAN THIS RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of the 15th day of November, 2005 by and between Path 1 Network Technologies Inc., a Delaware corporation (the “Company”), and Thomas L. Tullie (herein referred to as the “Participant”); WITNESSETH: WHEREAS, the Participant serves as Chief Executive Officer for the Company; WHEREAS, the Company has previously adopted the Path 1 Network Technologies Inc. 2000 Stock Option/Stock Issuance Plan (the “Plan”); WHEREAS, pursuant to the Plan, the Company has awarded the Participant shares of common stock under the Plan subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows (all capitalized terms used herein, unless otherwise defined, have the meaning ascribed to such terms in the Plan): 16. The Plan. The Plan, a copy of which is attached hereto as Exhibit A, is hereby incorporated by reference herein and made a part hereof for all purposes, and when taken with this Agreement shall govern the rights of the Participant and the Company with respect to the Award (as defined below). 17. Grant of Award. The Company hereby grants to the Participant an award (the “Award”) of Fifty Thousand (50,000) shares of Company common stock, par value $0.001 (the “Stock”), on the terms and conditions set forth herein and in the Plan. 18. Terms of Award. (a) Escrow of Shares. A certificate representing the shares of Stock subject to the Award (the “Restricted Stock”) shall be issued in the name of the Participant and shall be escrowed with the Controller of the Company (the “Escrow Agent”) subject to removal of the restrictions placed thereon or forfeiture pursuant to the terms of this Agreement. (b) Time Vesting. The shares of Restricted Stock will vest in one lump amount on November 15, 2008 subject to and based on the Participant’s continuous service with the Company through November 15, 2008. In the event the Participant’s service with the Company is terminated before November 15, 2008 (i) without “Cause” or (ii) by the Participant voluntarily for “Good Reason”, then, if and only if the condition stated in Section 4.3 of the employment letter agreement dated November 13, 2005 between the Company and the Participant is satisfied, any shares of Restricted Stock that have not yet been vested shall immediately vest. Once vested pursuant to the terms of this Agreement, the Restricted Stock shall be deemed Vested Stock. The Participant expressly acknowledges that nothing in the Plan or in this Agreement gives him any right to continue his service with the Company for any period of time, nor does the Plan or this Agreement interfere in any way with his right or the Company’s right to terminate that service at any time, for any reason, with or without cause (subject to any applicable consequences under any express written contracts).   6 -------------------------------------------------------------------------------- (c) Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. Cash dividends declared and paid by the Company with respect to the shares of Restricted Stock shall be paid to the Participant. (d) Vested Stock—Removal of Restrictions. Upon Restricted Stock becoming Vested Stock, all restrictions shall be removed from the certificates representing such Stock and the Secretary of the Company shall (subject to Section 11 below) deliver to the Participant certificates representing such Vested Stock free and clear of all restrictions. (e) Forfeiture. In the event the Participant’s employment with the Company is, prior to all shares of Restricted Stock becoming Vested Stock, terminated for any reason other than (i) death, (ii) disability, (iii) without Cause, or (iv) by the Participant for Good Reason, then all shares of Restricted Stock which have not yet been vested shall be absolutely forfeited and the Participant shall have no further interest therein of any kind whatsoever. 19. Change of Control Vesting. (a) Upon a Change of Control, all Restricted Stock shall immediately become Vested Stock and the Company shall deliver to the Participant certificates representing the Vested Stock free and clear of all restrictions. (b) “Change of Control” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 20. Cause. “Cause” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 21. Good Reason. Voluntary termination for “Good Reason” shall have the definition given to that term in the employment letter agreement dated November 13, 2005 between the Company and the Participant. 22. Stock Powers and the Beneficiary. The Participant hereby agrees to execute and deliver to the Controller of the Company a stock power (endorsed in blank) in the form of Exhibit B hereto covering his Award and authorizes the Controller to deliver to the Company any and all shares of Restricted Stock that are forfeited under the provisions of this Agreement, together with such stock power. 23. Non-transferability of Award. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, encumber or charge any shares of Restricted Stock or any interest therein in any manner whatsoever before they vest. 24. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing. 25. Binding Effect and Governing Law. This Agreement shall be (i) binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns except as may be limited by the Plan and (ii) governed and construed under the laws of the State of California, without regard to its conflicts of laws provisions. 26. Withholding. The Company and the Participant shall comply with all federal and state laws and regulations, if any, respecting the withholding, deposit and payment of any income, employment   7 -------------------------------------------------------------------------------- or other taxes relating to the Award. No share certificate shall be delivered to the Participant except upon payment of all required employee-side withholding taxes by the Participant to the Company. Any delay by the Participant in making such payment shall not affect the due date for such delivery nor the date as of which the value of Shares is measured for withholding tax purposes. 27. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision hereof. 28. Counterparts. This Agreement may be executed in any number of identical counterparts, each of which shall be deemed an original for all purposes, but all of which taken together shall form but one agreement. 29. Entire Agreement; No Amendments. The parties acknowledge that this Award constitutes 50,000 of the Initial Shares which were to be granted by the Company to the Participant pursuant to the employment letter agreement dated November 13, 2005 between the Company and the Participant, and satisfies all of the Company’s obligations with regard to such 50,000 of the restricted Initial Shares. This Agreement constitutes the complete agreement of the parties with regard to the subject matter hereof, including the employment letter agreement, and supersedes all prior or contemporaneous commitments and agreements, oral or written, with regard thereto. This Agreement may not be amended except in writing and signed by the parties hereto. 30. Attorneys. The parties acknowledge that they have the right to have been represented by legal counsel of their own choosing, and that Heller Ehrman LLP and Hayden Trubitt are representing the Company and are not representing the Participant. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   Path 1 Network Technologies Inc. (a Delaware corporation) By:   /s/    JEREMY FERRELL Its:   Interim CFO   Participant: /s/    THOMAS L. TULLIE         Thomas L. Tullie   8 -------------------------------------------------------------------------------- Exhibit A 2000 STOCK OPTION/STOCK ISSUANCE PLAN -------------------------------------------------------------------------------- Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, Thomas L. Tullie, an individual, hereby irrevocably assigns and conveys to _______________________,___________________________ (            ) shares of the Common Stock of Path 1 Network Technologies Inc., a Delaware corporation, $0.001 par value, and appoints __________ as attorney to transfer such shares on the books of such corporation. Dated: ___________       Thomas L. Tullie

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Exhibit 10.70 Option Agreement This OPTION AGREEMENT (this “Agreement”) is made and entered into as of August 8, 2006 (the “Effective Date”), by and between DTS, Inc., a Delaware corporation (together with its Affiliates and permitted assigns, “DTS”), and Avica Technology Corporation, a California corporation (“Avica”).  Capitalized terms used without definition shall have the meanings set forth in Section 8.2 hereof. Whereas, DTS and Avica have entered into an Exclusive License Agreement, dated as of the date hereof (the “Exclusive License Agreement”); Whereas, DTS may, in its sole discretion, deliver a Purchase Election Notice (as such term is defined below) to cause Avica to (i) sell all or substantially all of its assets to DTS and (ii) assign to or cause to be assumed by DTS any of Avica’s contracts, in accordance with their terms, as DTS shall select in its sole discretion (the “Asset Purchase”), upon the terms and subject to the conditions set forth in this Agreement; Whereas, the board of directors of Avica (the “Avica Board”) has approved and adopted the consummation of the transactions contemplated hereby, and has determined to submit the performance of transactions contemplated by this agreement and the Exclusive License Agreement to the holders (the “Avica Stockholders”) of the shares of Avica’s Common Stock, no par value per share (the “Avica Common Stock”), for their approval by written consent; and Whereas, the Avica Board has carefully considered the terms of this Agreement and the Exclusive License Agreement and has determined that the terms and conditions of the transactions contemplated hereby and thereby, including the Asset Purchase, are fair and in the best interests of, and are advisable to, Avica and the Avica Stockholders, and the Avica Board recommends that the Avica Stockholders vote for the approval of this Agreement, the Exclusive License Agreement, the Asset Purchase and the transactions contemplated hereby and thereby. Now, Therefore, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally bound hereby, DTS and Avica hereby agree as follows: ARTICLE 1 THE ASSET PURCHASE 1.1           The Asset Purchase.  Subject to the other terms and conditions of this Agreement and the Asset Purchase Agreement (as defined below), the Asset Purchase may be consummated under the following circumstances: (a)           Form of Asset Purchase Agreement.  Within forty-five (45) days after the date of this Agreement, DTS and Avica shall have prepared and agreed to the form of asset purchase agreement, together with such related agreements as shall be referenced therein (collectively, the “Asset Purchase Agreement”), pursuant to which the Asset Purchase shall be consummated in DTS’ sole discretion as set forth in this Agreement.  At such time as DTS and Avica shall have agreed to the final form of the Asset Purchase Agreement (the “Form Agreement Date”), DTS and Avica shall evidence such agreement in writing, Avica shall confirm in writing its representations and warranties thereunder as of the Form Agreement Date and the Asset Purchase Agreement shall be deemed attached as Exhibit A hereto.  The Asset Purchase Agreement shall, among other things, contain representations and warranties to be made by Avica, and shall contemplate a schedule of disclosures and exceptions to such representations and warranties (the “Avica Disclosure Schedule”).  The Asset Purchase Agreement shall also contain other schedules, including schedules that list all assets of the Company (the “Asset Schedules”).  Avica shall -------------------------------------------------------------------------------- complete and, on the Form Agreement Date, deliver to DTS the Avica Disclosure Schedule, the Asset Schedules and such other schedules as are contemplated by the Asset Purchase Agreement, each of which shall be true, accurate and complete as of the Form Agreement Date. (b)           Disclosure Schedules.  At any time during the Option Period (but not more than twice in any 12-month period), DTS may, upon notice to Avica (a “Disclosure Schedule Request”), require Avica to prepare an updated schedule of disclosures and exceptions to the representations and warranties of Avica contained in the Asset Purchase Agreement, together with updated Asset Schedules and updates to such other schedules as are contemplated by the Asset Purchase Agreement (collectively, an “Updated Avica Disclosure Schedule”), as if such representations, warranties and disclosures were made as of the date of such Updated Avica Disclosure Schedule, except to the extent any such representations and warranties refer expressly to an earlier date, provided, that in no event shall DTS be entitled to deliver a Disclosure Schedule Request after the Option Expiration Date.  Avica shall prepare and deliver to DTS an Updated Avica Disclosure Schedule within thirty (30) days of receipt of a Disclosure Schedule Request.  An Updated Avica Disclosure Schedule delivered pursuant to this Section 1.1(b) shall refer only to (i) disclosures of actual facts contained in the Avica Disclosure Schedule attached to the Asset Purchase Agreement as of the Form Agreement Date, and (ii) disclosures of actual facts in existence on the date of such Updated Avica Disclosure Schedule that have occurred or been discovered since the Form Agreement Date, and the Updated Avica Disclosure Schedule shall not otherwise limit or modify any of the representations and warranties made in the Asset Purchase Agreement.  No disclosure of a fact or event on an Updated Avica Disclosure Schedule shall be deemed to cure any failure to disclose such fact or event on the Avica Disclosure Schedule, or otherwise amend the Avica Disclosure Schedule. (c)           Election by DTS to Cause The Asset Purchase. (i)            At any time during the Option Period, DTS shall have the right to elect, in its sole discretion, to cause Avica to close the Asset Purchase (the “Option”) by delivery to Avica of a written notice of such election (a “Purchase Election Notice”) in the form of Exhibit B hereto.  The Purchase Election Notice shall also set forth the proposed closing date of the Asset Purchase (which shall, unless otherwise mutually agreed to by the parties, be no less than ten (10) days nor more than sixty (60) days after the date of the Purchase Election Notice).  In the event that Avica does not deliver an Updated Avica Disclosure Schedule to DTS within the time period specified in Section 1.1(b), the Avica Disclosure Schedule originally attached to the Asset Purchase Agreement, shall be deemed to be the final Avica Disclosure Schedule for all purposes of this Agreement and the Asset Purchase Agreement and all references to Avica Disclosure Schedule and the Updated Avica Disclosure Schedule in Article 2 hereof shall be deemed to refer to such original Avica Disclosure Schedule.  The Purchase Election Notice, when duly signed and delivered by DTS in its sole discretion, shall be deemed the irrevocable commitment of DTS and Avica to consummate the Asset Acquisition, subject to the terms and conditions of the Asset Purchase Agreement, on the closing date specified in the Purchaser Election Notice. (ii)           Notwithstanding anything to the contrary in this Agreement but subject to Section 1.3, (A) none of the parties hereto shall have any obligation to consummate the Asset Purchase unless and until DTS delivers a Purchase Election Notice and (B) DTS is under no obligation to deliver any Purchase Election Notice or a Disclosure Schedule Request at any time. (d)           Consummation of the Asset Purchase.  The obligations of Avica and DTS to consummate the Asset Purchase shall be subject to the satisfaction of such conditions as shall be set forth in the Asset Purchase Agreement.  Subject to the fulfillment or waiver of all of such conditions, as soon as is reasonably practicable on or after the closing date specified in the Purchase Election Notice, a closing (the “Asset Closing”) will be held at the offices of Heller Ehrman LLP in San Diego, California (or such other place as the parties may agree).  The date on which the Asset Closing is actually held is 2 -------------------------------------------------------------------------------- referred to herein as the “Asset Closing Date.”  On the Asset Closing Date, DTS and Avica shall cause the Asset Purchase to be consummated. (e)           Payment of Purchase Price.  In the event DTS elects, in its sole discretion, to consummate the Asset Purchase, and subject to the fulfillment or waiver of all of the conditions contained in the Asset Purchase Agreement, at the Asset Closing, DTS shall deliver to Avica the Asset Purchase Price, which shall be payable as set forth below. *** (i)            *** (A)          *** (B)           *** (C)           *** ·      *** ·      *** (D)          *** (E)           *** (ii)           *** (A)          *** (B)           *** -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 3 -------------------------------------------------------------------------------- ·      *** ·      *** (C)           In no event shall the number of [***] Shares delivered or deliverable to Avica in payment of the Asset Purchase Price exceed five percent (5%) of the aggregate number of shares of common stock of [***] outstanding immediately prior to the Asset Closing (assuming conversion of any then-outstanding securities that are convertible into shares of capital stock of [***]) (the “Five Percent Limit”).  If the number of [***] Shares otherwise deliverable in full payment of the Asset Purchase Price would otherwise exceed the Five Percent Limit, then [***] shall pay any remaining unpaid balance of the Asset Purchase Price in cash. (D)          The issuance of [***] Shares in payment of the Asset Purchase Price is subject to the availability of and compliance with a valid exemption from the registration or qualification provisions of U.S. federal and any applicable state or other securities laws. (E)           Any [***] Shares issued in payment of the Asset Purchase Price shall be “restricted securities” under the U.S. federal securities laws and shall contain an appropriate legend relating thereto. 1.2           Other Provisions Relating to the Issuance of Shares. (a)           Restricted Securities; Legend.  Any *** Shares *** issued in payment of the Asset Purchase Price shall be “restricted securities” under the U.S. federal securities laws (the “Restricted Securities”).  Any certificate representing the Restricted Securities shall be imprinted with the following legend (or the substantial equivalent thereof): “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, OTHER THAN PURSUANT TO REGISTRATION UNDER SAID ACT OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 OR OTHER SIMILAR RULE OR EXEMPTION AS THEN IN EFFECT, WITHOUT FIRST OBTAINING (I) IF REASONABLY REQUIRED BY THE COMPANY, A WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE CONTEMPLATED SALE, TRANSFER OR OTHER DISPOSITION WILL NOT BE IN VIOLATION OF SAID ACT, OR (II) A ‘NO-ACTION’ OR INTERPRETIVE LETTER FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH STAFF WILL TAKE NO ACTION IN RESPECT OF THE CONTEMPLATED SALE, TRANSFER OR OTHER DISPOSITION.” In the event that any certificate representing *** Shares *** is imprinted with the foregoing legend (or a similar legend), DTS *** shall cause such legends to be removed in connection with any resale of such *** Shares *** that is made in compliance with, or pursuant to a valid exemption from, the registration provisions of the Securities Act. (b)           Notice of Proposed Transfers.  Avica hereby agrees, and any other holder of any certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 4 -------------------------------------------------------------------------------- the provisions of this Section 1.2(b).  Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice ***, of such holder’s intention to effect such transfer, sale, assignment or pledge.  Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and shall be accompanied at such holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall be, reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, or (ii) a “no action” letter from the SEC to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto, or (iii) any other evidence reasonably satisfactory to counsel to the Company, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company.  The Company will not require such a legal opinion or “no action” letter in any transaction in compliance with Rule 144.  Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 1.2(a) above, except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act. (c)           No Fractional Shares.  In the event that all or any portion of the Asset Purchase Price is paid in the form of *** Shares, no certificates or scrip representing fractional shares of *** Shares shall be issued, but an amount in cash equal to the aggregate value of any such fractional shares *** shall instead be paid to Avica. 1.3           Payment upon Unexercised Expiration of the Option Period. (a)           In the event that DTS shall not have consummated the Asset Purchase on or before the Option Expiration Date, then DTS shall pay to Avica the Unexercised Option Expiration Amount on the next business day following the Option Expiration Date.  Such payment shall be made by wire transfer in same day funds to Avica’s account at *** as follows: *** *** or at such other account as Avica may provide to DTS in a written notice pursuant to Section 8.1. (b)           For purposes of clarity, in no event shall the Unexercised Option Expiration Amount be payable if DTS has consummated the Asset Purchase.  DTS shall not, in any event, pay both the Asset Purchase Price and the Unexercised Option Expiration Amount. 1.4           No Obligation or Liability to Avica Stockholders.  The Asset Purchase Price or the Unexercised Option Expiration Amount, in either case as applicable, shall be paid by DTS to Avica and not to the Avica Stockholders, or any of them.  Avica hereby acknowledges and confirms, and each Avica -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 5 -------------------------------------------------------------------------------- Stockholder, by his, her or its approval of this Agreement, acknowledges and confirms, that DTS has no obligation to and shall have no liability with respect to any or all of the Avica Stockholders with respect to the Asset Purchase Price or the Unexercised Option Expiration Amount after either such payment has been made to Avica in accordance with this Agreement.  In addition, Avica hereby covenants, and each Avica Stockholder, by his, her or its approval of this Agreement, covenants not to take or participate in any action or institute or participate in any proceeding against DTS with respect to the Asset Purchase Price or the Unexercised Option Expiration Amount after either such payment has been made to Avica in accordance with this Agreement. 1.5           *** ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF AVICA Avica hereby represents and warrants to DTS as of the Effective Date that, except as set forth on the Schedule of Exceptions to this Agreement delivered to DTS on the Effective Date, each of the representations and warranties set forth in this Article 2 below are true and correct as of the Effective Date. In addition, Avica shall represent and warrant to DTS as of each of (a) the Form Agreement Date and (b) the Asset Closing Date, that each of the representations and warranties that shall be set forth in the Asset Purchase Agreement are true and correct as of such dates; provided, that the representations and warranties made as of the Form Agreement Date shall be qualified by the Avica Disclosure Schedule, and the representations and warranties as of the Asset Closing Date shall be qualified by the Updated Avica Disclosure Schedule delivered by Avica most recently prior to the delivery of the Purchase Election Notice by DTS, and the references below to Avica Disclosure Schedule shall be deemed, for purposes of determining the accuracy of such representations and warranties as of the Asset Closing Date, to be references to such Updated Avica Disclosure Schedule. Information contained in certain sections or subsections of the Schedule of Exceptions, Avica Disclosure Schedule or Updated Avica Disclosure Schedule may be applicable to other of its sections and/or subsections and Avica shall use its commercially reasonable efforts to cross-reference the exceptions to all applicable representations and warranties.  Any document, agreement, matter, or other information referenced in one section or subsection of the Schedule of Exceptions, Avica Disclosure Schedule or Updated Avica Disclosure Schedule shall be deemed referenced in all other sections or subsections therein for all purposes of this Agreement or the Asset Purchase Agreement, as applicable, if and to the extent it appears from the face of the Schedule of Exceptions, Avica Disclosure Schedule or Updated Avica Disclosure Schedule that such information would reasonably be so appropriate.  The Schedule of Exceptions, Avica Disclosure Schedule or Updated Avica Disclosure Schedule shall set forth all exceptions to the representations and warranties being made by Avica to DTS pursuant to this Agreement or the Asset Purchase Agreement, as applicable. 2.1           Organization, Good Standing and Qualification.  Avica is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to carry on its business as now conducted.  Avica is duly qualified or licensed to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.  Avica has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and the Related Agreements, and to perform its obligations under, and carry out the provisions of, this Agreement and the Related Agreements, and to carry on its business as presently conducted. -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 6 -------------------------------------------------------------------------------- 2.2           Capitalization and Voting Rights. (a)           The authorized capital of Avica consists of (except as otherwise disclosed in the Avica Disclosure Schedule) 40,000,000 shares of common stock, no par value per share (the “Avica Common Stock”). (b)           The number of shares of Avica Common Stock issued and outstanding is set forth in Section 2.2(b) of Avica Disclosure Schedule.  Section 2.2(b) of the Avica Disclosure Schedule sets forth the name and address of each Securityholder and the Securities owned by each Securityholder, including in the case of instruments, options, warrants, convertible debt or other instruments and other rights to acquire capital stock of Avica, the number of shares of Avica’s capital stock each option, warrant, instrument or other right is vested or exercisable for as of the Effective Date, the Form Agreement Date or the Asset Closing Date, as applicable. (c)           Except as set forth in Section 2.2(c) of Avica Disclosure Schedule or as expressly contemplated by this Agreement and the Related Agreements, there are not outstanding any options, warrants, instruments, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or other agreements or instruments of any kind, including convertible debt instruments, for the purchase or acquisition from Avica of any of its Securities.  Avica is not a party or subject to any agreement or understanding and, to Avica’s knowledge, there is no agreement or understanding between any other persons, that affects or relates to the voting or giving of written consents with respect to any security or by a director of Avica. (d)           All of the issued and outstanding shares of Avica Common Stock (i) have been duly authorized and validly issued and are fully paid and nonassessable, and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. 2.3           Authorization; Binding Obligations; Governmental Consents. (a)           All corporate action on the part of Avica, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Related Agreements, and the performance of all obligations of Avica hereunder and thereunder, have been taken prior to the Effective Date.  This Agreement and the Related Agreements will be valid and legally binding obligations of Avica, enforceable against Avica in accordance with their respective terms, except as such enforcement may be limited by (a) the effect of bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium or other laws affecting or relating to the rights of creditors generally, or (b) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity.  The option with respect to the Asset Purchase granted to DTS pursuant to this Agreement is not and the Asset Purchase will not be subject to any preemptive rights or rights of first refusal relating thereto. (b)           No consent, approval, permit, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority or any other person on the part of Avica is required in connection with the execution and delivery of this Agreement or the Related Agreements and the consummation of the transactions contemplated hereby or thereby, except as explicitly set forth in this Agreement and the Related Agreements. 2.4           Litigation.  There is no action, suit, proceeding or investigation pending or, to the knowledge of Avica, currently threatened against Avica and its Subsidiaries or any of its officers or directors.  The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or, to the knowledge of Avica, threatened involving the prior employment of any of Avica’s employees, their use in connection with Avica’s business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.  Avica and its Subsidiaries are not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, 7 -------------------------------------------------------------------------------- suit, proceeding or investigation by Avica or any of its Subsidiaries currently pending or that Avica or any of its Subsidiaries intends to initiate. 2.5           No Conflicts with Other Instruments.  The execution, delivery and performance of this Agreement and the Related Agreements will not result in violation or default of any provision of Avica’s or any of it Subsidiaries’ Articles of Incorporation or bylaws, or of any material mortgage, indenture, contract, agreement, instrument, judgment, order, writ or decree by which it is bound or, to Avica’s knowledge, of any provision of any federal or state statute, rule or regulation applicable to Avica or any of its Subsidiaries, or be in conflict with or constitute, with or without the passage of time or giving of notice, a default under any such provision, instrument, judgment, order, writ or decree, or result in the creation of any material mortgage, pledge, lien, charge or encumbrance upon any of the properties or assets of Avica or any of its Subsidiaries or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the business, operations or any of the assets or properties of Avica or any of its Subsidiaries. 2.6           Disclosure.  Avica has provided DTS or counsel to DTS with all material information that DTS has requested in connection with its due diligence investigation relating to this Agreement and the Related Agreements.  Except as set forth in this Agreement, to the knowledge of Avica, there is no material fact relating to Avica that Avica or any of its Subsidiaries, as the case may be, has not disclosed to DTS or counsel to DTS and of which any of its officers, directors or executive employees is aware that could reasonably be expected to result in a Material Adverse Effect on Avica. 2.7           Brokers; Expenses.  No finder, broker, agent or other similar intermediary has acted for or on behalf of Avica in connection with the negotiation of this Agreement or the Related Agreements or the consummation of the transactions contemplated hereby or thereby and no finder, broker, agent or similar intermediary shall be owed any amount as a result of or in connection with this Agreement, the Related Agreements or upon any consummation of the Asset Purchase. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF DTS DTS hereby represents and warrants to Avica as of the Effective Date, as follows, subject in each case to such exceptions as are specifically contemplated by this Agreement. 3.1           Organization, Good Standing and Qualification. DTS is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  DTS has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and the Related Agreements to which it is a party, to carry out the provisions of this Agreement and those of the Related Agreements to which it is party, and to perform its obligations under, and carry out the provisions of, this Agreement and such Related Agreements, and to carry on its business as presently conducted and as presently proposed to be conducted.  DTS is duly qualified to transact business and is in good standing in each jurisdiction where such qualification is required and in which failure to so qualify would have a Material Adverse Effect on DTS. 3.2           Authorization; Binding Obligations; Governmental Consents.  All corporate actions on the part of DTS, and its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and those of the Related Agreements to which it is a party and the performance of all obligations of DTS hereunder and thereunder have been taken; provided, that as of the Effective Date, the board of directors of DTS has not authorized any consummation of the Asset Purchase or delivery of a Purchase Election Notice.  This Agreement and the those of the Related Agreements to which DTS is a party are the valid and legally binding obligations of DTS, enforceable against DTS in accordance with their respective terms, except as such enforcement may be limited by (a) the effect of bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium or other laws affecting or relating to the rights of creditors generally, or (b) the rules governing the availability of 8 -------------------------------------------------------------------------------- specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity. 3.3           Compliance with Other Instruments.  The execution, delivery and performance of this Agreement and the Related Agreements to which it is party, and the performance by DTS of each such agreement in accordance with their respective terms will not (a) violate the Certificate of Incorporation or bylaws of DTS, (b) breach or result in a violation of any law, rule or regulation applicable to DTS, or (c) constitute a material breach of the terms, conditions, provisions of, or constitute a default under, any judgment, order, writ or decree of any court or arbitrator to which DTS is a party or any material mortgage, indenture, agreement, contract or instrument to which DTS is a party or by which it is bound, to the extent that such breach or default could reasonably be expected to prevent DTS from consummating the transactions contemplated hereby or (d) result in the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization, or approval applicable to the business, operations or any of the assets or properties of DTS, to the extent that such breach or default could reasonably be expected to prevent DTS from consummating the transactions contemplated hereby. 3.4           Available Resources.  At the times required, if any, pursuant to this Agreement and the Related Agreements, DTS shall have sufficient funds, debt borrowing capacity or shares of authorized and unissued capital stock to satisfy its obligations hereunder and thereunder. 3.5           Brokers; Expenses.  No finder, broker, agent or other similar intermediary has acted for or on behalf of DTS in connection with the negotiation of this Agreement or the Related Agreements or the consummation of the transactions contemplated hereby or thereby and no finder, broker, agent or similar intermediary shall be owed any amount as a result of or in connection with this Agreement, the Related Agreements or upon any consummation of the Asset Purchase. ARTICLE 4 CONDUCT OF BUSINESS PENDING THE ASSET PURCHASE AND RELATED COVENANTS 4.1           Conduct of Business of Avica.  Avica covenants and agrees that, during the Option Period, unless DTS shall otherwise agree in writing, Avica shall use commercially reasonable efforts to preserve the current relationships of Avica with customers, suppliers and other persons with which Avica has significant business relations.  Avica shall use its commercially reasonable efforts to satisfy and extinguish, promptly following the License Closing and to the extent funds are reasonably available for such purpose, all of its liabilities as of the License Closing.  Avica further covenants and agrees that, during the Option Period, Avica shall use its commercially reasonable efforts to (i) avoid incurring additional liabilities during the Option Period beyond Avica’s ability to satisfy such obligations as they come due and (ii) to satisfy and extinguish all liabilities incurred during the Option Period as they come due. 4.2           Negative Covenants.  During the Option Period, Avica shall not, without the prior written consent of DTS: (a)           declare or pay any dividends on, or make any other distributions (whether in cash, stock or property) in respect of, any of its capital stock; (b)           pay any bonus, increased salary or special remuneration to any officer, director, employee or consultant of Avica in such capacity, or enter into any new employment or consulting agreement with any such person; (c)           grant any Encumbrances on any of the Licensed IP; (d)           guarantee or act as a surety for any obligation of any third party; (e)           initiate any voluntary bankruptcy or insolvency proceeding; 9 -------------------------------------------------------------------------------- (f)            repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (g)           incur any Indebtedness for borrowed money or guarantee any such Indebtedness or issue or sell any debt securities or guarantee any debt securities of others; (h)           enter into any material contract or commitment, or violate, amend or otherwise modify or waive any of the terms of any agreements, understandings, instruments or contracts which are material to the business of Avica as currently conducted and as proposed to be conducted.  For purposes of this Section 4.2(g), the parties hereto acknowledge that any such actions with respect to any contract or commitment, or series of related contracts or commitments, having a value in excess of $10,000 shall be deemed to be material and outside the ordinary course of business.  Any contact or commitment of any size entered into, or extended, by Avica during the Option Period shall explicitly provide that the consummation of the Asset Purchase shall not result in a breach or violation of such contract or otherwise require the payment of any fees or expenses in connection therewith, or give the other party the right to accelerate any obligations of Avica thereunder or to cause the termination of such contract; (i)            except for the sale of Avica’s inventory, sell, lease, license or otherwise dispose of or encumber any of its properties or assets which are material, individually or in the aggregate, taken as a whole; (j)            cause or permit any amendments to its Restated Articles or bylaws; (k)           terminate or waive any right that has material value to Avica; (l)            commence any lawsuit or other legal proceeding, except as may be required or permitted pursuant to Avica’s indemnification obligations to DTS under the Exclusive License Agreement; (m)          acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof which are material, individually or in the aggregate, to Avica’s business, taken as a whole; (n)           merge or consolidate with any entity or initiate or consummate any voluntary liquidation or dissolution, or effect a recapitalization or reorganization in any form of transaction; (o)           hire or retain, or continue to retain or employ, any employee or consultant having access to confidential or proprietary information of Avica unless such employee or consultant enters into, or has entered into, a proprietary information and inventions agreement, a confidentiality agreement, or a mutual confidentiality agreement with Avica in a form reasonably agreed to by DTS, or amend or otherwise modify, or grant a waiver under, any such confidentiality or proprietary information agreement with any such person; (p)           enter into any transaction outside the ordinary course of business with any director, officer, employee, significant stockholder or family member of or consultant to any such person, corporation or other entity of which any such person beneficially owns 10% or more of the equity interests or has 10% or more of the voting power, or Subsidiary or Affiliate of Avica, except as approved by a majority of the disinterested directors of the Avica Board on terms and conditions which are fair and reasonable to Avica and no less favorable to Avica as could be obtained from a third party on an arms-length basis; (q)           knowingly engage in any other activity which could reasonably be expected to materially impair the ability of DTS or Avica to consummate the Asset Purchase; or (r)            permit any Subsidiary of Avica to take any action from which Avica would be prohibited pursuant to this Section. 10 -------------------------------------------------------------------------------- 4.3           Notice to DTS of Certain Proceedings.  In addition, during the Option Period, Avica shall deliver prompt notice to DTS of (a) the initiation or institution (or any threat thereof) of any bankruptcy or insolvency proceeding; and (b) any litigation or other legal or administrative proceeding (or threat thereof), in either case known to Avica. 4.4           Payment of Taxes, Etc.  Avica shall, and shall cause each of its Subsidiaries to, use its commercially reasonable efforts, promptly following the License Closing, to file all of its Tax Returns that are overdue or delinquent as of the License Closing (taking all timely filed proper extension requests into account).  Avica shall, and shall cause each of its Subsidiaries to, use its commercially reasonable efforts, promptly following the License Closing and to the extent funds are reasonably available for such purpose, timely pay and discharge all Taxes (other than Taxes contested in good faith by Avica or its Subsidiaries in appropriate proceedings), assessments and other governmental charges or levies imposed upon it or its income or any of its property as well as all claims of any kind (including claims for labor, materials and supplies), in each case, that are due and payable as of the License Closing.  In addition, Avica shall, and shall cause each of its Subsidiaries to, timely file all of its Tax Returns as they become due after the License Closing (taking all timely filed proper extension requests into account).  Avica shall, and shall cause each of its Subsidiaries to, timely pay and discharge (to the extent funds are reasonably available for such purpose) as they become due and payable following the License Closing all Taxes (other than Taxes contested in good faith by Avica or its Subsidiaries in appropriate proceedings), assessments and other governmental charges or levies imposed upon it or its income or any of its property as well as all claims of any kind (including claims for labor, materials and supplies) that, if unpaid, may by law become a lien or charge upon its properties.  All Tax Returns referenced above, shall be true, correct and complete. 4.5           Board Observation Rights.  During the Option Period, Avica shall permit one (1) representative of DTS, who shall initially be ***, to attend all formal meetings of the Avica Board at which minutes are kept in a nonvoting observer capacity and, in this respect, shall give such representatives copies of all notices, minutes, consents and other materials that Avica provides to its directors in such capacity; provided, however, that Avica shall be entitled to exclude such representatives from access to any material or meeting or portion thereof to the extent that Avica reasonably believes (a) that such exclusion is necessary to maintain the attorney-client privilege with respect to any material fact or advice or (b) that such material or meeting or portion thereof presents a clear conflict between Avica and DTS relating to the relationship represented by this Agreement and the Related Agreements, or otherwise.  All information obtained by DTS or such representatives pursuant to this Section 4.5 shall be kept confidential in accordance with Article 7 of this Agreement, to the extent it constitutes Confidential Information. ARTICLE 5 ADDITIONAL AGREEMENTS 5.1           Notices; Consents; Filings.  From and after the delivery of a Purchase Election Notice, Avica shall use its commercially reasonable efforts, at Avica’s expense, to obtain all necessary third party consents required in connection with the Asset Purchase.  In the event that Avica shall fail to obtain any third party consent necessary for the consummation of the Asset Purchase, Avica shall use commercially reasonable efforts, and take any such actions reasonably requested by DTS, to minimize any adverse effect upon DTS and its Subsidiaries, and its business resulting, or which could reasonably be expected to result after the Asset Closing, from the failure to obtain such consent. 5.2           Stockholders Meeting; Written Consent. Subject to the fiduciary duties of the Avica Board under applicable law, in addition to the solicitation of stockholder approval required under Section 5.4, if requested by DTS in writing (a “Meeting Request”) at any time during the Option Period, Avica shall, at its option, (a) cause a meeting of the Avica Stockholders (a “Stockholders Meeting”), to be called for purposes of approving, reapproving or ratifying the Asset Purchase and this Agreement, or -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 11 -------------------------------------------------------------------------------- (b) circulate a solicitation for written consent in lieu of such Stockholders Meeting for the same purposes (a “Written Consent”).  In the event that DTS delivers a Meeting Request pursuant to this Section 5.2, Avica shall cause a Stockholders Meeting to be held, or a solicitation for Written Consent to be delivered to each of its stockholders, on such date as may be reasonably requested by DTS and set forth in the Meeting Request and is consistent with Avica’s bylaws and applicable law, and shall distribute on a timely basis to all stockholders of Avica any soliciting materials relating to such meeting or solicitation for Written Consent (including any information prepared by DTS and, to the extent such information statement or proxy statement relates to Avica or the Asset Purchase, reasonably approved by Avica).  Subject to the fiduciary duties of the Avica Board under applicable law, any such information statement, proxy statement or prospectus shall be distributed together with a copy of the recommendation of the Avica Board that the Avica Stockholders vote “FOR” the approval and adoption of the Asset Purchase and this Agreement. 5.3           Further Assurances. (a)           Following the delivery of a Purchase Election Notice, each of DTS and Avica will: (i)            use its commercially reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Asset Purchase and the transactions contemplated hereby, including using its commercially reasonable efforts to obtain all permits, consents, approvals, authorizations, qualifications and orders of governmental authorities (if any) as are necessary for the consummation of the Asset Purchase and the other transactions contemplated hereby and to fulfill the conditions set forth in the Asset Purchase Agreement.  In case, at any time after the Asset Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their commercially reasonable efforts to take all such action; and (ii)           cooperate and use its commercially reasonable efforts to vigorously contest and resist any action, including administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restricts, prevents or prohibits consummation of the Asset Purchase and the other transactions contemplated hereby, including by vigorously pursuing all available avenues of administrative and judicial appeal. (b)           From the Effective Date until the Asset Closing, Avica will take all further action that is necessary or desirable to carry out the purposes of this Agreement, and the proper officers and directors of Avica shall use their commercially reasonable efforts to take all such action and shall refrain from taking any actions which would be contrary to, inconsistent with or against, or would frustrate the essential purposes of, the transactions contemplated by this Agreement, if DTS were to deliver a Purchase Election Notice. 5.4           Stockholder Approval.  Following the execution of this Agreement, Avica will promptly solicit and obtain the approval by written consent of the execution and delivery by Avica of this Agreement, the Exclusive License Agreement, the Escrow Agreement and the Asset Purchase Agreement and the consummation of the transactions contemplated hereby and thereby, by Avica Stockholders holding at least 90% of the outstanding shares of Avica Common Stock (the “Stockholder Ratification”).  Such solicitation shall be in form and substance reasonably approved by DTS, and distributed to the Avica Stockholders no later than 3 business days after the Form Agreement Date.  Avica shall take all other action necessary or advisable to secure the Stockholder Ratification, by vote or written consent, consistent with California Law. 12 -------------------------------------------------------------------------------- 5.5           Voting Agreement.  Avica shall use reasonable efforts to cause Avica Shareholders holding at least two-thirds (2/3) of all outstanding shares of Avica’s common stock to enter into and deliver the Voting Agreement to DTS on or prior to the date hereof. 5.6           Notice of Developments.  Avica shall use reasonable efforts to give prompt written notice to DTS of any material development causing a breach of any of its representations and warranties in this Agreement or the Exclusive License Agreement. 5.7           Exclusivity. (a)           From and after the date of this Agreement until the Asset Closing or termination of this Agreement pursuant to Article 8, Avica will not, nor will it authorize or permit any of its officers, directors, Affiliates or employees or any investment banker, attorney or other advisor or representative retained by it to, directly or indirectly, (i) solicit, initiate or induce the making, submission or announcement of any Alternative Proposal, (ii) participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Alternative Proposal, (iii) engage in discussions with any person with respect to any Alternative Proposal, except as to disclose the existence of these provisions, (iv) endorse or recommend any Alternative Proposal (except if required pursuant to the exercise of such person’s fiduciary duty), or (v) enter into any letter of intent or similar document or any contract, agreement or commitment contemplating or otherwise relating to any Alternative Proposal.  Avica and its Subsidiaries will, and will cause their respective officers, directors, Affiliates, employees, investment bankers, attorneys and other advisors and representatives to, immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Alternative Proposal.  Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding two sentences by any officer, director or employee of Avica or any of its Subsidiaries or any investment banker, attorney or other advisor or representative of Avica or any of its Subsidiaries shall be deemed to be a breach of this Section 5.7 by Avica. (b)           In addition to the obligations of Avica set forth in Section 5.7(a), Avica as promptly as practicable shall advise DTS in writing of any Alternative Proposal or of any request for nonpublic information or other inquiry which Avica reasonably believes could lead to an Alternative Proposal, the material terms and conditions of such Alternative Proposal (to the extent known), and the identity of the person or group making any such request, inquiry or Alternative Proposal.  Avica agrees to keep DTS informed on a current basis of the status and details (including any material amendments or proposed amendments) of any such request, inquiry or Alternative Proposal. 5.8           Access to Properties and Information.  At all times until the expiration of the Option Period, Avica will afford to DTS and its authorized representatives, upon reasonable notice, reasonable access during normal business hours to all properties, books, records, contracts and documents of Avica as DTS and such authorized representatives may reasonably request and a complete opportunity to make such investigations as DTS and such authorized representatives reasonably request, and Avica will furnish or cause to be furnished to DTS and its authorized representatives all such information with respect to the affairs and businesses of Avica as they may reasonably request.  All information obtained by DTS pursuant to this Section 5.8 shall be kept confidential in accordance with Article 7 of this Agreement, to the extent it constitutes Confidential Information.  No investigation pursuant to this Section 5.8 shall affect any representation or warranty in this Agreement, the Asset Purchase Agreement or the Related Agreements of any party hereto or thereto or any condition to the obligations of the parties hereto or thereto. 13 -------------------------------------------------------------------------------- 5.9           Public Announcements. (a)           On or after the Effective Date, DTS and Avica shall issue a joint press release, reasonably acceptable to both parties, regarding the transactions contemplated by the Exclusive License Agreement and this Agreement. (b)           Following the Effective Date, DTS shall be permitted to make such public disclosure regarding the content of this Agreement and the Related Agreements if it is advised in good faith by outside legal counsel that such disclosure may reasonably be required under or by any applicable law, regulatory or securities exchange listing agreement.  Nothing herein express or implied shall require DTS to consult with Avica following the Asset Closing. (c)           Except as provided under Section 5.9(a), Avica shall not, nor shall any Avica Stockholder or employee, officer, director, consultant or advisor of Avica, without the prior written consent of DTS, issue any press release or otherwise make any public statements with respect to this Agreement, the Related Agreements or the transactions contemplated hereby or thereby at any time, other than as may be required by law or legal process, and then only in compliance with the notice provisions of Article 7. (d)           Notwithstanding anything herein to the contrary, DTS may in its reasonable discretion issue press releases and make public announcements relating to its products and services, including any Avica products or services sold and/or licensed by DTS, or any other disclosure that is consistent with prior press releases or public announcements that are permitted under this Section 5.9. (e)           *** ARTICLE 6 TERMINATION This Agreement may be terminated and the Asset Purchase may be abandoned at any time prior to the Asset Closing, notwithstanding any requisite approval and adoption of this Agreement and the transactions contemplated hereby by the Avica Stockholders: (a)           by the mutual written consent of the parties; (b)           by DTS at any time in its sole discretion upon written notice to Avica, which will be deemed to include any written notice to Avica delivered by DTS that DTS will not exercise the Option (the “Termination Notice”); provided, that in the event DTS exercises its rights under this Article 6, then DTS shall pay to Avica the Unexercised Option Expiration Amount on the next business day following effectiveness of the Termination Notice.  Upon the effectiveness of any termination of this Agreement as a result of delivery by DTS of a Termination Notice, the Exclusive License Agreement shall also be terminated.  The obligation of DTS to pay Avica the Unexercised Option Expiration Amount shall survive the termination of this Agreement. ARTICLE 7 CONFIDENTIALITY A party receiving or having access to Disclosing Party’s Confidential Information (each, a “Recipient”) will not use Disclosing Party’s Confidential Information except as permitted herein, and will -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 14 -------------------------------------------------------------------------------- not disclose, except as expressly permitted herein, such Confidential Information to any third party except to Recipient’s employees and consultants as is reasonably required in connection with the exercise of Recipient’s rights and obligations under this Agreement (“Authorized Representatives”).  Each Recipient will ensure that each of its Authorized Representatives, before obtaining access to the Disclosing Party’s Confidential Information, is bound by a written confidentiality agreement, with provisions to protect such Confidential Information at least as restrictive as those contained herein.  Each Recipient shall be responsible for any breach of this Section 8 by its Authorized Representatives.  Each Recipient agrees that it shall take all reasonable measures to protect the secrecy of and avoid disclosure or use of Confidential Information of the Disclosing Party in order to prevent it from falling into the public domain or the possession of persons other than those persons authorized under this Agreement to have any such information.  Such measures shall include the highest degree of care that Recipient utilizes to protect its own Confidential Information of a similar nature, which shall be no less than reasonable care.  However, each Recipient may disclose Confidential Information of Disclosing Party:  (i) pursuant to the order or requirement of a court, administrative agency or other governmental body, provided that Disclosing Party gives reasonable notice to the other party to contest such order or requirement; and (ii) on a confidential basis to legal or financial advisors, who shall be deemed to be Authorized Representatives hereunder.  Whether or not a protective order or other such remedy is obtained, or whether the Disclosing Party waives compliance with the provisions hereof, Recipient agrees to (a) furnish only that portion of the Confidential Information that Recipient is legally required to furnish or disclose and (b) exercise Recipient’s reasonable efforts to obtain assurance that confidential treatment was accorded such Confidential Information.  Upon expiration or termination of this Agreement for any reason, Recipient shall, as reasonably instructed by the Disclosing Party, promptly destroy or return to the Disclosing Party all documents and other tangible materials representing the Disclosing Party’s Confidential Information and all copies thereof, and purge all electronic copies or other representations thereof that are under Recipient’s direct or indirect control.  Notwithstanding the foregoing, Avica or its legal counsel and DTS’ legal counsel, respectively, shall be permitted to retain one (1) copy of all such Confidential Information in its records for archival purposes, provided such Confidential Information remains subject to the terms and conditions set forth in this Article 7. ARTICLE 8 GENERAL PROVISIONS 8.1           Notices.  All notices, claims and demands hereunder, and all other communications which are required to be given in writing pursuant to this Agreement, shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person or by express mail courier or by facsimile with confirmation copy sent by first class mail (received at the facsimile machine to which it is transmitted prior to 5 p.m., local time, on a business day for the party to which it is sent, or if received after 5 p.m., local time, as of the next business day) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.1): if to DTS: DTS, Inc. 5171 Clareton Drive Agoura Hills, California  91301 Attention:  General Counsel Telephone:  (818) 706-3525 Facsimile:  (818) 827-2470 15 -------------------------------------------------------------------------------- with a copy to: Heller Ehrman LLP 4350 La Jolla Village Drive San Diego, CA  92122 Attention:  Kirt Shuldberg, Esq. Telephone:  (858) 450-8400 Facsimile:  (858) 450-8499   if to Avica: Avica Technology Corporation 1202 Olympic Blvd. Santa Monica, CA  90404 Attention:  President Telephone:  (310) 985-9840   with a copy to: Mitchell Silberberg & Knupp LLP 11377 West Olympic Blvd., Los Angeles, CA 90064 Attention: Jan Powers, Esq. Telephone:  (310) 312-3257 Facsimile:  (310) 231-8357   8.2           Certain Definitions.  For purposes of this Agreement, the term: “Affiliate” means, with respect to any person, any person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person.  Until the consummation of the Asset Purchase, Avica shall not be deemed for any purposes of this Agreement to be an Affiliate of DTS. “Alternative Proposal” means any bona fide offer or proposal (other than an offer or proposal by DTS) relating to any Prohibited Transaction. “Asset Purchase Price” means $1,500,000 minus (i) the aggregate amount of all liabilities of Avica outstanding as of the Asset Closing Date that are expressly assumed by DTS (excluding future ongoing obligations under executory contracts); (ii) the aggregate amount of the sum of (a) the accounts receivable balance and (b) 30% of the inventory balance, in each case, on Avica’s balance sheet dated as of the date of the License Closing; and (iii) all DTS Direct Liability Payments which have not been reimbursed to DTS out of the Liability Escrow. “business day” (whether such term is capitalized or not) means any day other than Saturday, Sunday or a legal holiday that banks located in Los Angeles, California are closed for business. “California Law” means the California Corporations Code of the State of California, as amended. “Confidentiality Information” means with respect to a party hereto (the “Disclosing Party”), collectively:  (i) all technical, financial and/or business information of any kind whatsoever, including all data, compilations, blueprints, plans, audio and/or video recordings and/or devices, information on computer disks, software, source code, object code, tapes, printouts and other printed, typewritten or handwritten documents, specifications, systems, schemas, methods (including delivery, storage, receipt, transmission, presentation and manufacture of audio, video, informational or other data or content), strategies, business or marketing development plans, customer lists, research projections, processes, 16 -------------------------------------------------------------------------------- techniques, designs, sequences, components, programs, technology, ideas, know-how, improvements, inventions (whether or not patentable or copyrightable), information about operations and maintenance, trade secrets, formulae, models, patent disclosures, information regarding the skills and compensation of the Disclosing Party’s employees, information concerning the actual or anticipated business, research or development of the Disclosing Party or its actual or potential customers or partners, information which is or has been generated or received in confidence by or for the Disclosing Party by or from any person; (ii) any and all tangible and intangible embodiments thereof of any kind whatsoever including all compositions, machinery, apparatus, records, reports, drawings, copyright applications, patent applications, documents, samples, prototypes, models, products and the like; and (iii) any extensions or derivatives thereof of any kind whatsoever.  Confidential Information does not include information that the Recipient proves:  (a) is or becomes generally known to the public through no fault or breach of this Agreement by the Recipient; (b) is known to the Recipient at the time of disclosure without an obligation of confidentiality; (c) is entirely independently developed by the Recipient without any access or reference to or use of the Disclosing Party’s Confidential Information; (d) the Recipient rightfully obtains from a third party without restriction on use or disclosure; or (e) is disclosed with the prior written approval of the Disclosing Party.  Information shall not be deemed to be in the public domain as a result of the individual elements being separately found in the public domain. “DTS Direct Liability Payments” means any amount DTS pays to any third party to satisfy any liability of or claim against Avica pursuant to the terms and conditions of the Escrow Agreement. “Encumbrance” shall have the meaning set forth in the Exclusive License Agreement. “Escrow Agreement” shall have the meaning set forth in the Exclusive License Agreement. “Exchange” means the applicable principal public market, exchange or trading system on which *** Shares *** are traded. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. “GAAP” means United States generally accepted accounting principles consistently applied. “Governmental Authority” (whether such term is capitalized or not) means any United States (federal, state or local) or foreign government, or governmental, regulatory or administrative authority, agency or commission. “Indebtedness” means, as applied to any person, (a) all indebtedness for borrowed money, whether current or funded, or secured or unsecured, (b) all indebtedness for the deferred purchase price of property or services represented by a note or other security, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (d) all indebtedness secured by a purchase money mortgage or other lien to secure all or part of the purchase price of property subject to such mortgage or lien, (e) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as capital leases in respect of which such person is liable as lessee, (f) any liability in respect of banker’s acceptances or letters of credit, and (g) all indebtedness referred to in clauses (a), (b), (c), (d), (e) or (f) above which is directly or indirectly guaranteed by or which such person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against loss. “Liability Escrow” shall have the meaning set forth in the Exclusive License Agreement. “License Closing” means the closing under the Exclusive License Agreement. “License Term” shall have the meaning set forth in the Exclusive License Agreement. -------------------------------------------------------------------------------- ***  Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. 17 -------------------------------------------------------------------------------- “Licensed IP” shall have the meaning set forth in the Exclusive License Agreement. “Material Adverse Effect” means with respect to Avica or DTS, as the case may be, any change or effect that, when taken individually or together with all other adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of Avica or DTS, as the case may be, and their respective Subsidiaries, taken as a whole. “Option Expiration Date” means the last day of the Option Period. “Option Period” means the period beginning upon the License Closing and ending on expiration or earlier termination of the License Term. “person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government. “Prohibited Transaction” means (a) any transaction or series of related transactions other than the transactions contemplated by this Agreement involving the purchase of all or any significant portion of the capital stock or assets of Avica, (b) any agreement to enter into a business combination with Avica, (c) any agreement made, other than in the ordinary course of business, with regard to the Intellectual Property owned or licensed by Avica, and (d) any other extraordinary business transaction involving the license of all or substantially all of the Intellectual Property owned or licensed by Avica. “Related Agreements” means the Exclusive License Agreement, the Voting Agreement and all other agreements entered into in connection therewith. “SEC” means the United States Securities and Exchange Commission. “Securities” means all shares of Avica Common Stock, all outstanding options, warrants, convertible notes, rights of conversion and other rights to acquire capital stock of Avica, and all shares issuable upon exercise or conversion of all options, warrants, convertible notes, rights of conversion and other rights to acquire stock of Avica, outstanding from time to time, whether or not then currently vested, exercisable or convertible. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. “Securityholder” means any holder of Securities. “Subsidiary or Subsidiaries” (whether or not capitalized) of any person means (i) any corporation of which such person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock the holders of which are generally entitled to vote for the election of the board of directors of such corporation, or (ii) any partnership, limited liability company, association, trust, joint venture, or other non-corporate entity in which such person (either alone or through or together with any other Subsidiary) holds, directly or indirectly, an equity interest. “Unexercised Option Expiration Amount” shall mean a one time payment equal to $500,000, which shall be payable solely as described in Sections 1.3 and 6(b). “Voting Agreement” means that certain Voting Agreement in substantially the form of Exhibit C attached hereto. 8.3           Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of applicable law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the matters referred to herein are not affected in any manner materially adverse to any 18 -------------------------------------------------------------------------------- party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the matters referred to herein be consummated as originally contemplated to the fullest extent possible. 8.4           Entire Agreement; Assignment.  This Agreement, together with the Related Agreements, constitutes the entire agreement among the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof.  DTS shall have the right to assign all of its rights and obligations under this Agreement to any entity which is, at the time of assignment, an Affiliate of DTS, notwithstanding that the assignee may not continue to be an Affiliate of DTS thereafter; provided, that no such assignment to an Affiliate shall relieve the assigning party of its obligations hereunder.  In the event of such an assignment, all rights and obligations of DTS hereunder shall be deemed to be rights and obligations of such assignee.  DTS or its assignee shall also have the right to assign all of its rights and obligations under this Agreement to any person that acquires a majority by voting power of all of the capital stock, or substantially all of the assets, of DTS or its assignee or the division or business unit of DTS or its assignee responsible for the business of Avica; provided, that such person assumes this Agreement, in writing, and agrees to be bound by and to comply with all of the terms and conditions hereof.  Avica shall not assign, delegate or transfer its rights and obligations under this Agreement to any third party without the prior written consent of DTS.  For purposes of this Agreement, an “assignment” by Avica under this Section 8.4 shall be deemed to include each of the following: (a) a change in beneficial ownership of Avica of greater than twenty percent (20%) (whether in a single transaction or series of transactions); (b) a merger of Avica with another party, whether or not Avica is the surviving entity; (c) the acquisition of more than twenty percent (20%) of any class of Avica’s voting stock (or any class of non-voting security convertible into voting stock) by a person who is not currently a shareholder of Avica (whether in a single transaction or series of transactions); and (d) the sale of more than twenty percent (20%) of Avica’s assets (whether in a single transaction or series of transactions); provided, however, that an assignment shall not be deemed to include (i) any change in beneficial ownership resulting from the conversion of convertible securities, outstanding as of the Effective Date, by existing Avica Stockholders, or (ii) any change in beneficial ownership resulting from a transfer of Avica shares made in compliance with Avica’s Bylaws, as in effect on the Effective Date, to any third party who is not in DTS’ judgment a competitor or potential competitor of DTS and so long as each permitted transferee agrees in writing to be bound by and comply with the terms and conditions of the Voting Agreement as if such transferee were a Shareholder (as defined in such Voting Agreement) and a signatory to such Voting Agreement.  Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. 8.5           Parties in Interest.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and nothing in this Agreement, express or implied is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8.6           Specific Performance.  The parties hereto agree that irreparable damage would occur in the event that any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity. 8.7           Governing Law.  This Agreement shall be governed by, and construed in accordance with the laws of the State of California applicable to contracts executed in and to be performed in that state. 8.8           Consent to Jurisdiction.  Avica and DTS consent to jurisdiction and venue in the state and federal courts in Los Angeles, California. 19 -------------------------------------------------------------------------------- 8.9           Headings; Interpretation.  The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the word “include,” “includes,” or “including” appears in this Agreement, it shall be deemed in each instance to be followed by the words “without limitation.” 8.10         Counterparts.  This Agreement may be executed and delivered (including by facsimile or pdf transmission) in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 8.11         Fees and Expenses.  All costs and expenses incurred in connection with this Agreement and the Asset Purchase by Avica shall be paid by Avica.  All costs and expenses incurred in connection with this Agreement and the Asset Purchase by DTS shall be paid by DTS. 8.12         Amendment.  Any waiver, modification or amendment of any provision of this Agreement will be effective only if in writing and signed by duly authorized representatives of the parties. 8.13         Waiver.  At any time prior to the Asset Closing, DTS and Avica may agree to (a) extend the time for the performance of any obligation or other act of the other party hereto, (b) waive any inaccuracy in the representations and warranties of the other contained herein or in any document delivered pursuant hereto, and (c) waive compliance by the other, as the case may be, with any agreement or condition contained herein.  Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.  The failure by either party to enforce any provision of this Agreement will not constitute a waiver of future enforcement of that or any other provision. 8.14         Remedies.  No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to herein or otherwise available at law, in equity or otherwise. 8.15         Force Majeure.  Except with respect to the payment of money, neither party will be responsible for any failure or delay in its performance under this Agreement due to causes beyond its reasonable control, including labor disputes, strikes, lockouts, shortages of or inability to obtain labor, energy, raw materials or supplies, war, riot, act of God or governmental action. [The remainder of the page is intentionally left blank.] 20 -------------------------------------------------------------------------------- In Witness Whereof, DTS and Avica have duly executed this Option Agreement as of the date first above written. DTS, Inc.               By:   /s/ Jon E. Kirchner       Jon Kirchner     President and Chief Executive Officer               Avica Technology Corporation               By:   /s/ Nicholas J. Clay       Nicholas J. Clay     Chairman and Chief Executive Officer     Signature page to Option Agreement -------------------------------------------------------------------------------- LIST OF EXHIBITS Exhibit A                                                Form of Asset Purchase Agreement Exhibit B                                                Purchase Election Notice Exhibit C                                                Form of Voting Agreement -------------------------------------------------------------------------------- EXHIBIT A Form of Asset Purchase Agreement Intentionally Omitted. -------------------------------------------------------------------------------- EXHIBIT B Purchase Election Notice Intentionally Omitted. -------------------------------------------------------------------------------- EXHIBIT C Form of Voting Agreement Intentionally Omitted. --------------------------------------------------------------------------------

Heartland Financial USA, Inc.   2005 Long-Term Incentive Plan   Performance Restricted Stock Agreement   THIS PERFORMANCE RESTRICTED STOCK AGREEMENT (this “Agreement”), entered into as of the Grant Date (as defined in Section 1(b)), by and between the Participant and Heartland Financial USA, Inc., a Delaware corporation (the “Company”);   WITNESSETH THAT:   WHEREAS, the Company maintains the Heartland Financial USA, Inc. 2005 Long-Term Incentive Plan (the “Plan”), which is incorporated into and forms a part of this Agreement, and the Participant has been selected by the committee administering the Plan (the “Committee”) to receive a Restricted Stock Award under the Plan;   NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:   Section 1.  Terms of Award. The following terms used in this Agreement shall have the meanings set forth in this Section 1:   (a)  The “Participant” is                          .   (b)  The “Grant Date” is                          .   (c)  The number of “Covered Shares” awarded under this Agreement is            shares. “Covered Shares” are shares of Stock granted under this Agreement and are subject to the terms and conditions of this Agreement and the Plan.   Except where the context clearly implies to the contrary, any capitalized term in this Agreement shall have the meaning ascribed to that term under Section 9 of this Agreement or the Plan.   Section 2.  Award. The Participant is hereby granted the number of Covered Shares set forth in Section 1(c), subject to the terms and conditions of this Agreement and the Plan.   Section 3.  Dividends and Voting Rights.   (a)  No dividends shall be payable to or for the benefit of the Participant for Covered Shares with respect to record dates occurring prior to the Vesting Date of such shares.   (b)  The Participant shall be entitled to vote the Covered Shares during the Restricted Period to the same extent as would have been applicable to the Participant if the Participant was then vested in the shares; provided, however, that the Participant shall not be entitled to vote the shares with respect to record dates for such voting rights arising prior to the Grant Date, or with respect to record dates occurring on or after the date, if any, on which the Participant has forfeited those Covered Shares.   Section 4.  Retention of Covered Shares. Each share of Stock issued with respect to the Covered Shares granted under this Agreement shall be registered in the name of the Participant and shall be retained by the Company during the applicable Restricted Period (as defined in Section 5(a)).   Section 5.  Vesting and Forfeiture of Shares.    (a)  Covered Shares may not be sold, assigned, transferred, pledged or otherwise encumbered (“Restrictions”) until the expiration of the Restricted Period or, if earlier, until the Participant is vested in the shares. Except as otherwise provided in this Section 5, the Participant shall forfeit the unvested Covered Shares (whether or not earned) as of a Date of Termination (as defined in Section 9(i)) that occurs during the Restricted Period. All Covered Shares shall be forfeited as of December 31, 2009, to the extent not earned as of such date. A Participant shall earn and later vest in the Covered Shares and then own the shares free and clear of all Restrictions pursuant to this Section 5. With respect to all Covered Shares, the “Restricted Period” shall begin on the Grant Date and shall end on the “Vesting Date” applicable to such shares (subject to the “Slip-Back” exception provided in paragraph (g) below).   (b)  Portions of the Covered Shares shall be eligible to be earned upon on the attainment of Performance Measures (provided in Exhibit A) based on the following allocations:     PERCENTAGE OF COVERED SHARES -     FOR COMPANY EMPLOYEES     COVERED SHARES     EARNINGS GROWTH     ASSET GROWTH     100% BASED ON COMPANY PERFORMANCE     70%     (“Company Earnings Shares”)     30%     (“Company Asset Shares”)     PERCENTAGE OF COVERED SHARES -     FOR BANK EMPLOYEES     COVERED SHARES     EARNINGS GROWTH     ASSET GROWTH     50 % BASED ON COMPANY PERFORMANCE     35%     (“Company Earnings Shares”)     15%     (“Company Asset Shares”)     50 % BASED ON BANK PERFORMANCE     35%     (“Bank Earnings Shares”)     15%     (“Bank Asset Shares”)   (c)  As of each December 31 during the Restricted Period (a “Measurement Date”), the Company will determine the actual growth in the earnings and the assets at both the Company and Bank level and calculate the number of Covered Shares earned as of such date.   (d)  The “Earned Shares” for any Measurement Date shall be the sum of the following products:   (i)  Company Earnings Shares times the Company Earnings Percentage;   (ii)  Company Asset Shares times the Company Asset Percentage;   (iii)  Bank Earnings Shares times the Bank Earnings Percentage; plus   (iv)  Bank Asset Shares times the Bank Asset Percentage.   (e)   Subject to paragraph (g)(iii), as of each Measurement Date, the excess of the Earned Shares for such Measurement Date over the number of Earned Shares as of the last Measurement Date are “Newly Earned Shares.”   (f)  Only Earned Shares will be eligible for vesting. Newly Earned Shares will vest, and become “Vested Shares” upon the two-year anniversary of the Measurement Date on which they became Newly Earned Shares (such anniversary, the “Vesting Date”) if the Participant has remained continually employed through such two-year period; provided, however, if as of the scheduled Vesting Date there is a “Slip-Back” (as defined in Section 9(o)), then such Earned Shares shall not vest on such date. If there is a Slip-Back, the applicable Vesting Date for such Earned Shares shall be delayed and shall, if ever, occur on the first Measurement Date following the Slip-Back, on which the Performance Measures applicable to such shares are met, at which time the Earned Shares shall become Vested Shares and the Participant shall own the shares free of all Restrictions otherwise imposed by this Agreement; provided, however, that no such Vesting Date may occur, if at all, later than December 31, 2011.   (g)  Not withstanding the foregoing provisions of this Section 5:   (i)  Upon a Date of Termination, which occurs due to the Participant’s death, Disability (as defined in Section 9(l)) or due to the termination of the Participant’s employment for reasons other than Cause (as defined in Section 9(h)), prior to the end of the Restricted Period, the Participant shall become vested in the Earned Shares, become owner of all of such Covered Shares free of all Restrictions otherwise imposed by this Agreement and all unearned Covered Shares shall be immediately forfeited as of such Date of Termination.   (ii)  Upon a Date of Termination, which occurs due to the Participant’s Retirement (as defined in Section 9(m)), prior to the end of the Restricted Period and after the Participant has at least 10 years of service and has attained the age of 55; (A) all unearned Covered Shares shall continue to be subject to the earning provisions of this Section 5 as if Participant’s employment continued throughout the original Restriction Period and such shares will become Vested Shares if, and when, they become Earned Shares, and (B) all Earned Shares at the time of Retirement shall immediately become Vested Shares; provided, however, that all unearned Covered Shares shall be immediately forfeited if the Participant violates any applicable confidentiality, non-solicitation or non-competition agreement in effect between the Participant and the Company or Subsidiary. If at the time of the Participant’s Retirement, the Participant does not have least 10 years of service with the Company or has not attained the age of 55, then the provisions of (A) in the immediately preceding sentence will not apply and all unearned Covered Shares shall be immediately forfeited as of such Date of Termination.   (iii)  Upon a Change in Control of the Company; (A) all Earned Shares shall immediately become Vested Shares, and (B) all unearned shares shall become Vested Shares if the Plan and this Agreement are not fully assumed in such Change in Control transaction; provided, however, that after a Change in Control, to the extent the Plan and this Agreement are assumed, the unearned Covered Shares will become Vested Shares upon the Participant’s termination of employment by the Company (or successor entity) for reasons other than Cause or by the Participant for Good Reason (as defined in Section 9(m)), where either termination occurs within twelve (12) months following the Change in Control.   Section 6.  Adjustments. In addition to any adjustments to this Agreement permitted under the Plan, the Committee may, in its sole discretion, make any reasonable adjustments to the Performance Measures and targets that it deems appropriate to reflect effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management Discussion and Analysis section of the Company’s annual report: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions. The foregoing adjustments shall only be permissible by the Committee, as determined in the sole discretion of the Committee, to the extent such adjustments do not unfairly benefit or penalize the Participant.   Section 7.  Circuit Breaker. As of any Measurement Date, no unearned Covered Shares may become Earned Shares if as of such date there exists a material weakness in safety, soundness, and compliance (e.g., a regulatory memorandum of understanding), at the Company level or the Bank level, as determined in the sole discretion of the Committee (a “Circuit Breaker”), such that a Circuit Breaker at the Bank level will prevent the earning of Covered Shares for Participants employed by that Bank and that a Circuit Breaker at the Company level shall prevent the earning of Covered Shares by all Participants as of such Measurement Date.      Section 8.  Withholding. The grant and vesting of shares of Stock under this Agreement are subject to withholding of all applicable taxes. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan.   Section 9.  Definitions.  For purposes of this Agreement, words and phrases shall be defined as follows:   (a)  “Actual Bank Asset Growth” shall mean the actual bank asset growth as determined by the Committee, but in no event greater than the Target Bank Asset Growth.   (b)  “Actual Cumulative Bank Earnings” shall mean the actual bank earnings growth as determined by the Committee, but in no event greater than the Target Cumulative Bank Earnings.   (c)  “Actual Company Asset Growth” shall mean the actual company asset growth as determined by the Committee, but in no event greater than the Target Company Asset Growth.   (d)  “Actual Cumulative Company Earnings” shall mean the actual company earnings growth as determined by the Committee, but in no event greater than the Target Cumulative Company Earnings.   (e)  “Bank” shall mean the Participant’s employer, as may be applicable.   (f)  “Bank Asset Percentage” shall mean the Actual Bank Asset Growth as of a particular Measurement Date divided by the Target Bank Asset Growth.   (g)  “Bank Earnings Percentage” shall mean the Annual Cumulative Bank Earnings as of a particular Measurement Date divided by the Target Cumulative Bank Earnings.   (h)  “Cause” shall mean: (i) a material violation by Participant of any applicable material law or regulation respecting the business of Company or Subsidiary; (ii) Participant being found guilty of a felony or an act of dishonesty in connection with the performance of his duties as an employee or officer of the Company or Subsidiary, or which disqualifies Participant from serving as an officer or director of the Company or Subsidiary; (iii) the willful or negligent failure of Participant to perform his duties hereunder in any material respect; (iv) Participant engages in one or more unsafe or unsound banking practices that have a material adverse effect on the Company or Subsidiary; or (v) Participant is removed or suspended from banking pursuant to Section 8(e) of the Federal Deposit Insurance Act, as amended, or any other applicable state or federal law.    (i)  “Company Asset Percentage” shall mean the Actual Company Asset Growth as of a particular Measurement Date divided by the Target Company Asset Growth.   (j)  “Company Earnings Percentage” shall mean the Annual Cumulative Company Earnings as of a particular Measurement Date divided by the Target Cumulative Company Earnings.   (k)  “Date of Termination” shall mean the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer.  If, as a result of a sale or other transaction, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Participant’s Date of Termination caused by the Participant being discharged by the employer.   (l)  “Disability” shall mean a physical or mental disability (within the meaning of Section 22(e)(3) of the Code) which impairs the individual’s ability to substantially perform his or her current duties for a period of at least six (6) consecutive months, as determined by the Committee.   (m)  “Good Reason” shall mean upon the occurrence of any one of the following events:   (i)  Participant is not re-elected or is removed from the position with the Company or Subsidiary, other than as a result of Participant’s election or appointment to a position or positions of equal or superior scope and responsibility;   (ii)  Participant shall fail to be vested by Company or Subsidiary with the powers, authority and support services of any of said position or positions;   (iii)  The Participant is subjected to objectively difficult or unpleasant working conditions to the extent that a reasonable employee would feel compelled to resign, provided the Company has been given at least fifteen (15) days notice of such conditions and Participant's intent to resign and the Company fails to remedy such conditions within such fifteen (15) days;   (iv)  Participant is subjected to conditions constituting constructive discharge, as defined by Iowa statute or common law.   (n)  “Retirement” of the Participant means, the occurrence of the Participant’s Date of Termination on or after the date (i) the Participant reaches the age of fifty-five (55) and has ten (10) years of combined service with the Company or Subsidiary (as determined by the Committee), or (ii) the Participant retires pursuant to the provisions of any defined benefit retirement plan sponsored by the Company or its subsidiaries that is then applicable to the Participant, all of the foregoing as approved by the Committee.   (o)  “Slip-Back” shall mean where, as of any Vesting Date, the Performance Measures utilized to determine whether such Covered Shares became Earned Shares are not currently met or exceeded. The Slip-Back shall continue until such Performance Measures are attained.   (p)  “Target Bank Asset Growth” shall mean the set dollar amount reflected on Exhibit A with respect to the Participant’s employer.   (q)  “Target Company Asset Growth” shall mean the set dollar amount reflected on Exhibit A.   (r)  “Target Cumulative Bank Earnings” shall mean the set dollar amount reflected on Exhibit A with respect to the Participant’s employer.   (s)  “Target Cumulative Company Earnings” shall mean the set dollar amount reflected on Exhibit A.   Section 10.  Heirs and Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business. If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been exercised or distributed, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant. If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under this Agreement or before the complete distribution of benefits to the Designated Beneficiary under this Agreement, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.   Section 11.  Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding.   Section 12.  Plan Governs. Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company.   Section 13.  Amendment. This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.     IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.   PARTICIPANT   HEARTLAND FINANCIAL USA, INC. By:         Its:             -------------------------------------------------------------------------------- Heartland Financial USA, Inc.   2005 Long-Term Incentive Plan   Exhibit A   Performance Targets for January 2005   Performance-Based Restricted Stock Awards     ENTITY     TARGET CUMULATIVE EARNINGS     TARGET ASSET GROWTH     Heartland Financial USA, Inc.         Arizona Bank & Trust         Dubuque Bank & Trust         First Community Bank         Galena State Bank & Trust         Heartland Business Bank         New Mexico Bank & Trust         Riverside Community Bank         Rocky Mountain Bank         Wisconsin Community Bank          

Exhibit 10.30 LOGO [g36512g96e74.jpg]   FISCAL YEAR                      SALES AND CONSULTING BONUS PLAN   Name:    Employee ID:      Title:    Effective Date:        COMPONENTS OF THE BONUS PLAN   There are three components to the bonus plan. The first two are calculated independently of each other. The third component is the sum of the first two components and applies a netting process to the first two components to determine the Total Bonus Target as set forth in Exhibit A to this Bonus Plan.     I. License Revenue and Outsourcing Bookings Growth Component   II. License and Consulting Margin Component   III. Total Bonus Target   I. LICENSE REVENUE and OUTSOURCING BOOKINGS GROWTH COMPONENT ASSUMPTIONS     •   All calculations are at constant dollar values.   •   License revenue and outsourcing growth bonus may fall below zero, and is carried forward to the Total Bonus Target.   •   The bonus for this component is calculated based on the confidential and proprietary formula set forth in Exhibit A to this Bonus Plan.   II. LICENSE and CONSULTING MARGIN COMPONENT ASSUMPTIONS   License and Outsourcing Margin:   •   All calculations are at constant dollar values.   •   License expense is adjusted to exclude the individual’s bonus expense/accrual that was reported as part of the license expense, when calculating margin.   •   The bonus is calculated on margin achieved above and beyond the gate.   •   The license and outsourcing margin subcomponent may fall below zero, and is carried forward to the Total Margin Bonus.   •   The bonus for the license and outsourcing margin subcomponent is calculated based on the confidential and proprietary formula set forth in Exhibit A to this Bonus Plan.   Consulting Margin:   •   All calculations are at constant dollar values.   •   The consulting margin subcomponent may fall below zero, and is carried forward to the Total Margin Bonus.   •   The bonus for the consulting margin subcomponent is calculated based on the confidential and proprietary formula set forth in Exhibit A to this Bonus Plan.   Total Margin Bonus:   •   The license and outsourcing margin subcomponent and consulting margin subcomponent are netted to reach a Total Margin Bonus as set forth in Exhibit A to this Bonus Plan.   •   The Total Margin Bonus may fall below zero, and is carried forward to the Total Bonus Target.   1 -------------------------------------------------------------------------------- LOGO [g36512g96e74.jpg]   FISCAL YEAR                  SALES AND CONSULTING BONUS PLAN   Name:              Employee ID: Title:              Effective Date:   III. TOTAL BONUS TARGET     •   The License Revenue and Outsourcing Bookings Growth Bonus and the Total License and Consulting Margin Bonus are netted to reach the Total Bonus Target as set forth in Exhibit A to this Bonus Plan.   •   The Total Bonus Target may not fall below zero.   •   Payment is made in US Dollars even though the basis of calculation is at constant dollars. No conversion from constant dollars to US Dollars is made.   The amounts that will be paid pursuant to the Bonus Plan are not currently determinable. The maximum total payout that                      may receive under the Bonus Plan is $            .   I acknowledge receipt and accept this document, accompanied by the FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions, as my FY     Sales and Consulting Bonus Plan.       Signature        Date              2 -------------------------------------------------------------------------------- LOGO [g36512g96e74.jpg]   FISCAL YEAR                      SALES AND CONSULTING BONUS PLAN   Name:              Employee ID: Title:              Effective Date:     EXHIBIT A TO SALES AND CONSULTING BONUS PLAN: PROPRIETARY AND CONFIDENTIAL     [Omitted]   3 -------------------------------------------------------------------------------- LOGO [g36512g96e74.jpg]   FISCAL YEAR                      SALES AND CONSULTING BONUS PLAN   Name:              Employee ID: Title:              Effective Date:   FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions   An executive’s FY     Sales and Consulting Executive Bonus Plan (“Bonus Plan”) consists of this document (the “FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions”), and the accompanying Individualized Bonus Plan as approved by the Oracle Corporation Board of Directors Committee on Compensation and Management Development (the “Compensation Committee”). Signature of the FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions indicates acceptance of the Bonus Plan.   Administration of the Bonus Plan. The Compensation Committee may terminate the Bonus Plan, in whole or in part, suspend the Bonus Plan, in whole or in part from time to time, and amend the Bonus Plan, from time to time, including the adoption of amendments deemed necessary or desirable to correct any defect or supply omitted data or reconcile any inconsistency in the Bonus Plan or in any award granted thereunder, so long as stockholder approval has been obtained, if required in order for awards under the Bonus Plan to qualify as “performance-based compensation” under Section 162(m). The Compensation Committee may amend or modify the Bonus Plan in any respect, or terminate the Bonus Plan, without the consent of any affected participant. However, in no event may such amendment or modification result in an increase in the amount of compensation payable pursuant to any award.   The Compensation Committee shall have all final discretion regarding the administration and interpretation of the Bonus Plan. The Compensation Committee shall make the final and binding determination of amounts payable under the Bonus Plan. Adjustments, modifications and changes may be made to bonuses, bonus rates, bonus factors, targets, margin gates, margin elements, or any other terms and conditions, and may result in a decrease in payments under the Bonus Plan. Awards under the Bonus Plan do not vest, and are not earned, until the Compensation Committee makes any and all final determinations and adjustments, modifications or changes of amounts payable under the Bonus Plan.   In addition, for any single large transaction, the Compensation Committee may review the transaction and determine appropriate treatment of the transaction under the Bonus Plan. Appropriate treatment may include, but is not limited to, limiting or reducing the applicable bonus, bonus rate, bonus factor, target, margin gate, margin elements, or any other terms and conditions. Bonuses under the Plan do not vest, and are not earned, until the Compensation Committee has determined final and appropriate treatment of the transaction.   The amounts that will be paid pursuant to the Bonus Plan are not currently determinable. The maximum total payout that                      may receive under this Bonus Plan is $            .   All awards will be paid in cash as soon as is practicable following determination of the award, unless the Committee has, prior to the grant of an award, received and approved, in its sole discretion, a request by a participant to defer receipt of an award in accordance with the Bonus Plan.   Executives on a paid or unpaid leave of absence will not be eligible to earn compensation under the Bonus Plan. Payments under the Bonus Plan may be adjusted to reflect time on leave.   Should an executive’s employment with Oracle terminate for any reason during fiscal year         , the participant will not be eligible to receive an award under the Bonus Plan.   4 -------------------------------------------------------------------------------- LOGO [g36512g96e74.jpg]   FISCAL YEAR                      SALES AND CONSULTING BONUS PLAN   Name:              Employee ID: Title:              Effective Date:   Under present federal income tax law, the executive will realize ordinary income equal to the amount of the award received in the year of receipt. That income will be subject to applicable income and employment tax withholding by the Company.   Advances against compensation may result in the executive incurring a negative compensation balance, where compensation advanced exceeds compensation earned under the Bonus Plan. No additional payments under the Bonus Plan will be made to executives who have incurred a negative balance until the entire negative balance has been offset in full by earned compensation under the Bonus Plan. The Company reserves the right to recover all advances against compensation that are not offset against earned compensation under the Bonus Plan. Only the Compensation Committee is authorized to forgive advances against compensation.   Club Excellence. Club Excellence qualification criteria are set forth in the executive’s Individualized Sales Bonus Plan where applicable. Final selection for Club Excellence is at the discretion of the Company. Neither cash nor any other form of compensation will be paid in lieu of the award. The award may not be transferred to another person.   Oracle Policies. The executive agrees to abide by published Oracle policies including these Terms and Conditions, the Code of Ethics and Business Conduct, the Proprietary Information Agreement and other employment and/or financial guidelines.   At-Will Employment. Employment at Oracle is at-will. Oracle makes no express or implied commitment that employment will have a minimum or fixed term, that Oracle may take adverse employment action only for cause or that employment is terminable only for cause. Either the executive or Oracle may terminate the employment relationship at any time for any reason. Additionally, Oracle may take any other employment action at any time for any reason. No one at Oracle may make, unless specifically authorized in writing by Oracle’s Board of Directors, any promise, express or implied, that employment is for any fixed term or that cause is required for the termination of or change in the employment relationship.   Severability. If any portion of this FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions shall, for any reason, be held invalid or unenforceable, or contrary to public policy or any law, the remainder of the FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions shall not be affected by such invalidity or unenforceability, but shall remain in full force and effect, as if the invalid or unenforceable term or portion thereof had not existed within this FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions.   Knowing and Voluntary Agreement. By signing the FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions, the executive is agreeing that he or she has read and understood every provision set forth herein, and that, in consideration for participation in the Bonus Plan, agrees to abide by its terms. The executive accepts this FY     Sales and Consulting Executive Bonus Plan: Terms and Conditions, along with the accompanying Individualized Sales Bonus Plan, as his or her FY     Sales Bonus Plan.   ACKNOWLEDGED AND ACCEPTED:              Print Name                     Signature        Date     5